AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 2006
REGISTRATION NO. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERIS BANCORP
(Exact name of registrant as specified in its charter)
Georgia | 6022 | 58-1456434 | ||
(State or other jurisdiction of of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
24 2 nd Avenue, S.E.
Moultrie, Georgia 31768
(229) 890-1111
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Dennis J. Zember Jr.
Executive Vice President and Chief Financial Officer
24 2 nd Avenue, S.E.
Moultrie, Georgia 31768
(229) 890-1111
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Steven E. Fox, Esq. Rogers & Hardin LLP 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 (404) 522-4700 |
Kathryn Knudson, Esq. Powell Goldstein LLP One Atlantic Center, Fourteenth Floor 1201 West Peachtree Street, N.W. Atlanta, Georgia 30309 (404) 572-6600 |
Approximate date of commencement of proposed sale to the public: Upon the merger of Islands Bancorp with and into the Registrant.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered |
Amount to be registered (1) |
Proposed maximum offering price per unit |
Proposed maximum aggregate offering price (2) |
Amount of registration fee |
||||
Common Stock, par value $1.00 per share |
661,846 shares | N/A | $2,988,800 | $320 |
(1) | This amount is based upon the estimated maximum number of shares of the registrants common stock issuable upon the consummation of the merger described in this Registration Statement and is approximately equal to the sum of (i) (a) the 555,195 shares of Islands Bancorp common stock which may be exchanged for shares of the registrants common stock in connection with the merger, based upon the 740,260 shares of Islands Bancorp common stock outstanding on September 30, 2006, multiplied by (b) a share exchange ratio of 1.0714 shares of the registrants common stock issuable in exchange for each outstanding share of Islands Bancorp common stock, and (ii) the 66,994 shares of the registrants common stock which may be issued in connection with the merger in exchange for the 112,550 warrants to purchase shares of Islands Bancorp common stock outstanding on September 30, 2006. |
(2) | This amount is estimated solely for purposes of calculating the registration fee. It is calculated pursuant to paragraphs (f)(2) and (f)(3) of Rule 457 under the Securities Act of 1933 and is equal to (i) the product of (a) $9.60, the per share book value of Islands Bancorp common stock as of September 30, 2006, and (b) the 740,260 shares of Islands Bancorp common stock outstanding on September 30, 2006; less (ii) the minimum amount of cash to be paid by the registrant in the transaction, which is anticipated to be approximately $4,117,696. |
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. AMERIS BANCORP MAY NOT DISTRIBUTE OR ISSUE THE SHARES OF AMERIS COMMON STOCK DESCRIBED HEREIN UNTIL THE REGISTRATION STATEMENT OF WHICH THIS PROXY STATEMENT/PROSPECTUS IS A PART HAS BEEN DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
PRELIMINARYSUBJECT TO COMPLETION
DATED , 2006
PROPOSED MERGERYOUR VOTE IS VERY IMPORTANT
To Islands Shareholders:
I am writing to you today about our proposed merger with Ameris Bancorp. The boards of directors of Ameris Bancorp and Islands Bancorp have each agreed to a merger that will result in Islands merging with and into Ameris. This transaction provides Islands with growth and strategic opportunities that would not be available to Islands on a stand-alone basis.
You will be asked to vote on the merger at a special meeting of the shareholders of Islands to be held on , 2006 at a.m., local time, at . We cannot complete the merger unless the holders of at least two-thirds of the shares of Islands common stock outstanding on , 2006, the record date for the special meeting, vote in favor of approval and adoption of the merger agreement. A copy of the merger agreement is attached as APPENDIX A to this proxy statement/prospectus. We urge you to read this proxy statement/prospectus carefully and in its entirety. Your board of directors recommends that you vote FOR the approval and adoption of the merger agreement.
Subject to certain exceptions described in this proxy statement/prospectus, if the merger is completed, then you will receive, for each Islands share that you own, either (i) cash in the amount of $22.50 (if the tangible capital of Islands is at least $6,150,000) or $22.25 (if the tangible capital of Islands is less than $6,150,000 but at least $6,000,000) or (ii) a to-be-determined number of shares of Ameris common stock with a market value, measured as of a 10-day trading period prior to the closing of the merger, equal to $22.50 (if the tangible capital of Islands is at least $6,150,000) or $22.25 (if the tangible capital of Islands is less than $6,150,000 but at least $6,000,000). For purposes of illustration only, if the merger had occurred on September 22, 2006 and the tangible capital of Islands was $6,175,000, then the exchange ratio for each share of Islands common stock would have been 0.8520 shares of Ameris common stock, having a value of $26.41 each based on the average closing price of Ameris common stock over the trading period.
You may elect to receive Ameris common stock, cash or a combination of stock and cash for your Islands shares, subject to proration in the event the aggregate stock elections are greater or less than 75%. Because elections are subject to proration, you may receive some stock, rather than cash, even though you make an all-cash election, and you may receive some cash, rather than stock, even though you make an all-stock election. We encourage you to obtain current market quotations for Ameris common stock, which is quoted on The Nasdaq Global Select Market under the ticker symbol ABCB.
Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing the enclosed proxy card to us. If you sign, date and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote in favor of the merger. If you fail to return your proxy card or do not vote in person at the meeting, the effect will be the same as a vote against the merger.
Under South Carolina law, you are entitled to dissent from the transactions contemplated by the merger agreement. A copy of the dissenters rights provisions under South Carolina law is attached as APPENDIX B to this proxy statement/prospectus.
We very much appreciate and look forward to your support.
Sincerely,
D. Martin Goodman
Chairman of the Board,
Islands Bancorp
See Risk Factors at page 12 for a discussion of certain factors that you should consider before you vote.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the securities to be issued in connection with the merger or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
The shares of Ameris common stock are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of any of the parties, and they are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other governmental agency.
The date of this proxy statement/prospectus is , 2006, and it is being mailed or otherwise delivered to Islands shareholders on or about , 2006.
PLEASE NOTE
This document, which is sometimes referred to as a proxy statement/prospectus, constitutes a proxy statement of Islands Bancorp with respect to the solicitation of proxies from Islands shareholders for the special meeting described herein and a prospectus of Ameris Bancorp for the shares of Ameris common stock that Ameris will issue to Islands shareholders in connection with the merger.
We have not authorized anyone to provide you with any information other than the information included in this proxy statement/prospectus and the documents we refer you to herein. If someone provides you with other information, then please do not rely on it.
This proxy statement/prospectus has been prepared as of the date on the cover page. There may be changes in the affairs of Ameris or Islands since that date that are not reflected in this document.
As used in this proxy statement/prospectus, the terms Ameris and Islands refer to Ameris Bancorp and Islands Bancorp, respectively, and, where the context requires, to Ameris and Islands and their respective subsidiaries.
As permitted under the rules of the Securities and Exchange Commission (the SEC), this proxy statement/prospectus incorporates important business and financial information about Ameris that is contained in documents filed with the SEC and that is not included in, or delivered with, this document. See the section entitled Incorporation of Certain Documents by Reference at page 66. You may obtain copies of these documents without charge from the website maintained by the SEC at www.sec.gov as well as from other sources. You may also obtain copies of these documents, without charge, by writing or calling:
Ms. Cindi H. Lewis
Ameris Bancorp
24 2 nd Avenue, S.E.
Moultrie, Georgia 31768
Telephone: (229) 890-1111
In order to obtain timely copies of such information in advance of the special meeting, you should make your request no later than , 2006.
ISLANDS BANCORP
2348 BOUNDARY STREET
BEAUFORT, SOUTH CAROLINA 29902
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Islands Bancorp will be held at at a.m., local time, on , 2006, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an agreement and plan of merger, dated as of August 15, 2006, pursuant to which Ameris Bancorp will acquire Islands Bancorp. You can find a copy of the merger agreement attached as APPENDIX A to the accompanying proxy statement/prospectus.
2. To transact such other business, if any, that may properly come before the special meeting or any adjournment or postponement of the special meeting.
Only shareholders of record at the close of business on , 2006 are entitled to receive notice of and vote at the special meeting or any adjournment or postponement of the special meeting. Approval and adoption of the merger agreement requires the affirmative vote of at least a majority of all of the votes entitled to be cast at the special meeting. A failure to vote will have the same effect as voting against the approval and adoption of the merger agreement.
Dissenters rights are available under South Carolina law to Islands shareholders with respect to the merger. See the section entitled Statutory Provisions for Dissenting Shareholders at page 42 of the accompanying proxy statement/prospectus for a discussion of the availability of dissenters rights and the procedures required to be followed to assert dissenters rights in connection with the merger.
We look forward to seeing you at the special meeting. Your vote is important. Please mark, sign and return your proxy card, whether or not you plan to attend the special meeting.
Your board of directors has determined that the proposed merger is advisable and in the best interest of Islands and its shareholders. Your board of directors recommends that you vote FOR the proposal to approve and adopt the merger agreement.
By Order of the Board of Directors,
D. Martin Goodman
Chairman of the Board
, 2006
Whether or not you expect to be present at the special meeting in person, please vote, sign, date and return the enclosed proxy promptly in the enclosed business reply envelope. If you do attend the special meeting, then you may withdraw your proxy and vote in person.
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING OF SHAREHOLDERS |
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Interests of Islands Directors and Executive Officers in the Merger |
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Ameris Common Stock Issued in the Merger to be Listed on NASDAQ |
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INTERESTS OF ISLANDS DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER |
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Financial Relationship Between Ameris and Islands and their Subsidiaries |
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Right to List of Holders and Inspection of Books and Records |
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APPENDIX D: ISLANDS BANCORP FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2005 |
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APPENDIX E: ISLANDS BANCORP FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 2006 |
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ii
QUESTIONS AND ANSWERS ABOUT THE MERGER
AND THE SPECIAL MEETING OF SHAREHOLDERS
Q: | WHY ARE YOU PROPOSING THAT ISLANDS BE ACQUIRED BY AMERIS? |
A: We believe that the proposed acquisition of Islands by Ameris will provide our shareholders with substantial benefits and will enable us to better serve our customers. Our products and markets generally are complementary, and the combined company should be in a better position to take advantage of opportunities within our market. The merger will enable you to hold stock in a larger and more diversified entity, whose shares are more widely held and more actively traded than are the shares of Islands, or to receive cash for all or a portion of your Islands shares. To review the reasons for the merger in more detail, see the section entitled Reasons for the Merger at page 20.
Q: | WHAT DO I NEED TO DO NOW? |
A: Carefully read this document, indicate on your proxy card how you want to vote, and sign, date and return the proxy card as soon as possible. Islands board of directors has voted to recommend that Islands shareholders vote FOR the approval and adoption of the merger agreement.
Q: | MY SHARES ARE HELD IN MY BROKERS NAME. HOW DO I GO ABOUT VOTING? |
A: Copies of this proxy statement/prospectus have been sent to your broker, who must forward a copy to you. The broker will request instructions from you as to how you want your shares to be voted and will vote your shares according to your instructions. Your broker cannot vote your shares with respect to the merger without your instructions. Your failure to instruct your broker how to vote your shares with respect to the merger will have the same effect as voting against the merger.
Q: | WHAT WILL I RECEIVE IN THE MERGER? |
A: Except in certain circumstances described under the section entitled Terms of the MergerMerger Consideration at page 30, if the merger is completed, then you will receive, for each Islands share that you own, either (i) cash in the amount of $22.50 (if the tangible capital of Islands is at least $6,150,000) or $22.25 (if the tangible capital of Islands is less than $6,150,000 but at least $6,000,000) or (ii) a to-be-determined number of shares of Ameris common stock with a market value, measured as of a 10-day trading period prior to the closing of the merger (which is referred to in this proxy statement/prospectus as the trading period), equal to $22.50 (if the tangible capital of Islands is at least $6,150,000) or $22.25 (if the tangible capital of Islands is less than $6,150,000 but at least $6,000,000). In either case, the purchase price for each Islands share (which is referred to in this proxy statement/prospectus as the per share purchase price) is determined based on the tangible capital of Islands two days prior to the closing of the merger. You may elect to receive Ameris common stock, cash or a combination of stock and cash for your Islands shares, subject to proration in the event the aggregate stock elections are greater or less than 75%. It is possible, therefore, that you will receive a different proportion of stock and cash than you elect. For example, if stock elections representing more than 75% of the outstanding shares of Islands common stock prior to the merger are made, then Ameris will prorate the number of shares of its common stock that the holders of Islands common stock will receive so that no more than 75% of the Islands shares are converted into Ameris common stock. Shareholders of Islands who do not properly submit an election for the type of consideration that they wish to receive will have their consideration prorated before other shareholders. Ameris will not issue fractional shares. Islands shareholders who would otherwise be entitled to receive a fractional share of Ameris common stock instead will receive cash based on the average closing price of the Ameris common stock during the trading period.
Q-1
Q: | WHAT ARE THE TAX CONSEQUENCES TO ME OF THE MERGER? |
A: We do not expect the merger to result in the recognition of any tax by Islands shareholders for federal income tax purposes, except with respect to any cash received. See the section entitled Federal Income Tax Consequences of the Merger at page 39 for a description of certain federal income tax consequences of the merger.
Q: | WHAT IS THE REQUIRED VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT? |
A: The holders of two-thirds of the outstanding shares of Islands common stock as of , 2006, the record date for the special meeting, must vote to approve and adopt the merger agreement in order for the merger to be completed. Abstentions from voting and broker non-votes are not considered affirmative votes and, therefore, will have the same practical effect as a vote against the merger. In addition, all of Islands directors, who beneficially owned, in the aggregate, approximately 34.0% of the outstanding shares of Islands common stock, as of the record date, have entered into a voting agreement with Ameris pursuant to which they granted to Ameris an irrevocable proxy to vote all voting securities of Islands held by such directors in favor of the approval and adoption of the merger agreement. No vote of Ameris shareholders is required to complete the merger.
Q: | SHOULD I SEND IN MY STOCK CERTIFICATES NOW? |
A: No. Under separate cover from this proxy statement/prospectus, we will send all Islands shareholders written instructions and transmittal materials for exchanging their share certificates. You will receive these instructions prior to the special meeting.
Q: | IF I LOST MY ISLANDS STOCK CERTIFICATE, CAN I STILL GET MY NEW STOCK? |
A: Yes. However, you will have to provide a paid surety bond that will protect Ameris against a loss in the event someone finds or has your lost certificate and is able to transfer it. To avoid having to pay for a surety bond, you should do everything you can to find your Islands certificate before the time comes to send it in.
Q: | AM I ENTITLED TO DISSENTERS RIGHTS IN CONNECTION WITH THE MERGER? |
A: Yes. If you wish, you may exercise dissenters rights arising out of the transactions contemplated by the merger agreement and obtain a cash payment for the fair value of your shares under South Carolina law. To exercise dissenters rights, you must not vote in favor of the approval and adoption of the merger agreement, and you must strictly comply with all of the applicable requirements of South Carolina law summarized under the section entitled Statutory Provisions for Dissenting Shareholders at page 42. The fair value of your shares may be more or less than the consideration to be paid in the merger. We have included a copy of the applicable provisions of South Carolina law as APPENDIX B to this proxy statement/prospectus.
Q: | HOW DO I ELECT THE TYPE OF THE MERGER CONSIDERATION THAT I PREFER TO RECEIVE? |
A: Under separate cover from this proxy statement/prospectus, we will send all Islands shareholders an election form and transmittal materials prior to the special meeting. You must properly complete and deliver to the exchange agent the election materials, together with your stock certificates (or a properly completed notice of guaranteed delivery). A return envelope will be enclosed for submitting the election form and certificates to the exchange agent. This is different from the envelope that you will use to return your completed proxy card. Please do not send your stock certificates or form of election with your proxy card. Election forms and stock certificates (or a properly completed notice of guaranteed delivery) must be
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received by the exchange agent by the election deadline, which is 5:00 p.m., Eastern time, on , 2006. If your shares are held in a brokerage or other custodial account, you should receive instructions from the entity where your shares are held advising you of the procedures for making your election and delivering your shares. If you do not receive these instructions, you should contact the entity where your shares are held. If you do not submit a properly completed and signed election form to the exchange agent by the election deadline (or if you submit a properly completed election form indicating no election, together with the certificates representing all of your shares), then you will be deemed to have made an election to convert all of your Islands shares into shares of Ameris common stock. In the event the merger agreement is terminated, any Islands stock certificates that you previously sent to the exchange agent will be promptly returned to you without charge.
Q: | CAN I BE SURE OF THE VALUE OF THE SHARES OF ANY AMERIS COMMON STOCK THAT I RECEIVE IN THE MERGER? |
A: No. The value of the merger consideration composed of Ameris common stock can change, although the cash portion of the merger consideration will not change. See the section entitled Terms of the MergerMerger Consideration at page 30.
Q: | WHEN DO YOU EXPECT TO COMPLETE THE MERGER? |
A: We are working toward completing the merger as quickly as possible. In addition to Islands shareholder approval, we must also obtain regulatory approvals. We expect the merger to be completed before the end of the year.
Q: | WHO SHOULD I CALL WITH QUESTIONS ABOUT THE MERGER? |
A: If you have any questions about the merger, you should contact Cindi H. Lewis at Ameris at (229) 890-1111.
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as anticipate, believe, continue, could, endeavor, estimate, expect, forecast, goal, intend, may, objective, potential, predict, project, seek, should, will and other similar words and expressions of future intent.
The ability of Ameris and Islands to predict results or the actual effect of future plans or strategies is inherently uncertain. Although Ameris and Islands believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could cause actual results and performance to differ from those expressed in our forward-looking statements include, but are not limited to:
| the costs of integrating Ameriss and Islands operations, which may be greater than Ameris expects; |
| potential customer loss and deposit attrition as a result of the merger and the failure to achieve expected gains, revenue growth and/or expense savings from such transactions; |
| Ameriss ability to effectively manage interest rate risk and other market, credit and operational risks; |
| Ameriss ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support Ameriss business; |
| Ameriss ability to keep pace with technological changes; |
| Ameriss ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by our customers and potential customers; |
| Ameriss ability to expand into new markets; |
| the cost and other effects of material contingencies, including litigation contingencies; |
| further easing of restrictions on participants in the financial services industry, such as banks, securities brokers and dealers, investment companies and finance companies, may increase competitive pressures and affect our ability to preserve our customer relationships and margins; |
| possible changes in general economic and business conditions in the United States in general and in the region and communities we serve in particular may lead to a deterioration in credit quality, which could require increases in our provision for credit losses, or a reduced demand for credit, thereby reducing earning assets; |
| the threat or occurrence of war or acts of terrorism and the existence or exacerbation of general geopolitical instability and uncertainty; and |
| possible changes in trade, monetary and fiscal policies, laws, and regulations, and other activities of governments, agencies, and similar organizations, including changes in accounting standards. |
The cautionary statements in the section entitled Risk Factors at page 12 and elsewhere in this proxy statement/prospectus also identify important factors and possible events that involve risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Ameris and Islands do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements.
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This summary highlights selected information from this proxy statement/prospectus. It does not contain all the information that is important to you. Each item in this summary refers to a page where that subject is discussed in more detail. To understand the merger fully, and for a more complete description of the legal terms of the merger and the merger agreement, you should read carefully this entire proxy statement/prospectus and the documents to which we have referred you. See the sections entitled Where You Can Get More Information at page 65 and Incorporation of Certain Documents by Reference at page 66. In addition, the merger agreement is attached as APPENDIX A to this proxy statement/prospectus and is incorporated into this proxy statement/prospectus by this reference. We urge you to read the merger agreement in its entirety; it is the legal document that governs the merger. Unless the context requires otherwise, the terms we, our, and us refer to Ameris and Islands together.
INFORMATION ABOUT AMERIS (PAGE 54) AND ISLANDS (PAGE 55)
AMERIS BANCORP, 24 2 nd AVENUE, S.E., MOULTRIE, GEORGIA 31768; (229) 890-1111. Ameris is a Georgia bank holding company headquartered in Moultrie, Georgia that owns four subsidiary banks. As of June 30, 2006, Ameris had consolidated total assets of approximately $1.78 billion, consolidated total loans of approximately $1.33 billion and consolidated shareholders equity of approximately $153.0 million. Ameris, through its subsidiary banks, is engaged in a full range of traditional banking, mortgage banking and investment services to individual and corporate customers through its 43 locations in Georgia, Florida and Alabama.
ISLANDS BANCORP, 2348 BOUNDARY STREET, BEAUFORT, SOUTH CAROLINA 29902; (843) 521-1968. Islands is a South Carolina bank holding company headquartered in Beaufort, South Carolina that owns one subsidiary bank. As of June 30, 2006, Islands had consolidated total assets of approximately $69.3 million, consolidated total loans of approximately $61.1 million and consolidated shareholders equity of approximately $6.9 million. Islands, through its subsidiary bank, is engaged in a full range of banking services at one location in South Carolina.
The proposed acquisition of Islands by Ameris is governed by a merger agreement. The merger agreement provides that, if all of the conditions set forth in the merger agreement are satisfied or waived, Islands will merge with and into Ameris. Ameris will be the surviving corporation after the merger, and Islands Community Bank, N.A. (Islands Bank), a wholly-owned subsidiary of Islands, will be merged with and into American Banking Company, a wholly-owned subsidiary bank of Ameris.
Except in certain circumstances described under the section entitled Terms of the MergerMerger Consideration at page 30, if the merger is completed, then each of the issued and outstanding shares of Islands common stock will be converted into the right to receive either the per share purchase price in cash or a to-be-determined number of shares of Ameris common stock with a market value, measured as of the trading period, equal to the per share purchase price. You may elect to receive Ameris common stock, cash or a combination of stock and cash for your Islands shares, subject to proration in the event the aggregate stock elections are greater or less than 75%. It is possible, therefore, that you will receive a different proportion of stock and cash than you elect. For example, if stock elections representing more than 75% of the outstanding shares of Islands common stock prior to the merger are made, then Ameris will prorate the number of shares of its common stock that the holders of Islands common stock will receive so that no more than 75% of the Islands shares are converted into Ameris common stock. Shareholders of Islands who do not properly submit an election for the type of consideration that they wish to receive will have their consideration prorated before other shareholders.
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Ameris will not issue fractional shares. Islands shareholders who would otherwise be entitled to receive a fractional share of Ameris common stock instead will receive cash based on the average closing price of the Ameris common stock during the trading period.
Depending upon the average closing price of the Ameris common stock during the trading period and the tangible capital of Islands, existing Islands shareholders will own between approximately 3.3% and 4.4% of the total outstanding shares of Ameris common stock following the merger.
We urge you to read the merger agreement, which is attached as APPENDIX A to this proxy statement/prospectus, in its entirety.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 39)
The merger has been structured to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which is referred to in this proxy statement/prospectus as the Code. It is a condition to the completion of the merger that Islands and Ameris receive opinions from their respective tax counsel, dated as of the effective date of the merger, to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming the merger qualifies as a reorganization, in general:
| If you receive a combination of Ameris common stock and cash in exchange for your Islands common stock and your tax basis in your Islands common stock is less than the sum of the cash and the fair market value, as of the effective date of the merger, of the Ameris common stock received, you generally will recognize gain equal to the lesser of: (i) the sum of the cash and the fair market value of the Ameris common stock you receive, minus the tax basis of your Islands common stock surrendered, and (ii) the amount of cash you receive in the merger. However, if your tax basis in the Islands common stock surrendered in the merger is greater than the sum of the cash and the fair market value of the Ameris common stock you receive, then your loss will not be currently allowed or recognized for federal income tax purposes. |
| If you receive solely Ameris common stock in exchange for Islands common stock, then you generally will not recognize any gain or loss, except with respect to cash you receive in lieu of fractional shares of Islands common stock. |
| If you receive solely cash in exchange for your Islands common stock, then you generally will recognize gain or loss equal to the difference between the amount of cash you receive and the tax basis in your shares of Islands common stock. |
See the section entitled Federal Income Tax Consequences of the Merger at page 39 for a more complete discussion of the United States federal income tax consequences of the merger. We urge you to consult with your tax advisor for a full understanding of the tax consequences of the merger to you.
OPINION OF FINANCIAL ADVISOR TO ISLANDS (PAGE 22)
Howe Barnes Investments, Inc., now known as Howe Barnes Hoefer & Arnett, Inc. (Howe Barnes), has given an opinion to Islands board of directors that, as of the date of the merger agreement, the consideration to be received in the merger was fair, from a financial point of view, to Islands shareholders. This opinion is attached as APPENDIX C to this proxy statement/prospectus. You should read this opinion completely to understand the assumptions made, matters considered and limitations of the review undertaken by Howe Barnes. This opinion does not constitute a recommendation to any Islands shareholder as to how to vote on the merger agreement or as to the form of consideration that a Islands shareholder should elect.
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REASONS FOR THE MERGER (PAGE 20)
Islands believes that by becoming part of a larger organization with greater resources, it will be able to serve its customers and communities better and provide more competitive services. The merger will also enable Islands shareholders to exchange their relatively illiquid shares of Islands common stock, in a partially tax-free transaction, for cash and shares of common stock of a larger company, the stock of which is more widely held and more liquid than that of Islands.
ISLANDS RECORD DATE AND VOTING (PAGES 16 AND 17)
If you owned shares of Islands common stock at the close of business on , 2006, the record date for the special meeting, you are entitled to vote on the approval and adoption of the merger agreement and any other matters considered at the special meeting. On the record date, there were 740,260 shares of Islands common stock outstanding. You will have one vote at the special meeting for each share of Islands common stock you owned on the record date. The affirmative vote of shareholders owning at least two-thirds of the outstanding Islands common stock is required to approve and adopt the merger agreement. As of the close of business on the record date for the special meeting, directors and executive officers of Islands and their respective affiliates may be deemed to be the beneficial owners of shares of Islands common stock representing approximately 34.2% of the outstanding voting power of Islands. Each of the directors and executive officers of Islands has indicated that such person intends to vote or direct the vote of all the shares of Islands common stock over which such person has voting control in favor of the merger proposal and the election of each of the director nominees. In addition, all of Islands directors, who beneficially owned, in the aggregate, approximately 34.0% of the outstanding shares of Islands common stock, as of the record date, have entered into a voting agreement with Ameris pursuant to which they granted to Ameris an irrevocable proxy to vote all voting securities of Islands held by such directors in favor of the approval and adoption of the merger agreement.
ISLANDS BOARD OF DIRECTORS RECOMMENDS SHAREHOLDER APPROVAL (PAGE 16)
Islands board of directors has determined that the merger is advisable and in the best interests of Islands and its shareholders and unanimously recommends that you vote FOR the approval and adoption of the merger agreement.
AMERISS DIVIDEND POLICY FOLLOWING THE MERGER (PAGE 37)
Ameris currently pays quarterly dividends of $0.14 per share of common stock. Ameris expects that it will continue to pay quarterly dividends, but it may change that policy based on business conditions, its financial condition or other factors. Islands is restricted under the merger agreement from paying dividends or making any distributions in respect of Islands common stock.
INTERESTS OF ISLANDS DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (PAGE 45)
When considering the recommendation of Islands board of directors, you should be aware of potential conflicts of interest of, and the benefits available to, certain of Islands directors and executive officers. These directors and executive officers may be deemed to have interests in the merger that are different from, or in addition to, their interests as Islands shareholders generally. Islands board of directors was aware of these interests and considered them before approving the merger and the merger agreement.
COMPARATIVE RIGHTS OF SHAREHOLDERS (PAGE 59)
Ameris is incorporated under the laws of the State of Georgia and is subject to the Georgia Business Corporation Code and the Georgia Financial Institutions Code. Islands is incorporated under the laws of the State
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of South Carolina and is subject to the South Carolina Business Corporation Act of 1988 and South Carolina banking laws. Upon completion of the merger, the shareholders of Islands will become shareholders of Ameris, and the Articles of Incorporation and Bylaws of Ameris will govern their rights. Ameriss Articles of Incorporation and Bylaws differ somewhat from Islands Articles of Incorporation and Bylaws.
EFFECT OF THE MERGER ON ISLANDS STOCK OPTIONS AND WARRANTS (PAGE 36)
Prior to the execution of the merger agreement, there were 40,869 outstanding options to purchase Islands common stock, which options had exercise prices of between $10.00 and $11.00 per share. Pursuant to the terms of the merger agreement, any option that is outstanding at the effective time of the merger will be cancelled in consideration of a cash payment to the option holder.
Prior to the execution of the merger agreement, there were 112,550 outstanding warrants to purchase Islands common stock, each of which had an exercise price of $10.00 per share. Pursuant to the terms of the merger agreement, each warrant holder may elect to receive either Ameris common stock or cash in exchange for all of his or her warrants. A warrant holder who does not properly provide an election notice for his or her warrants will have those warrants cancelled at the effective time of the merger in consideration of the issuance of Ameris common stock for 50% of the warrants and a cash payment for the remaining 50% of the warrants.
ACCOUNTING TREATMENT OF THE MERGER (PAGE 37)
We expect to account for the merger as a purchase transaction for accounting and financial reporting purposes under accounting principles generally accepted in the United States (GAAP).
EMPLOYEE BENEFITS OF ISLANDS EMPLOYEES AFTER THE MERGER (PAGE 36)
Ameris has agreed to offer to all current employees of Islands who become Ameris employees substantially the same employee benefits as those offered by Ameris to its employees in similar positions. Ameris will also give Islands employees full credit for their years of service with Islands for both eligibility and vesting.
CONDITIONS TO THE MERGER (PAGE 33)
We will complete the merger only if several conditions are satisfied, including the following:
| at least two-thirds of Islands outstanding shares are voted in favor of the approval and adoption of the merger agreement; |
| the representations and warranties made by Ameris and Islands in the merger agreement are materially true and correct as of the effective date of the merger; |
| we receive all necessary regulatory approvals and any waiting periods required by law have passed; and |
| Islands counsel delivers an opinion that Islands shareholders will not recognize gain or loss for federal income tax purposes on the receipt of shares of Ameris common stock that they receive in the merger. |
TERMINATION OF THE MERGER AGREEMENT (PAGE 34)
Notwithstanding the approval and adoption of the merger agreement by Islands shareholders at the special meeting, our boards of directors can jointly agree to terminate the merger agreement at any time. In addition, either party can terminate the merger agreement if:
| we do not complete the merger by March 31, 2007; |
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| the other party materially breaches any of the representations, warranties or covenants it made or obligations it has under the merger agreement and fails to cure the breach; |
| the conditions to completing the merger are not satisfied; or |
| any applicable regulatory agency denies approval of the merger. |
AMERIS COMMON STOCK ISSUED IN THE MERGER TO BE LISTED ON NASDAQ (PAGE 36)
The shares of Ameris common stock to be issued in the merger will be listed on The Nasdaq Global Select Market under the symbol ABCB.
REQUIRED REGULATORY APPROVALS (PAGE 34)
We cannot complete the merger unless it is approved by the Federal Reserve Board, the Georgia Department of Banking and Finance and the South Carolina Board of Financial Institutions. Ameris has filed applications with these regulatory authorities for approval of the merger. Although we cannot be certain when or whether we will obtain the required regulatory approvals, we do not know of any reason why we should not obtain them in a timely manner.
COMPARATIVE MARKET PRICES OF COMMON STOCK (PAGE 9)
Ameris common stock is traded on The Nasdaq Global Select Market under the symbol ABCB. Islands common stock is not traded on any established market. On August 15, 2006, the last day prior to the public announcement of the merger, the last reported sale price per share of Ameris common stock on The Nasdaq Global Select Market was $26.60. The resulting equivalent pro forma price per share of Islands common stock would have been $22.50.
To the knowledge of Islands, the most recent sale of Islands common stock prior to the public announcement of the merger was on April 19, 2006, which was a sale of 100 shares for a purchase price of $12.00 per share. To the knowledge of Islands, there have been no sales since the announcement of the merger. There can be no assurance as to what the market price of the Ameris common stock will be if and when the merger is consummated.
DISSENTING SHAREHOLDERS RIGHTS (PAGE 42)
Islands shareholders may dissent from the merger and, upon following the requirements of South Carolina law, receive cash in the amount of the fair value of their Islands shares instead of the cash and shares of Ameris stock offered pursuant to the merger agreement.
Any Islands shareholder who wishes to exercise dissenters rights:
| must file a written notice of intent to dissent prior to the vote; |
| must not vote in favor of the merger agreement; and |
| must strictly comply with the procedural requirements of South Carolina law. |
A copy of the dissenters rights statutes is attached as APPENDIX B to this proxy statement/prospectus. We encourage you to read the statutes carefully and to consult with legal counsel if you desire to exercise your dissenters rights.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
We are providing the following information regarding Ameris to help you analyze the financial aspects of the merger. This information is based on and should be read in conjunction with, and is qualified in its entirety by, the historical financial information contained in annual and quarterly reports and other information Ameris has filed with the SEC. Information as of and for each of the quarters ended June 30, 2006 and 2005 with respect to Ameris is unaudited; however, in the opinion of management of Ameris, all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of the results for the periods presented have been included in the reports filed by Ameris. Ameriss results for the six months ended June 30, 2006 are not necessarily indicative of the results of operations that may be expected for any other interim period or the year as a whole. The information has been adjusted to reflect all stock splits and stock dividends declared through the date of this proxy statement/prospectus. See the section entitled Where You Can Get More Information at page 65. Financial information relating to Islands may be found in the annual and quarterly reports Islands has filed with the SEC, including Islands Form 10-KSB for the year ended December 31, 2005, which is attached hereto as APPENDIX D, and Islands Form 10-QSB for the quarter ended June 30, 2006, which is attached hereto as APPENDIX E.
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AMERIS BANCORP AND SUBSIDIARIES
(In Thousands, Except Per Share Data and Ratios)
Six Months Ended June 30, |
Years Ended December 31, | |||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||
Selected Balance Sheet Data: |
||||||||||||||||||||||||||||
Total assets |
$ | 1,783,344 | $ | 1,305,156 | $ | 1,697,209 | $ | 1,267,993 | $ | 1,169,111 | $ | 1,193,406 | $ | 1,177,953 | ||||||||||||||
Total loans |
1,330,713 | 962,412 | 1,186,601 | 877,074 | 840,539 | 833,447 | 805,076 | |||||||||||||||||||||
Total deposits |
1,446,128 | 1,035,863 | 1,375,232 | 986,224 | 906,524 | 916,047 | 931,156 | |||||||||||||||||||||
Investment securities |
257,283 | 218,371 | 243,742 | 221,741 | 196,289 | 184,081 | 156,835 | |||||||||||||||||||||
Shareholders equity |
153,002 | 125,084 | 148,703 | 120,939 | 113,613 | 107,484 | 104,148 | |||||||||||||||||||||
Selected Income Statement Data: |
||||||||||||||||||||||||||||
Interest income |
56,963 | 36,153 | 79,539 | 64,365 | 64,479 | 71,347 | 72,913 | |||||||||||||||||||||
Interest expense |
22,898 | 11,461 | 26,934 | 19,375 | 22,141 | 28,240 | 34,928 | |||||||||||||||||||||
Net interest income |
34,065 | 24,692 | 52,605 | 44,990 | 42,338 | 43,107 | 37,985 | |||||||||||||||||||||
Provision for loan losses |
1,411 | 905 | 1,651 | 1,786 | 3,945 | 5,574 | 4,566 | |||||||||||||||||||||
Other income |
7,430 | 7,156 | 13,530 | 13,023 | 14,718 | 15,706 | 11,749 | |||||||||||||||||||||
Other expenses |
24,379 | 20,290 | 43,607 | 36,505 | 35,147 | 37,807 | 30,843 | |||||||||||||||||||||
Income before tax |
15,705 | 10,653 | 20,877 | 19,722 | 17,964 | 15,432 | 14,325 | |||||||||||||||||||||
Income tax expense |
5,290 | 3,553 | 7,149 | 6,621 | 5,954 | 5,077 | 4,692 | |||||||||||||||||||||
Net income |
10,415 | 7,100 | 13,728 | 13,101 | 12,010 | 10,355 | 9,633 | |||||||||||||||||||||
Per Share Data: |
||||||||||||||||||||||||||||
Net incomebasic |
0.80 | 0.60 | 1.15 | 1.12 | 1.03 | 0.87 | 0.87 | |||||||||||||||||||||
Net incomediluted |
0.79 | 0.60 | 1.14 | 1.11 | 1.02 | 0.87 | 0.87 | |||||||||||||||||||||
Bok value |
11.75 | 10.54 | 11.48 | 10.28 | 9.68 | 9.17 | 8.68 | |||||||||||||||||||||
Tangible book value |
7.99 | 8.15 | 7.64 | 7.84 | 7.76 | 7.16 | 6.57 | |||||||||||||||||||||
Dividends |
0.28 | 0.28 | 0.56 | 0.47 | 0.43 | 0.40 | 0.40 | |||||||||||||||||||||
Profitability Ratios: |
||||||||||||||||||||||||||||
Net income to average total assets |
1.21 | % | 1.12 | % | 1.04 | % | 1.12 | % | 1.04 | % | 0.90 | % | 1.00 | % | ||||||||||||||
Net income to average stockholders equity |
13.78 | % | 11.55 | % | 10.87 | % | 11.19 | % | 10.85 | % | 9.81 | % | 10.30 | % | ||||||||||||||
Net interest margin |
4.38 | % | 4.23 | % | 4.31 | % | 4.15 | % | 3.96 | % | 4.07 | % | 4.27 | % | ||||||||||||||
Efficiency ratio |
58.75 | % | 63.71 | % | 65.94 | % | 62.93 | % | 61.60 | % | 64.28 | % | 62.02 | % | ||||||||||||||
Loan Quality Ratios: |
||||||||||||||||||||||||||||
Net charge-offs to total loans |
0.05 | % | -0.03 | % | 0.03 | % | 0.22 | % | 0.46 | % | 0.68 | % | 0.54 | % | ||||||||||||||
Reserve for loan losses to total loans and OREO |
1.75 | % | 1.72 | % | 1.88 | % | 1.77 | % | 1.78 | % | 1.78 | % | 1.85 | % | ||||||||||||||
Non performing assets to total loans and OREO |
0.70 | % | 0.53 | % | 0.90 | % | 0.70 | % | 0.95 | % | 1.11 | % | 1.67 | % | ||||||||||||||
Reserve for loan losses to nonperforming loans |
316.74 | % | 377.50 | % | 232.57 | % | 274.70 | % | 231.20 | % | 196.64 | % | 124.97 | % | ||||||||||||||
Reserve for loan losses to total nonperforming assets |
250.95 | % | 323.25 | % | 207.68 | % | 253.32 | % | 187.58 | % | 160.74 | % | 111.00 | % | ||||||||||||||
Liquidity Ratios: |
||||||||||||||||||||||||||||
Loans to total deposits |
92.02 | % | 92.91 | % | 86.28 | % | 88.93 | % | 92.72 | % | 90.98 | % | 86.46 | % | ||||||||||||||
Loans to average earning assets |
85.48 | % | 82.43 | % | 97.33 | % | 80.91 | % | 78.63 | % | 78.76 | % | 90.56 | % | ||||||||||||||
Noninterest-bearing deposits to total deposits |
13.93 | % | 14.59 | % | 14.60 | % | 15.22 | % | 15.63 | % | 14.38 | % | 13.48 | % | ||||||||||||||
Capital Adequacy Ratios: |
||||||||||||||||||||||||||||
Common stockholders equity to total assets |
8.58 | % | 9.58 | % | 8.76 | % | 9.54 | % | 9.72 | % | 9.01 | % | 8.84 | % | ||||||||||||||
Average Total stockholders equity Average total assets |
8.77 | % | 9.68 | % | 9.55 | % | 9.98 | % | 9.56 | % | 9.17 | % | 9.74 | % | ||||||||||||||
Dividend payout ratio |
35.00 | % | 46.67 | % | 48.70 | % | 41.96 | % | 41.75 | % | 45.98 | % | 45.98 | % |
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COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following tables present unaudited selected historical, pro forma combined and equivalent per share data, as if the merger had been consummated on the date indicated. The information is based on the historical financial statements of Ameris and Islands. The pro forma data does not purport to be indicative of the results of operations or the actual results that would have occurred had the merger been consummated at the beginning of the periods presented. The pro forma data gives effect to the merger based on numerous assumptions and estimates. If the merger is consummated as anticipated, then it will be accounted for as a purchase. The information presented below should be read in conjunction with, and is qualified in its entirety by, the historical financial information contained in annual and quarterly reports and other information Ameris and Islands have filed with the SEC, including the annual and quarterly reports of Islands attached to this proxy statement/prospectus as APPENDIX D and APPENDIX E.
As of and for the Six Months Ended June 30, 2006 |
As of and for the Year Ended December 31, 2005 |
|||||||||||||||||||||||
Ameris | Islands |
Pro forma Combined |
Equivalent Islands Amount Per Share (1) |
Ameris | Islands |
Pro forma Combined |
Equivalent Islands Amount Per Share (1) |
|||||||||||||||||
Net Income Per Common ShareBasic |
$ | 0.80 | $ | 0.36 | $ | 0.79 | $ | 0.67 | $ | 1.15 | $ | 0.83 | $ | 1.14 | $ | 0.96 | ||||||||
Net Income Per Common ShareDiluted |
$ | 0.79 | $ | 0.34 | $ | 0.78 | $ | 0.66 | $ | 1.14 | $ | 0.80 | $ | 1.13 | $ | 0.96 | ||||||||
Dividends Per Common Share |
$ | 0.28 | | $ | 0.27 | $ | 0.23 | $ | 0.56 | | $ | 0.51 | $ | 0.43 | ||||||||||
Book Value Per Common Share |
$ | 11.75 | $ | 9.37 | $ | 12.30 | $ | 10.41 | $ | 11.48 | $ | 7.84 | $ | 12.05 | $ | 10.19 | ||||||||
Tangible Book Value Per Common Share |
$ | 7.99 | $ | 9.37 | $ | 7.85 | $ | 6.64 | $ | 7.64 | $ | 7.84 | $ | 7.57 | $ | 6.40 |
(1) | The equivalent share information for Islands in the above table is computed in the following manner: (a) 25% of the shares of Islands common stock (including shares with respect to which dissenters rights have been perfected) will be converted into cash; and (b) 75% of the shares of Islands common stock will be converted into shares of Ameris common stock (plus cash in lieu of any fractional shares) having a market value of $26.60 per share at an exchange ratio of .8459 shares of Ameris common stock for each share of Islands common stock. |
Ameris common stock is traded on The Nasdaq Global Select Market (a successor to the Nasdaq National Market) under the symbol ABCB. Islands common stock is not publicly traded. The following table sets forth, for the indicated periods, the high and low closing sale prices for Ameris common stock as reported by The Nasdaq Global Select Market. The stock prices do not include retail mark-ups, mark-downs or commissions. Ameris had a total of shareholders of record as of , 2006.
Ameris Common Stock | ||||||
Closing Sales Prices | ||||||
High | Low | |||||
2006 |
||||||
Fourth Quarter (through , 2006) |
[$ | ] | [$ | ] | ||
Third Quarter |
$ | 28.05 | $ | 21.20 | ||
Second Quarter |
$ | 23.40 | $ | 20.37 | ||
First Quarter |
$ | 23.29 | $ | 19.71 | ||
2005 |
||||||
Fourth Quarter |
$ | 20.93 | $ | 17.90 | ||
Third Quarter |
$ | 20.18 | $ | 17.91 | ||
Second Quarter |
$ | 19.01 | $ | 16.63 | ||
First Quarter |
$ | 18.96 | $ | 15.43 | ||
2004 |
||||||
Fourth Quarter |
$ | 18.31 | $ | 16.09 | ||
Third Quarter |
$ | 16.88 | $ | 14.05 | ||
Second Quarter |
$ | 17.13 | $ | 14.88 | ||
First Quarter |
$ | 16.38 | $ | 13.58 |
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On August 15, 2006, the last day prior to the public announcement of Ameriss proposed acquisition of Islands, the last reported sale price per share of Ameris common stock on The Nasdaq Global Select Market was $26.60, and the resulting equivalent pro forma price per share of Islands common stock was $22.50. On , 2006, the latest practicable date prior to the mailing of this proxy statement/prospectus, the last reported sale price per share of Ameris common stock on The Nasdaq Global Select Market was $ , and the resulting equivalent pro forma price per share of Islands common stock was $ . The equivalent per share price of a share of Islands common stock at each specified date represents the last reported sale price of a share of Ameris common stock on such date multiplied by an assumed exchange ratio of approximately 0.8459 shares of Ameris common stock, plus $4,163,962.50 in cash exclusive of any withholdings (if the tangible capital of Islands is at least $6,150,000) or $4,117,696.20 in cash exclusive of any withholdings (if the tangible capital of Islands is less than $6,150,000 but at least $6,000,000). The market price of Ameris common stock at the effective time of the merger may be higher or lower than the market price at the time the merger proposal was announced, at the time the merger agreement was executed, at the time the mailing of this proxy statement/prospectus or at the time of the special meeting. Islands shareholders are not assured of receiving any specific market value of Ameris common stock at the effective time of the merger, and such value may be more or less than the current value of Ameris common stock.
There is no established public market for the Islands common stock. To the knowledge of Islands, the most recent trade of Islands common stock prior to August 15, 2006, the last day prior to the public announcement of Ameriss proposed acquisition of Islands, was the sale of 100 shares on April 19, 2006, at $12.00 per share. To the knowledge of Islands, there have been no trades of Islands common stock since the announcement of the merger.
The information regarding Islands common stock is provided for informational purposes only and, due to the absence of an active market for Islands common stock, you should not view it as indicative of the actual or market value of Islands common stock.
The holders of Ameris common stock are entitled to receive dividends when and if declared by Ameriss board of directors out of funds legally available therefor. Although Ameris currently intends to continue to pay quarterly cash dividends on Ameris common stock, there is no assurance that Ameriss dividend policy will remain unchanged after completion of the merger. The declaration and payment of dividends thereafter will depend upon business conditions, operating results, capital and reserve requirements, and the consideration by Ameriss board of directors of other relevant factors.
Ameris is a legal entity separate and distinct from its subsidiaries and its revenues depend in significant part on the payment of dividends from its subsidiary institutions. Ameriss subsidiary depository institutions are subject to certain legal restrictions on the amount of dividends they are permitted to pay. See the section entitled Supervision and RegulationPayment of Dividends at page 49. These restrictions may limit Ameriss ability to pay dividends to its shareholders. As of , 2006, Ameris does not believe these restrictions will impair Ameriss ability to declare and pay its routine and customary dividends.
The holders of Islands common stock are entitled to receive such dividends or distributions as Islands board of directors may declare out of funds legally available for such payments. The payment of distributions by Islands is subject to the restrictions of South Carolina law applicable to the declaration of distributions by a business corporation. A corporation generally may not authorize and make distributions if, after giving effect thereto, it would be unable to meet its debts as they become due in the usual course of business or if the corporations total assets would be less than the sum of its total liabilities plus the amount that would be needed, if it were to be dissolved at the time of distribution, to satisfy claims upon dissolution of shareholders who have preferential rights superior to the rights of the holders of its common stock.
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The ability of Islands to pay distributions is affected by the ability of its subsidiary banks to pay dividends. The ability of Islands subsidiary banks, as well as of Islands, to pay dividends in the future is influenced by bank regulatory requirements and capital guidelines. Islands is restricted under the merger agreement from paying dividends or making any distributions in respect of Islands common stock.
The following table sets forth cash dividends declared per share of Ameris common stock, as adjusted for Ameriss 6-for-5 stock split effective March 15, 2006, and Islands common stock for the periods indicated.
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In addition to the other information contained or incorporated by reference in this proxy statement/prospectus, we urge you to consider the following factors before deciding how to vote on the approval and adoption of the merger agreement.
RISKS ASSOCIATED WITH THE MERGER
You will not know the exact mix of consideration you will receive and might not be able to exchange your Islands common stock without recognizing gain for federal income tax purposes.
The consideration to be received by Islands shareholders in the merger is subject to proration. If you elect to receive all of the merger consideration in shares of Ameris common stock and the all-stock election is oversubscribed, then you will receive a portion of the merger consideration in cash. Similarly, if you elect to receive all of the merger consideration in cash and all the all-cash election is oversubscribed, then you will receive a portion of the merger consideration in shares of Ameris common stock. Accordingly, you may not receive exactly the type of consideration you elect to receive in the merger, which could result in, among other things, tax consequences that differ from those that would have resulted if you had received the form of consideration that you elected (including the potential recognition of gain for federal income tax purposes if you receive cash). A discussion of the proration mechanism can be found under the section entitled Terms of the MergerMerger Consideration at page 30, and a discussion of the material federal income tax consequences of the merger can be found under the section entitled Federal Income Tax Consequences of the Merger at page 39.
Because the market price of Ameris common stock may fluctuate, you cannot be sure of the market value of the common stock that you will receive in the merger.
Upon completion of the merger, the issued and outstanding shares of Islands common stock will be converted into the right to receive a combination of cash and shares of Ameris common stock pursuant to the terms of the merger agreement. The value of the portion of the merger consideration that will be paid in shares of Ameris common stock will be determined based on the average closing price of Ameris common stock during the trading period. The market price of Ameris common stock will likely be different, and may be lower, than this average on the date that this proxy statement/prospectus is mailed to you, or the date of the special meeting, and on the date you receive your shares of Ameris common stock. Differences in Ameriss stock price may result from a variety of factors, including general market and economic conditions, changes in Ameriss business, operations and prospects, and regulatory considerations. Many of these factors are beyond Ameriss control.
The market value of the Ameris common stock received by you in the merger may change based upon the average closing price of Ameris common stock.
If the average closing price of Ameris common stock during the trading period is between $21.00 and $28.00 per share, then the market value of the Ameris common stock to be received by Islands shareholders in the merger will equal the per share purchase price measured as of the trading period. If the average closing price of Ameris common stock during the trading period is higher than $28.00 per share, then the value of the Ameris common stock you will receive for each share of Islands common stock will be greater than the per share purchase price measured as of the trading period. If the average closing price of the Ameris common stock during the trading period is less than $21.00 per share, then Islands and Ameris will each have the right to terminate the merger agreement. If neither party elects to terminate, then Ameris, in its discretion, will either issue additional shares of Ameris common stock to you or pay additional cash to you so that you will receive value equal to the per share purchase price. If the average closing price of the Ameris common stock during the trading period is less than $21.00 per share and neither Islands nor Ameris exercises its right of termination, then the value of the Ameris common stock you will receive for each share of Islands common stock will be less than the per share purchase price measured as of the trading period.
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Combining our two companies may be more difficult, costly or time-consuming than we expect.
Ameris and Islands have operated and, until completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees or disruption of each companys ongoing business or inconsistencies in standards, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. If we have difficulties with the integration process, then we might not achieve the economic benefits we expect to result from the merger. As with any merger of banking institutions, there also may be business disruptions that cause us to lose customers or cause customers to take their deposits out of our banks and move their business to other financial institutions.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated.
The merger must be approved by the Federal Reserve Board, the Georgia Department of Banking and Finance and the South Carolina Board of Financial Institutions. These regulatory authorities will consider, among other factors, the competitive impact of the merger, our financial and managerial resources and the convenience and needs of the communities to be served. As part of that consideration, we expect that the Federal Reserve Board, the Georgia Department of Banking and Finance and the South Carolina Board of Financial Institutions will review capital position, safety and soundness, legal and regulatory compliance and Community Reinvestment Act matters. There is no assurance as to whether these regulatory approvals will be received, the timing of such approvals or whether any conditions will be imposed in connection with such approvals.
The market price of Ameris common stock after the merger may be affected by factors different from those affecting Islands common stock currently.
The businesses of Ameris and Islands differ in certain respects and, accordingly, the results of operations of the combined company and the market price of the combined companys shares of common stock after the merger may be affected by factors different from those currently affecting the independent results of operations of each of Ameris and Islands. For a discussion of the businesses of Ameris and Islands and of certain factors to consider in connection with those businesses, see the sections entitled Information About Ameris at page 54 and Information About Islands at page 55 and the documents that Ameris has filed with the SEC.
The merger agreement limits Islands ability to pursue alternatives to the merger.
The merger agreement contains provisions that limit Islands ability to discuss competing third-party proposals to acquire all or a significant part of Islands or its subsidiary banks. In addition, Islands has agreed to pay Ameris a fee of $500,000 if the transaction is terminated because Islands decides to pursue another acquisition transaction. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Islands from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger or might result in a potential competing acquiror proposing to pay a lower per share price to acquire Islands than it might otherwise have proposed to pay.
Certain directors and executive officers of Islands have interests in the merger other than their interests as shareholders.
Certain directors and executive officers of Islands have interests in the merger other than their interests as shareholders. Islands board of directors was aware of these interests at the time it approved the merger. These interests may cause Islands directors and executive officers to view the merger proposal differently than you may view it. See the section entitled Interests of Islands Directors and Executive Officers in the Merger at page 45.
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The trading volume in Ameris common stock has been relatively low.
The trading volume in Ameris common stock on The Nasdaq Global Select Market has been relatively low when compared with larger companies listed on The Nasdaq Global Select Market or other stock exchanges. We cannot say with any certainty that a more active and liquid trading market for Ameris common stock will develop. Because of this, it may be more difficult for you to sell a substantial number of shares for the same price at which you could sell a smaller number of shares.
You will have less influence as a shareholder of Ameris than you have as a shareholder of Islands.
Depending upon the average closing price of the Ameris common stock during the trading period, existing Islands shareholders will own between approximately 3.3% and 4.4% of the total outstanding shares of Ameris common stock following the merger. If the merger occurs, then each Islands shareholder who receives Ameris common stock will become a shareholder of Ameris with a percentage ownership of the combined company much smaller than such shareholders percentage interest of Islands and, accordingly, will have less influence on the management and policies of Ameris than such shareholder now has on the management and policies of Islands.
The fairness opinion obtained by Islands will not reflect changes in circumstances between the signing of the merger agreement and the effective date of the merger.
Islands has not obtained an updated opinion as of the date of this document from its financial adviser. Changes in the operations and prospects of Islands, general market and economic conditions and other factors which may be beyond the control of Islands, and on which the fairness opinion was based, may alter the value of Islands or the prices of shares of Islands common stock and shares of Ameris common stock by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. For a description of the opinion that Islands received from its financial advisor, see the section entitled Opinion of Financial Advisor to Islands at page 22.
Changes in interest rates could have an adverse effect on Ameriss income.
The combined companys profitability depends to a large extent upon its net interest income. Net interest income is the difference between interest income on interest-earning assets, such as loans and investments, and interest expense on interest-bearing liabilities, such as deposits and borrowings. Ameriss net interest income will be adversely affected if market interest rates change such that the interest the combined company has to pay on deposits and borrowings increases faster than the interest it earns on loans and investments. See the section entitled Supervision and Regulation-Fiscal and Monetary Policy at page 53.
Competition in the banking industry is intense.
Competition in the banking and financial services industry is intense. In their primary market areas, Ameriss subsidiary banks compete with other commercial banks, savings and loan associations, credit unions, finance companies, mutual funds, insurance companies and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors have substantially greater resources and lending limits than Ameriss subsidiary banks and may offer certain services that Ameriss subsidiary banks do not or cannot provide. The profitability of Ameris depends upon the continued ability of its subsidiary banks to compete in their market areas.
Ameriss Articles of Incorporation and Bylaws may prevent or delay a takeover by another company.
Ameriss Articles of Incorporation permit Ameriss board of directors to issue preferred stock without shareowner action. The ability to issue preferred stock could discourage a company from attempting to obtain
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control of Ameris by means of a tender offer, merger, proxy contest or otherwise. Additionally, Ameriss Articles of Incorporation and Bylaws divide Ameriss board of directors into three classes, as nearly equal in size as possible, with staggered three-year terms. One class is elected each year. The classification of Ameriss board of directors could make it more difficult for a company to acquire control of Ameris. Ameris is also subject to certain provisions of the Georgia Business Corporation Code and Ameriss Articles of Incorporation which relate to business combinations with interested shareholders.
Success of Ameris depends upon local economic conditions.
Ameriss success is dependent to a certain extent upon the general economic conditions in the geographic markets served by Ameriss subsidiary banks, primarily including south central and southwestern Georgia, southeastern Alabama, north central Florida and the immediate surrounding areas. Adverse changes in the geographic markets that Ameriss subsidiary banks serve would likely impair their ability to collect loans and could otherwise have a negative effect on the financial condition of Ameris. Examples of potential unfavorable changes in economic conditions which could affect south central and southwestern Georgia, southeastern Alabama and north central Florida include, among other things, the adverse effects of weather on agricultural production and a substantial decline in agricultural commodity prices.
Ameris and its subsidiary banks operate in a regulated environment.
Bank holding companies and banks operate in a highly regulated environment and are subject to the supervision and examination by several federal and state regulatory agencies. Ameris is subject to The Bank Holding Company Act of 1956 and to regulation and supervision by the Federal Reserve Board. Ameriss subsidiary banks are also subject to the regulation and supervision of the Federal Deposit Insurance Corporation (the FDIC), the Georgia Department of Banking and Finance and the Florida Department of Banking and Finance. Federal and state laws and regulations govern matters ranging from the regulation of certain debt obligations, changes in control of bank holding companies and the maintenance of adequate capital for the general business operations and financial condition of Ameriss subsidiary banks, including permissible types, amounts and terms of loans and investments, the amount of reserves against deposits, restrictions on dividends, establishment of branch offices, and the maximum rate of interest that may be charged by law. The Federal Reserve Board also possesses cease and desist powers over bank holding companies to prevent or remedy unsafe or unsound practices or violations of law. These and other restrictions limit the manner by which Ameris and its subsidiary banks may conduct their businesses and obtain financing. Furthermore, the commercial banking business is affected not only by general economic conditions but also by the monetary policies of the Federal Reserve Board. These monetary policies have had, and are expected to continue to have, significant effects on the operating results of commercial banks. Changes in monetary or legislative policies may affect the ability of Ameriss subsidiary banks to attract deposits and make loans.
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ISLANDS SPECIAL SHAREHOLDERS MEETING
The special meeting of shareholders of Islands will be held at at a.m., local time, on , 2006.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting, holders of Islands stock will be asked to consider and vote upon the approval and adoption of the merger agreement. Islands shareholders may also consider such other matters as may properly be brought before the special meeting and may be asked to vote on a proposal to adjourn or postpone the special meeting, which could be used to allow more time for soliciting additional votes to approve and adopt the merger agreement.
Islands board of directors has approved the merger agreement and recommends a vote for approval and adoption of the merger agreement.
RECORD DATE; SHARES OUTSTANDING; QUORUM
Only shareholders of record of Islands common stock at the close of business on , 2006 will be entitled to notice of, and to vote at, the special meeting. On , 2006, Islands had outstanding 740,260 shares of Islands common stock. There is no other class of Islands common stock outstanding. Each share of Islands common stock entitles the holder to one vote. The presence at the Islands special meeting, in person or by proxy, of shareholders entitled to cast a majority of all the votes entitled to be cast at the special meeting will constitute a quorum. There must be a quorum present in order for the vote on the merger agreement.
The approval and adoption of the merger agreement will require the affirmative vote of at least two-thirds of the outstanding shares of Islands ( i.e., at least 493,507 shares). Approval of the adjournment of the special meeting requires the affirmative vote of a majority of the shares represented at the special meeting, whether or not a quorum is present. As of the record date for the special meeting, all of Islands directors, who together beneficially owned 251,618 shares as of the record date, or approximately 34.0% of the outstanding Islands common stock, have granted to Ameris an irrevocable proxy to vote their Islands common stock in favor of the approval and adoption of the merger agreement.
All executed proxies received at or prior to the special meeting will be voted at the meeting in the manner specified, unless the proxy is revoked prior to the vote. Properly executed proxies that do not contain voting instructions will be voted FOR the approval and adoption of the merger agreement.
It is not expected that any other matter will be brought before the special meeting. If, however, other matters are properly presented, the persons named as proxies will vote in accordance with their best judgment with respect to such matters.
If a quorum is not obtained, the special meeting may be adjourned for the purpose of obtaining additional proxies. At any reconvening of the meeting, all proxies will be voted in the same manner as the proxies would have been voted at the original convening of the meeting (except for any proxies which have been revoked or withdrawn).
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EFFECT OF ABSTENTIONS AND BROKER NON-VOTES
You may abstain from voting on the approval and adoption of the merger agreement. Abstentions will be considered shares present and entitled to vote at the special meeting but will not be counted as votes cast at the meeting. Broker non-votes with respect to the merger agreement also will not be counted as votes cast at the meeting.
Because the approval and adoption of the merger agreement requires the affirmative vote of at least two-thirds of all shares entitled to vote at the special meeting, abstentions by Islands shareholders and broker non-votes will have the same effect as votes against the merger agreement. Accordingly, you are urged to complete, date and sign the accompanying form of proxy card and return it promptly in the enclosed postage-paid envelope.
The grant of a proxy on the enclosed Islands form does not preclude you from voting in person or otherwise revoking a proxy. You may revoke a proxy at any time prior to its exercise by:
| filing with the secretary of Islands a duly executed revocation of proxy; |
| submitting a duly executed proxy bearing a later date; or |
| appearing at the special meeting and voting in person at the meeting. |
Attendance at the special meeting will not, in and of itself, constitute a revocation of a proxy. All written notices of revocation and other communications with respect to the revocation of proxies should be addressed to: D. Martin Goodman, Islands Bancorp, 2348 Boundary Street, Beaufort, South Carolina 29902.
Islands will bear the cost of the solicitation of proxies from its shareholders, and Ameris and Islands will each bear one-half of the costs associated with printing and mailing of this proxy statement/prospectus. In addition to solicitation by mail, the directors, officers and employees of Islands may solicit proxies from Islands shareholders by telephone or telegram or in person without compensation other than reimbursement of their actual and reasonable expenses. Islands will reimburse any custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in connection with forwarding proxy solicitation material to beneficial owners of the stock they hold.
Islands board of directors knows of no other matters to be brought before the special meeting. However, if other matters should come before the special meeting, it is the intention of the persons named in the enclosed form of proxy to vote the proxy in accordance with their judgment of what is in the best interest of Islands.
You should not send stock certificates with your proxy cards. As described below under the section entitled Exchange of Islands Stock Certificates at page 29, you will be sent materials for exchanging your shares of Islands under separate cover prior to the special meeting.
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The following information summarizes information pertaining to the merger. The descriptions of the terms and conditions of the merger, the merger agreement and any related documents in this proxy statement/prospectus are not complete and are qualified in their entirety by the more detailed appendices to this proxy statement/prospectus which are incorporated by reference, including the merger agreement attached as APPENDIX A. We urge you to read the appendices in their entirety.
If the Islands shareholders approve and adopt the merger agreement and the other conditions to the consummation of the merger are satisfied, Ameris will acquire Islands pursuant to the merger of Islands with and into Ameris. Ameris will exchange cash and shares of its common stock, plus cash instead of any fractional share, for each outstanding share of Islands common stock as to which appraisal rights have not been exercised and perfected (other than treasury shares and shares held by Ameris or Islands or their subsidiaries, all of which will be cancelled in the merger). Each share of Ameris common stock issued and outstanding immediately prior to the effective time of the merger will remain issued and outstanding and unchanged as a result of the merger.
In exercising their fiduciary responsibilities to shareholders, Islands management and board of directors regularly assess the local banking industry, including the regulatory and competitive environment for banking services. In assessing the environment, Islands management and board of directors endeavor to implement strategies to maximize shareholder wealth.
In August 2005, Islands board of directors decided not to renew the employment agreement of then-chief executive officer William B. Gossett, and in November 2005, Mr. Gossetts employment agreement was terminated.
Beginning in late August 2005, Islands began receiving unsolicited expressions of interest from other financial institutions. As a result, the board of directors engaged Howe Barnes to provide a thorough analysis of all of Islands strategic alternatives. In conducting its analysis of the report from Howe Barnes, the board of directors carefully considered the expressions of interest that it received in light of current market conditions and Islands prospects for creating future shareholder value by implementing its growth strategy. After concluding its analysis, the board determined that it was in the best interests of Islands shareholders to remain an independent institution and to pursue Islands growth strategy. The board informed Islands shareholders of its decision by letter dated December 27, 2005.
After not renewing Mr. Gossetts contract and after reaching the decision to remain an independent institution, Islands board of directors interviewed several candidates for the president and chief executive officer position. The position remained open for several months, and during this period, Howe Barnes continued to receive unsolicited expressions of interest to purchase the company. As a result, the board of directors determined that it would be in the best interests of Islands shareholders to revisit Islands strategic alternatives and directed Howe Barnes to evaluate the expressions of interest.
During the second quarter of 2006, Islands executives met with the management team of Ameris for the purpose assessing the merits of combining the respective organizations. During July 2006, Islands also held multiple meetings with the management of Ameris.
In July and August 2006, Howe Barnes discussed the terms of a potential merger of Islands with Ameris. Ameris expressed its preliminary indication of interest utilizing 75% stock and 25% cash. Howe Barnes and Islands considered the Ameris offer as well as the timing and expectation of offers from other interested parties.
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Islands discussed its obligations to give due consideration to all relevant factors, including the short-term and long-term interests of Islands employees, customers, shareholders and other constituents. After extensive negotiation, the parties agreed on a purchase price of either $22.25 or $22.50 per share for each share of Islands common stock, with the actual purchase price dependent upon the tangible capital of Islands.
On August 15, 2006, the Islands board of directors met to evaluate and discuss the proposed definitive merger agreement between Islands and Ameris. Howe Barnes furnished the Islands board of directors its oral opinion (subsequently confirmed in writing) that, as of the date of its opinion and based upon and subject to the considerations described in its opinion and other matters that Howe Barnes considered relevant, the proposed merger consideration was fair, from a financial point of view, to holders of Islands common stock. Powell Goldstein LLP, legal counsel to Islands, discussed with the Islands board of directors the legal standards applicable to its decisions and actions with respect to the proposed transactions and reviewed the legal terms of the proposed merger and the related agreements.
Following review and discussion, the Islands board of directors voted to approve the definitive merger agreement with Ameris at the meeting held on August 15, 2006. Islands and Ameris, together with their counsel, finalized, executed and delivered the definitive agreements for the transaction on that date.
The board of directors of Islands believes the merger is in the best interests of its shareholders because the merger will permit them to exchange their ownership in Islands for an equity interest in Ameris, which has greater financial resources and a larger shareholder base than Islands. The board of directors of Islands also believes that the terms of the merger, including the basis of exchange of Ameris common stock for Islands common stock, which was determined through arms-length negotiations between Ameris and Islands, are fair and equitable and take into account the relative earning power of Ameris and Islands, historic and anticipated operations, the economies of scale to be achieved through the merger, the trading prices and liquidity of the shares of the respective companies and other pertinent factors.
The board of directors of Islands believes that in the current regulatory and competitive environment, larger organizations with greater economies of scale, including the ability to spread largely fixed costs over a larger revenue base and the ability to attract management talent able to compete in a more sophisticated financial services environment, will be more successful than smaller organizations. Management of Ameris and Islands believe that there is a future for community banks in the banking industry, but that community banks will be required to achieve a critical size to maintain above-average economic performance.
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AMERISS REASONS FOR THE MERGER
In deciding whether to enter into the merger agreement, Ameriss board of directors, with the assistance of its outside advisors, considered a number of factors, including the following:
| the financial condition, operating results, current business and future prospects of Ameris and Islands; |
| a comparison of the terms of the proposed merger with comparable transactions, both in the southeastern United States and elsewhere; |
| the quality of Islands management and its extensive experience in the coastal South Carolina market; |
| the fact that the merger provides Ameris with a natural extension of its coastal Georgia presence; and |
| the complementary nature of the business of Ameris and Islands, particularly each organizations emphasis on traditional community banking. |
In approving the transaction, Ameriss board of directors did not specifically identify any one factor or group of factors as being more significant than any other factor in the decision making process, although individual directors may have given one or more factors more weight than other factors.
ISLANDS REASONS FOR THE MERGER
Islands board of directors, with the assistance of its outside advisors, evaluated the financial, legal and market considerations bearing on the decision to recommend the merger. The terms of the merger, including the aggregate merger consideration to be received for the shares of Islands common stock, resulted from arms-length negotiations between representatives of Islands and Ameris. In reaching its conclusion that the merger agreement is in the best interest of Islands and its shareholders, Islands board of directors considered, without assigning any relative or specific values, a number of factors, including the following:
| alternatives to the merger, including continuing to operate Islands on a stand-alone basis, considering the breadth of its product line, economic conditions and the prospects for community banking and competition in the financial services area; |
| the merger consideration to be received in the proposed merger, including the fact that although the cash received generally will be taxable, the Islands shareholders are not expected to recognize any gain or loss for federal income tax purposes on the receipt of any Ameris common stock in the merger; |
| a comparison of the terms of the proposed merger with comparable transactions, both in the southeastern United States and elsewhere; |
| information concerning the business, financial condition, results of operations and prospects of Islands and Ameris; |
| competitive factors and trends toward consolidation in the banking industry; |
| the regulatory environment for financial institutions generally; and |
| the opinion rendered by Howe Barnes to Islands board of directors that, as of the date of the merger agreement, the merger consideration to be received in the proposed merger was fair, from a financial point of view, to the holders of Islands common stock. |
Islands board of directors believes that by becoming part of a larger organization with greater resources, Islands will be able to serve its customers and communities better and to provide services that will be competitive in the combined companys market and elsewhere. Similarly, a larger organization will be able to provide greater career opportunities for Islands employees.
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Islands board of directors also considered the separate agreements and benefits proposed for employees and management and concluded that those terms were reasonable. See the section entitled Interests of Islands Directors and Executive Officers in the Merger at page 45.
The foregoing discussion of the information and factors considered by Islands board of directors is not intended to be exhaustive. Islands board of directors did not assign any relative or specific weights to the foregoing factors, and individual directors may have given different weights to different factors. Islands board of directors collectively made its determination with respect to the merger based on the conclusion reached by its members, in light of the factors that each of them considered appropriate, that the merger is in the best interest of Islands shareholders.
Islands board of directors believes that the terms of the merger are in the best interest of Islands and its shareholders and has approved the merger agreement. Islands board of directors recommends that the shareholders of Islands approve and adopt the merger agreement.
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OPINION OF FINANCIAL ADVISOR TO ISLANDS
INTRODUCTION
We retained Howe Barnes to act as our financial advisor in connection with analyzing our strategic alternatives, including a possible merger and related matters. As part of its engagement, Howe Barnes agreed, if requested by us in connection with a possible merger, to render an opinion with respect to the fairness, from a financial point of view, to the holders of our common stock, of the merger consideration. As used in this section, the merger consideration for each share of Islands common stock is $22.50 unless the tangible capital of Islands at closing is less than $6,150,000 but greater than or equal to $6,000,000, in which case it will be $22.25. Howe Barnes is regularly engaged in evaluations of businesses and their securities and in advising financial institutions and other companies with regard to mergers and acquisitions. We selected Howe Barnes as our financial advisor based upon Howe Barnes qualifications, expertise and reputation in that capacity.
Howe Barnes delivered to our board its written opinion dated August 15, 2006 that, based upon and subject to the assumptions and limitations described in the opinion, the per share purchase price to be paid to our shareholders was fair, from a financial point of view, as of the date of the opinion. No limitations were imposed by us on Howe Barnes with respect to the investigations made or the procedures followed in rendering its opinion. On July 31, 2006, Howe Barnes completed its merger with Hoefer & Arnett, Inc. and is now known as Howe Barnes Hoefer & Arnett, Inc.
The full text of Howe Barnes written opinion to our board, dated August 15, 2006, which sets forth the assumptions made, matters considered and extent of review by Howe Barnes, is attached as APPENDIX C and is incorporated herein by reference. You should read the fairness opinion carefully and in its entirety. The following summary of Howe Barnes opinion is qualified in its entirety by reference to the full text of the opinion. Howe Barnes opinion is directed to our board and does not constitute a recommendation to any shareholder of Islands as to how a shareholder should vote with regard to the merger at the special meeting described in this proxy statement/prospectus. The opinion addresses only the financial fairness of the consideration to be received by the holders of our common stock. The opinion does not address the relative merits of the merger or any alternatives to the merger, the underlying decision of our board to approve or proceed with or effect the merger, or any other aspect of the merger.
Howe Barnes, in connection with rendering its opinion:
| participated in discussions with representatives of Islands and Ameris concerning Islands and Ameris financial condition, businesses, assets, earnings, prospects, and such senior managements views as to its future financial performance; |
| reviewed the terms of the merger agreement; |
| reviewed certain financial statements, both audited (where available) and unaudited, and related financial information of Islands, including its audited financial statements for the three years ended December 31, 2005, 2004 and 2003, unaudited financial statements for the quarters ended June 30, 2006 and March 31, 2006, as well as other internally and externally generated reports and documents; |
| reviewed certain financial statements, both audited (where available) and unaudited, and related financial information of Ameris, including its audited financial statements for the three years ended December 31, 2005, 2004 and 2003 and unaudited financial statements for the quarters ended June 30, 2006 and March 31, 2006, as well as other internally and externally generated reports and documents; |
| reviewed certain financial forecasts and projections of Islands and Ameris, prepared by their respective management teams; |
| reviewed historical trading activity of Ameris common stock; and |
| reviewed certain of the financial terms, to the extent publicly available, of certain recent business combinations involving other financial institutions. |
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The written opinion provided by Howe Barnes, dated as of August 15, 2006, was necessarily based upon economic, monetary, financial market, and other relevant conditions as of the date the opinion was rendered. Accordingly, it was understood that although subsequent developments may affect its opinion, Howe Barnes does not have any obligation to further update, revise or reaffirm its opinion.
In connection with its review and arriving at its opinion, with the consent of our board, Howe Barnes assumed and relied upon the accuracy and completeness of the financial information and other pertinent information provided by us and Ameris to Howe Barnes for purposes of rendering its opinion. Howe Barnes did not assume any obligation to independently verify any of the information listed above, including, without limitation, information from published sources, as being complete and accurate. With regard to the financial information, including financial projections it received from us, as well as projections of cost savings, Howe Barnes assumed that this information reflects the best available estimates and good faith judgments of management as to our future performance and that the projections provided a reasonable basis upon which Howe Barnes could formulate its opinion. We do not publicly disclose internal management forecasts or projections of the type utilized by Howe Barnes in connection with Howe Barnes role as our financial advisor, and those forecasts and projections were not prepared with a view towards public disclosure. The forecasts and projections were based upon numerous variables and assumptions that are inherently uncertain, including, among others, factors relative to the general economic and competitive conditions we face. Accordingly, actual results could vary significantly from those set forth in the forecasts and projections.
Howe Barnes does not purport to be an expert in the evaluation of loan portfolios or the allowance for loan losses with respect to loan portfolios and, accordingly, assumes that our allowances are adequate to cover any losses. In addition, Howe Barnes has not reviewed and does not assume any responsibility for any individual credit files and did not make an independent evaluation, appraisal or physical inspection of the assets or liabilities, contingent or otherwise, or our individual properties, nor was Howe Barnes provided with any such appraisals. In addition, for purposes of rendering its written opinion, Howe Barnes assumed that (i) the merger will be consummated in accordance with the terms set forth in the merger agreement, without any waiver of any of its material terms or conditions, and that obtaining the necessary regulatory approvals for the merger will not have an adverse effect on either separate institution or the combined entity, and (ii) the merger will be consummated in a manner that complies in all respects with the applicable provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and all other applicable federal and state statutes, rules and regulations. In addition, for purposes of its written opinion, Howe Barnes relied on advice of counsel and independent accountants to Islands and Ameris as to all legal and financial reporting matters with respect to Islands and Ameris, the merger and the merger agreement. No opinion was expressed by Howe Barnes as to whether any alternative transaction might produce consideration for the holders of our common stock in an amount in excess of that contemplated in the merger. In certain analyses described below that involve our per share data, Howe Barnes adjusted the data for the dilutive effects of stock options and warrants using the treasury method.
In connection with rendering its opinion to our board, Howe Barnes performed a variety of financial and comparative analyses, which are briefly summarized below. Such a summary of those analyses does not purport to be a complete description of the analyses performed by Howe Barnes. Moreover, Howe Barnes believes that the analyses must be considered as a whole and that selecting portions of the analyses and the factors considered, including information presented in tabular form, without considering all of the analyses and factors, could create an incomplete understanding of the process underlying the analyses and, more importantly, a misleading or incomplete view of the written opinion as to fairness from a financial point of view that is based on those analyses. The preparation of a financial advisors opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analyses or a summary description of such analyses. In its full analysis, Howe Barnes also included assumptions with respect to general economic, financial market, and other financial conditions. Furthermore, Howe Barnes drew from its past experience in similar transactions, as well as its experience in the valuation of securities and its general knowledge of the banking industry as a whole. Any estimates in Howe Barnes analyses are not necessarily indicative of actual future results or values, which may
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significantly diverge more or less favorably from those estimates. Estimates of company valuations do not purport to be appraisals or to necessarily reflect the prices at which companies or their respective securities actually may be sold. None of the individual analyses performed by Howe Barnes were assigned a greater significance by Howe Barnes than any other in forming its written opinion.
BANK MERGER MARKET OVERVIEW
In rendering its opinion, Howe Barnes reviewed certain pricing trends in the broader bank merger market. Howe Barnes analyzed the pricing for bank mergers on a historical basis distinguishing between banks with less than $100 million in assets and banks with greater than $100 million in assets. The table below shows the pricing ratios reviewed by Howe Barnes:
Price/Tangible Book Value | Price/ LTM Earnings (2) | |||||||||
Year |
Banks < $100MM in Assets |
Banks > $100MM in Assets |
Banks < $100MM in Assets |
Banks > $100MM in Assets |
||||||
1996 |
175 | % | 208 | % | 16.0x | 17.3x | ||||
1997 |
187 | % | 254 | % | 17.6x | 20.7x | ||||
1998 |
222 | % | 312 | % | 21.1x | 23.7x | ||||
1999 |
185 | % | 272 | % | 21.6x | 21.8x | ||||
2000 |
167 | % | 249 | % | 20.4x | 19.5x | ||||
2001 |
152 | % | 211 | % | 26.0x | 18.9x | ||||
2002 |
153 | % | 226 | % | 26.0x | 21.5x | ||||
2003 |
176 | % | 256 | % | 28.1x | 23.1x | ||||
2004 |
171 | % | 258 | % | 31.2x | 24.8x | ||||
2005 |
179 | % | 258 | % | 34.2x | 23.6x | ||||
2006 YTD (1) |
195 | % | 265 | % | 30.8x | 23.5x |
Source: SNL Financial, LC
(1) | Year to date as of June 27, 2006 |
(2) | LTM = last twelve months |
Howe Barnes noted that banks with less than $100 million in assets have consistently sold for lower multiples of tangible book value than banks with greater than $100 million in assets. Additionally, Howe Barnes demonstrated that since 2001 banks with less than $100 million in assets have sold for higher multiples of trailing earnings than banks with greater than $100 million assets.
Howe Barnes compared the pricing for Islands with several broad peer groups of transactions with similar characteristics to Islands. These broad peer groups are bank transactions announced twelve months prior to and included June 23, 2006.
Broad Peer Group: |
Price/Book Value |
Price/Tangible Book Value |
Price/ Reported Earnings |
Tangible Book Value Premium/ Core Deposits (2) |
|||||||
All U.S. |
225 | % | 238 | % | 22.3x | 18.1 | % | ||||
Southeast |
251 | % | 275 | % | 19.9x | 22.2 | % | ||||
Assets $50 to $100 million |
201 | % | 204 | % | 18.7x | 16.8 | % | ||||
Deal value $10 to $25 million |
185 | % | 191 | % | 19.5x | 13.7 | % | ||||
ROA 0.75% to 1.00% |
246 | % | 247 | % | 25.5x | 19.5 | % | ||||
ROE 9.0% to 12.0% |
224 | % | 230 | % | 22.1x | 14.8 | % | ||||
Islands (1) |
273 | % | 273 | % | 35.1x | 26.3 | % |
Source: SNL Financial, LC
(1) | Based on a price of $22.50 per share. |
(2) | Premium over tangible book value as a percentage of core deposits (total deposits less time deposits of $100,000 or more). |
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COMPARABLE TRANSACTION ANALYSIS
In rendering its opinion, Howe Barnes analyzed certain bank merger transactions that it deemed to be comparable to the proposed merger. Howe Barnes did not include every transaction that could be deemed to have occurred in the relevant industries. Howe Barnes selected two groups of comparable transactions: a group of comparable bank transactions focused on similar sized institutions (the Bank Peer Group) and a group of comparable bank transactions where the seller was located on the coast (the Coastal Peer Group).
Howe Barnes selected a Bank Peer Group which included 16 pending or completed bank merger transactions announced between December 31, 2003 and June 23, 2006 in which the selling institution was similar to us with respect to asset size, tangible capital, and profitability. Howe Barnes excluded transactions that would be considered a merger of equals. Howe Barnes used the following criteria to select comparable transactions:
| total assets between $25 million and $125 million at the time of announcement; |
| headquarters located in Florida, Georgia, North Carolina, South Carolina, Tennessee or Virginia; |
| a ratio of tangible capital to assets between 6% and 12% at the time of announcement; |
| a ratio of non-performing assets to total assets of less than 1.50% at the time of announcement; and |
| which did not report losses for either the most recent fiscal period or the last fiscal year before the transaction was announced. |
These criteria resulted in the following transactions (the Guideline Transactions):
Target |
Acquiror |
|
Southern Commerce Bank (FL) |
Dickinson Financial Corp. II (MO) |
|
SunCoast Bancorp Inc. (FL) |
NBC Capital Corp. (MS) |
|
Progressive State Bank (NC) |
New Century Bancorp Inc. (NC) |
|
Mountain Bancshares Inc. (GA) |
GB&T Bancshares Inc. (GA) |
|
Dekalb Bankshares (SC) |
First Community Corp. (SC) |
|
Buford Banking Group Inc. (GA) |
Gwinnett Commercial Group Inc. (GA) |
|
Sun Bancshares Inc. (SC) |
SCBT Financial Corp. (SC) |
|
West Metro Financial Services (GA) |
First Horizon National Corp. (TN) |
|
Academy Bank (TN) |
Bank of the South (TN) |
|
Peoples Community Capital Corp (SC) |
First Citizens Bancorp. (SC) |
|
FNBG Bancshares, Inc. (GA) |
GB&T Bancshares Inc. (GA) |
|
Community Bank of Smith County (TN) |
Wilson Bank Holding Company (TN) |
|
Eagle National Bank (GA) |
United Community Banks Inc. (GA) |
|
Coquina Bank (FL) |
Alabama National BanCorp. (AL) |
|
American Banking Corp. (FL) |
Citizens Banking Corp (FL) |
|
Quincy State Bank (FL) |
Capital City Bank Group Inc. (FL) |
Howe Barnes reviewed and compared financial performance and pricing information for the Guideline Transactions using data provided by SNL Financial, LC, a respected source of transaction data for the financial services industry, to financial and pricing ratios for Islands and the proposed merger, respectively. Howe Barnes compared the pricing ratios for the proposed merger to the average, median, maximum, and minimum ratios for the Guideline Transactions based on (1) price to book value, (2) price to tangible book value, (3) price to last 12 months reported earnings, and (4) tangible book value premium divided by core deposits.
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The following table represents a summary analysis of the pricing ratios for the Guideline Transactions and the proposed merger:
Guideline Transactions |
Price/Book Value |
Price/Tangible Book Value |
Price/Reported Earnings |
Tangible Book Value Premium/ Core Deposits (2) |
|||||||
Average |
252 | % | 252 | % | 29.1x | 23.9 | % | ||||
Maximum |
350 | % | 350 | % | 38.0x | 33.3 | % | ||||
Median |
239 | % | 239 | % | 31.0x | 24.4 | % | ||||
Minimum |
189 | % | 189 | % | 9.8x | 12.9 | % | ||||
Islands (1) |
273 | % | 273 | % | 35.1x | 26.3 | % |
(1) | Based on the purchase price of $22.50 per share. |
(2) | Premium over tangible book value as a percentage of core deposits (total deposits less time deposits of $100,000 or more). |
Howe Barnes selected a Coastal Peer Group which included 14 pending or completed bank merger transactions announced between December 31, 2003 and June 23, 2006 in which the selling institution was located on the coast and was similar to us with respect to asset size, tangible capital, and profitability. Howe Barnes excluded transactions that would be considered a merger of equals. Howe Barnes used the following criteria to select comparable transactions:
| total assets less than $500 million at the time of announcement; and |
| headquarters located in Florida, Georgia, North Carolina, South Carolina, Tennessee or Virginia. |
These criteria resulted in the following transactions (the Coastal Guideline Transactions):
Target |
Acquiror |
|
Bankshares Inc. (FL) |
Castle Creek Capital LLC (CA) | |
Beach Bank (FL) |
Sun American Bancorp (FL) | |
Southern Commerce Bank (FL) |
Dickinson Financial Corp. II (MO) | |
Port City Capital Bank (NC) |
Crescent Financial Corp. (NC) | |
SunCoast Bancorp Inc. (FL) |
NBC Capital Corp. (MS) | |
Banking Corporation of Florida (FL) |
Synovus Financial Corp. (GA) | |
First National Bancshares Inc. (FL) |
Whitney Holding Corp. (LA) | |
Sun Bancshares Inc. (SC) |
SCBT Financial Corp. (SC) | |
First National Banc Inc. (GA) |
ABC Bancorp (GA) | |
Tarpon Coast Bancorp (FL) |
First Busey Corp. (IL) | |
Marine Bancorp Inc. (FL) |
Home Bancshares Inc. (AR) | |
Pointe Financial Corp. (FL) |
South Financial Group Inc. (SC) | |
Citizens Bancshares Inc. (FL) |
ABC Bancorp (GA) | |
Madison Bancshares Inc. (FL) |
Whitney Holding Corp. (LA) |
Howe Barnes reviewed and compared financial performance and pricing information for the Coastal Guideline Transactions using data provided by SNL Financial, LC, a respected source of transaction data for the financial services industry, to financial and pricing ratios for Islands and the proposed merger, respectively. Howe Barnes compared the pricing ratios for the proposed merger to the average, median, maximum, and minimum ratios for the Coastal Guideline Transactions based on (1) price to book value, (2) price to tangible book value, (3) price to last 12 months reported earnings, and (4) tangible book value premium divided by core deposits.
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The following table represents a summary analysis of the pricing ratios for the Coastal Guideline Transactions and the proposed merger:
Costal Guideline Transactions |
Price/Book Value |
Price/Tangible Book Value |
Price/Reported Earnings |
Tangible Book Value Premium/ Core Deposits (2) |
|||||||
Average |
293 | % | 304 | % | 24.9x | 24.9 | % | ||||
Maximum |
437 | % | 457 | % | 34.4x | 39.9 | % | ||||
Median |
293 | % | 300 | % | 22.9x | 25.8 | % | ||||
Minimum |
198 | % | 198 | % | 12.9x | 6.8 | % | ||||
Islands (1) |
273 | % | 273 | % | 35.1x | 26.3 | % |
(1) | Based on the purchase price of $22.50 per share. |
(2) | Premium over tangible book value as a percentage of core deposits (total deposits less time deposits of $100,000 or more). |
The proposed purchase price of $22.50 per share represents 273% of our book value and tangible book value at June 30, 2006. These ratios are higher the average and median price to book value and price to tangible book value ratios exhibited by the Guideline Transactions and slightly lower than the average and median price to book value and price to tangible book value ratios exhibited by the Coastal Guideline Transactions. The core deposit premium of 26.3% represented by the aggregate merger consideration is slightly higher than the average and median core deposit premiums for the Guideline Transactions and Coastal Guideline Transactions. The price to earnings ratio of 35.1x for Islands was higher than the average and median price to earnings ratios for the Guideline Transactions and the Coastal Guideline Transactions.
No company used as a comparison in the above analyses is identical to us and no other transaction is identical to the merger. Accordingly, an analysis of the results of the foregoing is not purely mathematical; rather, such analyses involve complex considerations and judgments concerning differences in financial market and operating characteristics of the companies and other factors.
DISCOUNTED CASH FLOW ANALYSIS
Howe Barnes prepared a discounted cash flow analysis with regard to our estimated acquisition values. This analysis used projected earnings for the fiscal years 2007 through 2010 supplied by our management, and pre-tax merger cost savings of approximately $1,230,000 per year. Howe Barnes selected long-term growth rates of 5% to 8% and discount rates of 15% to 18% for purposes of this analysis. The analyses resulted in a range of present values of between $15.53 and $27.15 per common share of Islands. Howe Barnes observed that the estimated purchase price of $22.50 in the proposed merger lies within this range. This analysis was based on assumptions used by Howe Barnes in estimating our acquisition value, and is not necessarily indicative of actual values or actual future results and does not purport to reflect the prices at which any securities may trade at the present or at any time in the future. Howe Barnes noted that the discounted earnings was considered because it is a widely used valuation methodology, but that the results of the methodology are not conclusive and are highly dependent upon the numerous assumptions that must be made, including earnings growth rates, discount rates, terminal multiples, and cost savings.
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CONTRIBUTION ANALYSIS
Howe Barnes compared the contribution of Islands to the combined companies relative to the approximate ownership of the combined companies. Based on the merger consideration being paid 75% in stock and 25% in cash, the analysis indicated that Islands shareholders would own approximately 4.4% of the pro forma shares of Ameris. Islands approximate contributions are listed below by category:
Islands Contribution | |||
Assets |
3.8 | % | |
Loans |
4.5 | % | |
Deposits |
4.0 | % | |
Equity |
4.3 | % | |
Tangible equity |
6.2 | % | |
Pro Forma Ownership |
4.4 | % |
We have agreed to pay Howe Barnes a fee equal to a percentage of the aggregate merger consideration as compensation for financial advisory services rendered in connection with the proposed merger. Our board was aware of the fee arrangement with Howe Barnes and took it into account in considering Howe Barnes fairness opinion and in approving the merger. In addition, we have agreed to reimburse Howe Barnes for all reasonable expenses incurred by it on our behalf, and to indemnify Howe Barnes against some liabilities, including liabilities which may arise under the federal securities laws.
As noted above, the discussion in this section is merely a summary of the analyses and examinations that Howe Barnes considered to be material to its opinion. It is not a comprehensive description of all analyses and examinations actually conducted by Howe Barnes. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that the analysis was given greater weight than any other analysis. Accordingly, the ranges of valuations resulting from any particular analysis described above should not be taken to be Howe Barnes view of our actual value.
In performing its analyses, Howe Barnes made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond our control. The analyses performed by Howe Barnes are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those suggested by those analyses. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, those analyses and estimates are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, and Howe Barnes does not assume any responsibility if future results are materially different from those projected. As described above, Howe Barnes opinion and presentation to our board were among the many factors taken into consideration by our board in making its determination to approve, and to recommend that our shareholders approve, the merger.
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EXCHANGE OF ISLANDS STOCK CERTIFICATES
Prior to the special meeting, a letter of transmittal furnishing instructions for exchanging Islands stock certificates (and for replacing any lost, stolen or destroyed certificates) will be mailed under separate cover to you on the effective date of the merger. You should return this letter of transmittal, as soon as possible, together with your stock certificates to , the exchange agent for Ameris. As soon as practicable after the completion of the merger and receipt by the exchange agent of your Islands stock certificates, you will be mailed the cash and Ameris common stock (including cash for any fractional share interest or dividends or distributions) to which you are entitled pursuant to the merger agreement.
As of the effective date of the merger, each Islands stock certificate will be deemed for all corporate purposes only to evidence the right to receive cash and certificates representing shares of Ameris common stock pursuant to the merger agreement. Until the merger is completed and your Islands stock certificate is surrendered (or suitable arrangements made for any lost, stolen or destroyed certificate), you:
| will not be issued a certificate representing the shares of Ameris common stock which you are otherwise entitled to receive; |
| will not be paid the cash which you are otherwise entitled to receive; and |
| will not be paid dividends or other distributions in respect of the shares of Ameris common stock which you are otherwise entitled to receive. |
Any dividends or distributions or other cash payable to you will be retained, without interest, for your account until the completion of the merger and you surrender your stock certificate in accordance with the letter of transmittal.
If any certificates for shares of Ameris common stock are to be issued in a name other than that for which an Islands share certificate surrendered or exchanged is issued, then the Islands share certificate so surrendered must be properly endorsed and otherwise in proper form for transfer, and the person requesting the exchange must affix any requisite stock transfer tax stamps to such certificate surrendered, provide funds for their purchase, or establish to the satisfaction of the exchange agent that such taxes are not payable.
To the extent permitted by law, you will be entitled to vote after the effective time of the merger at any meeting of Ameris shareholders the number of shares of Ameris common stock into which you Islands stock are converted, regardless of whether you have exchanged certificates representing your Islands stock for certificates representing Ameris common stock.
There will be no transfers of shares of Islands common stock on Islands stock transfer books after the effective time of the merger. Islands common stock certificates presented for transfer after the effective time of the merger will be canceled and exchanged for cash and shares of Ameris common stock certificates.
Existing Ameris shareholders will keep their existing stock certificates and should not deliver any certificates for Ameris common stock.
The merger will be consummated if it is approved by the shareholders of Islands and if Ameris and Islands obtain all required consents and approvals, including the approvals of the Federal Reserve Board, the Georgia Department of Banking and Finance and the South Carolina Board of Financial Institutions, and satisfy the other conditions to the obligations of the parties to consummate the merger. The merger will become effective on the date and at the time that a certificate of merger is issued by the Secretary of State of Georgia. We presently expect that the effective date will occur in the fourth quarter of 2006.
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Upon completion of the merger, the separate legal existence of Islands will cease, and Islands Bank will become a wholly-owned subsidiary of Ameris. All property, rights, powers, duties, obligations, debts and liabilities of Islands will automatically be transferred to Ameris. Ameriss Articles of Incorporation will govern the combined entity. Thereafter, Islands Bank will merge with and into American Banking Company, a wholly-owned subsidiary of Ameris, and its separate existence will cease.
Except as described in the next paragraph, if the merger is completed, then you will receive, for each Islands share that you own, either the per share purchase price in cash or a to-be-determined number of shares of Ameris common stock with a market value, measured as of the trading period, equal to the per share purchase price. The per share purchase price will be $22.50 if Islands tangible capital measured as of two business days prior to the closing of the merger is at least $6,150,000 and will be $22.25 if the tangible capital measured as of such date is less than $6,150,000 but at least $6,000,000.
You may elect to receive Ameris common stock, cash or a combination of stock and cash for your Islands shares, subject to proration in the event the aggregate stock elections are greater or less than 75%. It is possible, therefore, that you will receive a different proportion of stock and cash than you elect. For example, if stock elections representing more than 75% of the outstanding shares of Islands common stock prior to the merger are made, Ameris will prorate the number of shares of its common stock that the holders of Islands common stock will receive so that no more than 75% of the Islands shares are converted into Ameris common stock. Ameris will not issue fractional shares. See the section entitled Terms of the MergerFractional Shares at page 32.
Except as noted below, the exchange ratio in the merger is a floatingrather than fixedexchange ratio. This means that the number of shares of Ameris common stock to be issued in the merger for each share of Islands common stock will increase or decrease based upon the average closing price of Ameris common stock during the trading period in order to ensure that the value of the Ameris common stock received in the merger, measured as of the trading period, will equal the per share purchase price, so long as the average closing price of Ameris common stock during the trading period is not less than $21.00 (an exchange ratio of 1.0714 at a per share purchase price of $22.50 and 1.0595 at a per share purchase price of $22.25) or higher than $28.00 (an exchange ratio of 0.8036 at a per share purchase price of $22.50 and 0.7946 at a per share purchase price of $22.25).
If the average closing price of the Ameris common stock during the trading period is less than $21.00 per share, then Islands and Ameris will each have the right to terminate the merger agreement. If neither party elects to terminate, then Ameris, in its discretion, will either issue additional shares of Ameris common stock to you or pay additional cash to you so that you will receive value equal to the per share purchase price. If the average closing price of the Ameris common stock during the trading period is less than $21.00 per share and neither Islands nor Ameris exercises its right of termination, then the value of the Ameris common stock you will receive for each share of Islands common stock will be less than the per share purchase price measured as of the trading period. If the average closing price of Ameris common stock during the trading period is higher than $28.00 per share, then the exchange ratio will be fixed at 0.8036 (if the per share purchase price is $22.50) or 0.7946 (if the per share purchase price is $22.25), and the value of the Ameris common stock you will receive for each share of Islands common stock will be more than the per share purchase price measured as of the trading period.
The following table shows examples of the number of shares of Ameris common stock and cash into which 100 shares of Islands common stock would be converted in the merger with a mix of merger consideration of 75% stock and 25% cash, assuming that the average closing price for Ameris stock during the trading period is as specified below and the per share purchase price is $22.50. The table also assumes no dissenters rights are
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exercised and ignores the payment of cash in lieu of fractional shares. Each share of Islands common stock held in the treasury of Islands and each share of Islands common stock owned by Ameris or any subsidiary of Ameris or Islands, other than in a fiduciary capacity, immediately prior to the effective time of the merger will be canceled and extinguished. No payment will be made with respect to such shares.
MERGER CONSIDERATION EXCHANGED FOR 100 SHARES OF ISLANDS COMMON STOCK |
|||||||
ASSUMED AVERAGE CLOSING PRICE OF AMERIS COMMON STOCK |
RESULTING EXCHANGE RATIO |
CASH |
NUMBER OF SHARES OF
AMERIS COMMON
|
||||
$28.00 |
0.8036 | $ | 562.50 | 60 | |||
$26.60 |
0.8459 | $ | 562.50 | 65 | |||
$23.60 |
0.9534 | $ | 562.50 | 73 | |||
$21.00 |
1.0714 | $ | 562.50 | 80 |
We cannot assure you that the current fair market value of Ameris or Islands common stock will be equivalent to the fair market value of Ameris or Islands common stock on the effective date of the merger.
If the aggregate number of shares of Islands common stock in respect of which stock elections have been made exceeds 75% of the number of shares of Islands common stock outstanding immediately prior to the effective time of the merger, then the number of shares of Islands common stock which each holder who has not properly submitted an election form otherwise would have been entitled to receive will be reduced proportionately for each such holder (based on the number of shares held by such holder as compared to the number of shares held by all such non-electing holders) to the extent necessary so that the aggregate number of shares entitled to receive stock shall equal 75% of the number of shares of Islands common stock outstanding immediately prior to the effective time of the merger. If, after redesignating all shares held by non-electing holders to provide for the payment of cash for such shares, the aggregate number of shares entitled to receive stock continues to exceed 75%, then the number of shares of Islands common stock for which each electing holder has made an election to receive stock and otherwise would have been entitled to receive stock will be reduced proportionately for each such holder (based on the number of shares as to which an election was made by such holder as compared to the number of shares as to which an election was made by all electing holders) to the extent necessary so that the aggregate number of shares entitled to receive stock shall equal 75% of the number of shares of Islands common stock outstanding immediately prior to the effective time of the merger. Each share of Islands common stock that is not converted into stock will be converted into the right to receive the per share purchase price in cash.
If the aggregate number of shares of Islands common stock in respect of which cash elections have been made exceeds 25% of the number of shares of Islands common stock outstanding immediately prior to the effective time of the merger, then the number of shares of Islands common stock for which each holder who has made an election to receive cash and otherwise would have been entitled to receive cash will be reduced proportionately for each such holder (based on the number of shares as to which an election was made by such holder as compared to the number of shares as to which an election was made by all holders) to the extent necessary so that the aggregate number of shares entitled to receive cash shall equal 25% of the number of shares of Islands common stock outstanding immediately prior to the effective time of the merger. Each share of Islands common stock that is not converted into cash will be converted into the right to receive shares of Ameris common stock.
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Holders of shares of Islands common stock who properly elect to exercise the appraisal rights provided for in Chapter 13 of the South Carolina Business Corporation Act of 1988 will not have their shares converted into the right to receive merger consideration. If a holders appraisal rights are lost or withdrawn, then such holder will receive the same consideration as all other holders of Islands common stock. For more information, see the section entitled Statutory Provisions for Dissenting Shareholders at page 42.
Ameris will not issue any fractional shares of its common stock to Islands shareholders. Islands shareholders who would otherwise be entitled to receive a fractional share of Ameris common stock instead will receive cash, without interest, for such fractional share in an amount equal to the product of the fraction multiplied by the average closing price of the Ameris common stock during the trading period. You will not be entitled to dividends, voting rights or any other shareholder rights with respect to any fractional share interest.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties relating, among other things, to:
| the organization and capital structures of Ameris and Islands; |
| the contracts, employees, employee benefits, labor relations, litigation, real property, intangible assets and environmental compliance of Islands; |
| the due authorization, execution, delivery, performance and enforceability of the merger agreement; |
| consents or approvals of regulatory authorities and third parties necessary to complete the merger; |
| certain financial statements through the period ended June 30, 2006 fairly presenting the financial condition and results of operations of the respective parties in conformity with GAAP; and |
| the absence of material adverse changes, since June 30, 2006, in the consolidated assets, business, liabilities, financial condition and results of operations of Ameris (and its subsidiaries) and Islands (and its subsidiaries) or in any of their respective relationships with customers, employees, lessors or others. |
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the merger agreement, Ameris and Islands have each agreed to use reasonable efforts to preserve their business organizations intact and to maintain satisfactory relationships with their customers, suppliers, regulators and employees. In addition, Ameris and Islands agreed to conduct their businesses and to engage in transactions only in the ordinary course of business as conducted at the date of the merger agreement and in compliance in all material respects with all applicable laws and regulations and all contracts to which either is a party.
Among other things, without Ameriss prior written consent (which will not be unreasonably withheld or delayed), Islands has agreed not to:
| amend its Articles of Incorporation, Bylaws or other governing instruments; |
| repurchase, redeem or otherwise acquire or declare or pay any dividend or make any other distribution in respect of its capital stock; |
| engage in certain activities such as selling, leasing, mortgaging or otherwise disposing of property having a book value exceeding $50,000 or incur indebtedness (except in the ordinary course of business for reasonable and adequate consideration); |
| enter into any compensation agreements or increase salaries, employee benefits, directors fees or bonuses, except to the extent consistent with past practices; |
32
| increase any compensation or benefits payable to its officers and employees, pay any bonuses, enter into or amend any severance protection agreements or pay or grant bonuses to any of its directors; |
| adopt or change employee benefit plans unless required by law, regulation or judicial interpretation or as deemed necessary or advisable, in the opinion of counsel, to maintain its tax status; |
| acquire direct control of any other person or entity except under certain circumstances; |
| modify or amend any material contracts; |
| adjust, split, combine or reclassify any of its capital stock or sell, lease, dispose of or otherwise encumber any shares of its capital stock or any asset with a book value in excess of $50,000; or |
| commence or settle any litigation with a potential liability to Islands in excess of $25,000. |
Islands has also agreed, among other things, to:
| maintain accurate books and records; |
| file all reports required to be filed with regulatory agencies; and |
| operate its business in the usual, regular and ordinary course and to preserve intact its business organization and assets. |
The merger agreement requires Islands to consult with Ameris on all strategic and operational matters and to permit a representative of Ameris to attend all board meetings of Islands and Islands Bank in a non-voting observer capacity. The purpose of these provisions is to facilitate the full exchange of information concerning the business, operations, capital spending, budgets and financial results of Ameris and Islands until the completion of the merger and to facilitate the efficient transition and combination of the two businesses.
The obligations of Islands and Ameris to consummate the merger are subject to various conditions, including the following:
| the merger agreement shall have been duly approved by the Islands shareholders; |
| all necessary governmental approvals for the merger shall have been obtained, and all waiting periods required by law or imposed by any governmental authority with respect to the merger shall have expired (see the section entitled Terms of the Merger-Required Regulatory Approvals at page 34); |
| no action, suit, proceeding or claim shall have been instituted, made or threatened relating to the merger; |
| Islands shall have received an opinion of its counsel dated as of the effective date of the merger to the effect that, among other things, the merger will be treated for federal income tax purposes as a tax-free reorganization within the meaning of Section 368(a) of the Code (see the section entitled Federal Income Tax Consequences of the Merger at page 39); |
| the representations and warranties of Ameris and Islands shall be accurate in all material respects as of the date of the merger agreement and as of the effective date of the merger; |
| the tangible capital of Islands measured as of two business days prior to the closing of the merger shall be at least $6,000,000; |
| Ameris and Islands shall have performed in all material respects all covenants and obligations required to be performed by each of them at or prior to the effective date of the merger; |
|
the registration statement registering the shares of Ameris common stock to be received by Islands shareholders, of which this proxy statement/prospectus is a part, shall have been declared effective by |
33
the SEC, no stop order suspending the effectiveness of the registration statement shall have been issued, no action, suit, proceeding or investigation by the SEC to suspend the effectiveness of the registration statement shall have been initiated and be continuing, and all necessary approvals under federal and state securities laws relating to the issuance or trading of shares of Ameris common stock issuable pursuant to the merger shall have been received; and |
| other conditions which are customary for transactions of the type contemplated by the merger agreement. |
See the sections entitled Terms of the Merger-Representations and Warranties at page 32 and Terms of the Merger-Conduct of Business Pending the Merger at page 32.
The merger may not proceed unless we receive the required regulatory approvals. We know of no reason why such approvals will not be obtained, but we cannot assure you that such regulatory approvals will be obtained or when we will obtain them. The Federal Reserve Board, the Georgia Department of Banking and Finance and the South Carolina Board of Financial Institutions must approve the merger. We will also be required to notify the Office of the Comptroller of the Currency (the OCC) prior to consummating the merger. Applications for the approvals described in this section were filed with the Federal Reserve Board and the Georgia Department of Banking and Finance on September 29, 2006 and with the South Carolina Board of Financial Institutions on October 2, 2006. We are not aware of any other regulatory approvals or actions that are required for consummation of the merger. Should any other approval or action be required, we presently contemplate that such approval or action would be sought.
In evaluating the merger, the Federal Reserve Board must consider, among other factors, the financial and managerial resources and future prospects of the institutions and the convenience and needs of the communities to be served. The relevant statutes prohibit the Federal Reserve Board from approving the merger if:
| it would result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of the United States; or |
| its effect in any section of the country could be to lessen substantially competition or to tend to create a monopoly, or if it would result in a restraint of trade in any other manner, unless the Federal Reserve Board should find that any anti-competitive effects are outweighed clearly by the public interest and the probable effect of the transaction in meeting the convenience and needs of the communities to be served. |
The merger may not be consummated until the fifteenth day following the date of approval by the Federal Reserve Board, during which time the United States Department of Justice will be afforded the opportunity to challenge the transaction on antitrust grounds. The commencement of any antitrust action will stay the effectiveness of the approval of the agencies, unless a court of competent jurisdiction should specifically order otherwise.
The Georgia Department of Banking and Finance and the FDIC must approve the merger of Islands Bank with and into American Banking Company. In their evaluation of each of these transactions, the Georgia Department of Banking and Finance and the FDIC will take into account considerations similar to those taken into account by the Federal Reserve Board.
WAIVER, AMENDMENT AND TERMINATION
We may agree to amend the merger agreement. However, after approval and adoption of the merger agreement by the Islands shareholders, we cannot enter into any amendment that reduces the merger consideration payable in exchange for the Islands shares without the approval of the Islands shareholders. One party may waive any breach of the merger agreement by the other party or the failure of the other party to meet any conditions or terms of the merger agreement.
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The merger agreement may be terminated and the merger abandoned at any time prior to the effective date, even though we have received the approval of Islands shareholders:
| by our mutual consent; |
| by either one of us if, without the fault of the terminating party, the closing of the merger does not occur on or before March 31, 2007; |
| by either of us (if the terminating party is not in material breach) if regulatory approval is denied; |
| by either of us if: (i) the other party materially breaches its representations, warranties or covenants under the merger agreement and the breach is not corrected within 30 days after notice, (ii) an event or circumstance arises as a result of which the other party will be unable to satisfy certain conditions of the merger agreement, or (iii) if, at the closing of the merger, any condition to the obligations of such party is not met; |
| by Islands if it has entered into a definitive agreement to be acquired by another party, so long as Islands complies with the terms of the merger agreement and pays Ameris the fee described in the section entitled Terms of the Merger- Expenses and Fees in Connection with the Merger at page 35; or |
| by either of us, under certain circumstances, if the average closing price of the Ameris common stock during the trading period is less than $21.00 per share. |
If the merger is terminated as described above, the merger agreement will have no effect, except for certain of its provisions, including those relating to the obligations to maintain the confidentiality of certain information and to return all documents obtained from the other party under the merger agreement.
EXPENSES AND FEES IN CONNECTION WITH THE MERGER
Islands and Ameris each will bear its respective costs and expenses incurred in connection with the merger, including the fees, expenses and disbursements of its respective counsel and auditors and one-half of the costs incurred in connection with printing and mailing this proxy statement/prospectus, whether or not the merger is consummated. However, in the event that the merger agreement is terminated by Islands upon execution of a definitive agreement with a third party or in the event that, prior to the termination of the merger agreement, Islands receives a takeover proposal and, within one year of such termination, enters into, approves, recommends or takes action with respect to a merger, consolidation or other business combination with any other person, then Islands will have to pay to Ameris the sum of $500,000. Also, if the merger agreement is terminated because either Ameris or Islands materially breaches its representations, warranties or covenants thereunder, the non-breaching party will be entitled to immediate reimbursement of its merger-related expenses up to $250,000 from the breaching party and will be free to pursue all other remedies available to it by reason of such breach.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Ameris intends to undertake a comprehensive review of the business operations, capitalization and management of Islands after the merger and, based on the results of such review, intends to develop and implement a business plan aimed at maximizing the financial condition, operating results and future prospects of the combined company.
NON-COMPETITION AND NON-DISCLOSURE AGREEMENTS
It is a condition to the consummation of the merger that each director of Islands enter into a non-competition and non-disclosure agreement with Ameris. The agreement will provide that such director will not engage or participate in any business or enterprise that competes with the business activities of Ameris or Islands. The agreement will be effective for one year following the completion of the merger. The scope of the agreement will be limited to a geographic area within a 50-mile radius of Beaufort, South Carolina.
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In addition, the agreement will provide that for one year following the completion of the merger, such director will not recruit certain employees of Islands or Ameris and will be prohibited from influencing certain persons to discontinue or reduce their business relationship with Ameris or Islands.
The agreement will further provide that such director will not disclose any confidential information of Ameris or Islands for one year following the closing of the merger or reveal any trade secrets of Ameris or Islands for so long as they remain trade secrets.
The description of the non-competition and non-disclosure agreement is qualified by reference to the complete text of such agreement, which is an exhibit to the merger agreement which is attached as APPENDIX A to this proxy statement/prospectus.
ISLANDS STOCK OPTIONS AND WARRANTS
There are 40,869 outstanding options to purchase Islands common stock, which options have exercise prices of between $10.00 and $11.00 per share. Pursuant to the terms of the merger agreement, any option that is outstanding at the effective time of the merger will be cancelled in consideration of a cash payment to the option holder.
There are 112,550 outstanding warrants to purchase Islands common stock, each of which has an exercise price of $10.00 per share. Pursuant to the terms of the merger agreement, each warrant holder may elect to receive either Ameris common stock or cash in exchange for all of his or her warrants. A warrant holder who does not properly provide an election notice for his or her warrants will have those warrants cancelled at the effective time of the merger in consideration of Ameris common stock for 50% of the warrants and a cash payment for the remaining 50% of the warrants.
EMPLOYEE BENEFITS OF ISLANDS EMPLOYEES AFTER THE MERGER
Ameris has agreed to offer to all employees of Islands who become Ameris employees after the merger substantially the same employee benefits as those offered by Ameris to its employees having like tenure, officer status and compensation levels.
Ameris has agreed that all rights to indemnification and all limitations of liability existing in favor of indemnified parties under Islands Articles of Incorporation and Bylaws as in effect on August 15, 2006 with respect to matters occurring prior to or at the effective time of the merger will survive the merger. In addition, Ameris has agreed to cause the officers and directors of Islands to be covered by directors and officers liability insurance for three years following the effective time of the merger, subject to certain conditions.
No director or executive officer of Islands owns any Ameris common stock. No director or executive officer of Ameris has any personal interest in the merger other than as an Ameris shareholder. No Ameris director or executive officer owns any shares of Islands common stock.
NASDAQ LISTING AND PUBLIC TRADING MARKET
Ameris common stock is traded on The Nasdaq Global Select Market under the trading symbol ABCB. The shares of Ameris common stock issuable pursuant to the merger will be traded on the same market under the same symbol. The shares of Ameris common stock to be issued in the merger will be freely transferable under applicable securities laws, except to the extent of any limitations or restrictions applicable to any shares received by any shareholder who may be deemed an affiliate of Islands on the date of the special meeting or an affiliate of Ameris following completion of the merger. See the section entitled Restrictions on Resales by Affiliates at page 44.
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The holders of Ameris common stock receive dividends if and when declared by Ameriss board of directors out of legally available funds. Ameris declared a dividend of $0.14 per share of common stock for the fourth quarter of 2005 and for each of the first three quarters of 2006. Following the completion of the merger, Ameris expects to continue paying quarterly cash dividends on a basis consistent with past practice. However, the declaration and payment of dividends will depend upon business conditions, operating results, capital and reserve requirements and consideration by Ameriss board of directors of other relevant factors.
NO SOLICITATION OF ALTERNATIVE TRANSACTIONS
Islands was required to immediately cease any negotiations with any person regarding any acquisition transaction existing at the time the merger agreement was executed. In addition, neither Islands nor any of its subsidiaries may solicit, directly or indirectly, inquiries or proposals with respect to or, except under certain circumstances, furnish any information relating to, or participate in any negotiations or discussions concerning, any sale of all or substantially all of Islands assets, any purchase of a substantial equity interest in Islands or any merger or other combination with Islands. Subject to its fiduciary duties, Islands board of directors may not withdraw its recommendation to you of the merger or recommend to you any such other transaction.
Islands was also required to instruct their respective officers, directors, agents, and affiliates to refrain from taking action prohibited of Islands and is required to notify Ameris immediately if it receives any inquires from third parties. However, no director or officer of Islands is prohibited from taking any action that Islands board of directors determines in good faith, after consultation with counsel, is required by law or is required to discharge such directors or officers fiduciary duties.
ACCOUNTING TREATMENT OF THE MERGER
Ameris is required to account for the merger as a purchase transaction under GAAP. Under the purchase method of accounting, the assets (including identifiable intangible assets) and liabilities (including executory contracts and other commitments) of Islands will be recorded, as of completion of the merger, at their respective fair values and added to those of Ameris. Any excess of purchase price over the net fair value of Islands assets and liabilities is recorded as goodwill (excess purchase price). Financial statements and reported results of operations of Ameris issued after completion of the merger will reflect these values but will not be restated retroactively to reflect the historical financial position or results of operations of Islands. The results of operations of Islands will be included in the results of operations of Ameris following the effective time of the merger.
Concurrent with the execution of the merger agreement, Ameris and each member of Islands board of directors, who beneficially own, in the aggregate, approximately 34.0% of the outstanding shares of Islands common stock as of the record date, entered into a voting agreement. Pursuant to the voting agreement, each director agreed that he or she would vote, and granted Ameris an irrevocable proxy to vote, all shares of Islands common stock which such director beneficially owns and is entitled to vote (or direct the voting of):
| in favor of approval and adoption of the merger agreement, the merger, the other transactions contemplated by the merger agreement and any other actions required in furtherance of the merger agreement; |
| against any action, proposal, transaction or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement by Islands under the merger agreement or by any Islands shareholder under the voting agreement; and |
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| except with the written consent of Ameris, against any action or proposal (other than as contemplated by the merger agreement) involving Islands that is intended, or could reasonably be expected, to adversely affect or delay the merger or the transactions contemplated by the merger agreement, including: |
| a competing third-party proposal to acquire all or a significant portion of Islands; |
| any change in the persons who constitute Islands board of directors that is not approved in advance by at least a majority of the persons who were directors of Islands as of the date of the merger agreement or their successors who were so approved; |
| any material change in Islands capitalization or any amendment to Islands Articles of Incorporation or Bylaws; or |
| any other material change in Islands corporate structure or business. |
Each Islands director also agreed that, until the voting agreement is terminated, such director will not:
| sell, transfer, tender, pledge, encumber, assign or otherwise dispose of (which actions are collectively referred to herein as a Transfer), or enter into any contract, option or agreement with respect to the Transfer of, any shares of Islands common stock beneficially owned by such director (except for any Transfer between Islands shareholders who are both parties to the voting agreement and except for any pledge or encumbrance which does not impair any such directors ability to perform its obligations under the voting agreement); |
| take any action that would have the effect of preventing, impeding or adversely affecting such directors ability to perform such directors obligations under the voting agreement; or |
| solicit, initiate, conduct or continue any discussions or negotiations, or knowingly respond to or encourage any inquires or proposals, or provide any information to any person, relating to any competing third-party proposal to acquire all or a significant part of Islands. |
The voting agreement will terminate and have no further effect upon the earlier to occur of:
| the mutual consent of Ameris and the Islands shareholders who are parties to the voting agreement; |
| the date on which the merger is completed; |
| the date on which the merger agreement is terminated in accordance with its terms; and |
| the date on which the merger agreement is amended or modified, or any provision therein is waived, in a manner which reduces either the number of shares of Ameris common stock issuable or the amount of cash payable to the Islands shareholders pursuant to the merger agreement. |
The description of the voting agreement is qualified by reference to the complete text of the voting agreement, which is an exhibit to the merger agreement which is attached as APPENDIX A to this proxy statement/ prospectus.
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FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material anticipated federal income tax consequences of the merger. This summary is based on the federal income tax laws now in effect and as currently interpreted. This summary does not take into account possible changes in these laws or interpretations, including amendments to applicable statutes or regulations or changes in judicial or administrative rulings, some of which may have retroactive effect. This summary does not address all aspects of the possible federal income tax consequences of the merger and is not intended as tax advice to any person.
In particular, this summary does not address the federal income tax consequences of the merger to Islands shareholders in light of their particular circumstances or status. For example, this summary does not address the federal income taxation of the merger to Islands shareholders (i) who hold their shares of Islands common stock as part of a hedge, straddle, constructive sale or conversion transaction, as those terms are used in the Code, or (ii) who are foreign persons, tax-exempt entities, dealers in securities, insurance companies or corporations, among others. This summary also does not address any consequences of the merger under any state, local or foreign laws or the tax treatment of shares of Islands or options, warrants or other rights to purchase shares of Islands stock that are or have been received as compensation. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL AND OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, Powell Goldstein LLP, counsel to Islands, delivered a tax opinion to Islands to the effect that the merger will qualify as a tax-free reorganization under Section 368(a) of the Code and that a Islands shareholder will not recognize gain on the exchange of shares of Islands common stock in the merger in excess of the amount of cash received by the shareholder in the merger. That opinion was rendered (i) in reliance on certain representations provided by management of Islands and Ameris, (ii) based upon a specific assumption that Islands shareholders will receive as merger consideration Ameris common stock with a value equal to 75% of the value of total value of all Islands common stock as of the effective time of the merger, and (iii) subject to certain other assumptions and limitations as stated therein. It is a condition to Islands and Ameriss obligations to effect the merger that such tax opinion shall have been reissued in substantially the same form as of the effective time of the merger. Although the condition to receive the tax opinion at the closing of the merger is waivable, if such condition is waived by both Islands and Ameris, then the Islands shareholders will be re-solicited with respect to the merger.
The tax opinion of Powell Goldstein LLP is based upon the Code, the applicable regulations promulgated or proposed thereunder, current rulings of the Internal Revenue Service and judicial decisions as in effect on the date of such opinion, all of which are subject to modification or challenge at any time and perhaps with retroactive effect.
CONSEQUENCES TO ISLANDS SHAREHOLDERS
Each Islands shareholder who receives a combination of Ameris common stock and cash pursuant to the merger will realize gain or loss equal to the difference between (i) the sum of the cash plus the fair market value of the Ameris common stock received and (ii) such shareholders adjusted tax basis in the shares of Islands common stock surrendered. Any such gain will only be recognized to the extent of the cash received. Any such loss, however, will not be recognized but will instead be reflected in the tax basis of the Ameris common stock received. Accordingly, a Islands shareholder generally will be able to recognize any such loss as an offset to the amount realized upon a subsequent sale or exchange of such Ameris common stock. For this purpose, gain or loss must be calculated separately for each identifiable block of shares surrendered in the exchange, and a loss recognized on one block of shares of Islands common stock cannot be used to offset a gain recognized on another block of shares of Islands common stock.
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Any gain recognized by a Islands shareholder in the merger will be eligible for capital gain treatment (assuming the Islands shareholders shares of Islands common stock are held as a capital asset by the shareholder) unless the receipt of cash has the effect of a distribution of a dividend (within the meaning of Section 356 of the Code taking into account the constructive ownership rules of Section 318 of the Code), in which case such gain will be taxable as ordinary income to the extent of the shareholders ratable share of Islands undistributed earnings and profits. In general, the determination of whether the gain recognized in the exchange will be treated as capital gain or has the effect of a distribution of a dividend depends upon whether and to what extent the exchange reduces the shareholders deemed percentage stock ownership of Ameris. For purposes of this determination, the shareholder is treated as if the shareholder first exchanged all of the shareholders shares of Islands common stock solely for Ameris common stock and Ameris then immediately redeemed (which we refer to in this proxy statement/prospectus as a deemed redemption) a portion of the Ameris common stock in exchange for the cash the shareholder actually received. The gain recognized in the deemed redemption will be treated as capital gain if the deemed redemption is substantially disproportionate with respect to the shareholder or not essentially equivalent to a dividend.
The deemed redemption will generally be substantially disproportionate with respect to a shareholder if the percentage described in clause (ii) below is less than 80% of the percentage described in clause (i) below. Whether the deemed redemption is not essentially equivalent to a dividend with respect to a shareholder will depend upon the shareholders particular circumstances. At a minimum, however, in order for the deemed redemption to be not essentially equivalent to a dividend, the deemed redemption must result in a meaningful reduction in the shareholders deemed percentage stock ownership of Ameris. In general, that determination requires a comparison of (i) the percentage of the outstanding stock of Ameris that the shareholder is deemed actually and constructively to have owned immediately before the deemed redemption and (ii) the percentage of the outstanding stock of Ameris that is actually and constructively owned by the shareholder immediately after the deemed redemption. In applying the above tests, a shareholder may, under the constructive ownership rules, be deemed to own stock that is owned by other persons or stock underlying a shareholders option to purchase such stock in addition to the stock actually owned by the shareholder.
The Internal Revenue Service has ruled that a shareholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs is generally considered to have a meaningful reduction if that shareholder has a relatively minor reduction in that shareholders percentage stock ownership under the above analysis; accordingly, the gain recognized in the exchange by such a shareholder would be treated as capital gain.
These rules are complex and dependent upon the specific factual circumstances particular to each Islands shareholder. Consequently, each Islands shareholder that may be subject to these rules should consult such shareholders tax advisor as to the application of these rules to the particular facts relevant to such shareholder.
An Islands shareholder who receives Ameris common stock and cash will receive a basis in the Ameris common stock equal to the basis of the Islands stock surrendered in the exchange, decreased by the amount of cash received, and increased by the amount of any gain recognized on the exchange. The holding period of the Ameris common stock received by such a shareholder will include the holding period of the shares of Islands stock surrendered in the exchange, provided the surrendered shares were held as a capital asset as of the effective time of the merger.
The payment of cash to Islands shareholders in lieu of fractional shares of Ameris common stock will be treated as if such fractional shares were distributed as part of the exchange and then redeemed for cash. That means that, in general, gain or loss will be recognized, measured by the difference between the amount of cash received for such fractional shares and the basis of the Islands stock allocable to such fractional shares. In general, such gain or loss will constitute capital gain or loss if the shares of Islands stock were held as capital assets immediately prior to the effective time of the merger, which gain or loss will be long-term in nature if the shares of Islands stock exchanged therefor have been held (or are deemed to have been held) for more than one year.
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CONSEQUENCES TO ISLANDS AND AMERIS
If the merger is treated as a reorganization within the meaning of Section 368(a) of the Code, then no gain or loss will be recognized by Ameris or Islands in the merger.
Any Islands shareholder who dissents from the merger and receives solely cash in exchange for such shareholders Islands common stock will realize gain or loss equal to the difference between the cash received (other than amounts, if any, which are or are deemed to be interest for U.S. federal income tax purposes, which amounts will be taxed as ordinary income) and the shareholders adjusted tax basis in the Islands common stock surrendered. Any such gain or loss generally should be capital in nature, although any dissenting shareholder who will directly or constructively (under the attribution rules of Section 318 of the Code) own any shares of Ameris common stock immediately after the merger should consult such shareholders own tax advisor to determine whether any such gain could constitute dividend income in whole or in part.
Absent an applicable exemption, Ameriss exchange agent must withhold 28% of the cash consideration to which any Islands shareholder is entitled in the merger, unless the shareholder provides his or her tax identification number and certifies, under penalties of perjury, that such number is correct. Accordingly, if requested by the exchange agent, each Islands shareholder should complete an IRS Form W-9 or substitute form to provide the information and certification necessary to avoid this backup withholding. This information will be distributed to the Islands shareholders with the letter of transmittal.
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STATUTORY PROVISIONS FOR DISSENTING SHAREHOLDERS
The following discussion is not a complete description of the law relating to appraisal rights available under South Carolina law and is qualified by the full text of Chapter 13 of the South Carolina Business Corporation Act of 1988. Chapter 13 is attached as APPENDIX B to this proxy statement/prospectus. If you desire to exercise appraisal rights, you should review carefully Chapter 13 and are urged to consult a legal advisor before electing or attempting to exercise these rights.
Any holder of record of Islands common stock who objects to the merger, and who complies with all of the provisions of Chapter 13 of the South Carolina Business Corporation Act of 1988 (but not otherwise), will be entitled to demand and receive payment for all (but not less than all) of his or her shares of Islands common stock if the proposed merger is consummated.
A shareholder of Islands who objects to the merger and desires to receive payment of the fair value of his or her Islands common stock:
1. must file a written objection to the merger with Islands either prior to the special meeting or at the meeting but before the vote is taken, and the written objection must contain a statement that the shareholder intends to demand payment for his or her shares if the merger agreement is approved and adopted; AND
2. must not vote his or her shares in favor of the merger agreement; AND
3. must demand payment and deposit his or her certificate(s) in accordance with the terms of the dissenters notice sent to the dissenting shareholder by Islands following approval and adoption of the merger agreement.
A vote against the merger agreement alone will not constitute the separate written notice and demand for payment referred to immediately above. Dissenting shareholders must separately comply with all three conditions.
Any notice required to be given to Islands must be forwarded to Islands Bancorp, 2348 Boundary Street, Beaufort, South Carolina 29902, Attention: Chief Executive Officer.
If the merger agreement is approved and adopted, Islands will mail, no later than 10 days thereafter, by certified mail to each shareholder who has complied with conditions 1 and 2 above, written notice of such approval and adoption, addressed to the shareholder at such address as the shareholder has furnished Islands in writing or, if none, at the shareholders address as it appears on the records of Islands. Islands will set a date by which it must receive the payment demand, which date may not be fewer than 30 nor more than 60 days after the date the dissenters notice is delivered, and a date by which certificates must be deposited as instructed in the notice, which date may not be fewer than 20 days after the date the payment demand is received by Islands. The shareholder must make the written election to dissent and demand for payment described in condition 3 above by the payment demand date as set by Islands.
As soon as the merger is consummated, or upon receipt of a payment demand, Islands will pay to each dissenting shareholder who has substantially complied with the payment demand requirements of Chapter 13 of the South Carolina Business Corporation Act of 1988 the amount that Islands estimates to be the fair value of the shares of Islands common stock, plus accrued interest. This payment will be accompanied by (i) Islands financial statements, (ii) a statement of Islands estimate of the fair value of the shares and an explanation of how this estimate of the fair value and the interest were calculated, (iii) notification of rights to demand additional payment, and (iv) a copy of the provisions of Chapter 13.
As authorized by Chapter 13, Islands intends to withhold any payments from a dissenting shareholder as to any shares of which the dissenting shareholder (or the beneficial owner on whose behalf he or she is asserting
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dissenters rights) was not the beneficial owner on August 16, 2006, the date of the first public announcement of the terms of the merger, unless the beneficial ownership devolved upon him or her by operation of law from a person who was the beneficial owner on that date. Where payments are withheld, Islands will be required, after the merger, to send to the holder of these shares an offer to pay the holder an amount equal to Islands estimate of their fair value plus accrued interest, together with an explanation of the calculation of fair value and interest and a statement of the holders right to demand additional payment for the shares.
If the merger is not consummated within 60 days after the date set for demanding payment and depositing certificates, Islands, within the same 60-day period, will return the deposited certificates. If, after returning deposited certificates, the merger is consummated, Islands must send a new dissenters notice and repeat the payment demand procedure.
If the dissenting shareholder believes that the amount paid by Islands for his or her shares of Islands common stock or offered by Islands for shares of which he or she was not the beneficial owner on August 16, 2006 is less than the fair value of his or her shares or that the interest due is calculated incorrectly, or if Islands fails to make payment or offer payment (or, if the merger has not been consummated, Islands does not return the deposited certificates) within 60 days after the date set for demanding payment in the dissenters notice, then the dissenting shareholder may within 30 days after (i) Islands made or offered payment for the shares or failed to pay for the shares or (ii) Islands failed to return deposited certificates timely, notify Islands in writing of his or her own estimate of the fair value of the shares (including interest due) and demand payment of the estimate (less any payment previously received). Failure to notify Islands in writing of any demand for additional payment within 30 days after Islands made or offered payment for the shares will constitute a waiver of the right to demand additional payment.
If Islands and the dissenting shareholder cannot agree on a fair price within 60 days after Islands receives the demand for additional payment, Chapter 13 provides that Islands will institute judicial proceedings in a South Carolina state circuit court in Beaufort County to fix (i) the fair value of the shares immediately before consummation of the merger, excluding any appreciation or depreciation in anticipation of the merger, unless such exclusion would be inequitable, and (ii) the accrued interest. The fair value of the Islands common stock could be more than, the same as or less than the per share purchase price. Islands must make all dissenters whose demands for additional payment remain unsettled parties to the proceeding and all the parties must be served with a copy of the petition. The court is required to issue a judgment for the amount, if any, by which the fair value of the shares, as determined by the court, plus interest, exceeds the amount paid by Islands. If Islands does not institute a proceeding within the 60-day period, Islands will pay each dissenting shareholder whose demand remains unsettled the respective amount demanded by each shareholder.
The court will assess the costs and expenses of the proceeding against Islands, except that the court may assess costs and expenses as it deems appropriate against any or all of the dissenting shareholders if it finds that their demand for additional payment was arbitrary, vexatious or otherwise not in good faith. The court may award fees and expenses of counsel and experts in amounts the court finds equitable (i) against Islands if the court finds that Islands did not comply substantially with the relevant requirements of Chapter 13 or (ii) against either Islands or any dissenting shareholder, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith.
Islands shareholders should note that cash paid to dissenting shareholders in satisfaction of the fair value of their shares will be recognized as gain or loss for federal income tax purposes.
Failure by an Islands shareholder to follow the steps required by the South Carolina Business Corporation Act of 1988 for perfecting appraisal rights may result in the loss of such rights. In view of the complexity of these provisions, if you hold Islands common stock and are considering dissenting from the approval and adoption of the merger agreement and exercising your appraisal rights under the South Carolina Business Corporation Act of 1988, you should consult your legal advisors.
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RESTRICTIONS ON RESALES BY AFFILIATES
This proxy statement/prospectus does not cover any resales of Ameris common stock to be received by the Islands shareholders upon the completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any such resale.
The shares of Ameris common stock to be issued in the merger will be freely transferable under the Securities Act. However, this will not be the case for shares issued to any shareholder who may be deemed to be an affiliate of Islands for purposes of Rule 145 under the Securities Act as of the date of the special meeting. Affiliates may resell their Ameris common stock only in transactions registered under the Securities Act or permitted by the resale provisions of Rule 145 under the Securities Act or as otherwise permitted thereby. These rules also apply to Ameris common stock owned by affiliates of Ameris. Affiliates generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by or are under common control with Ameris or Islands and include directors, certain executive officers and principal shareholders. The restrictions on resales by an affiliate extend also to certain related parties of the affiliate, including spouses, relatives and spouses relatives who in each case have the same home as the affiliate.
The merger agreement requires Islands to use its best efforts to cause each of its affiliates to deliver a written affiliate agreement to Ameris to the effect generally that the affiliate will not offer or otherwise dispose of any shares of Ameris stock owned by the affiliate, except in compliance with the Securities Act and the rules and regulations issued thereunder. The description of the affiliate agreement is qualified by reference to the complete text of the affiliate agreement, which is an exhibit to the merger agreement attached as APPENDIX A to this proxy statement/prospectus.
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INTERESTS OF ISLANDS DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
You should be aware of potential conflicts of interest of, and the benefits available to, certain Islands directors and executive officers. These directors and executive officers may be deemed to have interests in the merger that are different from, or in addition to, their interests as Islands shareholders generally. These interests include, among others, employment agreements with certain employees of Islands, proposed employee benefits for those persons who become employees of an Ameris subsidiary after the merger and indemnification and insurance coverage. Islands board of directors was aware of these interests and considered them, in addition to other matters, in approving the merger agreement.
Islands Bank and John R. Perrill previously entered into a Contract of Employment dated as of November 17, 2005, pursuant to which Mr. Perrill serves as the Senior Loan Officer and Acting Chief Executive Officer of Islands Bank. This employment agreement, which has a term of five years expiring November 17, 2010, provides that Mr. Perrill will receive a minimum base salary annually of $135,000. The agreement also provides that Mr. Perrill will participate in Islands Banks salary and bonus incentive plan and will receive other fringe benefits similar to those provided to other employees of Islands Bank. In addition, under the agreement, if Islands Bank is sold within a five-year period beginning on the date of the agreement, Mr. Perrill is entitled to two years severance pay upon the change in control unless he is provided continued employment under the same or substantially similar terms and conditions as those provided in his employment agreement. Pursuant to the employment agreement, Mr. Perrill will serve as Senior Loan Officer of Islands Bank once a chief executive officer of Islands Bank has been named.
After the proposed merger of Islands and Ameris and the concurrent merger of Islands Bank into American Banking Company, American Banking Company will assume Mr. Perrills existing employment agreement and Mr. Perrill will serve as senior credit officer of American Banking Companys operations in Beaufort, South Carolina pursuant to the agreement. Because Mr. Perrills employment will continue, he will not be entitled to severance pay.
Ameris has agreed that all rights to indemnification and all limitations of liability existing in favor of officers and directors of Islands and Islands Bank as provided in their respective Articles of Incorporation and Bylaws as in effect on August 15, 2006 with respect to matters occurring prior to or at the effective time of the merger will survive the merger. In addition, Ameris has agreed to cause, for a period of three years following the effective time of the merger, the officers and directors of Islands to be covered by directors and officers liability insurance comparable to that maintained by Islands prior to the merger with carriers comparable to Islands existing carrier and containing terms and conditions no less advantageous in any material respect to the officers and directors of Islands. Ameris is not, however, required to expend in any one year an amount in excess of 150% of the current annual premiums paid by Islands for its directors and officers liability insurance.
Solely to facilitate the merger negotiations with Ameris, Islands has entered into a Settlement Agreement and Release with William B. Gossett, its former chief executive officer. The settlement agreement is conditioned upon the consummation of the merger, provides for the payment of $295,000 to Mr. Gossett, $18,863.82 for his attorneys fees and contains mutual releases. This payment to Mr. Gossett will settle Mr. Gossetts claim against Islands and Islands Bank, which alleged that Islands and Islands Bank did not have cause to terminate Mr. Gossetts employment.
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DESCRIPTION OF AMERIS CAPITAL STOCK
Ameriss authorized capital stock consists of 30,000,000 shares of common stock, $1.00 par value per share, of which shares were issued and outstanding as of the record date for the special meeting, and 5,000,000 shares of preferred stock, none of which are issued and outstanding. Ameris has reserved shares of Ameris common stock for issuance pursuant to outstanding options to purchase such shares.
The holders of Ameris common stock are entitled to receive dividends when, as and if declared by Ameriss board of directors and paid by Ameris out of funds legally available therefor and to share ratably in the assets of Ameris available for distribution after the payment of all prior claims in the event of any liquidation, dissolution or winding-up of Ameris. All outstanding shares of Ameris common stock are duly authorized and validly issued, fully paid and nonassessable.
Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each of its subsidiary banks and to commit resources to support each such bank. Consistent with this policy, the Federal Reserve Board has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends, unless the available net income of the bank holding company is sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with its capital needs, asset quality and overall financial condition.
The ability of Ameris to pay cash dividends is currently influenced, and in the future could be further influenced, by bank regulatory policies or agreements and by capital guidelines. Accordingly, the actual amount and timing of future dividends, if any, will depend on, among other things, future earnings, the financial condition of Ameris and each of its subsidiary banks, the amount of cash on hand at the holding company level, outstanding debt obligations, if any, and the requirements imposed by regulatory authorities.
Holders of Ameris common stock are entitled to one vote per share on all matters requiring a vote of shareholders. The Ameris common stock does not have cumulative voting rights, which means that the holders of more than 50% of the outstanding Ameris common stock voting for the election of directors can elect 100% of the directors if they choose to do so. In such event, the holders of the remaining Ameris common stock will not be able to elect any of the directors.
No shares of Ameris preferred stock have been issued. Ameriss board of directors is authorized to issue the Ameris preferred stock, without shareholder approval, in one or more series and to fix and determine, among other things: the dividend payable with respect to such shares of Ameris preferred stock, including whether and in what manner such dividend shall be accumulated; whether such shares shall be redeemable and, if so, the prices, terms and conditions of such redemption; the amount payable on such shares in the event of voluntary or involuntary liquidation; the nature of any purchase, retirement or sinking fund provisions; the nature of any conversion rights with respect to such shares; and the extent of the voting rights, if any, of such shares. Certain of such rights may, under certain circumstances, adversely affect the rights or interests of holders of Ameris common stock. In addition, the Ameris preferred stock may be issued as a defensive device to thwart an attempted hostile takeover of Ameris.
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LIMITATION OF DIRECTORS LIABILITY
Ameriss Articles of Incorporation provide that no director of Ameris shall be liable to Ameris or its shareholders for monetary damages for breach of the duty of care or other duty as a director, except for liability:
| for any appropriation, in violation of the directors duties, of any business opportunity of Ameris; |
| for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; |
| in respect of certain unlawful dividend payments or stock redemptions or repurchases; or |
| for any transaction from which the director derived an improper personal benefit. |
The effect of these provisions is to eliminate the rights of Ameris and its shareholders (through shareholders derivative suits on behalf of Ameris) to recover monetary damages against a director for breach of fiduciary duty as a director (including breaches resulting from grossly negligent behavior), except in the situations described above. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Ameris pursuant to the foregoing, Ameris has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
CERTAIN ANTITAKEOVER PROVISIONS
The issuance of shares of Ameris common stock or Ameris preferred stock may place Ameris in a position to deter a future takeover attempt that some shareholders may favor. In the event of a proposed merger, tender offer or other attempt to gain control of Ameris, it will be possible for Ameriss board of directors to authorize the issuance of Ameris preferred stock to impede completion of the proposed merger, tender offer or other attempt to gain control. Ameriss board of directors, however, did not consider the potential deterrent as a reason for establishing the number of its authorized shares.
Ameriss Articles of Incorporation provide that Ameriss board of directors be divided into three classes of directors as nearly equal in number as possible. At each annual meeting of shareholders, one class of directors is elected for a three-year term. Classification of directors has the effect of making it more difficult for shareholders to change the composition of Ameriss board of directors. At least two annual meetings of shareholders, instead of one, will generally be required to effect a change in the majority of Ameriss board of directors. Such classification provisions, therefore, could also have the effect of discouraging a third party from initiating a proxy contest, making a tender offer or otherwise attempting to obtain control of Ameris.
On February 23, 1998, Ameriss board of directors declared a dividend distribution of one preferred share purchase right on each outstanding share of its common stock. The purchase rights are designed to assure that all Ameris shareholders receive fair and equal treatment in the event of any proposed takeover of Ameris and to guard against partial tender offers, squeeze-outs, open market accumulations and other abusive tactics to gain control of Ameris without paying all Ameris shareholders the full value of their investment. The purchase rights will not prevent a takeover; however, they should encourage anyone seeking to acquire Ameris to negotiate with Ameriss board of directors prior to attempting a takeover.
Computershare currently acts as the transfer agent for the Ameris common stock.
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The following discussion sets forth certain of the material elements of the regulatory framework applicable to banks and bank holding companies and provides certain specific information relevant to Ameris and Islands. A change in applicable statutes, regulations or regulatory policy may have a material effect on the business of Ameris.
Ameris and Islands are both bank holding companies registered with the Federal Reserve Board under The Bank Holding Company Act. As a result, our companies are subject to the supervision, examination and reporting requirements of that act and the regulations of the Federal Reserve Board. Additionally, Islands is subject to regulation by the South Carolina Board of Financial Institutions under the South Carolina Banking and Branching Efficiency Act, and Ameris is subject to regulation by the Georgia Department of Banking and Finance under the Georgia Bank Holding Company Act. Ameriss subsidiary banks are chartered in Georgia and Florida, and Islands subsidiary bank is a national bank. Each of our bank subsidiaries is insured by the FDIC to the full extent permitted by law. As a result, Islands subsidiary bank is subject to the supervision, examination and reporting requirements of the OCC and the FDIC, while Ameriss subsidiary banks are subject to the supervision, examination and reporting requirements of the Georgia Department of Banking and Finance, the Florida Department of Banking and Finance and the FDIC.
The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before:
| it may acquire direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% percent of the voting shares of the bank; |
| it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or |
| it may merge or consolidate with any other bank holding company. |
The Bank Holding Company Act further provides that the Federal Reserve Board may not approve any transaction that would result in a monopoly or that would substantially lessen competition in the banking business, unless the public interest in meeting the needs of the communities to be served outweighs the anti-competitive effects. The Federal Reserve Board is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks involved and the convenience and needs of the communities to be served. Consideration of financial resources generally focuses on capital adequacy, and consideration of convenience and needs issues focuses, in part, on the performance under The Community Reinvestment Act of 1977, both of which are discussed in more detail below.
The Bank Holding Company Act generally prohibits a bank holding company from engaging in activities other than:
| banking; |
| managing or controlling banks or other permissible subsidiaries; and |
| acquiring or retaining direct or indirect control of any company engaged in any activities other than activities closely related to banking or managing or controlling banks. |
The activities in which holding companies and their affiliates are permitted to engage were substantially expanded by The Gramm-Leach-Bliley Act, which was enacted into law in 1999. The Gramm-Leach-Bliley Act repeals the anti-affiliation provisions of The Glass-Steagall Act to permit the common ownership of commercial
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banks, investment banks and insurance companies. The Gramm-Leach-Bliley Act also amends The Bank Holding Company Act to permit a financial holding company to, among other things, engage in any activity that the Federal Reserve Board determines to be (i) financial in nature or incidental to such financial activity or (ii) complementary to a financial activity and not a substantial risk to the safety and soundness of depository institutions or the financial system generally. The Federal Reserve Board must consult with the Secretary of the Treasury in determining whether an activity is financial in nature or incidental to a financial activity. Holding companies may continue to own companies conducting activities which had been approved by federal order or regulation on the day before The Gramm-Leach-Bliley Act was enacted. Effective August 24, 2000, Ameris became a financial holding company.
In determining whether a particular activity is permissible, the Federal Reserve Board considers whether performing the activity can be expected to produce benefits to the public that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices. The Federal Reserve Board has the power to order a bank holding company or its subsidiaries to terminate any activity or control of any subsidiary when the continuation of the activity or control constitutes a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company.
Our banks are also subject to numerous state and federal statutes and regulations that affect their business, activities and operations, and each is supervised and examined by one or more state or federal bank regulatory agencies. Islands subsidiary bank is subject to regulation, supervision and examination by the OCC and the FDIC, and Ameriss subsidiary banks are subject to regulation, supervision and examination by the FDIC, the Georgia Department of Banking and Finance and the Florida Department of Banking and Finance. These regulatory agencies regularly examine the operations of our banks and are given the authority to approve or disapprove mergers, consolidations, the establishment of branches and similar corporate actions. These regulatory agencies also have the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law.
Ameris and Islands are legal entities separate and distinct from their bank subsidiaries. Substantially all of Ameriss and Islands revenues result from amounts paid as dividends to Ameris and Islands by their subsidiary banks. Our banking subsidiaries are subject to statutory and regulatory limitations on the payment of dividends to Ameris and Islands. Ameris and Islands are also subject to statutory and regulatory limitations on dividend payments to their shareholders.
If, in the opinion of the federal banking regulators, a depository institution under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice, the regulatory authority may require, after notice and hearing, that the institution cease and desist from the practice. The federal banking agencies have indicated that paying dividends that deplete a depository institutions capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. The federal agencies have also issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. See the section entitled Supervision and RegulationPrompt Corrective Action at page 51.
The Georgia Financial Institutions Code and the Georgia Department of Banking and Finances regulations provide:
| that dividends of cash or property may be paid only out of the banks retained earnings; |
| that dividends may not be paid if the banks paid-in capital and retained earnings which are set aside for dividend payment and other distributions do not, in combination, equal at least 20% of the banks capital stock; and |
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| that dividends may not be paid without prior approval of the Georgia Department of Banking and Finance if |
| the banks total classified assets at its most recent examination exceed 80% of its equity capital; |
| the aggregate amount of dividends to be declared exceeds 50% of the banks net profits after taxes but before dividends for the previous calendar year; or |
| the ratio of equity capital to total adjusted assets is less than 6%. |
The payment of dividends by our bank holding companies and our subsidiaries may also be affected or limited by other factors, such as a requirement by a regulatory agency to maintain adequate capital above regulatory guidelines.
FINANCIAL RELATIONSHIP BETWEEN AMERIS AND ISLANDS AND THEIR SUBSIDIARIES
There are also various legal restrictions on the extent to which Ameris or Islands can borrow or otherwise obtain credit from their banking subsidiaries. In general, these restrictions require that any such extensions of credit must be secured by designated amounts of specified collateral and are limited to 10% of any banking subsidiarys capital stock and surplus.
Under Federal Reserve Board policy, Ameris and Islands are expected to act as a source of financial strength to their banking subsidiaries and to commit resources to support each banking subsidiary. This support may be required at times when, absent such Federal Reserve Board policy, Ameris or Islands may not find itself willing or able to provide it.
Any capital loans by a bank holding company to a subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of the subsidiary bank. In the event of a bank holding companys bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.
Ameris and Islands must comply with the Federal Reserve Boards established capital adequacy standards, and our subsidiary banks are required to comply with the capital adequacy standards established by the FDIC. The Federal Reserve Board has promulgated two basic measures of capital adequacy for bank holding companies: a risk-based measure and a leverage measure. A bank holding company must satisfy all applicable capital standards to be considered in compliance.
The risk-based capital standards are designed to:
| make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies; |
| account for off-balance-sheet exposure; and |
| minimize disincentives for holding liquid assets. |
Assets and off-balance-sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted assets is 8.0%. At least half of total capital must be comprised of Tier 1 Capital, which is common stock, undivided profits, minority interests in the equity accounts of consolidated subsidiaries and noncumulative perpetual preferred stock, less goodwill and certain other intangible assets. The remainder may consist of Tier 2 Capital, which is subordinated debt, other
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preferred stock and a limited amount of loan loss reserves. At June 30, 2006, Ameriss total risk-based capital ratio and its Tier 1 risk-based capital ratio were 12.01% and 10.75%, respectively. On an Ameris and Islands combined basis such ratios at June 30, 2006, would have been approximately 11.72% and 10.46%, respectively.
In addition, the Federal Reserve Board has established minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio of Tier 1 Capital to average assets, less goodwill and certain other intangible assets, of 3.0% for bank holding companies that meet specified criteria. All other bank holding companies generally are required to maintain a minimum leverage ratio of 4.00%. Ameriss ratio at June 30, 2006 was 8.63%. On an Ameris and Islands combined basis, such ratio at June 30, 2006 would have been 8.43%. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve Board has indicated that it will consider a tangible Tier 1 Capital leverage ratio and other indicia of capital strength in evaluating proposals for expansion or new activities. The Federal Reserve Board has not advised Ameris of any specific minimum leverage ratio or tangible Tier 1 Capital leverage ratio applicable to it.
Ameriss and Islands subsidiary banks are subject to risk-based and leverage capital requirements adopted by the FDIC and the OCC which are substantially similar to those adopted by the Federal Reserve Board for bank holding companies. Our banks were in compliance with applicable minimum capital requirements as of June 30, 2006.
Neither of our bank holding companies nor any of our bank subsidiaries has been advised by any federal banking agency of any specific minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on taking brokered deposits, and certain other restrictions on its business. As described below, the FDIC can impose substantial additional restrictions upon FDIC-insured depository institutions that fail to meet applicable capital requirements. See the section entitled Supervision and RegulationPrompt Corrective Action at page 51.
The Federal Deposit Insurance Act, among other things, requires the federal regulatory agencies to take prompt corrective action if a depository institution does not meet minimum capital requirements. The FDI Act establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. A depository institutions capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation.
The federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels applicable to FDIC-insured banks. The relevant capital measures are the Total Capital ratio, Tier 1 Capital ratio and the leverage ratio. Under the regulations, a FDIC-insured bank will be:
| well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 Capital ratio of 6% or greater and a leverage ratio of 5% or greater and is not subject to any order or written directive by the appropriate regulatory authority to meet and maintain a specific capital level for any capital measure; |
| adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 Capital ratio of 4% or greater and a leverage ratio of 4% or greater (3% in certain circumstances) and is not well capitalized; |
| undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 Capital ratio of less than 4% or a leverage ratio of less than 4% (3% in certain circumstances); |
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| significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 Capital ratio of less than 3% or a leverage ratio of less than 3%; and |
| critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. As of June 30, 2006, Ameriss subsidiary banks had capital levels that qualify each as being well capitalized, and Islands Bank had a capital level that qualifies as being well capitalized.
An FDIC-insured bank is generally prohibited from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the bank would thereafter be undercapitalized. Undercapitalized banks are subject to growth limitations and are required to submit a capital restoration plan. The federal regulators may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the banks capital. In addition, for a capital restoration plan to be acceptable, the banks parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of: (i) an amount equal to 5% of the banks total assets at the time it became undercapitalized; and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a bank fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized insured banks may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized institutions are subject to the appointment of a receiver or conservator. A bank that is not well capitalized is subject to certain limitations relating to so-called brokered deposits.
The Community Reinvestment Act requires federal bank regulatory agencies to encourage financial institutions to meet the credit needs of low- and moderate-income borrowers in their local communities. An institutions size and business strategy determines the type of examination that it will receive. Large, retail-oriented institutions are examined using a performance-based lending, investment and service test. Small institutions are examined using a streamlined approach. All institutions may opt to be evaluated under a strategic plan formulated with community input and pre-approved by the bank regulatory agency.
The Community Reinvestment Act regulations provide for certain disclosure obligations. Each institution must post a notice advising the public of its right to comment to the institution and its regulator on the institutions Community Reinvestment Act performance and to review the institutions Community Reinvestment Act public file. Each lending institution must maintain for public inspection a public file that includes a listing of branch locations and services, a summary of lending activity, a map of its communities and any written comments from the public on its performance in meeting community credit needs. The Community Reinvestment Act requires public disclosure of a financial institutions written Community Reinvestment Act evaluations. This promotes enforcement of Community Reinvestment Act requirements by providing the public with the status of a particular institutions community reinvestment record.
The Gramm-Leach-Bliley Act makes various changes to The Community Reinvestment Act. Among other changes, Community Reinvestment Act agreements with private parties must be disclosed and annual Community Reinvestment Act reports must be made to a banks primary federal regulator. A bank holding
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company will not be permitted to become a financial holding company and no new activities authorized under the Gramm-Leach-Bliley Act may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a satisfactory Community Reinvestment Act rating in its latest Community Reinvestment Act examination.
Financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing personal financial information with nonaffiliated third parties except for third parties which market the institutions own products and services. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to consumers.
Banking is a business which depends on interest rate differentials. In general, the difference between the interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitutes the major portion of a banks earnings. Thus, the earnings and growth of Ameris will be subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The Federal Reserve Board regulates the supply of money through various means, including open market dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve Board and the reserve requirements on deposits. The nature and timing of any changes in such policies and their effect on Ameris cannot be predicted.
Current and future legislation and the policies established by federal and state regulatory authorities will affect Ameriss future operations. Banking legislation and regulations may limit our growth and the return to our investors by restricting certain of our activities.
In addition, capital requirements could be changed and have the effect of restricting our activities or requiring additional capital to be maintained. We cannot predict what changes, if any, will be made to existing federal and state legislation and regulations or the effect that such changes may have on Ameriss business.
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Financial and other information relating to Ameris, including information relating to Ameriss current directors and executive officers, are set forth in Ameriss 2005 Annual Report on Form 10-K, Ameriss Definitive Proxy Statement for the 2006 Annual Meeting of Shareholders filed with the SEC on April 11, 2006, Ameriss 2006 Quarterly Reports on Form 10-Q and Ameriss 2006 Current Reports on Form 8-K, which are incorporated by reference herein and copies of which may be obtained from Ameris as indicated in the section entitled Where You Can Get More Information at page 65. See the section entitled Incorporation of Certain Documents by Reference at page 66.
Ameris is a bank holding company that engages, through its subsidiaries, in providing full banking services to customers of its subsidiary banks. Ameris is engaged in a full range of traditional banking, mortgage banking, investment and insurance services to individual and corporate customers at its 42 banking locations.
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Islands is a South Carolina corporation that was incorporated on July 23, 1999 to organize and serve as the holding company for Islands Bank. Islands Bank began operations as a community bank on July 9, 2001 and emphasizes prompt, personalized customer service to the individuals and businesses located in Beaufort County, South Carolina, including the city of Beaufort, and its neighboring islands and communities.
Islands Bank operates as a full-service commercial bank. It offers personal and business checking accounts, money market accounts, savings accounts and various certificates of deposit and individual retirement accounts, as well as commercial, real estate, installment and other consumer loans. Islands Banks real estate loans include commercial real estate, construction and development and residential real estate loans. In addition, Islands Bank provides such services as cashiers checks, safe-deposit boxes, travelers checks, banking by mail, online banking and billpay, direct deposit and U.S. Savings Bonds. Islands Bank also offers MasterCard(R) and Visa(R) credit card services through a correspondent bank as an agent.
Islands primary market area consists of a large portion of Beaufort County, which includes the city of Beaufort and the adjacent communities of Port Royal and Burton. It also includes the islands that are northeast of the Broad River and south of the Coosaw River. Some of the major islands in Islands market area are Ladys Island, Fripp Island, Parris Island, St. Helena Island, Hunting Island, Port Royal Island, Dataw Island and Harbor Island. The city of Beaufort serves as the commercial and retail center for communities in the southern corner of South Carolina and is considered a key economic focal point of the Beaufort County area.
Islands Bank competes with other commercial banks, savings and loan associations, credit unions, money market mutual funds and other financial institutions conducting business in the Beaufort County market and elsewhere. Many of Islands Banks competitors have equal or greater financial or banking related resources than Islands and Islands Bank. These competitors offer the same or similar products and services as Islands Bank. Currently, Islands Banks three largest competitors in terms of market share are Wachovia Bank, N.A., Bank of America, N.A. and South Carolina Bank & Trust, N.A.
Islands Bank operates a loan production office near the Citadel Mall in Charleston, South Carolina. This limited service office does not accept deposits and offers small business loans guaranteed by the U.S. Small Business Administration.
Lending Policy . Islands Bank offers a full range of lending products, including commercial, real estate and consumer loans to individuals and small and medium-sized businesses and professional concerns. Islands Banks loan portfolio is allocated approximately as follows:
Loan Classification |
Percentage | ||
Real estate loans |
86 | % | |
Consumer loans |
10 | % | |
Commercial loans |
4 | % |
Loan Approval and Review . Islands Bank has established loan approval policies that provide for various levels of officer lending authority. When the amount of total loans to a single borrower exceeds that individual officers lending authority, an officer with a higher lending limit or Islands Banks Loan Committee determines
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whether to approve the loan request. Islands Bank does not make any loans to any of its directors or executive officers unless its board of directors approves the loan, and the terms of the loan are no more favorable than would be available to any other applicant.
Lending Limits . Islands Banks lending activities are subject to a variety of lending limits imposed by federal law. Different limits apply in certain circumstances based on the type of loan or the nature of the borrower, including the borrowers relationship to Islands Bank. In general, however, Islands Bank may loan any one borrower a maximum amount equal to either of the following:
| 15% of Islands Banks capital and surplus; or |
| 25% of its capital and surplus if the amount that exceeds 15% is fully secured by readily marketable collateral. |
Islands Bank has not established any minimum or maximum loan limits other than the statutory lending limits described above. Islands Bank may sell loan participations to other financial institutions in order to meet the lending needs of loan customers requiring extensions of credit above Islands Banks limits.
Credit Risks . The principal economic risk associated with each category of loans that Islands Bank makes is the creditworthiness of the borrower. Borrower creditworthiness is affected by general economic conditions and the strength of the relevant business market segment. General economic factors affecting a borrowers ability to repay include interest, inflation and employment rates, as well as other factors affecting a borrowers customers, suppliers and employees.
Real Estate Loans . Islands Bank makes commercial real estate loans, construction and development loans, and residential real estate loans. These loans include commercial loans where Islands Bank takes a security interest in real estate out of an abundance of caution and not as the principal collateral for the loan, but excludes home equity loans, which are classified as consumer loans. Islands Bank competes for real estate loans with competitors who are well established in the Beaufort County area and have greater resources and lending limits. As a result, it may have to charge lower interest rates to attract borrowers.
| Commercial Real Estate . Islands Bank offers commercial real estate loans to developers of both commercial and residential properties. Islands Bank manages its credit risk by actively monitoring such measures as advance rate, cash flow, collateral value and other appropriate credit factors. Risks associated with commercial real estate loans include the general risk of the failure of each commercial borrower, which will be different for each type of business and commercial entity. Islands Bank evaluates each business on an individual basis and attempt to determine its business risks and credit profile. Management attempts to reduce credit risks in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 80 percent. In addition, we may also require personal guarantees of the principal owners. |
|
Construction and Development Loans . Construction and development loans are made both on a pre-sold and speculative basis. If the borrower has entered into an arrangement to sell the property prior to beginning construction, the loan is considered to be on a pre-sold basis. If the borrower has not entered into an agreement to sell the property prior to beginning construction, the loan is considered to be on a speculative basis. Residential and commercial construction loans are made to builders and developers and to consumers who wish to build their own home. The term of construction and development loans generally are limited to 18 months, although payments may be structured on a longer amortization basis. The ratio of the loan principal to the value of the collateral as established by independent appraisal does not exceed 75 percent. Speculative loans are based on the borrowers financial strength and cash flow position. Loan proceeds are disbursed based on the percentage of completion and only after the project has been inspected by an experienced construction lender or appraiser. These loans generally command higher rates and fees commensurate with the risks warranted in the construction lending field. The risk |
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in construction lending depends upon the performance of the builder in building the project to the plans and specifications of the borrower and Islands Banks ability to administer and control all phases of the construction disbursements. Upon completion of the construction, management anticipates that the mortgage will be converted to a permanent loan and may be sold to an investor in the secondary mortgage market. |
| Residential Real Estate Loans . Residential real estate loans are made to qualified individuals for the purchase of existing single-family residences in Islands primary market area. These loans conform to Islands Banks appraisal policy and real estate lending policy which detail maximum loan-to-value ratios and maturities. Management believes these loan-to-value ratios are sufficient to compensate for fluctuations in real estate market value and to minimize losses that could result from a downturn in the residential real estate market. Mortgage loans that do not conform to Islands Banks policies are sold in the secondary markets. The risk of these loans depends on the salability of the loan to national investors and on interest rate changes. Islands Bank limits interest rate risk and credit risk on these loans by locking in the interest rate for each loan with the secondary market investor and receiving the investors underwriting approval before originating the loan. Islands Bank retains loans for its portfolio when it has sufficient liquidity to fund the needs of the established customers and when rates are favorable to retain the loans. The loan underwriting standards and policies are generally the same for both loans sold in the secondary market and those retained in Islands Banks portfolio. |
Consumer and Installment Loans . Consumer loans include lines of credit and term loans secured by second mortgages on the residences of borrowers for a variety of purposes, including home improvements, education and other personal expenditures. Consumer loans also include installment loans to individuals for personal, family and household purposes, including automobile loans to individuals and pre-approved lines of credit. Consumer loans generally involve more risk than first mortgage loans because the collateral for a defaulted loan may not provide an adequate source of repayment of the principal due to damage to the collateral or other loss of value while the remaining deficiency often does not warrant further collection efforts. In addition, consumer loan performance depends upon the borrowers continued financial stability and is, therefore, more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Various federal and state laws also limit the amount that can be recovered.
Commercial Loans . Commercial lending activities are directed principally toward businesses whose demand for funds falls within Islands Banks anticipated lending limits. This category of loans includes loans made to individuals, partnerships, and corporate borrowers. The loans are obtained for a variety of business purposes. Particular emphasis is placed on loans to small to medium-sized professional firms, retail and wholesale businesses, light industry and manufacturing concerns operating in and around the primary market area. Islands Bank considers small businesses to include commercial, professional and retail businesses with annual gross sales of less than $15 million or annual operating costs of less than $3 million. Within small business lending, Islands Bank focuses on niches in the market and offers small business loans utilizing government enhancements, such as the Small Business Administrations 7(a) program. The types of commercial and small business loans provided include principally term loans with variable interest rates secured by equipment, inventory, receivables and real estate, as well as secured and unsecured working capital lines of credit. Risks of these types of loans depend on the general business conditions of the local economy and the local business borrowers ability to sell its products and services in order to generate sufficient business profits to repay the loan under the agreed upon terms and conditions. Personal guarantees may be obtained from the principals of business borrowers and third parties to further support the borrowers ability to service the debt and reduce the risk of nonpayment.
Investments . In addition to loans, Islands Bank makes other investments, primarily in obligations of the United States or obligations guaranteed as to principal and interest by the United States and other taxable securities. No investment held by Islands Bank exceeds any applicable limitation imposed by law or regulation. Islands Banks asset and liability management committee reviews the investment portfolio on an ongoing basis to ascertain investment profitability and to verify compliance with its investment policies.
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Deposits . Islands Bank offers a full range of interest-bearing and noninterest-bearing accounts, including commercial and retail checking accounts, money market accounts, individual retirement accounts, savings accounts, and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposits. All deposit accounts are insured by the FDIC up to the maximum amount permitted by law. Islands Banks transaction accounts and time certificates are tailored to its principal market area at competitive rates. The sources of deposits are residents, businesses and employees of businesses within Islands Banks primary market area. These deposits are obtained through personal solicitation by Islands Banks officers and directors, direct mail solicitations, and advertisements published in the local media.
Asset and Liability Management . Islands Banks primary assets consists of its loan portfolio and its investment accounts. Its liabilities consist primarily of its deposits. Managements objective is to support asset growth primarily through growth of core deposits, which include deposits of all categories made by individuals, partnerships, corporations and other entities. Consistent with the requirements of prudent banking necessary to maintain liquidity, management seeks to match maturities and rates of loans and the investment portfolio with those of deposits, although exact matching is not always possible. Management seeks to invest the largest portion of Islands Banks assets in real estate, consumer and commercial loans. Islands Banks investment account consists primarily of marketable securities of the United States Government and federal agencies, generally with varied maturities.
Islands Banks asset/liability mix is monitored on a regular basis with a monthly report detailing interest-sensitive assets and interest-sensitive liabilities prepared and presented to the board of directors. The objective of this policy is to control interest-sensitive assets and liabilities so as to minimize the impact of substantial movements in interest rates on Islands Banks earnings.
At June 30, 2006, Islands and Islands Bank employed 18 full-time employees and two part-time employees. Islands Bancorp does not have any employees other than its officers who are also employees of Islands Bank. Islands considers its relationship with its employees to be excellent.
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COMPARATIVE RIGHTS OF SHAREHOLDERS
Upon consummation of the merger, shareholders of Islands (other than those shareholders receiving only cash for their shares of Islands common stock, including shareholders exercising dissenters rights) will automatically become shareholders of Ameris. The rights of a holder of Ameris common stock are similar in some respects and different in other respects from the rights of a holder of Islands common stock. The rights of Islands shareholders are currently governed by the South Carolina Business Corporation Act of 1988 and the Articles of Incorporation and Bylaws of Islands. The rights of Ameris shareholders are governed by the Georgia Business Corporation Code and the Articles of Incorporation and Bylaws of Ameris.
The following is a summary of certain material differences in the rights of holders of Ameris and Islands common stock. The summary is necessarily general, and it is not intended to be a complete statement of all differences affecting the rights of shareholders and respective entities. It is qualified in its entirety by reference to the Georgia Business Corporation Code, the South Carolina Business Corporation Act of 1988 and the Articles of Incorporation and Bylaws of each corporation. Islands shareholders should consult with their own legal counsel with respect to specific differences and changes in their rights as shareholders which will result from the proposed merger.
Ameris . All of the issued and outstanding shares of Ameris common stock are freely tradeable, except for approximately shares held by affiliates of Ameris, as such term is defined in Rule 144 under the Securities Act, which shares may only be sold pursuant to an effective registration statement under the Securities Act or in compliance with Rule 144 or another applicable exemption from the registration requirements of the Securities Act. Ameris common stock is traded on the Nasdaq Global Select Market under the symbol ABCB.
Islands. All of the 740,260 issued and outstanding shares of Islands common stock are freely tradeable, except for approximately shares held by affiliates of Islands, which shares may only be sold pursuant to an effective registration statement under the Securities Act or in compliance with Rule 144 or another applicable exemption from the registration requirements of the Securities Act. There is no established trading market for Islands common stock.
Ameris and Islands . Both Ameris and Islands are reporting companies that file annual and quarterly financial reports with the SEC. Ameris also files certain reports with the Federal Reserve Board and the Georgia Department of Banking and Finance, and Islands files certain reports with the Federal Reserve Board and the South Carolina Board of Financial Institutions.
PREEMPTIVE, VOTING AND LIQUIDATION RIGHTS
Ameris . The Ameris common stock does not have preemptive rights. Each share of Ameris common stock has the right to cast one vote on all matters voted upon by the Ameris shareholders.
Under the Georgia Business Corporation Code, a majority of the outstanding shares entitled to vote must approve any dissolution or liquidation of a corporation, unless the articles of incorporation or bylaws require a greater vote. Neither Ameriss Articles of Incorporation nor its Bylaws imposes any such requirement.
Islands. Like Ameris common stock, the Islands common stock does not have preemptive rights, and each share of Islands common stock has the right to cast one vote on all matters voted upon by the Islands shareholders.
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Under the South Carolina Business Corporation Act of 1988, two-thirds of the outstanding shares entitled to vote must approve any dissolution or liquidation of a corporation, unless the articles of incorporation or bylaws requires a higher vote or a lower vote, which may not be less than a majority of the outstanding shares entitled to vote. Neither Islands Articles of Incorporation nor its Bylaws imposes a different requirement.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
Ameris. Under the Georgia Business Corporation Code, a merger (other than a merger of a subsidiary in which the parent owns at least 90% of each class of outstanding stock), a disposition of all or substantially all of a corporations property and a share exchange generally must be approved by a majority of the outstanding shares entitled to vote, unless the articles of incorporation or bylaws requires otherwise. Neither Ameriss Articles of Incorporation nor its Bylaws imposes any such requirement.
Islands. Under the South Carolina Business Corporation Act of 1988, a merger (other than a merger of a subsidiary in which the parent owns at least 90% of each class of outstanding stock), a disposition of all or substantially all of a corporations property and a share exchange generally must be approved by at least two-thirds of the outstanding shares entitled to vote, unless the articles of incorporation or bylaws requires a higher vote or a lower vote, which may not be less than a majority of the outstanding shares entitled to vote. Neither Islands Articles of Incorporation nor its Bylaws imposes a different requirement.
Ameris . Under the Georgia Business Corporation Code, a shareholder of a corporation participating in certain transactions may, under certain circumstances, receive the fair value of his or her shares in cash, in lieu of the consideration he or she would otherwise have received in the transaction. The Georgia Business Corporation Code recognizes dissenters rights in connection with mergers, share exchanges, sales of all or substantially all of the corporations property and certain amendments to the articles of incorporation that materially and adversely affect a shareholders rights. Appraisal rights are not available (unless otherwise provided in the corporations articles of incorporation): (i) if the shares of the corporation are listed on a national securities exchange or held of record by more than 2,000 shareholders, and shareholders by the terms of the merger or consolidation are not required to accept in exchange for their shares anything other than shares of stock of the surviving or resulting corporation, or shares of stock of any other corporation listed on a national securities exchange or held of record by more than 2,000 stockholders, other than cash in lieu of fractional shares of stock; or (ii) in a merger if the corporation is the surviving corporation and no vote of its shareholders thereon is required. Under the Georgia Business Corporation Code, shareholders of Ameris are not entitled to dissenters rights with respect to the proposed merger.
Islands. Holders of Islands common stock have dissenters rights with respect to the proposed merger. See the section entitled Statutory Provisions for Dissenting Shareholders at page 42.
Ameris and Islands. Ameris and Islands are both taxable entities under the Code and are taxed on their respective income and entitled to the deductions allowed under the Internal Revenue Code. A sale of Ameris common stock or Islands common stock will normally result in a capital gain or loss for federal income tax purposes. Shareholders of Ameris or Islands who receive dividends are expected to receive a copy of Form 1099 filed with the Internal Revenue Service prior to January 31 of the following year.
Ameris and Islands . The holders of Ameris common stock and Islands common stock are entitled to receive dividends when, as and if declared by Ameriss board of directors and Islands board of directors, respectively, and paid by Ameris and Islands, respectively, out of funds legally available therefor. Under Federal Reserve
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Board policy, a bank holding company is expected to act as a source of financial strength to each of its subsidiary banks and to commit resources to support each such bank. Consistent with this policy, the Federal Reserve Board has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless the available net income of the bank holding company is sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with its capital needs, asset quality and overall financial condition. The ability of Ameris and Islands to pay cash dividends is currently influenced, and in the future could be further influenced, by bank regulatory policies or agreements and by capital guidelines. Accordingly, the actual amount and timing of future dividends, if any, will depend on, among other things, future earnings, the financial condition of Ameris and Islands and each of their respective subsidiary banks, the amount of cash on hand at the holding company level, outstanding debt obligations, if any, and the requirements imposed by regulatory authorities.
Ameris and Islands . Neither the Ameris shareholders nor the Islands shareholders are personally liable for the obligations of Ameris or Islands, respectively.
Ameris and Islands . All issued and outstanding shares of Ameris common stock and Islands common stock are fully paid and nonassessable.
Ameris and Islands . Ameriss Articles of Incorporation and Islands Articles of Incorporation each provide that, with certain exceptions, officers and directors are not liable to Ameris or Islands, respectively, or their respective shareholders for monetary damages for breach of their fiduciary duty of care.
Ameris. The Georgia Business Corporation Code permits a corporation to indemnify a director if the director seeking indemnification acted in a manner he or she believed in good faith to be in or not opposed to the best interest of the corporation and, in the case of any criminal proceedings, that he or she had no reasonable cause to believe his conduct was unlawful, provided that indemnification in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding. Ameriss Articles of Incorporation provide that no director shall be personally liable to Ameris or its shareholders for monetary damages for any breach of the duty of care or other duty as a director, except that such liability shall not be eliminated: (i) for any appropriation, in violation of a directors duties, of any business opportunity of the corporation; (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law; (iii) for certain unlawful distributions; or (iv) for any transaction from which the director derived an improper personal benefit.
Islands. Like the Georgia Business Corporation Code, the South Carolina Business Corporation Act of 1988 permits a corporation to indemnify a director if the director seeking indemnification acted in a manner he or she believed in good faith to be in or not opposed to the best interest of the corporation and, in the case of any criminal proceedings, that he or she had no reasonable cause to believe his conduct was unlawful, provided that indemnification in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding. Islands Articles of Incorporation provide that no director shall be personally liable to Islands or its shareholders for monetary damages for any breach of the duty of care or other duty as a director, except that such liability shall not be eliminated: (i) for any appropriation, in violation of a directors duties, of any business opportunity of the corporation; (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law; (iii) for certain unlawful distributions; or (iv) for any transaction from which the director derived an improper personal benefit.
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Ameris and Islands . The business and affairs of Ameris and Islands are managed by or under the direction of each companys board of directors. Ameris and Islands have a provision in their respective Articles of Incorporation for a staggered board, and each director is elected every third year at the annual meeting of shareholders and may be removed and replaced, with or without cause, by a majority vote of the shareholders at any meeting of such holders.
Ameris . Special meetings of the Ameris shareholders may be called at any time by Ameriss Chairman of the Board, Vice Chairman of the Board, President, Secretary or a majority of the directors of Ameris. Special meetings of the Ameris shareholders also shall be called upon the written request of the holders of 50% or more of all shares of capital stock of Ameris entitled to vote in an election of directors.
Islands. Special meetings of the Island shareholders may be called at any time by Islands Chairman of the Board or by a majority of the directors of Islands. Special meetings of the Islands shareholders also shall be called upon the written request of the holders of 50% or more of all shares of capital stock of Islands entitled to vote in an election of directors.
Ameris. Under the Georgia Business Corporation Code, the shareholders of Ameris may not compel the dissolution of Ameris without prior action by the board of directors proposing such dissolution.
Islands. Under the South Carolina Business Corporation Act of 1988, if shareholders of Islands holding at least 10% of any class of voting stock of Islands propose dissolution, then the board of directors of Islands must submit that proposal to the shareholders for their vote at the next possible special or annual meeting of Islands shareholders.
Ameris and Islands . Ameriss Articles of Incorporation and Islands Articles of Incorporation each provide for perpetual existence, subject to termination or dissolution provided by applicable law.
Ameris . The Georgia Business Corporation Code affords Ameris shareholders the right to bring a legal action on behalf of Ameris (a shareholder derivative action) to recover damages from a third party or an officer or director of Ameris if the Ameris shareholder was a shareholder of Ameris at the time of the act or omission complained of or became a shareholder through transfer by operation of law from one who was a shareholder at that time and fairly and adequately represents the interest of Ameris in enforcing its rights. In addition, a shareholder may not commence a derivative proceeding until a written demand has been made upon the corporation to take suitable action and 90 days have expired from the date the demand was made (unless the demand has been rejected by the corporation or irreparable injury to the corporation would result by waiting for the expiration of that 90-day period). In addition, Ameris shareholders may bring class actions to recover damages from directors for violations of their fiduciary duties.
Islands . Under the South Carolina Business Corporation Act of 1988, a shareholder derivative action may be maintained on behalf of Islands in federal and state court in accordance with applicable rules of civil procedure.
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RIGHT TO LIST OF HOLDERS AND INSPECTION OF BOOKS AND RECORDS
Ameris . Under the Georgia Business Corporation Code, Ameris shareholders are generally entitled to inspect and copy Ameriss Articles of Incorporation, Bylaws, shareholder resolutions, board of directors resolutions, lists of names and addresses of board members, all written communications to shareholders, lists of names and business addresses of current directors and officers and the annual registration filed with the Secretary of State of the State of Georgia. An Ameris shareholder must make a written request at least five business days in advance of such inspection, which must occur during regular business hours at Ameriss principal office. Other Ameris records, including accounting records and the record of Ameris shareholders, are generally available to an Ameris shareholder for inspection and copying during regular business hours at a reasonable location specified by Ameris upon written demand at least five business days in advance if the shareholder makes a demand in good faith and for a proper purpose that is reasonably relevant to his or her legitimate interests as a shareholder, describes with reasonable particularity the purpose and the records desired to be inspected, and the records requested are directly connected with a stated purpose and are to be used only for that stated purpose. A Georgia corporation may limit these latter inspection rights to shareholders owning more than 2% of the outstanding stock of the corporation. Ameriss Articles of Incorporation do not contain any such limitation.
Islands . Under the South Carolina Business Corporation Act of 1988, Islands shareholders are generally entitled to inspect and copy Islands Articles of Incorporation, Bylaws, shareholder resolutions, certain board of directors resolutions, lists of names and addresses of board members, all written communications to shareholders, lists of names and business addresses of current directors and officers and the annual report filed with the Department of Revenue of the State of South Carolina. An Islands shareholder must make a written request at least five business days in advance of such inspection, which must occur during regular business hours at Islands principal office. An Islands shareholder holding at least 1% of any class of shares of Islands is also entitled to inspect Islands federal and state income tax returns for the last ten years. Other Islands records, including accounting records and the record of Islands shareholders, are generally available to an Islands shareholder for inspection and copying during regular business hours at a reasonable location specified by Islands upon written demand at least five business days in advance if the shareholder makes a demand in good faith and for a proper purpose that is reasonably relevant to his or her legitimate interests as a shareholder, describes with reasonable particularity the purpose and the records desired to be inspected, and the records requested are directly connected with a stated purpose and are to be used only for that stated purpose. A South Carolina corporation may not limit these latter inspection rights.
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Certain federal income tax consequences of the proposed merger and the legality of the authorization and issuance under Georgia law of the Ameris common stock to be issued in the proposed merger will be passed upon by counsel to Ameris, Rogers & Hardin LLP, 2700 International Tower, 229 Peachtree Street, N.E., Atlanta, Georgia 30303.
Certain federal income tax consequences of the proposed merger will be passed upon by counsel to Islands by Powell Goldstein LLP, One Atlantic Center, Fourteenth Floor, 1201 West Peachtree Street, N.W., Atlanta, Georgia 30309.
The consolidated financial statements of Ameris incorporated in this proxy statement/prospectus by reference to Ameriss Annual Report on Form 10-K for the year ended December 31, 2005 have been so incorporated in reliance on the report of Mauldin & Jenkins, Certified Public Accountants, LLC, independent auditors, given on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Islands included in Islands Annual Report on Form 10-KSB for the year ended December 31, 2005, which is attached to this proxy statement/prospectus as APPENDIX D, have been audited by Francis and Company CPAs, independent auditors, as set forth in such firms report thereon. Such financial statements have been so included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
SHAREHOLDER PROPOSALS AND OTHER MATTERS
Pursuant to Rule 14a-8 under the Exchange Act, shareholders must present proper proposals for inclusion in a companys proxy statement and for consideration at the next annual meeting of its shareholders by submitting their proposals to the company in a timely manner.
Islands will hold an annual meeting in the year 2006 only if the merger is not consummated. In order to be eligible for inclusion in Islands proxy materials for next years annual meeting of shareholders, any shareholder proposal to take action at the meeting must be received at Islands main office at 2348 Boundary Street, Beaufort, South Carolina 29902.
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WHERE YOU CAN GET MORE INFORMATION
Ameris and Islands file annual, quarterly and special reports, proxy statements and other information with the SEC. The reports, proxy statements and other information filed by Ameris and Islands with the SEC can be inspected and copied at the SECs Public Reference Room at 100 F Street, N.E., Room 580, Washington, D.C. 20549, at prescribed rates, and from the web site that the SEC maintains at http://www.sec.gov. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Ameris common stock is quoted on The Nasdaq Global Select Market. The reports, proxy statements and other information concerning Ameris can be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
Ameris has filed a registration statement on Form S-4 to register with the SEC the Ameris common stock to be issued to shareholders of Islands in the merger. This proxy statement/prospectus is a part of the registration statement and constitutes a prospectus of Ameris in addition to being a proxy statement of Islands for its special meeting. As allowed by SEC rules, this proxy statement/prospectus does not contain all the information you can find in the registration statement or the exhibits to the registration statement. Copies of the registration statement and the exhibits and schedules thereto may be inspected, without charge, at the offices of the SEC, or obtained at prescribed rates from the Public Reference Section of the SEC at Room 580, 100 F Street, N.E., Washington, D.C. 20549, or obtained from the SEC web site.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Ameris to incorporate by reference information into this proxy statement/prospectus. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement/prospectus, except for any information superseded by information in this proxy statement/prospectus. This proxy statement/prospectus incorporates by reference the documents set forth below that Ameris has previously filed with the SEC:
| Annual Report on Form 10-K for the year ended December 31, 2005; |
| Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2006; |
| Current Reports on Form 8-K filed on January 27, 2006, April 24, 2006, July 24, 2006, August 17, 2006, September 8, 2006, September 21, 2006 and October 19, 2006; and |
| The description of Ameriss securities contained under the caption Description of Capital Stock found on pages 51-52 of the Preliminary Prospectus dated as of April 21, 1994 filed as part of Ameriss Registration Statement on Form SB-2 (Registration No. 33-77930) filed with the SEC on April 21, 1994, and Ameriss Registration Statement on Form 8-A12B (File No. 001-13901) filed with the SEC on February 25, 1998. |
All documents filed by Ameris with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement/prospectus and prior to the Islands special meeting shall be deemed to be incorporated by reference into this proxy statement/ prospectus from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this proxy statement/prospectus to the extent that a statement contained in this proxy statement/prospectus, or in any other subsequently filed document which is also incorporated herein by reference, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed to constitute a part of this proxy statement/prospectus except as so modified or superseded. The information relating to Ameris contained in this proxy statement/prospectus should be read together with the information in the documents incorporated herein by reference.
Documents incorporated by reference are available from Ameris without charge, excluding all exhibits unless we have specifically incorporated by reference an exhibit in this proxy statement/prospectus. Islands shareholders may obtain documents incorporated by reference by Ameris in this proxy statement/prospectus by requesting them in writing or by telephone from Cindi H. Lewis, Ameris Bancorp, 24 2 nd Avenue, S.E., Moultrie, Georgia 31768 (229-890-1111). If you would like to request documents, please do so by , 2006 to receive them before the special meeting.
All information concerning Ameris and its subsidiaries has been furnished by Ameris, and all information concerning Islands and Islands Bank has been furnished by Islands.
You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus to vote on the merger. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement/prospectus. This proxy statement/prospectus is dated , 2006. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date, and neither the mailing of this proxy statement/prospectus to shareholders nor the issuance of Ameris stock in the merger shall create any implication to the contrary. This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is not lawful to make any such offer or solicitation in such jurisdiction. Neither the delivery of this proxy statement/prospectus nor any distribution of securities made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of Ameris or Islands since the date hereof or that the information herein is correct as of any time subsequent to its date.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ISLANDS BANCORP
ISLANDS COMMUNITY BANK, N.A.
AMERIS BANCORP
AND
AMERICAN BANKING COMPANY
As of August 15, 2006
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Page | ||||||
ARTICLE 9. |
||||||
SECTION 9.1 |
Termination | A-36 | ||||
SECTION 9.2 |
Effect of Termination | A-37 | ||||
ARTICLE 10. |
||||||
SECTION 10.1 |
Definitions | A-37 | ||||
SECTION 10.2 |
Expenses; Effect of Certain Terminations | A-44 | ||||
SECTION 10.3 |
Brokers and Finders | A-44 | ||||
SECTION 10.4 |
Entire Agreement | A-44 | ||||
SECTION 10.5 |
Amendments | A-45 | ||||
SECTION 10.6 |
Waivers | A-45 | ||||
SECTION 10.7 |
Assignment | A-45 | ||||
SECTION 10.8 |
Notices | A-46 | ||||
SECTION 10.9 |
Governing Law | A-46 | ||||
SECTION 10.10 |
Counterparts | A-46 | ||||
SECTION 10.11 |
Interpretation | A-46 | ||||
SECTION 10.12 |
Enforcement of Agreement | A-47 | ||||
SECTION 10.13 |
Severability | A-47 | ||||
SECTION 10.14 |
Survival | A-47 |
LIST OF EXHIBITS
Exhibit Number |
Description |
|
1.2 | Bank Merger Agreement | |
3.5(a) | List of Option Holders | |
3.6(a) | List of Warrant Holders | |
3.6(b) | Form of letter from Warrant Holders | |
7.10 | Form of Affiliate Agreement | |
7.14 | Form of Shareholder Voting Agreement | |
8.2(d) | Matters as to which Target counsel will opine | |
8.2(f) | Form of Non-Competition and Non-Disclosure Agreement | |
8.3(d) | Matters as to which Purchaser counsel will opine |
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THIS AGREEMENT AND PLAN OF MERGER (the Agreement) is made and entered into as of August 15, 2006, by and among ISLANDS BANCORP (Target), a South Carolina corporation, and ISLANDS COMMUNITY BANK, N.A. (Target Bank), a national banking association, on the one hand, and AMERIS BANCORP (Purchaser), a Georgia corporation, and AMERICAN BANKING COMPANY (Purchaser Bank), a Georgia state-chartered bank, on the other hand. Certain terms used in this Agreement are defined in Section 10.1 hereof.
Preamble
The Boards of Directors of Target, Purchaser, Target Bank and Purchaser Bank are of the opinion that the transactions described herein are in the best interests of the respective Parties and their shareholders. This Agreement provides for (i) the merger of Target Bank with and into Purchaser Bank (the Bank Merger) and (ii) the combination of Target with Purchaser pursuant to the merger of Target with and into Purchaser, as a result of which the outstanding shares of the capital stock of Target shall be converted into the right to receive cash and shares of the common stock of Purchaser and the shareholders of Target (other than those shareholders, if any, who exchange their shares solely for cash) shall become shareholders of Purchaser (the Company Merger and, together with the Bank Merger, the Mergers). The transactions described in this Agreement are subject to the approvals of the shareholders of Target, 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 Company Merger for federal income tax purposes shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants and agreements set forth herein, the Parties agree as follows:
TERMS OF MERGERS AND CLOSING
SECTION 1.1 Terms of Company Merger . Subject to the terms and conditions of this Agreement, at the Effective Time, Target shall be merged with and into Purchaser in accordance with the provisions of Section 14-2-1107 of the GBCC and with the effect provided in Section 14-2-1106 of the GBCC. Purchaser shall be the Surviving Corporation resulting from the Company Merger and shall continue to be governed by the Laws of the State of Georgia. The Company Merger shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the respective Boards of Directors of Target and Purchaser.
SECTION 1.2 Terms of Bank Merger . Concurrent with the consummation of the Company Merger, Target Bank shall be merged with and into Purchaser Bank in accordance with the Financial Institutions Code of Georgia pursuant to the terms and conditions of the Bank Plan of Merger and Merger Agreement attached hereto as Exhibit 1.2 (the Bank Merger Agreement). Target shall vote the shares of Target Bank in favor of the Bank Merger Agreement and the Bank Merger.
SECTION 1.3 Time and Place of Closing . The Closing shall take place at 10:00 a.m. on the date that the Effective Time occurs or at such other time as the Parties, acting through their chief executive officers or chief financial officers, may mutually agree (the Closing Date). The Closing shall be held at such location as may be mutually agreed upon by the Parties or may be conducted by mail or facsimile as may be mutually agreed upon by the Parties.
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SECTION 1.4 Effective Time . The Company Merger shall become effective on the date and at the time specified in the Georgia Articles of Merger reflecting the Company Merger to be filed 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 or chief financial officer of each Party, the Parties shall use their reasonable efforts to cause the Effective Time to occur within thirty (30) days after the last to occur of (i) 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 Company Merger and (ii) the date on which the shareholders of Target approve this Agreement to the extent such approval is required by applicable Law. The Bank Merger Agreement shall become effective at the date and time specified therein.
ARTICLES; BY-LAWS; MANAGEMENT
SECTION 2.1 Company Merger . The Articles of Incorporation and By-Laws of Purchaser, as in effect immediately prior to the Effective Time, shall remain unchanged by reason of the Company Merger and shall be the Articles of Incorporation and By-Laws of Purchaser as the Surviving Corporation. The directors and officers of Purchaser at the Effective Time shall be the directors and officers of Purchaser as the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Each share of Purchaser Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time. At the Effective Time, the shares of Target Common Stock shall be converted as set forth in Article 3.
(a) The Articles of Incorporation and By-Laws of Purchaser Bank, as in effect immediately prior to the effective time of the Bank Merger, shall remain unchanged by reason of the Bank Merger and shall be the Articles of Incorporation and By-Laws of Purchaser Bank as the surviving entity in the Bank Merger. The directors and officers of Purchaser Bank at the effective time of the Bank Merger shall be the directors and officers of Purchaser Bank as the surviving entity in the Bank Merger until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Subject to the provisions of Section 2.2(b) hereof, at the effective time of the Bank Merger and by virtue thereof, (i) all shares of capital stock of Target Bank shall be canceled and (ii) the shares of capital stock of Purchaser Bank, as the surviving entity in the Bank Merger, issued and outstanding immediately prior to such effective time shall continue to be issued and outstanding, and no additional shares shall be issued as a result of the Bank Merger.
(b) The Parties agree that, notwithstanding any provision hereof to the contrary, upon the request of Purchaser, the method of effecting the Bank Merger may be changed to provide for the merger of Target Bank with and into a Purchaser Subsidiary other than Purchaser Bank, and the Target Companies shall cooperate in such efforts, including by entering into an appropriate amendment to this Agreement (to the extent such amendment only changes the method of effecting the Bank Merger and does not substantively affect this Agreement or the rights and obligations of the Parties or their respective shareholders hereunder); provided , however , that any actions taken pursuant to this Section 2.2(b) shall not (i) alter or change the kind or amount of consideration to be issued to holders of Outstanding Target Shares, the Option Holders or the Warrant Holders as provided for in this Agreement; (ii) adversely affect the tax consequences of the Company Merger to the holders of Outstanding Target Shares; (iii) Materially delay the receipt of the Consent of any Regulatory Authority required pursuant to Section 8.1(b) hereof; or (iv) otherwise cause any condition to Closing set forth herein not to be capable of being fulfilled (unless duly waived by the Party entitled to the benefits thereof).
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MANNER OF CONVERTING AND EXCHANGING SHARES IN THE COMPANY MERGER
SECTION 3.1 Conversion of Shares . Subject to the provisions of this Article 3, at the Effective Time, by virtue of the Company Merger and without any action on the part of the holders thereof, the shares of Purchaser Common Stock and Target Common Stock issued and outstanding immediately prior to the Effective Time shall be converted as follows:
(a) Each share of Purchaser Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time.
(b) At the Effective Time, each share of Target Common Stock (including any shares currently subject to options or warrants which are exercised prior to the Effective Time) outstanding immediately prior to the Effective Time, other than (i) shares with respect to which the holders thereof, prior to the Effective Time, met the requirements of, and perfected their dissenters rights under, Chapter 13 of the SCCA with respect to shareholders dissenting from the Company Merger (the Dissenting Shares), and (ii) shares held by Target or by Purchaser or the Purchaser Subsidiaries, in each case other than in a fiduciary capacity (each an Outstanding Target Share and, collectively, the Outstanding Target Shares), shall automatically be converted at the Effective Time into the right to receive cash and shares of Purchaser Common Stock, plus cash in lieu of fractional shares pursuant to Section 3.1(i) below, as set forth in this Section 3.1. Subject to the remaining provisions of this Section 3.1, each Target shareholder who does not dissent may elect to have each Outstanding Target Share held by such Target Shareholder converted into (i) cash in the amount of the Target Stock Price (the Cash Consideration) or (ii) a number of shares of Purchaser Common Stock (the Stock Consideration) equal to the Target Stock Price divided by the Average Market Price.
(c) Purchaser and Target shall each use its commercially reasonable efforts to mail to each holder of shares of Target Common Stock outstanding on the record date fixed for the Shareholders Meeting (the Record Date) a form (Form of Election) designed for the purpose of allowing the shareholder to elect, subject to the proration and election procedures set forth in this Section 3.1, whether to receive (i) the Cash Consideration for all of his or her Outstanding Target Shares (a Cash Election), (ii) the Stock Consideration for all of his or her Outstanding Target Shares (a Stock Election), or (iii) the Cash Consideration and the Stock Consideration for his or her Outstanding Target Shares in the relative proportions specified by such Target shareholder (a Combination Election). Target shareholders who hold such shares as nominees, trustees or in other representative capacities (a Representative) may submit multiple Forms of Election, provided that such Representative certifies that each such Form of Election covers all the shares of Target Common Stock held by each such Representative for a particular beneficial owner. A Form of Election must be received by the Exchange Agent no later than by the close of business five (5) days prior to the Effective Time (the Election Deadline) in order to be effective. All elections shall be irrevocable.
(d) Prior to the Effective Time, Purchaser shall select a bank or trust company reasonably acceptable to Target to act as exchange agent (the Exchange Agent) to effectuate the delivery of the Cash Consideration and the Stock Consideration to holders of Target Common Stock. Elections shall be made by holders of Target Common Stock by mailing, faxing or otherwise delivering to the Exchange Agent a Form of Election. To be effective, a Form of Election must be properly completed, signed and submitted to the Exchange Agent. Purchaser shall have the discretion, which it may delegate in whole or in part to the Exchange Agent, to determine whether Forms of Election have been properly completed, signed and submitted and to disregard immaterial defects in Forms of Election. The decision of Purchaser (or the Exchange Agent) in such matters shall be conclusive and binding. Neither Purchaser nor the Exchange Agent will be under any obligation to notify any Person of any defect in a Form of Election; provided , however , that Purchaser (or the Exchange Agent) shall use its reasonable best efforts to notify holders of Target Common Stock of any such defect.
(e) A holder of Target Common Stock who does not submit a Form of Election which is received by the Exchange Agent prior to the Election Deadline shall be deemed to have made a Stock Election to receive the
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Stock Consideration for each of his or her Outstanding Target Shares (a Default Stock Election). If Purchaser or the Exchange Agent shall determine, in its sole discretion, that any purported Cash Election, Stock Election or Combination Election was not properly made, such purported election shall be deemed to be of no force and effect, and the Target shareholder making such purported election shall for purposes hereof be deemed to have made a Default Stock Election.
(f) All shares of Target Common Stock which are subject to Cash Elections or the cash portion of Combination Elections are referred to herein as Cash Election Shares. All shares of Target Common Stock which are subject to Stock Elections (including Default Stock Elections) or the stock portion of Combination Elections are referred to herein as Stock Election Shares. The sum of the number of Dissenting Shares and the number of Cash Election Shares shall not be greater than 25% of the sum of the Outstanding Target Shares and the number of Dissenting Shares (the Maximum Cash Election Number). The number of Stock Election Shares shall not be greater than 75% of the number of Outstanding Target Shares (the Maximum Stock Election Number).
(g) If, after the results of the Forms of Election are calculated, the number of Stock Election Shares exceeds the Maximum Stock Election Number, then the Exchange Agent shall determine the number of Stock Election Shares which must be redesignated as Cash Election Shares, and all Target shareholders who have made a Default Stock Election shall, on a pro rata basis, have such number of their Stock Election Shares redesignated as Cash Election Shares so that the Maximum Stock Election Number is achieved. If, after redesignating to Cash Election Shares all shares for which a Default Stock Election was made, the Maximum Stock Election Number is not achieved, then the Exchange Agent shall determine the additional number of Stock Election Shares which must be redesignated as Cash Election Shares, and all Target shareholders who have Stock Election Shares shall, on a pro rata basis, have such number of their Stock Election Shares redesignated as Cash Election Shares so that the Maximum Stock Election Number is achieved. If, after the results of the Forms of Election are calculated, the number of Cash Election Shares exceeds the Maximum Cash Election Number, then the Exchange Agent shall determine the number of Cash Election Shares which must be redesignated as Stock Election Shares, and all Target s hareholders who have Cash Election Shares shall, on a pro rata basis, have such number of their Cash Election Shares redesignated as Stock Election Shares so that the Maximum Cash Election Number is achieved. Purchaser or the Exchange Agent shall make all computations contemplated by this Section 3.1, and all such computations shall be conclusive and binding on the holders of Target Common Stock.
(h) After the redesignation procedure set forth in Section 3.1(g) above is completed, all Cash Election Shares shall be converted into the right to receive the Cash Consideration, and all Stock Election Shares shall be converted into the right to receive the Stock Consideration. Such certificates previously evidencing shares of Target Common Stock (Old Certificates) shall be exchanged for (i) certificates evidencing the Stock Consideration or (ii) the Cash Consideration, multiplied in each case by the number of shares previously evidenced by the canceled certificate, upon the surrender of such certificates in accordance with the provisions of Section 3.2 hereof, without interest. Notwithstanding the foregoing, however, no fractional shares of Purchaser Common Stock shall be issued, and, in lieu thereof, a cash payment shall be made pursuant to Section 3.1(i) below.
(i) Notwithstanding any other provision of this Agreement, each holder of Outstanding Target Shares exchanged pursuant to the Company Merger who would otherwise have been entitled to receive a fraction of a share of Purchaser Common Stock as Stock Consideration (after taking into account all certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Purchaser Common Stock multiplied by the Average Market Price. No such holder will be entitled to dividends, voting rights, or any other rights as a shareholder in respect of any fractional shares.
(j) Each share of the Target Common Stock that is not an Outstanding Target Share as of the Effective Time shall be cancelled without consideration therefor.
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(k) No Dissenting Shares shall be converted in the Company Merger. All such shares shall be cancelled and the holders thereof shall thereafter have only such rights as are granted to dissenting shareholders under Chapter 13 of the SCCA; provided , however , that if any such shareholder fails to perfect his or her rights as a dissenting shareholder with respect to his or her Dissenting Shares in accordance with Chapter 13 of the SCCA, such shares held by such shareholder shall, upon the happening of that event, be treated the same as all other holders of Target Common Stock who at the Effective Time held Outstanding Target Shares.
SECTION 3.2 Exchange of Shares . Target shall send or cause to be sent to each holder of Outstanding Target Shares as of the Record Date a form of letter of transmittal (the Letter of Transmittal) for use in exchanging Old Certificates for cash and certificates representing Purchaser Common Stock which shall be deposited with the Exchange Agent by Purchaser as of the Effective Time. The Letter of Transmittal shall be mailed within ten (10) business days following the date of the Shareholders Meeting. The Letter of Transmittal will contain instructions with respect to the surrender of Old Certificates and the distribution of the Cash Consideration and certificates evidencing the Stock Consideration, which shall be deposited with the Exchange Agent by Purchaser as of the Effective Time. If any certificates for shares of Purchaser Common Stock are to be issued in a name other than that for which an Old Certificate surrendered or exchanged is issued, the Old Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and the person requesting such exchange shall affix any requisite stock transfer tax stamps to the Old Certificate surrendered or provide funds for their purchase or establish to the satisfaction of the Exchange Agent that such taxes are not payable. Unless and until Old Certificates or evidence that such certificates have been lost, stolen or destroyed (accompanied by such security or indemnity as shall be requested by Purchaser) are presented to the Exchange Agent, the holder thereof shall not be entitled to receive the consideration to be paid in exchange therefor pursuant to the Company Merger or any dividends payable on any Purchaser Common Stock to which he or she is entitled or to exercise any rights as a shareholder of Purchaser Common Stock, except as provided in Section 3.5 below. Subject to applicable Law and to the extent that the same has not yet been paid to a public official pursuant to applicable abandoned property Laws, upon surrender of his or her Old Certificates, the holder thereof shall be paid the consideration to which he or she is entitled. All such property, if held by the Exchange Agent for payment or delivery to the holders of unsurrendered Old Certificates and unclaimed at the end of one (1) year from the Effective Time, shall at such time be paid or redelivered by the Exchange Agent to Purchaser, and after such time any holder of an Old Certificate who has not surrendered such certificate shall, subject to applicable Laws and to the extent that the same has not yet been paid to a public official pursuant to applicable abandoned property Laws, look as a general creditor only to Purchaser for payment or delivery of such property. In no event will any holder of Target Common Stock exchanged in the Company Merger be entitled to receive any interest on any amounts held by the Exchange Agent or Purchaser.
SECTION 3.3 Shares Held by Target or Purchaser . Each of the shares of Target Common Stock held by any Target Company or by any Purchaser Company, in each 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.
SECTION 3.4 Rights of Former Target Shareholders . At the Effective Time, the stock transfer books of Target shall be closed as to holders of Target Common Stock immediately prior to the Effective Time, and no transfer of Target Common Stock by any such holder shall thereafter be made or recognized. Until surrendered for exchange in accordance with the provisions of Section 3.2 of this Agreement, each Old Certificate (other than shares to be canceled pursuant to Section 3.1(j) of this Agreement) 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 shareholders of record of Target shall be entitled to vote after the Effective Time at any meeting of shareholders of Purchaser the number of whole shares of Purchaser Common Stock into which their respective shares of Target Common Stock are converted, regardless of whether such holders have exchanged their certificates representing Target Common Stock for certificates representing Purchaser Common Stock in accordance with the provisions of this Agreement. Whenever a dividend or other distribution is declared by Purchaser on the Purchaser Common Stock, the record date for
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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 Purchaser Common Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any certificate representing shares of Target Common Stock issued and outstanding at the Effective Time until such holder surrenders such certificate for exchange as provided in Section 3.2 of this Agreement. However, upon surrender of such Target Common Stock certificate, the Purchaser Common Stock certificate (together with all such undelivered dividends or other distributions without interest), the Cash Consideration (without interest) and any undelivered cash payments to be paid for fractional share interests (without interest) shall be delivered and paid with respect to each share represented by such certificate.
SECTION 3.5 Treatment of Stock Options . The name of each holder (Option Holder) of an option to purchase shares of Target Common Stock issued by Target (Target Option) and the number of Target Options owned by such Option Holder is set forth on Exhibit 3.5(a) hereto. Each Target Option shall be cancelled upon consummation of the Company Merger, and all rights in respect thereof will cease to exist, in consideration of the automatic conversion at the Effective Time of such Target Option into the right to receive, on the Closing Date, cash in an amount equal to (i) the aggregate number of Option Shares for which such Target Option could have been exercised immediately prior to the Effective Time (whether or not such Target Option is then exercisable), multiplied by (ii) the difference between (A) the Target Stock Price and (B) the exercise price for each Option Share subject to such Target Option.
SECTION 3.6 Treatment of Warrants . The name of each holder (Warrant Holder) of a warrant to purchase shares of Target Common Stock issued by Target (Target Warrant) and the number of Target Warrants owned by such Warrant Holder is set forth on Exhibit 3.6(a) hereto. At the election of the Warrant Holder, the entirety of each Target Warrant held by such Warrant Holder shall be converted at the Effective Time into the right to receive, on the Closing Date, either (a) cash in an amount equal to (i) the aggregate number of Warrant Shares for which such Target Warrant could have been exercised immediately prior to the Effective Time (whether or not such Target Warrant is then exercisable), multiplied by (ii) the difference between (A) the Target Stock Price and (B) the exercise price for each Warrant Share subject to such Target Warrant, or (b) a number of shares of Purchaser Common Stock equal to (i) the aggregate number of Warrant Shares for which such Target Warrant could have been exercised immediately prior to the Effective Time (whether or not such Target Warrant is then exercisable), multiplied by (ii) the quotient obtained by dividing (A) the difference between (1) the Target Stock Price and (2) the exercise price for each Warrant Share subject to such Target Warrant, by (B) the Average Market Price. Such election shall be made by the Warrant Holders delivery to Target of an election notice in the form set forth in Exhibit A to Exhibit 3.6(b) hereto prior to the Election Deadline. A Warrant Holder who does not deliver such an election notice to Target by the Election Deadline shall receive cash in respect of 50% of the Warrant Shares issuable upon the exercise of such Warrant Holders Target Warrant and Purchaser Common Stock in respect of the remaining 50% of such Warrant Shares, in each case in an amount determined in accordance with the second sentence of this Section 3.6. Target has previously delivered to Purchaser a letter agreement in the form set forth in Exhibit 3.6(b) with each Warrant Holder pursuant to which each Warrant Holder has consented to the provisions of this Section 3.6.
REPRESENTATIONS AND WARRANTIES OF TARGET AND TARGET BANK
Target and Target Bank hereby, jointly and severally, represent and warrant to Purchaser as follows:
SECTION 4.1 Organization, Standing and Power .
(a) Target is a corporation duly organized, validly existing, and in good standing under the Laws of the State of South Carolina, and is duly registered as a bank holding company under the BHC Act. Target has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Target is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of
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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 Target.
(b) Target Bank is a national bank duly organized, validly existing, and in good standing under the Laws of the United States of America, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Target Bank is duly qualified or licensed to transact business and in good standing in the 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 it. The minute books and other organizational documents and corporate records for Target Bank have been made available to Purchaser for its review and are true and complete in all Material respects as in effect as of the date of this Agreement and accurately reflect in all Material respects all amendments thereto and all proceedings of the Board of Directors and shareholders thereof.
SECTION 4.2 Authority; No Breach .
(a) Each of Target and the Target Bank has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and the Bank Merger Agreement and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Bank Merger Agreement and the consummation of the transactions contemplated herein and therein, including the Mergers, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Target and Target Bank, subject to the approval of this Agreement by the holders of the outstanding Target Common Stock and by Target, as the sole shareholder of Target Bank. Subject to such requisite shareholder approval, this Agreement and the Bank Merger Agreement represent legal, valid and binding obligations of Target and Target Bank, as the case may be, enforceable against them in accordance with their respective 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) With respect to each of Target and Target Bank, neither the execution and delivery of this Agreement or the Bank Merger Agreement, nor the consummation of the transactions contemplated hereby or thereby, nor compliance with any of the provisions hereof or thereof, will (i) conflict with or result in a breach of any provision of its Articles of Incorporation or Association or its By-Laws, or (ii) constitute or result in a Default or loss of benefit under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Target Company under, any Contract or Permit of any Target 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 Target, or (iii) subject to receipt of the requisite approvals referred to in Section 8.1(b) of this Agreement, violate any Law or Order applicable to any Target Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate Laws, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the IRS 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 Target, no notice to, filing with, or Consent of, any public body or authority is necessary for the consummation by Target or Target Bank of the Mergers and the other transactions contemplated in this Agreement.
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(a) The authorized capital stock of Target consists of (i) 10,000,000 shares of Target Common Stock, of which 740,260 shares are issued and outstanding as of the date of this Agreement, and (ii) 2,000,000 shares of Preferred Stock, none of which are issued or outstanding as of the date of this Agreement. All of the issued and outstanding shares of capital stock of Target are duly and validly issued and outstanding and are fully paid and nonassessable under the SCCA. None of the outstanding shares of capital stock of Target has been issued in violation of any preemptive rights of the current or past shareholders of Target.
(b) The authorized capital stock of Target Bank consists of 600,000 shares of common stock, $5.00 par value per share. All of the issued and outstanding shares of capital stock of Target Bank are duly and validly issued and outstanding and are fully paid and nonassessable (except for assessment pursuant to 12 U.S.C. §55). None of the outstanding shares of capital stock of Target Bank has been issued in violation of any preemptive rights of the current or past shareholders of Target Bank.
(c) Except as set forth in Sections 4.3(a) and (b) of this Agreement, there are no shares of capital stock or other equity securities of Target or Target Bank outstanding and, except as set forth in Exhibit 3.5(a) and Exhibit 3.6(a) , there are 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 Target or Target Bank or contracts, commitments, understandings or arrangements by which Target or Target Bank is 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.
SECTION 4.4 Target Subsidiary . Target Bank is the only Subsidiary of Target, and Target owns all of the issued and outstanding shares of capital stock of Target Bank. No equity securities of Target Bank are or may become required to be issued (other than to a Target Company) by reason of any 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 Target Bank, and there are no Contracts by which Target Bank is bound to issue (other than to a Target Company) additional shares of its capital stock or options, warrants or rights to purchase or acquire any additional shares of its capital stock or by which any Target Company is or may be bound to transfer any shares of the capital stock of Target Bank (other than to a Target Company). There are no Contracts relating to the rights of any Target Company to vote or to dispose of any shares of the capital stock of Target Bank. Target Bank is an insured institution as defined in the Federal Deposit Insurance Act and applicable regulations thereunder.
SECTION 4.5 Financial Statements .
(a) Target has timely filed all Target Financial Statements with the SEC, and Target will deliver to Purchaser copies of all financial statements, audited or unaudited, of Target prepared subsequent to the date hereof. The Target Financial Statements (as of the dates thereof and for the periods covered thereby) (i) are or, if prepared after the date of this Agreement, will be in accordance with the books and records of the Target 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 (ii) present or will present, as the case may be, fairly the consolidated financial position of the Target Companies as of the dates indicated and the consolidated results of operations, changes in shareholders equity, and cash flows of the Target 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). To the Knowledge of Target, (x) the Target Financial Statements do not contain any untrue statement of a Material fact or omit to state a Material fact necessary to make the Target Financial Statements not misleading with respect to the periods covered thereby; and (y) the Target Financial Statements fairly present, in all Material respects, the financial condition, results of operations and cash flows of Target as of and for the periods covered by them.
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(b) Targets external auditor is and has been throughout the periods covered by the Target Financial Statements (i) independent with respect to Target within the meaning of Regulation S-X under the 1933 Act and (ii) in compliance with subsections (g) through (l) of Section 10A of the 1934 Act and the related rules of the SEC and the Public Company Accounting Oversight Board. Except as Previously Disclosed, Targets auditors have not performed any non-audit services for Target since January 1, 2004.
SECTION 4.6 Absence of Undisclosed Liabilities . Except as Previously Disclosed, no Target Company has any Liabilities that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target, except Liabilities which are accrued or reserved against in the consolidated balance sheets of Target as of June 30, 2006 included in the Target Financial Statements or reflected in the notes thereto. Except as Previously Disclosed, no Target Company has incurred or paid any Liability since June 30, 2006, 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 Target.
SECTION 4.7 Absence of Certain Changes or Events . Except as Previously Disclosed, since June 30, 2006, (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 Target, (b) the Target 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 Target provided in Article 7 of this Agreement, and (c) each Target Company has conducted its business in the ordinary and usual course (excluding the incurrence of expenses in connection with this Agreement and the transactions contemplated hereby).
(a) All Tax returns required to be filed by or on behalf of any of the Target Companies have been duly filed or requests for extensions have been timely filed, granted and have not expired for periods ended on or before June 30, 2006, 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 Target, and all returns filed are complete and accurate to the Knowledge of Target. 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 Target, except as reserved against in the Target Financial Statements delivered prior to the date of this Agreement. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid.
(b) None of the Target 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 Target Company, which deficiency is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target.
(c) Adequate provision for any Taxes due or to become due for any of the Target Companies for the period or periods through and including the date of the most recent respective Target Financial Statements has been made and is reflected on such Target Financial Statements.
(d) Deferred Taxes of the Target Companies have been provided for in accordance with GAAP.
(e) Each of the Target Companies is in compliance with, and its records contain all information and documents (including properly completed IRS Forms W-4 and 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 Target.
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(f) No Target Company has made any payments, is obligated to make any payments or is a party to any contract, agreement or other arrangement that could obligate it to make any payments that would be disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue Code.
(g) There are no Material Liens with respect to Taxes upon any of the Assets of any Target Company.
(h) No Target Company has filed any consent under former Section 341(f) of the Internal Revenue Code concerning collapsible corporations.
(i) No Target Company has or has had a permanent establishment in any foreign country, as defined in any applicable tax treaty or convention between the United States and such foreign country.
SECTION 4.9 Target Allowance for Possible Loan Losses . The allowance for possible loan or credit losses (the Target Allowance) shown on the consolidated balance sheets of Target included in the most recent Target Financial Statements dated prior to the date of this Agreement was, and the Target Allowance shown on the consolidated balance sheets of Target included in the financial statements of Target 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 Target Bank and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by Target Bank as of the dates thereof, except where the failure of such Target Allowance to be so maintained is not reasonably likely to have a Material Adverse Effect on Target.
SECTION 4.10 Assets . Except as Previously Disclosed or as disclosed or reserved against in the Target Financial Statements, or where the failure to own good and marketable title is not reasonably likely to have a Material Adverse Effect on Target, the Target 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 Target Companies are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Targets past practices. All Assets which are Material to Targets business on a consolidated basis, held under leases or subleases by any of the Target 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 Target 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 Target Companies is a named insured are reasonably sufficient. No Target Company has received notice from any insurance carrier that (i) such insurance will be cancelled or that coverage thereunder will be reduced or eliminated or (ii) premium costs with respect to such policies of insurance will be substantially increased. The Assets of the Target Companies include all assets required to operate the businesses of the Target Companies as presently conducted.
SECTION 4.11 Environmental Matters .
(a) Each Target Company, its Participation Facilities and, to the Knowledge of such Target Company, its Loan Properties are, and have been, in compliance with all Environmental Laws, except for violations which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target.
(b) There is no Litigation pending or, to the Knowledge of Target, threatened before any court, governmental agency or authority or other forum in which any Target Company or any of its Participation Facilities has been or, with respect to threatened Litigation, may be named as a defendant (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material or oil, whether or not occurring at, on, under or involving a site owned,
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leased or operated by any Target Company or any of its Participation Facilities, except for such Litigation pending or, to the Knowledge of Target, threatened that is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target.
(c) There is no Litigation pending or, to the Knowledge of Target, threatened before any court, governmental agency or board or other forum in which any of its Loan Properties (or any Target Company in respect of such Loan Property) has been or, with respect to threatened Litigation, may be named as a defendant or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material or oil, whether or not occurring at, on, under or involving a Loan Property, except for such Litigation pending or, to the Knowledge of Target, threatened that is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target.
(d) To the Knowledge of Target, there is no reasonable basis for any Litigation of a type described in subsections (b) or (c) above, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target.
(e) To the Knowledge of Target, during the period of (i) any Target Companys ownership or operation of any Loan Property, (ii) any Target Companys participation in the management of any Participation Facility, or (iii) any Target Companys holding of a security interest in a Loan Property, there has been no release of Hazardous Material or oil in, on, under or affecting any such Participation Facility or Loan Property, the release or presence of which could reasonably be expected to result in any reporting, clean up or remedial obligation pursuant to any Environmental Law, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target.
(f) Prior to the period of (i) any Target Companys ownership or operation of any Loan Property, (ii) any Target Companys participation in the management of any Participation Facility, or (iii) any Target Companys holding of a security interest in a Loan Property, to the Knowledge of Target, there has been no release of any Hazardous Material or oil in, on, under or affecting any such Participation Facility or Loan Property, the release or presence of which could reasonably be expected to result in any reporting, clean up or remedial obligation pursuant to any Environmental Law, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target.
SECTION 4.12 Compliance with Laws .
(a) Each Target 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 Target, 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 Target.
(b) Except as Previously Disclosed, no Target Company:
(i) is in violation of any Laws, Orders or Permits applicable to its business or employees conducting its business, including the Sarbanes-Oxley Act of 2002 and the USA Patriot Act of 2001, except for violations which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target; and
(ii) 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 (A) asserting that any Target 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 Target, (B) threatening to revoke any Permits, the revocation of which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target, or
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(C) requiring any Target 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.
(c) Except as is not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Target, each Target Company has properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents thereof and all applicable Law. No Target Company, or any director, officer or employee of any Target Company, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account that is reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Target, and, except as would not be reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Target, the accountings for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.
(d) The records, systems, controls, data and information of Target and Target Bank are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Target and Target Bank or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the immediately following sentence. Target and Target Bank have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Target (i) has designed disclosure controls and procedures to ensure that Material information relating to Target, including Target Bank, is made known to the management of Target by others within those entities and (ii) has disclosed, based on its most recent evaluation prior to the date hereof, to Targets auditors and the audit committee of its Board of Directors (A) any significant deficiencies or material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect in any Material respect its ability to record, process, summarize and report financial data and (B) any fraud, whether or not Material, that involves management or other employees who have a significant role in its internal controls. Target has made available to Purchaser a summary of any such disclosure made by management to Targets auditors and audit committee since January 1, 2004.
SECTION 4.13 Labor Relations . No Target Company is the subject of any Litigation asserting that it or any other Target 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 Target 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 Target Company, pending or, to its Knowledge, threatened nor, to its Knowledge, is there any activity involving any Target Companys employees seeking to certify a collective bargaining unit or engaging in any other organization activity.
SECTION 4.14 Employee Benefit Plans .
(a) Target has delivered or made available to Purchaser prior to the execution of this Agreement copies 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 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 Target 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 Target Benefit Plans).
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Any of the Target 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 Target ERISA Plan. Each Target 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 Target Pension Plan. No Target Pension Plan is or has been a multi-employer plan within the meaning of Section 3(37) of ERISA. Except as Previously Disclosed, the Target Companies do not participate in either a multi-employer plan or a multiple employer plan.
(b) The Target Companies have delivered or made available to Purchaser prior to the execution of this Agreement correct and complete copies of the following documents: (i) all trust agreements or other funding arrangements for all Target Benefit Plans (including insurance contracts) and all amendments thereto; (ii) with respect to any such Target Benefit Plans or amendments, all determination letters, Material rulings, Material opinion letters, Material information letters or Material advisory opinions issued by the IRS, the United States Department of Labor or the Pension Benefit Guaranty Corporation; (iii) all annual reports or returns, audited or unaudited financial statements, actuarial valuations and reports and summary annual reports prepared for any Target Benefit Plan with respect to the most recent plan year; and (iv) the most recent summary plan descriptions and any Material modifications thereto.
(c) All Target 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 Target. Target maintains a 401(k) plan originally adopted under a volume submitter arrangement offered by or in conjunction with its third party service provider. Effective on or about January 1, 2003, Target changed third party service providers and subsequent required plan amendments have been prepared by the successor third party service provider. Target has not obtained an individual determination letter from the Internal Revenue Service concerning the 401(k) plans tax-qualified status and, as a result of the foregoing events, Target may not be able to rely upon any favorable letter or advisory opinion that may have been issued to the volume submitter practitioner. No Target Company has engaged in a transaction with respect to any Target Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject any Target 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 Target or any Target Company.
(d) No Target Pension Plan has any unfunded current liability, as that term is defined in Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such plans most recent actuarial valuation, and the fair market value of the assets of any such plan exceeds the plans benefit liabilities, as that term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors that would apply if the plan terminated in accordance with all applicable legal requirements. Since the date of the most recent actuarial valuation, there has been (i) no Material change in the financial position of any Target Pension Plan, (ii) no change in the actuarial assumptions with respect to any Target Pension Plan, and (iii) no increase in benefits under any Target Pension Plan as a result of plan amendments or changes in applicable Law, which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target or Materially adversely affect the funding status of any such plan. Neither any Target Pension Plan nor any single-employer plan, within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any Target Company, or the single-employer plan of any entity which is considered one employer with Target under Section 4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an ERISA Affiliate), has an accumulated funding deficiency within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to have a Material Adverse Effect on Target. No Target Company has provided, or is required to provide, security to a Target Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code. All premiums required to be paid under ERISA Section 4006 have been timely paid by all Target Companies except to the extent any failure to do so would not have a Materially Adverse Effect on Target.
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(e) Within the six-year period preceding the Effective Time, no Liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by any Target Company with respect to any ongoing, frozen or terminated single-employer plan or the single-employer plan of any ERISA Affiliate, which Liability is reasonably likely to have a Material Adverse Effect on Target. Except as Previously Disclosed, no Target Company has incurred any withdrawal Liability with respect to a multi-employer plan under Subtitle B of Title IV of ERISA (regardless of whether based on contributions of an ERISA Affiliate), which Liability is reasonably likely to have a Material Adverse Effect on Target. No notice of a reportable event, within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Target Pension Plan or by any ERISA Affiliate within the 12-month period ending on the date hereof.
(f) Except as required under Title I, Part 6 of ERISA and Internal Revenue Code Section 4980B, no Target Company has any obligations for retiree health and life benefits under any of the Target Benefit Plans and there are no restrictions on the rights of such Target Company to amend or terminate any such Plan without incurring any Liability thereunder, which Liability is reasonably likely to have a Material Adverse Effect on Target.
(g) Except as Previously Disclosed, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any employee of any Target Company from any Target Company under any Target Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Target Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit, where such payment, increase or acceleration is reasonably likely to have a Material Adverse Effect on Target.
(h) The actuarial present values of all accrued deferred compensation entitlements (including entitlements under any executive compensation, supplemental retirement or employment agreement) of employees and former employees of any Target Company and its beneficiaries, other than entitlements accrued pursuant to funded retirement plans subject to the provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA, have been fully reflected on the Target Financial Statements to the extent required by and in accordance with GAAP.
SECTION 4.15 Material Contracts . Except as Previously Disclosed or otherwise reflected in the Target Financial Statements, none of the Target 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 $25,000, (b) any Contract relating to the borrowing of money by any Target Company or the guarantee by any Target Company of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, fully secured repurchase agreements, trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of business), and (c) any other Contract or amendment thereto that would be required to be filed as an exhibit to any report filed by Target with any Regulatory Authority as of the date of this Agreement that has not been filed by Target with any Regulatory Authority as an exhibit to any report filed by Target for the fiscal year ended December 31, 2005 (together with all Contracts referred to in Sections 4.10 and 4.14(a) of this Agreement, the Target Contracts). With respect to each Target Contract, (i) the Contract is in full force and effect, (ii) no Target Company is in Default thereunder other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the Target Companies, (iii) no Target Company has repudiated or waived any Material provision of any such Contract, and (iv) no other party to any such Contract is, to the Knowledge of the Target Companies, in Default in any respect, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the Target Companies, or has repudiated or waived any Material provision thereunder. Except as Previously Disclosed, all of the indebtedness of the Target Companies for money borrowed is prepayable at any time by the Target Companies without penalty or premium.
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SECTION 4.16 Legal Proceedings . Except as Previously Disclosed, there is no Litigation instituted or pending or, to the Knowledge of Target, 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 Target 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 Target, nor are there any Orders of any Regulatory Authorities, other governmental authorities or arbitrators outstanding against any Target Company, that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target.
SECTION 4.17 Reports . Except as Previously Disclosed, since January 1, 2004, each Target Company has timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file with any Regulatory Authority and has paid all fees and assessments due and payable in connection therewith, except where the failure to file such report, registration or statement or to pay any such fee or assessment is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target. Except as Previously Disclosed, as of their respective dates, each of such reports, registrations and statements (as amended, in the case of any report, registration or statement that has been amended in accordance with applicable Law), including the financial statements, exhibits, and schedules thereto, complied in all Material respects with all applicable Laws. Except as Previously Disclosed, as of their respective dates, none of such reports, registrations or statements contained any untrue statement of a Material fact or omitted 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.
SECTION 4.18 Statements True and Correct . No statement, certificate, instrument or other writing furnished or to be furnished by any Target Company or any Affiliate thereof to Purchaser 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 Target Company or any Affiliate thereof for inclusion in the Registration Statement to be filed by Purchaser 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 Target Company or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to the Target shareholders in connection with the Shareholders Meeting, and any other documents to be filed by any Target 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 Target, 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 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 Shareholders Meeting. All documents that any Target 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.
SECTION 4.19 Tax and Regulatory Matters . Except as Previously Disclosed, no Target Company or any Affiliate thereof has taken any action, or has any Knowledge of any fact or circumstance that is reasonably likely, to (a) prevent the transactions contemplated hereby, including the Company Merger, from qualifying 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 8.1(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 Target, there exists no fact, circumstance, or reason why the requisite Consents referred to in Section 8.1(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 8.1(b).
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SECTION 4.20 Intellectual Property .
(a) Target has Previously Disclosed to Purchaser all patents, trademarks, trade names, trade secrets, copyrights, processes, service marks, royalty rights or design rights owned, used or licensed (as licensor or licensee) by Target Companies in the operation of their respective businesses and all applications therefor and registrations thereof, whether foreign or domestic, owned or controlled by Target Companies (the Intellectual Property), and, in the case of any such rights that are so owned, the jurisdiction in which such rights or applications have been registered, filed or issued, and, in the case of any such rights that are not so owned, the agreements under which such rights arise. Each of the Target Companies has taken all action necessary to keep the Intellectual Property owned by it in full force and effect, including filing all necessary affidavits and other documents and utilizing such property in interstate commerce. Each of the Target Companies is the sole and exclusive owner of the Intellectual Property which has been Previously Disclosed as being owned by it, with the sole and exclusive right, except to the extent indicated therein, to use and license such property. No claim has been asserted or, to Targets Knowledge, threatened seeking cancellation or concurrent use of any registered trademark, trade name or service mark owned, used or licensed by any of the Target Companies.
(b) There are no claims, demands or suits pending or, to Targets Knowledge, threatened against any of the Target Companies claiming an infringement by any of the Target Companies of any patents, copyrights, processes, licenses, trademarks, service marks or trade names of others in connection with its business; none of the Intellectual Property or, as the case may be, the rights granted to any of the Target Companies in respect thereof, infringes on the rights of any Person or is being infringed upon by any Person; and none of the Intellectual Property is subject to any outstanding order, decree, judgment, stipulation, injunction, restriction or agreement restricting the scope of its use by any of the Target Companies.
SECTION 4.21 Charter Provisions . Each Target Company has taken all action so that the entering into of this Agreement and the consummation of the Mergers and the other transactions contemplated by this Agreement do not and will not result in the grant of any rights to any Person under its Articles of Incorporation or Association or its By-Laws or other governing instruments (other than, with respect to Target, voting, dissenters rights of appraisal or other similar rights) or restrict or impair the ability of Purchaser to vote, or otherwise to exercise the rights of a shareholder with respect to, shares of any Target Company that may be acquired or controlled by it.
SECTION 4.22 State Takeover Laws . Target has taken all necessary action to exempt the transactions contemplated by this Agreement from any applicable moratorium, control share, fair price, business combination or other state takeover Law.
SECTION 4.23 Derivatives . All interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for Targets own account, or for the account of either Target Bank or its customers, were entered into (i) in accordance with prudent business practices and all applicable Laws and (ii) with counterparties believed to be financially responsible.
SECTION 4.24 Community Reinvestment Act . Each Target Bank has complied in all Material respects with the provisions of the Community Reinvestment Act (CRA) and the rules and regulations thereunder, has a CRA rating of not less than satisfactory, has received no Material criticism from regulators with respect to discriminatory lending practices, and has no Knowledge of any conditions or circumstances that are likely to result in a CRA rating of less than satisfactory or Material criticism from regulators with respect to discriminatory lending practices.
SECTION 4.25 Privacy of Customer Information .
(a) Each Target Bank is the sole owner of all individually identifiable personal information (IIPI) relating to its customers, former customers and prospective customers that will be transferred to Purchaser Companies pursuant to this Agreement and the other transactions contemplated hereby. For purposes of this Section 4.25, IIPI means any information relating to an identified or identifiable natural person.
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(b) The collection and use of such IIPI by each Target Bank and the transfer of such IIPI to Purchaser Companies complies with all applicable privacy policies, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act and all other applicable state, federal and foreign privacy Law.
SECTION 4.26 Technology Systems .
(a) Except as Previously Disclosed, no action will be necessary as a result of the transactions contemplated by this Agreement to enable the electronic data processing, information, record keeping, communications, telecommunications, hardware, third party software, networks, peripherals, portfolio trading and computer systems, including any outsourced systems and processes, and Intellectual Property that are used by the Target Companies (collectively, the Technology Systems) to continue to be used by the Surviving Corporation and its Subsidiaries to the same extent and in the same manner that such Technology Systems have been used by the Target Companies prior to the Effective Time.
(b) The Technology Systems (for a period of eighteen (18) months prior to the Effective Time) have not suffered unplanned disruption causing a Material Adverse Effect on the business of any of the Target Companies. Except for ongoing payments due under relevant third party agreements, the Technology Systems are free from any Liens. Except as Previously Disclosed, access to business critical parts of the Technology Systems is not shared with any third party.
(c) None of the Target Companies has received notice of or is aware of any Material circumstances, including the execution of this Agreement, that would enable any third party to terminate any of its agreements or arrangements relating to the Technology Systems (including maintenance and support).
SECTION 4.27 Opinion of Financial Advisor . Target has received the opinion of Howe Barnes Investments, Inc. dated the date of this Agreement, to the effect that the consideration to be received by the holders of Target Common Stock pursuant hereto is fair, from a financial point of view, to such holders, a signed copy of which has been delivered to Purchaser.
SECTION 4.28 Board Recommendation . The Board of Directors of Target, at a meeting duly called and held, has (i) determined that this Agreement and the transactions contemplated hereby, including the Mergers, taken together, are fair to and in the best interests of Targets shareholders and (ii) resolved to recommend that the holders of the shares of Target Common Stock approve this Agreement and the Company Merger.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Target and Target Bank as follows:
SECTION 5.1 Organization, Standing and Power . Each of Purchaser and Purchaser Bank is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Georgia, and Purchaser is duly registered as a bank holding company under the BHC Act. Each of Purchaser and Purchaser Bank has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Each of Purchaser and Purchaser Bank 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 Purchaser.
SECTION 5.2 Authority; No Breach .
(a) Each of Purchaser and Purchaser Bank has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and the Bank Merger Agreement and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement
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and the Bank Merger Agreement and the consummation of the transactions contemplated herein and therein, including the Mergers, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Purchaser and Purchaser Bank. This Agreement and the Bank Merger Agreement represent legal, valid and binding obligations of Purchaser and Purchaser Bank, as the case may be, enforceable against them in accordance with their respective 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) With respect to each of Purchaser and Purchaser Bank, neither the execution and delivery of this Agreement or the Bank Merger Agreement, nor the consummation of the transactions contemplated hereby or thereby, nor compliance with any of the provisions hereof or thereof, will (i) conflict with or result in a breach of any provision of its Articles of Incorporation or By-Laws, or (ii) constitute or result in a Default or loss of benefit under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Purchaser Company under, any Contract or Permit of any Purchaser 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 Purchaser, or (iii) subject to receipt of the requisite approvals referred to in Section 8.1(b) of this Agreement, violate any Law or Order applicable to any Purchaser Company or any of its Assets.
(c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate Laws and rules of the NASD, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the IRS 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 Purchaser, no notice to, filing with, or Consent of, any public body or authority is necessary for the consummation by Purchaser or Purchaser Bank of the Mergers and the other transactions contemplated in this Agreement.
(a) The authorized capital stock of Purchaser consists of (i) 30,000,000 shares of Purchaser Common Stock, of which 13,033,445 shares were issued and outstanding as of July 31, 2006, and (ii) 5,000,000 shares of Preferred Stock, none of which are issued or outstanding as of the date of this Agreement. All of the issued and outstanding shares of Purchaser Common Stock and all of the issued and outstanding shares of capital stock of Purchaser Bank are, and all of the shares of Purchaser Common Stock to be issued in exchange for shares of Target Common Stock upon consummation of the Company 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 Purchaser Common Stock has been, and none of the shares of Purchaser Common Stock to be issued in exchange for shares of Target Common Stock upon consummation of the Company Merger will be, issued in violation of any preemptive rights of the current or past shareholders of Purchaser. Options to purchase 502,088 shares of Purchaser Common Stock under the Purchaser Stock Plans were outstanding as of July 31, 2006. Purchaser owns all of the issued and outstanding shares of capital stock of Purchaser Bank free and clear of all Liens.
(b) Except as set forth in Section 5.3(a) of this Agreement or as Previously Disclosed, there are no shares of capital stock or other equity securities of Purchaser 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 Purchaser or contracts, commitments, understandings or arrangements by which Purchaser is 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.
SECTION 5.4 Purchaser Subsidiaries . The Purchaser Subsidiaries are as set forth in Purchasers SEC Documents. Purchaser owns all of the issued and outstanding shares of capital stock of each Purchaser Subsidiary. No equity securities of any Purchaser Subsidiary are or may become required to be issued (other than to a Purchaser Company) by reason of any options, warrants, scrip, rights to subscribe to, calls or commitments
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of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of any such Subsidiary, and there are no Contracts by which any Purchaser Subsidiary is bound to issue (other than to a Purchaser Company) additional shares of its capital stock or options, warrants or rights to purchase or acquire any additional shares of its capital stock or by which any Purchaser Company is or may be bound to transfer any shares of the capital stock of any Purchaser Subsidiary (other than to a Purchaser Company). There are no Contracts relating to the rights of any Purchaser Company to vote or to dispose of any shares of the capital stock of any Purchaser Subsidiary. All of the shares of capital stock of each Purchaser Subsidiary held by a Purchaser Company are fully paid and nonassessable under the applicable corporation Law of the jurisdiction in which such Subsidiary is incorporated or organized and are owned by the Purchaser Company free and clear of any Lien. Each Purchaser Subsidiary is either a bank 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 incorporated or 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 Purchaser 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 Purchaser. Each Purchaser Subsidiary that is a depository institution is an insured institution as defined in the Federal Deposit Insurance Act and applicable regulations thereunder.
SECTION 5.5 Financial Statements .
(a) Purchaser has timely filed all Purchaser Financial Statements with the SEC, and Purchaser will deliver to Target copies of all financial statements, audited and unaudited, of Purchaser prepared subsequent to the date hereof. The Purchaser 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 Purchaser 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 Purchaser Companies as of the dates indicated and the consolidated results of operations, changes in shareholders equity, and cash flows of the Purchaser 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). To the Knowledge of Purchaser, (i) the Purchaser Financial Statements do not contain any untrue statement of a Material fact or omit to state a Material fact necessary to make the Purchaser Financial Statements not misleading with respect to the periods covered by them; and (ii) the Purchaser Financial Statements fairly present, in all Material respects, the financial condition, results of operations and cash flows of Purchaser as of and for the periods covered by them.
(b) Purchasers external auditor is and has been throughout the periods covered by the Purchaser Financial Statements (i) independent with respect to Purchaser within the meaning of Regulation S-X under the 1933 Act and (ii) in compliance with subsections (g) through (l) of Section 10A of the 1934 Act and the related rules of the SEC and the Public Company Accounting Oversight Board. Except as Previously Disclosed, Purchasers auditors have not performed any non-audit services for Purchaser since January 1, 2004.
SECTION 5.6 Absence of Undisclosed Liabilities . No Purchaser Company has any Liabilities that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser, except Liabilities which are accrued or reserved against in the consolidated balance sheets of Purchaser as of June 30, 2006 included in the Purchaser Financial Statements or reflected in the notes thereto. No Purchaser Company has incurred or paid any Liability since June 30, 2006, 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 Purchaser.
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SECTION 5.7 Absence of Certain Changes or Events . Except as Previously Disclosed, since June 30, 2006, (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 Purchaser, (b) the Purchaser 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 Purchaser provided in Article 7 of this Agreement, and (c) each Purchaser Company has conducted its business in the ordinary and usual course (excluding the incurrence of expenses in connection with this Agreement and the transactions contemplated hereby).
(a) All Tax returns required to be filed by or on behalf of any of the Purchaser Companies have been timely filed or requests for extensions have been timely filed, granted and have not expired for periods ended on or before June 30, 2006, 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 Purchaser, and all returns filed are complete and accurate to the Knowledge of Purchaser. 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 Purchaser, except as reserved against in the Purchaser Financial Statements delivered prior to the date of this Agreement. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid.
(b) None of the Purchaser 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 Purchaser Company, which deficiency is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
(c) Adequate provision for any Taxes due or to become due for any of the Purchaser Companies for the period or periods through and including the date of the respective Purchaser Financial Statements has been made and is reflected on such Purchaser Financial Statements.
(d) Deferred Taxes of the Purchaser Companies have been provided for in accordance with GAAP.
SECTION 5.9 Purchaser Allowance for Possible Loan Losses . The allowance for possible loan or credit losses (the Purchaser Allowance) shown on the consolidated balance sheets of Purchaser included in the most recent Purchaser Financial Statements dated prior to the date of this Agreement was, and the Purchaser Allowance shown on the consolidated balance sheets of Purchaser included in the financial statements of Purchaser 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 Purchaser Companies and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by the Purchaser Companies as of the dates thereof, except where the failure of such Purchaser Allowance to be so adequate is not reasonably likely to have a Material Adverse Effect on Purchaser.
SECTION 5.10 Assets . Except as Previously Disclosed or as disclosed or reserved against in the Purchaser Financial Statements, the Purchaser 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 Purchaser Companies are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Purchasers past practices. All Assets which are Material to Purchasers business on a consolidated basis, held under leases or subleases by any of the Purchaser 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
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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 Purchaser 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 Purchaser Companies is a named insured are reasonably sufficient. No Purchaser Company has received notice from any insurance carrier that (i) such insurance will be cancelled or that coverage thereunder will be reduced or eliminated or (ii) premium costs with respect to such policies of insurance will be substantially increased. The Assets of the Purchaser Companies include all assets required to operate the businesses of the Purchaser Companies as presently conducted.
SECTION 5.11 Environmental Matters .
(a) Each Purchaser Company, its Participation Facilities and, to the Knowledge of such Purchaser Company, its Loan Properties are, and have been, in compliance with all Environmental Laws, except for violations which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
(b) There is no Litigation pending or, to the Knowledge of Purchaser, threatened before any court, governmental agency or authority or other forum in which any Purchaser Company or any of its Participation Facilities has been or, with respect to threatened Litigation, may be named as a defendant (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material or oil, whether or not occurring at, on, under or involving a site owned, leased or operated by any Purchaser Company or any of its Participation Facilities, except for such Litigation pending or, to the Knowledge of Purchaser, threatened that is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
(c) There is no Litigation pending or, to the Knowledge of Purchaser, threatened before any court, governmental agency or board or other forum in which any of its Loan Properties (or any Purchaser Company in respect of such Loan Property) has been or, with respect to threatened Litigation, may be named as a defendant or potentially responsible party (i) for alleged noncompliance (including by any predecessor), with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material or oil, whether or not occurring at, on, under or involving a Loan Property, except for such Litigation pending or, to the Knowledge of Purchaser, threatened that is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
(d) To the Knowledge of Purchaser, there is no reasonable basis for any Litigation of a type described in subsections (b) or (c) above, except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
(e) To the Knowledge of Purchaser, during the period of (i) any Purchaser Companys ownership or operation of any Loan Property, (ii) any Purchaser Companys participation in the management of any Participation Facility, or (iii) any Purchaser Companys holding of a security interest in a Loan Property, there has been no release of Hazardous Material or oil in, on, under or affecting such property, Participation Facility or Loan Property, the release or presence of which could reasonably be expected to result in any reporting, clean up or remedial obligation pursuant to any Environmental Law, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
(f) Prior to the period of (i) any Purchaser Companys ownership or operation of any Loan Property, (ii) any Purchaser Companys participation in the management of any Participation Facility, or (iii) any Purchaser Companys holding of a security interest in a Loan Property, to the Knowledge of Purchaser, there has been no release of any Hazardous Material or oil in, on, under or affecting any such Participation Facility or Loan Property, the release or presence of which could reasonably be expected to result in any reporting, clean up or remedial obligation pursuant to any Environmental Law, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
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SECTION 5.12 Compliance with Laws .
(a) Each Purchaser 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 Purchaser, 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 Purchaser.
(b) Except as Previously Disclosed, no Purchaser Company:
(i) is in violation of any Laws, Orders or Permits applicable to its business or employees conducting its business, including the Sarbanes-Oxley Act of 2002 and the USA Patriot Act of 2001, except for violations which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser; and
(iii) 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 (A) asserting that any Purchaser 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 Purchaser, (B) threatening to revoke any Permits, the revocation of which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser, or (C) requiring any Purchaser 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.
(c) Except as is not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Purchaser, each Purchaser Company has properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents thereof and all applicable Law. No Purchaser Company, or any director, officer or employee of any Purchaser Company, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account that is reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Purchaser, and, except as would not be reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Purchaser, the accountings for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.
(d) The records, systems, controls, data and information of Purchaser and the Purchaser Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Purchaser and its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the immediately following sentence. Purchaser and the Purchaser Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Purchaser (i) has designed disclosure controls and procedures to ensure that Material information relating to Purchaser, including the Purchaser Subsidiaries, is made known to the management of Purchaser by others within those entities and (ii) has disclosed, based on its most recent evaluation prior to the date hereof, to Purchasers auditors and the audit committee of its Board of Directors (A) any significant deficiencies or material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect in any Material respect its ability to record, process, summarize and report financial data and (B) any fraud, whether or not Material, that involves management or other employees who have a significant role in its internal controls. Purchaser has made available to Target a summary of any such disclosure made by management to Purchasers auditors and audit committee since January 1, 2004.
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SECTION 5.13 Labor Relations . No Purchaser Company is the subject of any Litigation asserting that it or any other Purchaser 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 Purchaser 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 Purchaser Company, pending or, to its Knowledge, threatened, nor, to its Knowledge, is there any activity involving any Purchaser Companys employees seeking to certify a collective bargaining unit or engaging in any other organization activity.
SECTION 5.14 Employee Benefit Plans .
(a) For purposes of this Agreement, Purchaser Benefit Plans means 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 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 Purchaser 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. Any of the Purchaser 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 Purchaser ERISA Plan. Each Purchaser 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 Purchaser Pension Plan. No Purchaser Pension Plan is or has been a multi-employer plan within the meaning of Section 3(37) of ERISA. The Purchaser Companies do not participate in either a multi-employer plan or a multiple employer plan.
(b) All Purchaser 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 Purchaser. Each Purchaser Benefit Plan which is intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the IRS or may rely upon an opinion issued by the IRS to a prototype sponsor, and neither Purchaser nor any Purchaser Company is aware of any circumstances reasonably likely to result in revocation of any such favorable determination letter or failure of any Purchaser Benefit Plan intended to satisfy Internal Revenue Code Section 401 to satisfy the Tax qualification provisions of the Internal Revenue Code applicable thereto. No Purchaser Company has engaged in a transaction with respect to any Purchaser Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject any Purchaser 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 Purchaser or any Purchaser Company.
(c) No Purchaser Pension Plan has any unfunded current liability, as that term is defined in Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such plans most recent actuarial valuation, and the fair market value of the assets of any such plan exceeds the plans benefit liabilities, as that term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors that would apply if the plan terminated in accordance with all applicable legal requirements. Since the date of the most recent actuarial valuation, there has been (i) no Material change in the financial position of any Purchaser Pension Plan, (ii) no change in the actuarial assumptions with respect to any Purchaser Pension Plan, and (iii) no increase in benefits under any Purchaser Pension Plan as a result of plan amendments or changes in applicable Law, which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser or Materially adversely affect the funding status of any such plan. Neither any Purchaser Pension Plan nor any single-employer plan, within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any Purchaser Company, or the single-employer plan of any ERISA Affiliate, has an accumulated funding deficiency within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to have a Material Adverse Effect on Purchaser. No Purchaser Company has provided, or is
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required to provide, security to a Purchaser Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code. All premiums required to be paid under ERISA Section 4006 have been timely paid by all Purchaser Companies except to the extent any failure to do so would not have a Materially Adverse Effect on Purchaser.
(d) Within the six-year period preceding the Effective Time, no Liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by any Purchaser Company with respect to any ongoing, frozen or terminated single-employer plan or the single-employer plan of any ERISA Affiliate, which Liability is reasonably likely to have a Material Adverse Effect on Purchaser. Except as Previously Disclosed, no Purchaser Company has incurred any withdrawal Liability with respect to a multi-employer plan under Subtitle B of Title IV of ERISA (regardless of whether based on contributions of an ERISA Affiliate), which Liability is reasonably likely to have a Material Adverse Effect on Purchaser. No notice of a reportable event, within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Purchaser Pension Plan or by any ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as required under Title I, Part 6 of ERISA and Internal Revenue Code Section 4980B, no Purchaser Company has any obligations for retiree health and life benefits under any of the Purchaser Benefit Plans and there are no restrictions on the rights of such Purchaser Company to amend or terminate any such Plan without incurring any Liability thereunder, which Liability is reasonably likely to have a Material Adverse Effect on Purchaser.
(f) Except as Previously Disclosed, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any employee of any Purchaser Company from any Purchaser Company under any Purchaser Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Purchaser Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit, where such payment, increase or acceleration is reasonably likely to have a Material Adverse Effect on Purchaser.
(g) The actuarial present values of all accrued deferred compensation entitlements (including entitlements under any executive compensation, supplemental retirement or employment agreement) of employees and former employees of any Purchaser Company and its beneficiaries, other than entitlements accrued pursuant to funded retirement plans subject to the provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA, have been fully reflected on the Purchaser Financial Statements to the extent required by and in accordance with GAAP.
SECTION 5.15 Legal Proceedings . Except as Previously Disclosed, there is no Litigation instituted or pending or, to the Knowledge of Purchaser, 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 Purchaser 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 Purchaser, nor are there any Orders of any Regulatory Authorities, other governmental authorities, or arbitrators outstanding against any Purchaser Company, that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
SECTION 5.16 Reports . Except as Previously Disclosed, since January 1, 2004, each Purchaser Company has timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file with the SEC, other Regulatory Authorities, and any applicable state securities or banking authorities and has paid all fees and assessments due and payable in connection therewith, except where the failure to so file such report, registration or statement or to pay any such fee or assessment is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser. As of their respective dates, each of such reports, registrations and statements, including the financial statements,
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exhibits, and schedules thereto, complied in all Material respects with all applicable Laws. As of their respective dates, none of such reports, registrations or statements contained any untrue statement of a Material fact or omitted 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.
SECTION 5.17 Statements True and Correct . No statement, certificate, instrument or other writing furnished or to be furnished by any Purchaser Company or any Affiliate thereof to Target 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 Purchaser Company or any Affiliate thereof for inclusion in the Registration Statement to be filed by Purchaser 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 Purchaser Company or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to Targets shareholders in connection with the Shareholders Meeting, and any other documents to be filed by any Purchaser 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 Target, 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 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 Shareholders Meeting. All documents that any Purchaser 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.
SECTION 5.18 Tax and Regulatory Matters . No Purchaser Company or any Affiliate thereof has taken any action, or has any Knowledge of any fact or circumstance that is reasonably likely, to (a) prevent the transactions contemplated hereby, including the Company Merger, from qualifying 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 8.1(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 Purchaser, there exists no fact, circumstance or reason why the requisite Consents referred to in Section 8.1(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 8.1(b).
SECTION 5.19 Charter Provisions . Each Purchaser Company has taken all action so that the entering into of this Agreement and the consummation of the Mergers and the other transactions contemplated by this Agreement do not and will not result in the grant of any rights to any Person under its Articles of Incorporation or By-Laws or other governing instruments or restrict or impair the ability of any Target shareholder to vote, or otherwise to exercise the rights of a shareholder with respect to, shares of Purchaser Common Stock that may be acquired or controlled by such shareholder.
SECTION 5.20 Community Reinvestment Act . Purchaser has complied in all Material respects with the provisions of the CRA and the rules and regulations thereunder, has a CRA rating of not less than satisfactory, and has received no Material criticism from regulators with respect to discriminatory lending practices, and has no Knowledge of any conditions or circumstances that are likely to result in CRA ratings of less than satisfactory or Material criticism from regulators with respect to discriminatory lending practices.
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CONDUCT OF BUSINESS PENDING CONSUMMATION
SECTION 6.1 Affirmative Covenants of Target . Unless the prior written consent of Purchaser shall have been obtained, and except as otherwise contemplated herein, Target shall and shall cause Target Bank to: (a) operate its business in the usual, regular, and ordinary course; (b) preserve intact its business organization and Assets and maintain its rights and franchises; (c) use its reasonable efforts to cause its representations and warranties set forth in this Agreement to be correct at all times; and (d) take no action which would (i) adversely affect the ability of any Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in the second sentence of Section 8.1(b) 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.
SECTION 6.2 Negative Covenants of Target . From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, Target 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 or chief financial officer of Purchaser, which consent shall not be unreasonably withheld or delayed:
(a) amend the Articles of Incorporation or Association, By-Laws or other governing instruments of any Target Company; or
(b) incur any additional debt obligation or other obligation for borrowed money (other than indebtedness of a Target Company to another Target Company) (for the Target Companies on a consolidated basis) except in the ordinary course of the business of Target Companies consistent with past practices (which shall include, for Target Subsidiaries that are depository institutions, creation of deposit liabilities, purchases of federal funds, receipt of Federal Home Loan Bank advances, and entry into repurchase agreements fully secured by U.S. government or agency securities), or impose, or suffer the imposition, on any share of stock of any Target Company of any Lien or permit any such Lien to exist; or
(c) repurchase, redeem or otherwise acquire or exchange (other than redemptions without the payment of any additional consideration or exchanges in the ordinary course under employee benefit plans or exercises or conversions prior to the Effective Time of Target Options or Target Warrants pursuant to the terms thereof), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of any Target Company, or declare or pay any dividend or make any other distribution in respect of Targets capital stock; or
(d) except for this Agreement or pursuant to another agreement with a Purchaser Company, or pursuant to the exercise of Target Options or Target Warrants outstanding as of the date hereof and pursuant to the terms thereof in existence on the date hereof, or as Previously Disclosed, 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 Target Common Stock or any other capital stock of any Target 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 Target Company or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Target Common Stock or sell, lease, mortgage or otherwise dispose of or otherwise encumber (i) any shares of capital stock of any Target Subsidiary (unless any such shares of stock are sold or otherwise transferred to another Target 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
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(f) acquire another business or merge or consolidate with another entity or acquire direct or indirect control over any Person, other than in connection with (i) internal reorganizations or consolidations involving existing Subsidiaries, (ii) foreclosures in the ordinary course of business, or (iii) acquisitions of control by a depository institution Subsidiary in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or officers of any Target Company (including such discretionary increases as may be contemplated by existing employment agreements), except in accordance with past practice Previously Disclosed or as required by Law; pay any bonus except to employees in accordance with past practice Previously Disclosed or the provisions of any applicable program or plan adopted by its Board of Directors prior to the date of this Agreement; enter into or amend any severance agreements with officers of any Target Company; or pay any bonus to, or grant any increase in fees or other increases in compensation or other benefits to, directors of any Target Company; or
(h) enter into or amend any employment Contract between any Target Company and any Person (unless such amendment is required by Law) that the Target 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 Target Company or make any Material change in or to any existing employee benefit plans of any Target 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 regulatory accounting requirements or GAAP; or
(k) fail to maintain its books, accounts and records in the usual manner on a basis consistent with that heretofore employed; or
(l) commence any Litigation other than in accordance with past practice, settle any Litigation involving any Liability of any Target Company for money damages in excess of $25,000 or which involves Material restrictions upon the operations of any Target Company; or
(m) enter into any new line of banking or nonbanking business in which it is not actively engaged as of the date of this Agreement; or
(n) (i) charge off (except as may otherwise be required by Law or by regulatory authorities or by GAAP consistently applied) or sell (except in the ordinary course of business consistent with past practices or as the Board of Directors of the respective Target Company deems necessary to conduct safe and sound banking practices) any of its portfolio of loans, discounts or financing leases, or (ii) sell any asset held as other real estate or other foreclosed assets for an amount Materially less than 100% of its book value; or
(o) 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; or
(p) make any Material election with respect to Taxes; or
(q) except for purchases of U.S. Treasury securities or U.S. Government agency securities, which in either case have maturities of five (5) years or less, (i) 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 any Target Company, or (ii) otherwise acquire direct or indirect control over any Person other than in connection with (A) foreclosures in the ordinary course of business, (B) acquisitions of control by a depository institution Subsidiary in its fiduciary capacity, or (C) the creation of new, wholly-owned Subsidiaries organized to conduct or continue activities otherwise permitted by this Agreement.
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SECTION 6.3 Affirmative Covenants of Purchaser . Unless the prior written consent of Target shall have been obtained, and except as otherwise contemplated herein, Purchaser shall and shall cause each Purchaser Subsidiary to: (a) operate its business in the usual, regular, and ordinary course; (b) preserve intact its business organization and Assets and maintain its rights and franchises; (c) use its reasonable efforts to cause its representations and warranties set forth in this Agreement to be correct at all times; and (d) take no action which would (i) adversely affect the ability of any Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in the second sentence of Section 8.1(b) 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.
SECTION 6.4 Adverse Changes in Condition . Each Party agrees to give written notice promptly to the other Party upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of its Subsidiaries which (i) is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on it or (ii) 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.
SECTION 6.5 Reporting Requirements . Each Party and its Subsidiaries shall timely 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. If financial statements are contained in any such reports filed with the SEC, such financial statements will fairly present the consolidated financial position of the entity filing such statements as of the dates indicated and the consolidated results of operations, changes in shareholders equity and cash flows for the periods then ended in accordance with GAAP (subject in the case of interim financial statements to normal recurring year-end adjustments that are not Material). As of their respective dates, such reports filed with the SEC will comply in all Material respects with the Securities Laws and will not contain any untrue statement of a Material fact or omit to state a Material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Any financial statements contained in any other reports to another Regulatory Authority shall be prepared in accordance with Laws applicable to such reports.
ADDITIONAL AGREEMENTS
SECTION 7.1 Registration Statement; Proxy Statement; Shareholder Approval . As soon as practicable after execution of this Agreement, Purchaser shall file the Registration Statement with the SEC, and shall use its best efforts to cause the Registration Statement to become effective under the 1933 Act and take any action required to be taken under applicable Securities Laws in connection with the issuance of the shares of Purchaser Common Stock upon consummation of the Company Merger. Target shall furnish all information concerning it and the holders of its capital stock as Purchaser may reasonably request in connection with such action. Target 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 the transactions contemplated hereby and such other related matters as it deems appropriate. In connection with the Shareholders Meeting, (a) Purchaser shall prepare and file on Targets behalf a Proxy Statement (which shall be included in the Registration Statement and which shall include an explanation of the restrictions on resale with respect to the shares of Purchaser Common Stock received by the holders of Target Common Stock in the Company Merger) with the SEC and mail it to Targets shareholders, (b) each of the Parties shall furnish to the other all information concerning it that the other Party may reasonably request in connection with such Proxy Statement, (c) the Board of Directors of Target shall unanimously recommend to its shareholders (subject to compliance with their fiduciary duties as advised by counsel) that they approve this Agreement and the transactions contemplated hereby, and (d) the Board of Directors and officers of Target shall use their best efforts to obtain such shareholders approval. Target, as the sole shareholder of Target Bank, shall take all action to effect shareholder approval of the Bank Merger Agreement.
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SECTION 7.2 Listing . Purchaser shall use its best efforts to list, prior to the Effective Time, on the NASDAQ Global Select Market, the shares of Purchaser Common Stock to be issued to the holders of Target Common Stock pursuant to the Company Merger.
SECTION 7.3 Applications . Purchaser shall promptly prepare and file, and Target shall cooperate in the preparation and, where appropriate, filing of, applications with all Regulatory Authorities having jurisdiction over the transactions contemplated by this Agreement seeking the requisite Consents necessary to consummate the transactions contemplated by this Agreement.
SECTION 7.4 Filings with State Offices . Upon the terms and subject to the conditions of this Agreement, Purchaser shall execute and file the Georgia Articles of Merger with the Secretary of State of the State of Georgia in connection with the Closing.
SECTION 7.5 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 commercially 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 Mergers 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 Purchaser in connection with the Purchaser Common Stock to be issued in the Company Merger or a resolicitation of proxies as a consequence of an acquisition agreement by Purchaser or any of its Subsidiaries shall not violate this covenant), including using its 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 8 of this Agreement. Each Party shall use, and shall cause each of its Subsidiaries to use, its commercially reasonable efforts to obtain all Consents necessary or desirable for the consummation of the transactions contemplated by this Agreement.
SECTION 7.6 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 the consummation of the Mergers and shall permit the other Party to make or cause to be made such investigation of the business and properties of it and its Subsidiaries and of their respective financial and legal conditions as the other Party reasonably requests, provided that such investigation shall be reasonably related to the transactions contemplated hereby and shall not interfere unnecessarily with normal operations.
(b) Except as may be required by applicable Law or legal process, and except for such disclosure to those of its directors, officers, employees and representatives as may be appropriate or required in connection with the transactions contemplated hereby, each Party shall hold in confidence all nonpublic information obtained from the other Party (including work papers and other Material derived therefrom) as a result of this Agreement or in connection with the transactions contemplated hereby (whether so obtained before or after the execution hereof) until such time as the Party providing such information consents to its disclosure or such information becomes otherwise publicly available. Promptly following any termination of this Agreement, each of the Parties agrees to use its best efforts to cause its respective directors, officers, employees and representatives to destroy or return to the providing party all such nonpublic information (including work papers and other material retrieved therefrom), including all copies thereof. 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 position 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.
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(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.
(d) Neither any Party nor any Subsidiary of a Party shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of its customers, jeopardize the attorney-client or similar privilege with respect to such information or contravene any Law, rule, regulation, Order, judgment, decree, fiduciary duty or agreement entered into prior to the date of this Agreement. The Parties will use their reasonable efforts to make appropriate substitute disclosure arrangements, to the extent practicable, in circumstances in which the restrictions of the immediately preceding sentence apply.
(e) Notwithstanding subsection (b) of this Section 7.6 or any other written or oral understanding or agreement to which the Parties are parties or by which they are bound, the Parties acknowledge and agree that any obligations of confidentiality contained herein and therein that relate to the tax treatment and tax structure of the Mergers (and any related transaction or arrangements) have not applied from the commencement of discussions between the Parties and will not hereafter apply to the Parties; and each Party (and each of its employees, representatives, or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Mergers and all materials of any kind that are provided to such Party relating to such tax treatment and tax structure, all within the meaning of Treasury Regulation Section 1.6011-4; provided , however , that each Party recognizes that each other Party has a right to maintain, in its sole discretion, any privilege that would protect the confidentiality of a communication relating to the Mergers, including a confidential communication with its attorney or a confidential communication with a federally authorized tax practitioner under Section 7525 of the Internal Revenue Code and that such privilege is not intended to be affected by the foregoing. These principles are meant to be interpreted so as to prevent the Mergers from being treated as offered under conditions of confidentiality within the meaning of the Treasury Regulations promulgated under Internal Revenue Code Sections 6011 and 6111(d)(2).
SECTION 7.7 Press Releases . Prior to the Effective Time, Target and Purchaser shall consult with each other as to the form and substance of any press release or other public disclosure Materially related to this Agreement or any transaction contemplated hereby; provided , however , that nothing in this Section 7.7 shall be deemed to prohibit any Party from making any disclosure which its counsel deems necessary or advisable in order to satisfy such Partys disclosure obligations imposed by Law.
(a) Target shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any officer, director of employee of, or any investment banker, attorney or other advisor or representative of, Target or any of its Subsidiaries to, (i) solicit or initiate, or encourage the submission of, any Takeover Proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal; provided , however , that, subject to compliance with subsection (c) below and after having consulted with independent outside legal counsel and having determined, in good faith, that the failure to do so would likely constitute a breach by the Target Board of Directors of its fiduciary duties to Target shareholders under applicable Law, Target may, in response to an unsolicited Takeover Proposal that (i) was not received in violation of this Section 7.8, (ii) is not subject to financing and (iii) the Target Board of Directors determines in good faith, after consultation with a financial advisor of nationally recognized reputation to such effect, would result in a transaction more favorable to Target shareholders than the Company Merger, (A) furnish information with respect to Target to any Person pursuant to a confidentiality agreement and (B) participate in negotiations regarding such Takeover Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the immediately preceding sentence by any executive officer of Target or any of its Subsidiaries or any investment banker, attorney or other advisor or representative of Target or any of its Subsidiaries, whether or not
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such person is purporting to act on behalf of Target or any of its Subsidiaries or otherwise, shall be deemed to be a breach of this Section 7.8 by Target. For purposes of this Agreement, Takeover Proposal means an inquiry, proposal or acquisition or purchase of a substantial amount of assets of Target or any of its Subsidiaries (other than investors in the ordinary course of business) or of over 15% of any class of equity securities of Target or any of its Subsidiaries or any tender offer or exchange offer that, if consummated, would result in any Person beneficially owning 15% or more of any class of equity securities of Target or any of its Subsidiaries, or any merger, consolidation, business combination, sale of substantially all assets, recapitalization, liquidation, dissolution or similar transaction involving Target or any of its Subsidiaries other than the transactions contemplated by this Agreement, or any other transaction the consummation of which would reasonably be expected to impede, interfere with, prevent or Materially delay the Mergers or which would reasonably be expected to dilute Materially the benefits to Purchaser of the transactions contemplated hereby.
(b) Except as set forth herein, neither the Board of Directors of Target nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Purchaser, the approval or recommendation of such Board of Directors or any such committee of this Agreement or the Mergers, (ii) approve or recommend, or propose to approve or recommend, any Takeover Proposal or (iii) enter into any agreement with respect to any Takeover Proposal. Notwithstanding the foregoing, if, after consultation with independent outside legal counsel and its financial advisors, the Board of Directors determines, in good faith, that failure to do so would likely constitute a breach of its fiduciary duties to Target shareholders under applicable Law, then, prior to the Shareholders Meeting, the Target Board of Directors may (subject to the terms of this and the following sentences) approve or recommend (and, in connection therewith, withdraw or modify its approval or recommendation of this Agreement or the Mergers) a Superior Proposal, or enter into an agreement with respect to a Superior Proposal, in each case at any time after the second Business Day following Purchasers receipt of written notice (a Notice of Superior Proposal) advising Purchaser that the Target Board of Directors has received a Superior Proposal, specifying the Material terms and conditions of such Superior Proposal and identifying the Person making such Superior Proposal; provided that Target shall not enter into an agreement with respect to a Superior Proposal unless Target shall have furnished Purchaser with written notice no later than 12:00 noon one (1) day in advance of any date that it intends to enter into such agreement. For purposes of this Agreement, a Superior Proposal means any bona fide proposal (not subject to financing) to acquire, directly or indirectly, for consideration consisting of cash or securities, more than 50% of the shares of Target Common Stock or of the common stock of either Target Bank then outstanding or all or substantially all of the assets of Target or of either Target Bank and otherwise on terms that the Target Board of Directors determines in its good faith judgment (after consultation with a financial advisor of nationally recognized reputation) to be more favorable to Target shareholders than the Company Merger.
(c) In addition to the obligations of Target set forth in subsection (b) above, Target shall immediately advise Purchaser orally and in writing of any request for information or of any Takeover Proposal, or any inquiry with respect to or which could lead to any Takeover Proposal, the Material terms and conditions of such request, Takeover Proposal or inquiry, and the identity of the person making any Takeover Proposal or inquiry. Target shall keep Purchaser fully informed of the status and details (including amendments or proposed amendments) of any such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 7.8 shall prohibit Target from making any disclosure to Targets shareholders if the Target Board of Directors determines in good faith, after receipt of the written advice of outside counsel to such effect, that it is required to do so in order to discharge properly its fiduciary duties to shareholders under applicable Law; provided that Target does not, except as permitted by subsection (b) above, withdraw or modify, or propose to withdraw or modify, its position with respect to the Mergers or approve or recommend, or propose to approve or recommend, a Takeover Proposal.
SECTION 7.9 Tax Treatment . Each of the Parties undertakes and agrees to use its reasonable efforts to cause the Company Merger to, and to take no action which would cause the Company 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.
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SECTION 7.10 Agreement of Affiliates . Target has Previously Disclosed all Persons whom it reasonably believes are affiliates of Target for purposes of Rule 145 under the 1933 Act. Target shall use its best efforts to cause each such Person to deliver to Purchaser not later than thirty (30) days after the date of this Agreement, a written agreement, substantially in the form of Exhibit 7.10 hereto, providing that such Person will not sell, pledge, transfer or otherwise dispose of the shares of Target Common Stock held by such Person except as contemplated by such agreement and will not sell, pledge, transfer or otherwise dispose of the shares of Purchaser Common Stock to be received by such Person upon consummation of the Company Merger except in compliance with applicable provisions of the 1933 Act and the rules and regulations thereunder. Regardless of whether each such affiliate has provided the written agreement referred to in this Section, Purchaser shall be entitled to place restrictive legends upon certificates for shares of Purchaser Common Stock issued to affiliates of Target pursuant to this Agreement to enforce the provisions of this Section.
SECTION 7.11 Employee Benefits and Contracts . Target will terminate the Target Benefit Plans as of the Effective Time, other than the Contract of Employment between Target and John R. Perrill dated November 17, 2005, which Purchaser Bank shall assume as of the Effective Time. Following the Effective Time, Purchaser shall provide generally to officers and employees of the Target Companies, who at or after the Effective Time become employees of a Purchaser Company (collectively, New Purchaser Employees), benefits under the employee benefit plans of Purchaser on terms and conditions which, when taken as a whole, are substantially similar to those currently provided by the Purchaser Companies to their similarly situated officers and employees. For purposes of participation, vesting and benefit accrual under all employee plans of the Purchaser Companies, the service of the employees of the Target Companies prior to the Effective Time shall be treated as service with a Purchaser Company participating in such employee benefit plans. Purchaser also shall credit New Purchaser Employees for amounts paid under Target Benefit Plans for the plan year for purposes of applying deductibles, co-payments and out-of-pocket maximums under the employee benefit plans of Purchaser.
SECTION 7.12 Large Deposits . Prior to the Closing, Target will provide Purchaser with a list of all certificates of deposit or checking, savings or other deposits owned by persons who, to the Knowledge of Target, had deposits aggregating more than $100,000 and a list of all certificates of deposit or checking, savings or other deposits owned by directors and officers of Target and each Target Bank and their Affiliates in an amount aggregating more than $100,000 as of the last day of the calendar month immediately prior to the Closing.
SECTION 7.13 Indemnification Against Certain Liabilities . Purchaser agrees that all rights to indemnification and all limitations of liability existing in favor of the officers and directors of Target and each Target Bank (Indemnified Parties) as provided in their respective Articles of Incorporation or Association and By-Laws as of the date hereof with respect to matters occurring prior to the Effective Time shall survive the Mergers. To the extent available, Purchaser shall maintain in effect for not less than three (3) years after the Closing Date policies of directors and officers liability insurance comparable to those maintained by Target with carriers comparable to Targets existing carriers and containing terms and conditions which are no less advantageous in any Material respect to the officers and directors of Target and which cover Targets present officers and directors for such three-year period regardless of whether or not such Persons remain employed by Target after the Closing Date, provided that the annual premium for such insurance shall not exceed 150% of the most current annual premium paid by Target for its directors and officers liability insurance.
SECTION 7.14 Voting Agreement . Concurrent with the execution hereof, Target shall obtain and deliver to Purchaser an agreement in substantially the form of Exhibit 7.14 hereto from each member of Targets Board of Directors.
SECTION 7.15 Cooperation; Attendance at Board Meetings . In order to facilitate the Mergers and the combination of the respective businesses of Purchaser and Target as promptly as practicable following the Effective Time and to the extent not in violation of applicable Laws or the directives of any Regulatory Authority: (i) Target shall, and shall cause its Subsidiaries to, consult with Purchaser on all strategic and operational matters; and (ii) an individual selected by Purchaser reasonably acceptable to Target shall have the right to attend all meetings of the Board of Directors of Target and Target Bank in a non-voting observer
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capacity, to receive notice of such meetings and to receive the information provided by Target or Target Bank to such Boards of Directors, provided that Target or Target Bank may require that any person proposing to attend any meetings of its Boards of Directors shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so received during such meetings or otherwise. Notwithstanding the foregoing, this Section 7.15 shall not apply with respect to any meeting, or portion of a meeting, of the Board of Directors of Target at which such Board plans to discuss (i) matters related to Targets rights and obligations under this Agreement or (ii) any Takeover Proposal.
SECTION 7.16 Section 16 Matters . Prior to the Effective Time: (a) the Board of Directors of Purchaser, or an appropriate committee of non-employee directors thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the acquisition by any officer or director of the Target who may become a covered person of Purchaser for purposes of Section 16 of the 1934 Act (together with the rules and regulations thereunder, Section 16), of shares of Purchaser Common Stock or options to purchase shares of Purchaser Common Stock pursuant to this Agreement and the Merger shall be an exempt transaction for purposes of Section 16; and (b) the Board of Directors of Purchaser, or an appropriate committee of non-employee directors thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the disposition by any officer or director Target who is a covered person of Target for purposes of Section 16 of shares of Purchaser Common Stock pursuant to this Agreement and the Merger shall be an exempt transaction for purposes of Section 16.
SECTION 7.17 Local Advisory Board . For a period of one (1) year following the consummation of the Mergers, Purchaser Bank shall maintain at the current location of the Target Bank a local advisory board, the members of which shall be Louis O. Dore, Martha B. Fender, D. Martin Goodman, Stancel E. Kirkland, Sr., Carl E. Lipscomb, Edward J. McNeil, Jr., Jimmy Lee Mullins, Sr., Frances K. Nicholson, J. Frank Ward and Bruce K. Wyles. Each advisory board member shall receive compensation for his or her service in the amount of $300 per month.
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
SECTION 8.1 Conditions to Obligations of Each Party . The respective obligations of each Party to perform this Agreement and consummate the Mergers and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by both Parties pursuant to Section 10.6 of this Agreement:
(a) Shareholder Approval . The shareholders of Target shall have approved this Agreement, and the consummation of the transactions contemplated hereby, including the Merger, as and to the extent required by Law 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 Mergers 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 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 so as to render inadvisable the consummation of the Mergers; provided , however , that no such condition or restriction shall be deemed to be Materially adverse unless it Materially differs from terms and conditions customarily imposed by any Regulatory Authority in connection with similar transactions.
(c) Consents and Approvals . Each Party shall have obtained any and all Consents required for consummation of the Mergers (other than those referred to in Section 8.1(b) of this Agreement) or for the
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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 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 any of the Parties, would so Materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement so as to render inadvisable the consummation of the Mergers.
(d) Legal Proceedings . No court or governmental or Regulatory Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) or taken any other action which prohibits, Materially restricts or makes illegal consummation of the transactions contemplated by this Agreement.
(e) 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 all Securities Laws relating to the issuance or trading of the shares of Purchaser Common Stock issuable pursuant to the Company Merger shall have been received.
(f) NASD Listing . The shares of Purchaser Common Stock issuable pursuant to the Company Merger shall have been approved for listing (subject to issuance) on the NASDAQ Global Select Market.
SECTION 8.2 Conditions to Obligations of Purchaser . The obligations of Purchaser to perform this Agreement and consummate the Mergers and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Purchaser pursuant to Section 10.6(a) of this Agreement:
(a) Representations and Warranties . The representations and warranties of Target set forth or referred to in this Agreement shall be true and correct in all respects 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), except (i) as expressly contemplated by this Agreement, or (ii) for representations and warranties (other than the representations and warranties set forth in Section 4.3 of this Agreement, which shall be true in all respects) the inaccuracies of which relate to matters that are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Target or would reasonably likely result in Purchasers inability to comply with the Sarbanes-Oxley Act of 2002; provided that, for purposes of this Section 8.2(a) only, those representations and warranties that 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 Target 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 . Target shall have delivered to Purchaser (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive officer, to the effect that the conditions set forth in Sections 8.2(a) and 8.2(b) of this Agreement have been satisfied, and (ii) certified copies of resolutions duly adopted by Targets 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 Purchaser and its counsel shall reasonably request.
(d) Opinion of Counsel . Target shall have delivered to Purchaser an opinion of Powell Goldstein LLP, counsel to Target, dated as of the Closing Date, covering those matters set forth in Exhibit 8.2(d) hereto, which opinion may be rendered in accordance with the Interpretive Standards on Legal Opinions to Third Parties in Corporate Transactions promulgated by the Corporate and Banking Law Section of the State Bar of Georgia (January 1, 1992) (the Interpretive Standards).
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(e) Accountants Letters . Purchaser shall have received from Elliott Davis, LLC, letters dated not more than five (5) days prior to (i) the date of the Proxy Statement and (ii) the Effective Time, with respect to certain financial information regarding Target, in form and substance reasonably satisfactory to Purchaser, which letters shall be based upon customary specified procedures undertaken by such firm.
(f) Noncompete Agreements . Each member of Targets Board of Directors shall have executed and delivered to Purchaser a Non-Competition and Non-Disclosure Agreement substantially in the form attached hereto as Exhibit 8.2(f) .
(g) Tax Matters . Purchaser shall have received the opinion of Rogers & Hardin LLP, counsel to Purchaser, dated the Closing Date, to the effect that for federal income tax purposes the Company Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. In rendering such opinion, counsel to Purchaser shall be entitled to rely upon customary representations and assumptions provided by Purchaser and Target that counsel to Purchaser reasonably deems relevant.
(h) Minimum Tangible Capital . Target shall have delivered to Purchaser a certificate, signed on its behalf by its acting chief executive officer, promptly following the close of business on the Business Day that is two (2) Business Days prior to the Closing Date certifying that, as of such time, the Tangible Capital of Target is at least (i) $6,000,000 or (ii) $6,150,000, as the case may be.
(i) Stock Options . The Board of Directors of Target, or the appropriate committee thereof, shall have taken all necessary action to permit all Target Options to be converted into the right to receive cash as set forth in Section 3.5 hereof as of the Effective Time.
SECTION 8.3 Conditions to Obligations of Target . The obligations of Target to perform this Agreement and consummate the Mergers and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Target pursuant to Section 10.6(b) of this Agreement:
(a) Representations and Warranties . The representations and warranties of Purchaser set forth or referred to in this Agreement shall be true and correct in all respects 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), except (i) as expressly contemplated by this Agreement, or (ii) for representations and warranties (other than the representations and warranties set forth in Section 5.3 of this Agreement, which shall be true in all respects) the inaccuracies of which relate to matters that are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Purchaser; provided that, for purposes of this Section 8.3(a), those representations and warranties that 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 Purchaser 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 . Purchaser shall have delivered to Target (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 set forth in Section 8.3(a) and 8.3(b) of this Agreement have been satisfied, and (ii) certified copies of resolutions duly adopted by Purchasers 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 Target and its counsel shall reasonably request.
(d) Opinion of Counsel . Purchaser shall have delivered to Target an opinion of Rogers & Hardin LLP, counsel to Purchaser, dated as of the Closing Date, covering those matters set forth in Exhibit 8.3(d) hereto, which opinion may be rendered in accordance with the Interpretive Standards.
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(e) Delivery of Merger Consideration . Purchaser shall have delivered the Cash Consideration and the Stock Consideration to the Exchange Agent.
(f) Tax Matters . Target shall have received the opinion of Powell Goldstein LLP, counsel to Target, dated the Closing Date, to the effect that for federal income tax purposes the Company Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. In rendering such opinion, counsel to Target shall be entitled to rely upon customary representations and assumptions provided by Purchaser and Target that counsel to Target reasonably deems relevant.
(g) Tail Insurance Coverage . Purchaser shall have provided Target written documentation evidencing the effectiveness of the insurance coverage described in Section 7.13 hereof.
TERMINATION
SECTION 9.1 Termination . Notwithstanding any other provision of this Agreement, and notwithstanding the approval of this Agreement by the shareholders of Target, this Agreement may be terminated and the Mergers abandoned at any time prior to the Effective Time:
(a) by mutual consent of the Boards of Directors of Purchaser and Target; or
(b) by the Board of Directors of either Party ( provided that the terminating Party is not then in Material breach of any representation, warranty, covenant or other 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 Mergers under the standard set forth in Section 8.2(a) of this Agreement in the case of Purchaser and Section 8.3(a) of this Agreement in the case of Target; or
(c) by the Board of Directors of either Party (provided that the terminating Party is not then in Material breach of any representation, warranty, 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 (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 (provided that the terminating Party is not then in Material breach of any representation, warranty, covenant or other agreement contained in this Agreement) in the event (i) any Consent of any Regulatory Authority required for consummation of the Mergers and the other transactions contemplated hereby has 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, or (ii) the shareholders of Target fail to approve this Agreement and the transactions contemplated hereby as required by the SCCA at the Shareholders Meeting where the transactions were presented to such shareholders for approval and voted upon (assuming, for this purpose, that Purchaser votes the proxies granted to it pursuant to Section 7.14 hereof in favor thereof); or
(e) by the Board of Directors of either Party in the event that the Company Merger shall not have been consummated by March 31, 2007, provided the failure to consummate the Company Merger on or before such date was not caused by any breach of this Agreement by the Party electing to terminate pursuant to this Section 9.1(e); or
(f) by the Board of Directors of either Party (provided that the terminating Party is not then in Material breach of any representation, warranty, 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 Mergers cannot be satisfied or fulfilled by the date specified in Section 9.1(e) of this Agreement; or
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(g) by the Board of Directors of either party if the Average Market Price (determined without regard to the proviso in the definition thereof) is less than $21.00, unless the Parties shall have agreed in writing prior to the Closing Date for the Purchaser to, in its discretion, either issue additional shares of Purchaser Common Stock or pay additional cash to holders of Outstanding Target Shares, such that, as a result thereof, each Outstanding Target Share will be converted into the right to receive cash or shares of Purchaser Common Stock having an aggregate value equal to the Target Stock Price; or
(h) by the Board of Directors of Purchaser if the Board of Directors of Target (A) shall withdraw, modify or change its recommendation with respect to this Agreement or the Mergers or shall have resolved to do so, or (B) shall have recommended or approved a Takeover Proposal or shall have resolved to do so; or
(i) by the Board of Directors of Target in connection with entering into a definitive agreement in accordance with Section 7.8(b), provided that it has complied with all provisions thereof, including the notice provisions therein, and that it makes simultaneous payment of the Termination Fee; or
(j) by the Board of Directors of Purchaser if Target fails to properly file required reports with the SEC on a timely basis; or
(k) by the Board of Directors of Purchaser if, prior to the Effective Time, there shall have occurred any event, change, occurrence, condition or state of facts that would, individually or in the aggregate, have a Material Adverse Effect on Target.
SECTION 9.2 Effect of Termination . In the event of the termination and abandonment of this Agreement pursuant to Section 9.1 hereof, this Agreement shall become null and void and have no effect, except (i) as provided in Sections 10.2 and 10.14 hereof, and (ii) for any liability of a Party arising out of a willful breach of any representation, warranty or covenant in this Agreement prior to the date of termination, unless such breach was required by Law or by any bank or bank holding company regulatory authority. Each Party hereby agrees that its sole right and remedy with respect to any non-willful breach of a representation or warranty or covenant by the other Party shall be not to close the transactions described herein if such breach results in the nonsatisfaction of a condition set forth in Article 8 hereof; provided , however , that the foregoing shall not be deemed to be a waiver of any claim for a willful breach of a representation, warranty or covenant or for fraud (except if such breach is required by Law or by any insurance regulatory authority, or bank or bank holding company regulatory authority), in which case the Parties will have all available legal rights and remedies.
MISCELLANEOUS
SECTION 10.1 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:
Affiliate of a Person shall mean (a) any other Person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with such Person or (b) any officer, director, partner, employer, or direct or indirect beneficial owner of any 10% or greater equity or voting interest of such Person.
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 Persons 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.
Average Market Price means the arithmetic average of the daily closing price per share of Purchaser Common Stock (adjusted appropriately for any stock split, stock dividend, recapitalization, reclassification or
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similar transaction that is effected or for which a record date occurs), as reported on the NASDAQ Global Select Market, for each of the ten (10) consecutive trading days ending on (and including) the trading day that occurs two (2) trading days prior to (and not including) the Closing Date; provided , however , that if the Average Market Price as calculated above is greater than $28.00, then the Average Market Price for purposes of this Agreement shall be $28.00, and if the Average Market Price as calculated above is less than $21.00, then the Average Market Price for purposes of this Agreement shall be $21.00.
Bank Merger shall have the meaning set forth in the Preamble hereto.
BHC Act shall mean the federal Bank Holding Company Act of 1956, as amended.
Business Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of Georgia generally are authorized or required by Law or other government action to close.
Cash Consideration shall have the meaning set forth in Section 3.1(b) of this Agreement.
Cash Election shall have the meaning set forth in Section 3.1(c) of this Agreement.
Cash Election Shares shall have the meaning set forth in Section 3.1(f) of this Agreement.
Closing shall mean the closing of the transactions contemplated hereby, as described in Section 1.3 of this Agreement.
Closing Date shall have the meaning set forth in Section 1.3 of this Agreement.
Combination Election shall have the meaning set forth in Section 3.1(c) of this Agreement.
Company Merger shall have the meaning set forth in the Preamble hereto.
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.
CRA shall have the meaning set forth in Section 4.24 of this Agreement.
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 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.
Default Stock Election shall have the meaning set forth in Section 3.1(e) of this Agreement.
Dissenting Shares shall have the meaning set forth in Section 3.1(b) of this Agreement.
Effective Time shall mean the date and time at which the Company Merger becomes effective as defined in Section 1.4 of this Agreement.
Election Deadline shall have the meaning set forth in Section 3.1(c) of this Agreement.
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Environmental Laws shall mean all Laws which are administered, interpreted or enforced by the United States Environmental Protection Agency and state and local agencies with primary jurisdiction over pollution or protection of the environment.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate shall have the meaning set forth in Section 4.14(d) of this Agreement.
Exchange Agent shall have the meaning set forth in Section 3.1(d) of this Agreement.
Exhibits shall mean the Exhibits attached to this Agreement, which 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.
Expenses and Fees shall have the meaning set forth in Section 10.2(a) of this Agreement.
Form of Election shall have the meaning set forth in Section 3.1(c) of this Agreement.
GAAP shall mean generally accepted accounting principles consistently applied during the periods involved.
Georgia Articles of Merger shall mean the Articles of Merger or Certificate of Merger, if applicable, to be executed by Purchaser and filed with the Secretary of State of the State of Georgia relating to the Company Merger as contemplated by Section 1.4 of this Agreement.
GBCC shall mean the Georgia Business Corporation Code.
Hazardous Material shall mean any pollutant, contaminant, or hazardous substance within the meaning of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq., or any similar federal, state or local Law.
IIPI shall have the meaning set forth in Section 4.25(a) of this Agreement.
Indemnified Parties shall have the meaning set forth in Section 7.13 of this Agreement.
Intellectual Property shall have the meaning set forth in Section 4.20 of this Agreement.
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
Interpretive Standards shall have the meaning set forth in Section 8.2(d) of this Agreement.
IRS shall mean the United States Internal Revenue Service.
Islands Common Stock shall have the meaning set forth in Section 4.3(b) of this Agreement.
Knowledge as used with respect to a Person shall mean the Knowledge after reasonable due inquiry of the President, Chief Financial Officer, Chief Accounting Officer, Chief Credit Officer or any Senior or Executive Vice President of such Person.
Law shall mean any code, law, ordinance, regulation, reporting or licensing requirement, rule, or statute applicable to a Person or its Assets, Liabilities or business, including those promulgated, interpreted or enforced by any of the Regulatory Authorities.
Letter of Transmittal shall have the meaning set forth in Section 3.2 of this Agreement.
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Liability shall mean any direct or indirect, primary or secondary, liability, indebtedness, obligation, penalty, cost or expense (including 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, default of title, 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 of, 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 other Liens incurred in the ordinary course of the banking business, and (iii) Liens which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on a Party.
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 Contracts related to it), or the transactions contemplated by this Agreement, but shall not include regular, periodic examinations of depository institutions and their Affiliates by Regulatory Authorities.
Loan Property shall mean any property owned by the Party in question or by any of its Subsidiaries or in which such Party or Subsidiary holds a security interest, and, where required by the context, includes the owner or operator of such property, but only with respect to such property.
Material or Materially 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 Mergers or the other transactions contemplated by this Agreement, provided that Material adverse impact shall not be deemed to include the impact of (w) changes in economic or other conditions, including the interest rate environment, affecting the banking industry in general, (x) changes in banking and similar Laws of general applicability or interpretations thereof by courts or governmental authorities, (y) changes in generally accepted accounting principles or regulatory accounting principles generally applicable to banks and their holding companies, and (z) the Mergers and compliance with the provisions of this Agreement on the operating performance of the Parties.
Maximum Cash Election Number shall have the meaning set forth in Section 3.1(f) of this Agreement.
Maximum Stock Election Number shall have the meaning set forth in Section 3.1(f) of this Agreement.
Mergers shall have the meaning set forth in the Preamble hereto.
NASD shall mean the National Association of Securities Dealers, Inc.
New Purchaser Employees shall have the meaning set forth in Section 7.11 of this Agreement.
1933 Act shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.
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1934 Act shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder.
Notice of Superior Proposal shall have the meaning set forth in Section 7.8(b) of this Agreement.
Old Certificates shall have the meaning set forth in Section 3.1(h) of this Agreement.
Option Holder shall have the meaning set forth in Section 3.5 of this Agreement.
Option Shares shall mean the shares of Target Common Stock issuable by Target in connection with the exercise of any Target Option (whether or not such Target Option is then exercisable).
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.
Outstanding Target Share shall have the meaning set forth in Section 3.1(b) of this Agreement.
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 Target and Target Bank, collectively, or Purchaser and Purchaser Bank, collectively, and Parties shall mean Target, Target Bank, Purchaser and Purchaser Bank, collectively.
Permit shall mean any federal, state, local or 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 capital stock, 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.
Previously Disclosed shall mean information (a) delivered in writing prior to or contemporaneously with the execution and delivery of this Agreement in the manner and to the Party and counsel described in Section 10.8 of this Agreement and describing in reasonable detail the matters contained therein, provided that in the case of Subsidiaries acquired after the date of this Agreement, such information may be so delivered by the acquiring Party to the other Party prior to the date of such acquisition, (b) disclosed prior to the date of this Agreement by one Party to the other Party in an SEC Document delivered to such other Party in which the specific information has been identified by the delivering Party, or (c) disclosed in writing during Purchasers due diligence investigation pursuant to Section 7.6(a) by Target to Purchaser describing in reasonable detail the matters contained therein.
Proxy Statement shall mean the proxy statement used by Target to solicit the approval of its shareholders of the transactions contemplated by this Agreement and shall include the prospectus of Purchaser relating to shares of Purchaser Common Stock to be issued to the shareholders of Target.
Purchaser Allowance shall have the meaning set forth in Section 5.9 of this Agreement.
Purchaser Benefit Plans shall have the meaning set forth in Section 5.14(a) of this Agreement.
Purchaser Common Stock shall mean the $1.00 par value common stock of Purchaser.
Purchaser Companies shall mean, collectively, Purchaser and all Purchaser Subsidiaries, including Purchaser Bank.
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Purchaser ERISA Plan shall have the meaning set forth in Section 5.14(a) of this Agreement.
Purchaser Financial Statements shall mean (a) the consolidated balance sheets (including related notes and schedules, if any) of Purchaser as of December 31, 2005, 2004 and 2003, and the related statements of income, changes in shareholders equity, and cash flows (including related notes and schedules, if any) and for each of the three years ended December 31, 2005, 2004 and 2003, as filed by Purchaser in its SEC Documents, and (b) the consolidated balance sheets of Purchaser (including related notes and schedules, if any) and related statements of income, changes in shareholders equity, and cash flows (including related notes and schedules, if any) included in its SEC Documents filed with respect to periods ended subsequent to December 31, 2005.
Purchaser Pension Plan shall have the meaning set forth in Section 5.14(a) of this Agreement.
Purchaser Stock Plans shall mean the existing stock option and other stock-based compensation plans of Purchaser.
Purchaser Subsidiaries shall mean the Subsidiaries of Purchaser.
Record Date shall have the meaning set forth in Section 3.1(c) of this Agreement.
Registration Statement shall mean the Registration Statement on Form S-4, or other appropriate form, to be filed with the SEC by Purchaser under the 1933 Act in connection with the transactions contemplated by this Agreement.
Regulatory Authorities shall mean, collectively, the Federal Trade Commission, the SEC, the NASD, the United States Department of Justice, the Board of the Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Georgia Department of Banking and Finance, the South Carolina Board of Financial Institutions, and all other federal, state, county, local or other governmental or regulatory agencies, authorities, instrumentalities, commissions, boards or bodies having jurisdiction over the Parties and their respective Subsidiaries.
Representative shall have the meaning set forth in Section 3.1(c) of this Agreement.
SCCA shall mean the South Carolina Business Corporation Act of 1988.
SEC shall mean the United States Securities and Exchange Commission.
SEC Documents shall mean all reports and registration statements filed by a Party or any of its Subsidiaries with the SEC 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 Advisers Act of 1940, as amended, the Trust Indenture Act of 1939, as amended, state blue sky Laws, and the rules and regulations of any Regulatory Authority promulgated thereunder.
Shareholders Meeting shall mean the meeting of the shareholders of Target to be held pursuant to Section 7.1 of this Agreement, including any adjournment or postponement thereof.
Stock Consideration shall have the meaning set forth in Section 3.1(b) of this Agreement.
Stock Election shall have the meaning set forth in Section 3.1(c) of this Agreement.
Stock Election Shares shall have the meaning set forth in Section 3.1(f) of this Agreement.
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Subsidiaries shall mean all those corporations, banks, associations or other entities of which the entity in question owns or controls 5% or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which 5% or more of the outstanding equity securities is owned directly or indirectly by its parent; provided , however , that 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.
Superior Proposal shall have the meaning set forth in Section 7.8(b) of this Agreement.
Surviving Corporation shall mean Purchaser as the surviving corporation resulting from the Company Merger.
Takeover Proposal shall have the meaning set forth in Section 7.8(a) of this Agreement.
Tangible Capital shall be determined in accordance with GAAP and shall mean the (i) total capital of the Target Companies (excluding accumulated comprehensive income) on a consolidated basis minus (ii) (A) goodwill and core deposit intangible balances of Target Companies on a consolidated basis and (B) all Target expenses related to the Merger, including legal fees, accounting fees, investment banking fees, printing charges, costs incurred in terminating existing data processing contracts and success fee, change of control or similar payments required to be made to employees as a result of the consummation of the Merger.
Target Allowance shall have the meaning set forth in Section 4.9 of this Agreement.
Target Benefit Plans shall have the meaning set forth in Section 4.14(a) of this Agreement.
Target Common Stock shall mean the no par value Common Stock of Target.
Target Companies shall mean, collectively, Target and all Target Subsidiaries, including Target Bank.
Target Contracts shall have the meaning set forth in Section 4.15 of this Agreement.
Target ERISA Plan shall have the meaning set forth in Section 4.14 of this Agreement.
Target Financial Statements shall mean (a) the consolidated balance sheets (including related notes and schedules, if any) of Target as of December 31, 2005, 2004 and 2003, and the related statements of income, changes in shareholders equity, and cash flows (including related notes and schedules, if any) for each of the three years ended December 31, 2005, 2004 and 2003, as filed by Target in its SEC Documents, and (b) the consolidated balance sheets of Target (including related notes and schedules, if any) and related statements of income, changes in shareholders equity, and cash flows (including related notes and schedules, if any) included in its SEC Documents filed with respect to periods ended subsequent to December 31, 2005.
Target Option shall have the meaning set forth in Section 3.5 of this Agreement.
Target Pension Plan shall have the meaning set forth in Section 4.14(a) of this Agreement.
Target Stock Plans shall mean the existing stock option and other stock-based compensation plans of Target.
Target Stock Price shall mean $22.50, unless the Tangible Capital of Target for purposes of Section 8.2(h) hereof is less than $6,150,000 but greater than or equal to $6,000,000, in which case Target Stock Price shall mean $22.25.
Target Subsidiaries shall mean the Subsidiaries of Target, which shall include the Target Subsidiaries described in Section 4.4 of this Agreement and any Person acquired as a Subsidiary of Target in the future and owned by Target at the Effective Time.
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Target Warrant shall have the meaning set forth in Section 3.6 of this Agreement.
Taxes shall mean any federal, state, county, local, foreign or other taxes, assessments, charges, fares, or impositions, including interest and penalties thereon or with respect thereto.
Technology Systems shall have the meaning set forth in Section 4.26 of this Agreement.
Termination Fee shall have the meaning set forth in Section 10.2 of this Agreement.
Warrant Holder shall have the meaning set forth in Section 3.6 of this Agreement.
Warrant Shares shall mean the shares of Target Common Stock issuable by Target in connection with the exercise of any Target Warrant (whether or not such Target Warrant is then exercisable).
SECTION 10.2 Expenses; Effect of Certain Terminations .
(a) Except as otherwise provided in this Section 10.2, (i) 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; and (ii) each of the Parties shall bear and pay one-half of costs incurred in connection with the printing and mailing of the Registration Statement and the Proxy Statement (the foregoing clauses (i) and (ii), collectively, the Expenses and Fees).
(b) Target shall pay, or cause to be paid, in same day funds to Purchaser, cash in the amount of $500,000 (the Termination Fee) upon demand if (A) Purchaser terminates this Agreement pursuant to Section 9.1(h) or Target terminates this Agreement pursuant to Section 9.1(i), or (B) prior to the termination of this Agreement (other than by Target pursuant to Section 9.1(c), 9.1(d)(i), 9.1(e) or 9.1(g)), a Takeover Proposal shall have been made and within one (1) year of such termination, Target enters into an agreement with respect to, or approves or recommends such Takeover Proposal.
(c) In the event this Agreement is terminated as a result of Purchasers willful breach of any of its representations, warranties or covenants contained herein, unless such breach was required by Law or by any bank or bank holding company Regulatory Authority, Purchaser shall reimburse Target for its reasonable out-of-pocket expenses directly relating to the Company Merger in an amount not to exceed $250,000, which amount shall not be deemed an exclusive remedy or liquidated damages.
(d) In the event this Agreement is terminated as a result of Targets willful breach of any of its representations, warranties or covenants contained herein, unless such breach was required by Law or by any bank or bank holding company Regulatory Authority, and other than under circumstances in which the provisions of Section 10.2(b) hereof shall apply, Target shall reimburse Purchaser for its reasonable out-of-pocket expenses relating to the Company Merger in an amount not to exceed $250,000, which amount shall not be deemed an exclusive remedy or liquidated damages.
SECTION 10.3 Brokers and Finders . Except for Howe Barnes Investments, Inc. with respect to Target, 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 its representing or being retained by or allegedly representing or being retained by Target or Purchaser, each of Target and Purchaser, 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.
SECTION 10.4 Entire Agreement . Except as otherwise expressly provided herein, this Agreement (including the Bank Merger Agreement and the other documents and instruments referred to herein) constitutes
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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 7.13 of this Agreement.
SECTION 10.5 Amendments . To the extent permitted by Law, this Agreement may be amended by a subsequent writing signed by each of the Parties upon the approval of the Boards of Directors of each of the Parties; provided , however , that after any such approval by the holders of Target Common Stock, there shall be made no amendment decreasing the consideration to be received by Target shareholders without the further approval of such shareholders.
(a) Prior to or at the Effective Time, Purchaser, 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 Target, to waive or extend the time for the compliance or fulfillment by Target of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Purchaser 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 Purchaser.
(b) Prior to or at the Effective Time, Target, 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 Purchaser, to waive or extend the time for the compliance or fulfillment by Purchaser of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Target 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 Target.
(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.
SECTION 10.7 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; provided , however , that if Purchaser is acquired before the Closing, this Agreement may be assigned by Purchaser and assumed by the acquiring Person without Targets consent. Subject to the immediately 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.
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SECTION 10.8 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, by registered or certified mail, postage pre-paid, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:
Purchaser: | Ameris Bancorp | |
24 2 nd Avenue, S.E. | ||
Moultrie, Georgia 31768 | ||
Telecopy Number: (229) 890-2235 | ||
Attention: President |
Copy to (which copy will not constitute notice to Purchaser):
Rogers & Hardin LLP | ||
2700 International Tower, Peachtree Center | ||
229 Peachtree Street, N.E. | ||
Atlanta, Georgia 30303 | ||
Telecopy Number: (404) 525-2224 | ||
Attention: Steven E. Fox, Esq. | ||
Target: | Islands Bancorp | |
2348 Boundary Street | ||
Beaufort, South Carolina 29902 | ||
Telecopy Number: (843) 521-1849 | ||
Attention: President |
Copy to (which copy will not constitute notice to Target):
Powell Goldstein LLP | ||
One Atlantic Center, Fourteenth Floor | ||
1201 West Peachtree Street, NW | ||
Atlanta, Georgia 30309-3488 | ||
Telecopy Number: (404) 572-6999 | ||
Attention: Kathryn Knudson, Esq. |
SECTION 10.9 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 Mergers.
SECTION 10.10 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. Executed counterparts of this Agreement may be delivered by the Parties via facsimile transmission.
SECTION 10.11 Interpretation . The captions contained in this Agreement are for reference purposes only and are not part of this Agreement. When a reference is made in this Agreement to Articles, Sections or Exhibits, such reference will be to an Article or Section of or Exhibit to this Agreement unless otherwise indicated. The table of contents contained in this Agreement is for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. Whenever the words include, includes or including are used in this Agreement, they will be deemed to be followed by the words without limitation. Unless the context otherwise requires (i) or is disjunctive but not necessarily exclusive, (ii) words in the singular include the plural and vice versa, (iii) the use in this Agreement of a pronoun in reference to a Party hereto includes the masculine, feminine or neuter, as the context may require, and (iv) terms used herein that are defined in GAAP have the meanings ascribed to them therein. No provision of this Agreement will be interpreted in favor of, or against, any
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of the Parties to this Agreement by reason of the extent to which any such Party or its counsel participated in the drafting thereof or by reason of the extent to which any such provision is inconsistent with any prior draft hereof, and no rule of strict construction will be applied against any Party hereto. This Agreement will not interpreted or construed to require any Person to take any action, or fail to take any action, if to do so would violate any applicable Law.
SECTION 10.12 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.
SECTION 10.13 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.
SECTION 10.14 Survival . The respective representations, warranties, obligations, covenants and agreements of the Parties shall not survive the Effective Time or the termination and abandonment of this Agreement, except that (i) Articles Two, Three and Ten and Sections 7.6(b), 7.9, 7.11 and 7.13 of this Agreement shall survive the Effective Time; and (ii) Sections 7.6(b), 9.2, 10.1, 10.2, 10.9 and 10.14 shall survive the termination and abandonment of this Agreement.
[Signatures on next page.]
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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 its officers as of the day and year first above written.
ATTEST: | ISLANDS BANCORP | |||
/s/ E DWARD J. M C N EIL |
By: |
/s/ D. M ARTIN G OODMAN |
||
Secretary | Its: | Chairman of the Board | ||
[CORPORATE SEAL] | ||||
ATTEST: | ISLANDS COMMUNITY BANK, N.A. | |||
/s/ E DWARD J. M C N EIL |
By: |
/s/ D. M ARTIN G OODMAN |
||
Secretary | Its: | Chairman of the Board | ||
[CORPORATE SEAL] | ||||
ATTEST: | AMERIS BANCORP | |||
/s/ C INDI H. L EWIS |
By: |
/s/ E DWIN W. H ORTMAN , J R . |
||
Secretary | Its: | President and Chief Executive Officer | ||
[CORPORATE SEAL] | ||||
AMERICAN BANKING COMPANY | ||||
/s/ C INDI H. L EWIS |
By: |
/s/ E DWIN W. H ORTMAN , J R . |
||
Secretary | Its: | President and Chief Executive Officer | ||
[CORPORATE SEAL] |
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BANK PLAN OF MERGER AND MERGER AGREEMENT
THIS BANK PLAN OF MERGER AND MERGER AGREEMENT (the Agreement) is made and entered into as of the day of , 2006, by and between AMERICAN BANKING COMPANY , a Georgia state-chartered bank (the Surviving Bank), and ISLANDS COMMUNITY BANK, N.A. , a national banking association (the Merging Bank) (the Merging Bank and the Surviving Bank are hereinafter collectively referred to as the Constituent Banks).
W I T N E S S E T H:
WHEREAS , the Constituent Banks, Ameris Bancorp, a Georgia corporation and the sole shareholder of the Surviving Bank (Ameris), and Islands Bancorp, a South Carolina corporation and the sole shareholder of the Merging Bank (Islands), have entered into that certain Agreement and Plan of Merger dated as of August 15, 2006 (the Holding Company Agreement), pursuant to which Islands would be merged with and into Ameris (the Company Merger);
WHEREAS , the Boards of Directors of the Constituent Banks deem it advisable and for the benefit of said Constituent Banks that the Merging Bank merge with and into the Surviving Bank immediately upon, and subject to, the consummation of the Company Merger (the Merger); and
WHEREAS , the Financial Institutions Code of Georgia (the Code) authorizes the merger of a national bank and a bank organized under the Code, subject to applicable provisions of the Code and the approval of such merger by the Department of Banking and Finance of the State of Georgia (the Department);
NOW, THEREFORE , for and in consideration of the premises and other mutual agreements, covenants, representations and warranties contained herein, the parties hereto agree as follows:
I.
MERGER; EFFECTIVE TIME
1.1 Merger . At the Effective Time, as hereinafter defined, the Merging Bank shall be merged with and into the Surviving Bank, in accordance with the Code. The Surviving Bank shall survive the Merger, the separate existence of the Merging Bank shall cease, and the Merger shall in all respects have the effect provided for in the applicable provisions of the Code.
1.2 Effective Time . Subject to the consummation of the Company Merger in accordance with the Holding Company Agreement, Articles of Merger evidencing the transactions contemplated herein shall be delivered to the Department for filing in accordance with the Code. The Merger shall be effective upon the issuance of a certificate of merger with respect thereto by the Secretary of State of the State of Georgia (the Effective Time).
II.
NAME OF SURVIVING BANK; ARTICLES OF
INCORPORATION; BYLAWS; DIRECTORS; OFFICERS
2.1 Name of Surviving Bank . The name of the Surviving Bank shall be American Banking Company or such other name as the Surviving Bank shall be operating under immediately prior to the Effective Time.
2.2 Articles of Incorporation of the Surviving Bank . The Articles of Incorporation of the Surviving Bank in effect at the Effective Time shall (until further amended) continue to be the Articles of Incorporation of the Surviving Bank.
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2.3 Bylaws of the Surviving Bank . The Bylaws of the Surviving Bank in effect at the Effective Time shall (until further amended) continue to be the Bylaws of the Surviving Bank.
2.4 Directors of the Surviving Bank . At the Effective Time, the directors of the Merging Bank immediately prior thereto shall cease to hold office, and each director of the Surviving Bank immediately prior thereto shall remain a director of the Surviving Bank and shall thereafter hold such office for the remainder of his or her term of office and until his or her successor has been elected and qualified, or as otherwise provided in the Articles of Incorporation or the Bylaws of the Surviving Bank or by the Code. The names of such directors are set forth on Schedule 2.4 attached hereto.
2.5 Executive Officers of the Surviving Bank . At the Effective Time, the executive officers of the Merging Bank immediately prior thereto shall cease to hold office, and each executive officer of the Surviving Bank immediately prior thereto shall remain an executive officer of the Surviving Bank, and each of the foregoing shall thereafter hold such office for the remainder of his or her term of office and until his or her successor has been elected or appointed and qualified, or as otherwise provided in the Articles of Incorporation or the Bylaws of the Surviving Bank or by the Code. The names of such executive officers are set forth on Schedule 2.5 attached hereto.
III.
SECURITIES
The shares of the capital stock of the Constituent Banks shall be converted as follows:
3.1 Stock of the Surviving Bank . At the Effective Time, each share of the common stock of the Surviving Bank issued and outstanding immediately prior to the Effective Time shall remain outstanding, shall be unaffected by the consummation of the Merger and shall continue to be held by Ameris.
3.2 Stock of the Merging Bank . At the Effective Time, each share of the common stock of the Merging Bank shall, by virtue of the Merger and without any action by the holder thereof, be extinguished.
IV.
GENERAL
4.1 Approval of Shareholders and the Department . This Agreement is subject to approval by the shareholders of the Constituent Banks and by the Department.
4.2 Necessary Action . The directors and officers of the Constituent Banks shall carry out and consummate this Agreement and shall have the power to adopt all resolutions, execute and file all documents and take all other actions that they may deem necessary or desirable for the purpose of effecting the merger of the Constituent Banks in accordance with this Agreement and the Code.
4.3 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement or the terms hereof to produce or account for more than one of such counterparts. Executed counterparts may be delivered by facsimile transmission.
[Signatures on following page.]
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IN WITNESS WHEREOF , each of the parties to this Agreement has caused this Agreement to be signed and delivered by its duly authorized officers, as of the date first written above.
ATTEST: | AMERICAN BANKING COMPANY | |||||
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By: |
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Secretary | Its: |
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[CORPORATE SEAL] | ||||||
ATTEST: | ISLANDS COMMUNITY BANK, N.A. | |||||
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By: |
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Secretary | Its: |
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[CORPORATE SEAL] |
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Schedule 2.4
Directors of Surviving Bank
Johnny W. Floyd
J. Raymond Fulp
Edwin W. Hortman, Jr.
Kenneth J. Hunnicutt
Daniel B. Jeter
Glenn A. Kirbo
Robert P. Lynch
Brooks Sheldon
Eugene M. Vereen, Jr.
Henry C. Wortman
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Schedule 2.5
Executive Officers of Surviving Bank
President and CEO: |
Edwin W. Hortman, Jr. |
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Chief Financial Officer: |
Dennis J. Zember Jr. |
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Executive Vice President: |
Jon S. Edwards |
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Executive Vice President: |
Thomas T. Dampier |
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Executive Vice President: |
Cindi H. Lewis |
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Executive Vice President: |
Johnny R. Myers |
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Executive Vice President: |
Ronnie F. Marchant |
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LIST OF HOLDERS OF TARGET OPTIONS
Name |
Number | |
Patsy Masters |
2,500 | |
John Perrill |
9,450 | |
Byron Richardson |
2,000 | |
Jimmy Mullins |
19,919 | |
Chris Gibson |
1,000 | |
Carol Nelson |
5,000 | |
Jane Langford |
1,000 |
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LIST OF HOLDERS OF TARGET WARRANTS
Name |
Number | |
Paul Dunnavant |
12,051 | |
Louis Dore |
11,005 | |
Stan Kirkland |
9,919 | |
Edward McNeil |
11,005 | |
Frank Ward |
3,724 | |
Frances Nicholson |
12,300 | |
Martin Goodman |
11,204 | |
Bruce Wyles |
11,404 | |
Daryl Ferguson |
19,919 | |
Narayan Shenoy |
10,019 |
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, 2006
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RE: Warrants for Shares of Common Stock of Islands Bancorp
Dear :
As you know, Islands Bancorp (Islands) has entered into an Agreement and Plan of Merger (the Merger Agreement) with Ameris Bancorp (Ameris) and certain of their respective subsidiaries which provides, among other things, for the merger of Islands with and into Ameris (the Merger). In connection with the Merger, shareholders of Islands will receive in exchange for their shares of common stock of Islands, no par value (Islands Common Stock), cash or shares (the Merger Consideration) of common stock of Ameris (Ameris Common Stock). Pursuant to the terms of one or more warrant agreements issued to you by Islands (each a Warrant), you have the right to acquire shares of Islands Common Stock (the Warrant Shares) at $10.00 per share. This letter will clarify the status of your Warrants in connection with the Merger.
The Merger Agreement provides that, upon consummation of the Merger, your Warrants will be converted into the right to receive cash or shares Ameris Common Stock. In lieu of giving effect to the provisions of any Warrant, you hereby consent and agree that Ameris will issue to you with respect to the Warrant Shares for which your Warrants may be exercised either cash or shares of Ameris Common Stock as set forth in Section 3.6 of the Merger Agreement.
You must make your election to receive cash or shares of Ameris Common Stock no later than , 2006 on the form attached hereto as Exhibit A . Pursuant to the Merger Agreement, if you do not make an election by this date, you will be deemed to have made a default election to receive cash for 50% of your Warrant Shares and Ameris Common Stock for 50% of your Warrant Shares.
Please acknowledge your agreement with the terms of this letter by signing where indicated below. By signing hereunder, you agree and acknowledge that your consent to receive cash or Ameris Common Stock for your Warrants is irrevocable and that, upon the consummation of the Merger, all Warrants held by you on the Closing Date shall be cancelled, and all rights thereunder shall cease to exist except as provided in this letter.
Sincerely, |
Ameris Bancorp |
[Acknowledgement on following page]
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Acknowledgment of Warrant Holder
Warrant Holder acknowledges and agrees to the terms this letter from Ameris Bancorp as of this day of , 2006.
|
(Warrant Holder) |
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EXHIBIT A
FORM OF WARRANT ELECTION
Pursuant to Section 3.6 of the Merger Agreement, I hereby elect to receive in exchange for each of my Warrants:
[ ] (a) cash in an amount equal to (i) the aggregate number of Warrant Shares for which my Warrants may be exercised, multiplied by (ii) the difference between (A) the Target Stock Price (as defined in the Merger Agreement) and (B) the exercise price for each Warrant Share; or
[ ] (b) a number of shares of Ameris Common Stock equal to (i) the aggregate number of Warrant Shares for which my Warrant may be exercised, multiplied by (ii) the quotient obtained by dividing (A) the difference between (1) the Target Stock Price (as defined in the Merger Agreement) and (2) the exercise price for each Warrant Share, by (B) the Average Market Price (as defined in the Merger Agreement).
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AFFILIATE AGREEMENT
Ameris Bancorp
24 2 nd Avenue, S.E.
Moultrie, Georgia 31768
Attention: President
Ladies and Gentlemen:
The undersigned is a shareholder of Islands Bancorp (Target), a South Carolina corporation, and will become a shareholder of Ameris Bancorp (Purchaser) pursuant to the transactions described in the Agreement and Plan of Merger, dated as of August 15, 2006 (the Agreement), by and between Target and Purchaser and certain of their respective subsidiaries. Under the terms of the Agreement, Target will be merged into and with Purchaser (the Merger), and the shares of the no par value common stock of Target (Target Common Stock) will be converted into and exchanged for cash or shares of the $1.00 par value common stock of Purchaser (Purchaser Common Stock). This Affiliate Agreement represents an agreement between the undersigned and Purchaser regarding certain rights and obligations of the undersigned in connection with the shares of Purchaser Common Stock 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 Purchaser hereby agree as follows:
1. Affiliate Status . The undersigned understands and agrees that as to Target 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.
2. Covenants and Warranties of Undersigned . The undersigned represents, warrants and agrees that:
(a) The Purchaser Common Stock received by the undersigned as a result of the Merger will be taken for his or her own account and not for others, directly or indirectly, in whole or in part.
(b) Purchaser has informed the undersigned that any distribution by the undersigned of Purchaser Common Stock has not been registered under the 1933 Act and that shares of Purchaser Common Stock received pursuant to the Merger can only be sold by the undersigned (i) following registration under the 1933 Act, or (ii) 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 (iii) to the extent some other exemption from registration under the 1933 Act might be available. The undersigned understands that Purchaser is under no obligation to file a registration statement with the SEC covering the disposition of the undersigneds shares of Purchaser Common Stock.
3. Restrictions on Transfer .
(a) The undersigned understands and agrees that stop transfer instructions with respect to the shares of Purchaser Common Stock received by the undersigned pursuant to the Merger will be given to Purchasers 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 may not be sold, transferred or otherwise disposed of except or unless (i) covered by an effective registration statement under the Securities Act of 1933, as amended, (ii) in accordance with (x) Rule 145(d) (in the case of shares issued to an individual who is not an affiliate of Purchaser) or (y) Rule 144 (in the case of shares issued to an individual who is an affiliate of Purchaser) of the Rules and Regulations of such Act, or (iii) in accordance with a legal opinion satisfactory to counsel for Purchaser that such sale or transfer is otherwise exempt from the registration requirements of such Act.
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(b) Such legend will also be placed on any certificate representing Purchaser securities issued subsequent to the original issuance of the Purchaser Common Stock pursuant to the Merger as a result of any stock dividend, stock split or other recapitalization as long as the Purchaser 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. In addition, if the provisions of Rules 144 and 145 are amended to eliminate restrictions applicable to the Purchaser Common Stock received by the undersigned pursuant to the Merger, or at the expiration of the restrictive period set forth in Rule 145(d), Purchaser, upon the request of the undersigned, will cause the certificates representing the shares of Purchaser 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 Purchaser of an opinion of its counsel to the effect that such legend may be removed.
4. 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 Purchaser Common Stock received by the undersigned in connection with the Merger, to the extent he or she believes necessary, with his or her counsel or counsel for Target.
5. Filing of Reports by Purchaser . Purchaser 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 (the 1934 Act), 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 Purchaser Common Stock issued to the undersigned pursuant to the Merger.
6. Transfer Under Rule 145(d) . If the undersigned desires to sell or otherwise transfer the shares of Purchaser Common Stock received by him or her 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 Purchaser Common Stock, together with such additional information as the Transfer Agent may reasonably request. If Purchasers counsel concludes that such proposed sale or transfer complies with the requirements of Rule 145(d), Purchaser shall cause such counsel, at Purchasers expense, to provide such opinions as may be necessary to Purchasers Transfer Agent so that the undersigned may complete the proposed sale or transfer.
7. Acknowledgments . The undersigned recognizes and agrees that the foregoing provisions also apply with respect to Target Common Stock held by, and Purchaser Common Stock issued in connection with the Merger to, (a) the undersigneds spouse, (b) any relative of the undersigned or of the undersigneds spouse who has the same home as the undersigned, (c) any trust or estate in which the undersigned, the undersigneds 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 undersigneds spouse and any such relative collectively own at least 10% of any class of equity securities or of the equity interest.
8. Miscellaneous . This Affiliate Agreement is the complete agreement between Purchaser 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.
[Signatures on next page.]
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This Affiliate Agreement is executed as of the day of , 2006.
Very truly yours, |
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Signature |
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Print Name |
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Address |
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Telephone No. |
AGREED TO AND ACCEPTED as of |
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, 2006 |
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AMERIS BANCORP | ||
By: |
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Its: |
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SHAREHOLDER VOTING AGREEMENT
This SHAREHOLDER VOTING AGREEMENT (the Agreement) is entered into as of 2006, by and among AMERIS BANCORP , a Georgia corporation (Ameris), and (each a Shareholder and collectively the Shareholders).
W I T N E S S E T H:
WHEREAS , as of the date hereof, each Shareholder beneficially owns (as such term is defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) and is entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) the number of shares of common stock, no par value per share (the Common Stock), of Islands Bancorp (the Company), set forth opposite such Shareholders name on Schedule I hereto (such shares of Common Stock, together with any other shares of Common Stock the voting power over which is acquired by any Shareholder during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms, are collectively referred to herein as the Subject Shares);
WHEREAS , Ameris and the Company and certain of their respective subsidiaries propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (the Merger Agreement), pursuant to which, among other things, the Company will merge with and into Ameris (the Merger); and
WHEREAS , as a condition to the willingness of Ameris to enter into the Merger Agreement, and as an inducement and in consideration therefor, each Shareholder is executing this Agreement.
NOW, THEREFORE , in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Capitalized Terms . For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement.
Section 1.2 Other Definitions . For purposes of this Agreement:
(a) Affiliate means, with respect to any specified Person, any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. For purposes of this Agreement, with respect to each Shareholder, the term Affiliate shall not include the Company and the Persons that directly, or indirectly through one or more intermediaries, are controlled by the Company.
(c) Person means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, other entity or group.
(d) Representative means, with respect to any particular Person, any director, officer, employee, accountant, consultant, legal counsel, investment banker, advisor, agent or other representatives of such Person.
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ARTICLE II
VOTING AGREEMENT AND IRREVOCABLE PROXY
Section 2.1 Agreement to Vote the Subject Shares . Each Shareholder, in his or her capacity as such, hereby agrees that, during the period commencing on the date hereof and continuing until the termination of this Agreement (such period, the Voting Period), at any meeting (or any adjournment or postponement thereof) of the Companys shareholders, however called, or in connection with any written consent of the Companys shareholders, such Shareholder shall vote (or cause to be voted) its Subject Shares (x) in favor of the approval of the terms of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement (and any actions required in furtherance thereof), (y) against any action, proposal, transaction or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement or of any Shareholder contained in this Agreement, and (z) except with the written consent of Ameris, against the following actions or proposals (other than the transactions contemplated by the Merger Agreement): (i) any Takeover Proposal; and (ii) (A) any change in the persons who constitute the board of directors of the Company that is not approved in advance by at least a majority of the persons who were directors of the Company as of the date of this Agreement (or their successors who were so approved); (B) any material change in the present capitalization of the Company or any amendment of the Companys articles of incorporation or bylaws; (C) any other material change in the Companys corporate structure or business; or (D) any other action or proposal involving the Company or any of its subsidiaries that is intended, or could reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the transactions contemplated by the Merger Agreement. Any such vote shall be cast or consent shall be given in accordance with such procedures relating thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent. Each Shareholder agrees not to enter into any agreement or commitment with any Person the effect of which would be inconsistent with or violative of the provisions and agreements contained in this Article II.
Section 2.2
Grant of Irrevocable Proxy
. Each Shareholder hereby appoints Ameris and any designee of Ameris, and each of them individually, as
such Shareholders proxy and attorney-in-fact, with full power of substitution and resubstitution, to vote or act by written consent during the Voting Period with respect the Subject Shares in accordance with Section 2.1. This proxy is
given to secure the performance of the duties of each Shareholder under this Agreement. The Shareholders shall promptly cause a copy of this Agreement to be deposited with the Company at its principal place of business. Each Shareholder shall take
Section 2.3 Nature of Irrevocable Proxy . The proxy and power of attorney granted pursuant to Section 2.2 by each Shareholder shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by such Shareholder. The power of attorney granted by each Shareholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of such Shareholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement.
ARTICLE III
COVENANTS
Section 3.1 Generally .
(a) Except for pledges in existence as of the date hereof, each Shareholder agrees that during the Voting Period, except as contemplated by the terms of this Agreement, it shall not (i) sell, transfer, tender, pledge, encumber, assign or otherwise dispose of (collectively, a Transfer), or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any or all of the Subject Shares; provided, however, that
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any Shareholder may Transfer any or all of its Subject Shares to any other Shareholder and may pledge or encumber any Subject Shares so long as such pledge or encumbrance would not impair any Shareholders ability to perform its obligations under this Agreement; or (ii) take any action that would have the effect of preventing, impeding, interfering with or adversely affecting its ability to perform its obligations under this Agreement.
(b) In the event of a stock dividend or distribution, or any change in the Common Stock by reason of any stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the term Subject Shares shall be deemed to refer to and include the Subject Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Subject Shares may be changed or exchanged or which are received in such transaction.
Section 3.2 Standstill Obligations of Shareholders . Each Shareholder, jointly and severally, covenants and agrees with Ameris that, during the Voting Period:
(a) such Shareholder shall not, nor shall such Shareholder permit any controlled Affiliate of such Shareholder to, nor shall such Shareholder act in concert with or permit any controlled Affiliate to act in concert with any Person to make, or in any manner participate in, directly or indirectly, a solicitation of proxies (as such terms are used in the rules of the Securities and Exchange Commission) or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of, any shares of Common Stock in connection with any vote or other action on any matter, other than to recommend that shareholders of the Company vote in favor of the Merger and the Merger Agreement and otherwise as expressly provided by Article II of this Agreement;
(b) such Shareholder shall not, nor shall such Shareholder permit any controlled Affiliate of such Shareholder to, nor shall such Shareholder act in concert with or permit any controlled Affiliate to act in concert with any Person to, deposit any shares of Common Stock in a voting trust or subject any shares of Common Stock to any arrangement or agreement with any Person with respect to the voting of such shares of Common Stock, except as provided by Article II of this Agreement; and
(c) such Shareholder shall not, and shall direct its Representatives not to, directly or indirectly, through any officer, director, agent or otherwise, enter into, solicit, initiate, conduct or continue any discussions or negotiations with, or knowingly encourage or respond to any inquiries or proposals by, or provide any information to, any Person, other than Ameris, relating to any Takeover Proposal, other than in compliance with the terms of the Merger Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER
Each Shareholder hereby represents and warrants, severally and not jointly, to Ameris as follows:
Section 4.1 Due Organization, etc . Such Shareholder has all necessary power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.
Section 4.2 Ownership of Shares . Schedule I sets forth, opposite such Shareholders name, the number of shares of Common Stock over which such Shareholder has record and beneficial ownership as of the date hereof. As of the date hereof, such Shareholder is the lawful owner of the shares of Common Stock denoted as being owned by such Shareholder on Schedule I and has the sole power to vote (or cause to be voted) such shares of Common Stock. Except as set forth on such Schedule I, neither such Shareholder nor any Affiliate of such Shareholder owns or holds any right to acquire any additional shares of any class of capital stock of the Company or other securities of the Company or any interest therein or any voting rights with respect to any securities of the Company. Such Shareholder has good and valid title to the Common Stock denoted as being owned by such Shareholder on Schedule I, free and clear of any and all pledges, mortgages, liens, charges, proxies, voting
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agreements, encumbrances, adverse claims, options, security interests and demands of any nature or kind whatsoever, other than those created by this Agreement or as could not reasonably be expected to impair such Shareholders ability to perform its obligations under this Agreement.
Section 4.3 No Conflicts . (i) No filing with any governmental authority, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by such Shareholder and the consummation by such Shareholder of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by such Shareholder, the consummation by such Shareholder of the transactions contemplated hereby or compliance by such Shareholder with any of the provisions hereof shall (A) conflict with or result in any breach of the organizational documents of such Shareholder, (B) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which such Shareholder is a party or by which such Shareholder or any of its Subject Shares or assets may be bound, or (C) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation, except for any of the foregoing as could not reasonably be expected to impair such Shareholders ability to perform its obligations under this Agreement.
Section 4.4 Reliance by Ameris . Such Shareholder understands and acknowledges that Ameris is entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by such Shareholder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AMERIS
Ameris hereby represents and warrants to the Shareholders as follows:
Section 5.1 Due Organization, etc . Ameris is a company duly organized and validly existing under the laws of the jurisdiction of its incorporation. Ameris has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Ameris have been duly authorized by all necessary action on the part of Ameris.
Section 5.2 Conflicts . (i) No filing with any governmental authority, and no authorization, consent or approval of any other Person is necessary for the execution of this Agreement by Ameris and the consummation by Ameris of the transactions contemplated hereby and (ii) none of the execution and delivery of this Agreement by Ameris, the consummation by Ameris of the transactions contemplated hereby shall (A) conflict with or result in any breach of the organizational documents of Ameris, (B) result in, or give rise to, a violation or breach of or a default under any of the terms of any material contract, understanding, agreement or other instrument or obligation to which Ameris is a party or by which Ameris or any of its assets may be bound, or (C) violate any applicable order, writ, injunction, decree, judgment, statute, rule or regulation, except for any of the foregoing as could not reasonably be expected to impair Ameriss ability to perform its obligations under this Agreement.
Section 5.3 Reliance by the Shareholders . Ameris understands and acknowledges that the Shareholders are entering into this Agreement in reliance upon the execution and delivery of the Merger Agreement by Ameris.
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ARTICLE VI
TERMINATION
Section 6.1 Termination . This Agreement shall terminate, become null and void and have no effect upon the earliest to occur of (i) the mutual consent of Ameris and the Shareholders, (ii) the Effective Time, (iii) the date of termination of the Merger Agreement in accordance with its terms, and (iv) the date of any modification, waiver or amendment to the Merger Agreement in a manner that reduces either the Stock Consideration or the Cash Consideration; provided , however , that termination of this Agreement shall not prevent any party hereunder from seeking any remedies (at law or in equity) against any other party hereto for such partys breach of any of the terms of this Agreement. Notwithstanding the foregoing, Section 7.1 and Sections 7.5 through 7.16, inclusive, of this Agreement shall survive the termination of this Agreement.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Appraisal Rights . To the extent permitted by applicable law, each Shareholder hereby waives any rights of appraisal or rights to dissent from the Merger that it may have under applicable law.
Section 7.2 Publication . Each Shareholder hereby permits Ameris to publish and disclose in the Proxy Statement/Prospectus (including, without limitation, all documents and schedules filed with the Securities and Exchange Commission) his or her identity and ownership of shares of Common Stock and the nature of his or her commitments, arrangements and understandings pursuant to this Agreement; provided, however, that such publication and disclosure is subject in all cases to the prior review and comment by the Company and its advisors.
Section 7.3 Affiliate Letters . Each Shareholder agrees to execute an affiliate agreement, as soon as practicable after the date hereof, in substantially the form attached as Exhibit 7.10 to the Merger Agreement.
Section 7.4 Further Actions . Each of the parties hereto agrees to use its, his or her reasonable best efforts to do all things necessary to effectuate this Agreement.
Section 7.5 Fees and Expenses . Each of the parties shall be responsible for its, his or her own fees and expenses in connection with the entering into of this Agreement and the consummation of the transactions contemplated hereby.
Section 7.6 Amendments, Waivers, etc . This Agreement may not be amended, changed, supplemented, waived or otherwise modified, except upon the execution and delivery of a written agreement executed by each of the parties hereto. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its, his or her obligations hereunder, and any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its, his or her right to exercise any such or other right, power or remedy or to demand such compliance.
Section 7.7 Specific Performance . The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity.
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Section 7.8 Notices . Any notices or other communications required or permitted under, or otherwise in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person or upon confirmation of receipt when transmitted by facsimile transmission (with confirmation) or on receipt after dispatch by registered or certified mail, postage prepaid, addressed, or on the next Business Day if transmitted by national overnight courier, in each case as follows:
If to Ameris, addressed to it at:
Ameris Bancorp
24 2 nd Avenue, S.E.
Moultrie, Georgia 31768
Telecopy Number: (229) 890-2235
Attention: President
with a copy to:
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 525-2224
Attention: Steven E. Fox, Esq.
If to Target, addressed to:
with a copy to:
Section 7.9 Headings . The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Section 7.10 Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
Section 7.11 Entire Agreement . This Agreement (together with the Merger Agreement, to the extent referred to herein) constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof.
Section 7.13 Assignment . This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of each of the parties, except that Ameris may assign and transfer its rights and obligations hereunder to any direct or indirect wholly-owned subsidiary of Ameris.
Section 7.14 Parties in Interest . This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 7.15 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury .
(a) This Agreement and the transactions contemplated hereby, and all disputes between the parties under or related to the Agreement or the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws of the State of South Carolina, without regard to the application of South Carolina principles of conflicts of laws.
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(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.15(c).
Section 7.16 Counterparts . This Agreement may be executed in counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF , Ameris has caused this Agreement to be duly executed, and each Shareholder has duly executed this Agreement, all as of the day and year first above written.
AMERIS BANCORP | ||
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[NAMES OF SHAREHOLDERS] |
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MATTERS AS TO WHICH TARGET COUNSEL WILL OPINE
1. Target is a corporation duly organized and validly existing under the laws of the State of South Carolina with corporate power and authority (a) to conduct its business as described in the Proxy Statement and (b) to own and use its Assets.
2. Target Bank is a national bank duly organized and validly existing under the laws of the United States of America with all requisite power and authority to conduct its business as described in the Proxy Statement and to own and use its Assets. The deposits of Target Bank are insured by the Federal Deposit Insurance Corporation to the extent provided by law.
3. Targets authorized shares consist of shares of Common Stock, no par value per share, of which shares were outstanding as of , 2006, and shares of Preferred Stock, of which were outstanding as of , 2006. The outstanding shares of Target Common Stock have been duly authorized and validly issued, were not issued in violation of any statutory preemptive rights of shareholders, and are fully paid and nonassessable. To our knowledge, except for Target Options and as Previously Disclosed, there are no options, subscriptions, warrants, calls, rights or commitments obligating Target to issue equity securities or acquire its equity securities.
4. Target owns directly or indirectly all the issued and outstanding shares of the capital stock of Target Bank. To our knowledge, there are no options, subscriptions, warrants, calls, rights or commitments obligating Target Bank to issue equity securities or acquire its equity securities.
5. The execution and delivery by Target of the Agreement do not, and if Target 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 Target or the Articles of Association or Bylaws of Target Bank or, to our knowledge, result in any breach of, or default or acceleration under, any Material Contract or Order to which Target or Target Bank is a party or by which Target or Target Bank is bound.
6. The execution and delivery by Target Bank of the Bank Merger Agreement do not, and if Target Bank were now to perform its obligations under the Bank Merger Agreement such performance would not, result in any violation of the Articles of Incorporation, Articles of Association or Bylaws of either Target Bank or, to our knowledge, result in any breach of, or default or acceleration under, any Material Contract or Order to which Target Bank is a party or by which Target Bank is bound.
7. Target has duly authorized the execution and delivery of the Agreement and all performance by Target thereunder and has duly executed and delivered the Agreement.
8. The Agreement is enforceable against Target.
9. Target Bank has duly authorized the execution and delivery of the Bank Merger Agreement and all performance by it thereunder and has duly executed and delivered the Bank Merger Agreement.
10. The Bank Merger Agreement is enforceable against Target Bank.
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NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (the Agreement) is made and entered into as of the day of , 2006 by and between AMERIS BANCORP , a Georgia corporation (Ameris), and [NAME OF DIRECTOR] , an individual resident of the State of (Director).
W I T N E S S E T H:
WHEREAS , pursuant to the terms of that certain Agreement and Plan of Merger (the Merger Agreement) dated as of August 15, 2006 between Ameris and Islands Bancorp (Islands) and certain of their respective subsidiaries, Ameris and Islands have agreed, upon the terms and subject to the conditions set forth in the Merger Agreement, to a strategic combination of Ameris and Islands, and the shareholders of Islands will receive a combination of cash and shares of Ameris Common Stock in exchange for their shares of the common stock of Islands (the Merger);
WHEREAS , prior to the Merger, Islands was, and after the Merger, Ameris will continue to be, in the business of owning and operating financial institutions engaged in the business of banking, including, without limitation, the solicitation of time and demand deposits and the making of residential, consumer, commercial and corporate loans;
WHEREAS , Director is currently a shareholder and director of Islands, has heretofore been responsible for overseeing the management of the business of Islands, and has knowledge of the trade secrets, customer information and other confidential and proprietary information of Islands and its subsidiary;
WHEREAS , the execution of this Agreement is contemplated by the Merger Agreement, to which this Agreement is attached as Exhibit 8.2(g);
WHEREAS , in order to protect the goodwill of the business of Islands and the other value to be acquired by Ameris pursuant to the Merger Agreement, for which Ameris is paying substantial consideration, Ameris and Director have agreed that Ameris obligation to consummate the transactions contemplated by the Merger Agreement are subject to the condition, among others, that Director shall have entered into this Agreement;
WHEREAS , Director acknowledges that the provisions of this Agreement are reasonable and necessary to protect the legitimate interest of Ameris and the business and goodwill acquired by it pursuant to the Merger Agreement; and
WHEREAS , in order to induce Ameris to consummate the Merger and the other transactions contemplated by the Merger Agreement, Director is willing to enter into this Agreement;
NOW, THEREFORE , in consideration of the premises and the mutual covenants set forth herein, the parties agree as follows:
1. Definitions . As used in this Agreement, terms defined in the preamble and recitals of this Agreement shall have the meanings set forth therein and the following terms shall have the meanings set forth below:
(a) Ameris Market shall mean the geographic area within a radius of fifty (50) miles of the main office of Islands Community Bank, N.A., located at 2348 Boundary Street, Beaufort, South Carolina 29902.
(b) Competitive Business shall mean any Person engaged in the business of banking, including, without limitation, the solicitation of time and demand deposits and the making of residential, consumer, commercial and corporate loans.
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(c) Confidential Information shall mean all client and vendor lists, marketing arrangements, business plans, projections, financial information, training manuals, pricing manuals, product development plans, market strategies, internal performance statistics and other competitively sensitive information concerning Ameris, Islands and their respective subsidiaries which is material to Ameris and Islands and not generally known by the public, other than Trade Secrets, whether or not in written or tangible form.
(d) Key Employee shall mean any Person who is employed in a management, executive, supervisory, training, marketing or sales capacity for another Person.
(e) Person shall mean any individual, corporation, firm, unincorporated organization, association, partnership, limited liability company, trust (inter vivos or testamentary), estate of a deceased, insane or incompetent individual, business trust, joint stock company, joint venture or other organization, entity or business, whether acting in an individual, fiduciary or other capacity.
(f) Restricted Period shall mean the period from the date hereof until the first (1 st ) anniversary of the Effective Time (as defined in the Merger Agreement).
(g) Trade Secrets shall mean Trade Secrets, as defined in the Georgia Trade Secrets Act, and shall include, without limitation, the whole or any portion or phase of any technical information, designs, processes, procedures or improvements that are valuable and not generally known to the competitors of Ameris or Islands, whether or not in written or tangible form.
2. No Competing Business . Director hereby agrees that during the Restricted Period, except as permitted by Section 5 of this Agreement, Director will not, directly or indirectly, render any services to, or serve in a capacity with, any Competitive Business in the Ameris Market that is substantially similar or identical to the services which he performed for, or the capacity in which he served, Islands at any time during the two years prior to the date of this Agreement, without regard to (a) whether the Competitive Business has its office or other business facilities within the Ameris Market, or (b) whether Director resides or reports to an office within the Ameris Market.
3. No Solicitation .
3.1 Director hereby agrees that during the Restricted Period, except as permitted by Section 5 of this Agreement, Director will not, directly or indirectly, solicit, divert or take away the business of any customer of Ameris Bancorp or American Banking Company within the Ameris Market.
3.2 Director hereby agrees that during the Restricted Period, except as permitted by Section 5 of this Agreement, Director will not, directly or indirectly, recruit, solicit or otherwise induce or influence any Key Employee of Ameris Bancorp or American Banking Company to discontinue such employment or agency relationship.
4. No Disclosure of Proprietary Information .
4.1 Director hereby agrees that he will not directly or indirectly disclose to anyone, or use or otherwise exploit for his own benefit or for the benefit of anyone other than Ameris and Islands and their respective subsidiaries, any Trade Secrets for as long as they remain Trade Secrets, except as permitted by Section 5 of this Agreement.
4.2 Director hereby agrees that, during the Restricted Period, he will not directly or indirectly disclose to anyone, or use or otherwise exploit for Directors own benefit or for the benefit of anyone other than Ameris and Islands and their respective subsidiaries, any Confidential Information, except as permitted by Section 5 of this Agreement.
5. Permitted Activities . The restrictions set forth in Sections 2, 3 and 4 of this Agreement shall not apply to actions taken by Director during the time he is employed by Ameris or Islands or any of their respective subsidiaries to the extent, but only to the extent, that such actions are expressly approved by the Board of Directors of Ameris.
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6. Representations and Warranties . Director represents and warrants that this Agreement constitutes the legal, valid and binding obligation of Director, enforceable against him in accordance with its terms. Director represents and warrants that he has no right, title, interest or claim in, to or under any Trade Secrets or Confidential Information.
7. Waivers . Ameris will not be deemed as a consequence of any act, delay, failure, omission, forbearance or other indulgences granted from time to time by Ameris or for any other reason (a) to have waived, or to be estopped from exercising, any of its rights or remedies under this Agreement, or (b) to have modified, changed, amended, terminated, rescind, or superseded any of the terms of this Agreement.
8. Injunctive Relief . Director acknowledges (a) that any violation of this Agreement will result in irreparable injury to Ameris; (b) that damages at law would not be reasonable or adequate compensation to Ameris for violation of this Agreement; and (c) that Ameris shall be entitled to have the provisions of this Agreement specifically enforced by preliminary and permanent injunctive relief without the necessity of proving actual damages and without posting bond or other security, as well as to an equitable accounting of all earnings, profits and other benefits arising out of any such violation.
9. Notices . All notices and other communications under this Agreement shall be in writing and may be given by any of the following methods: (a) personal delivery; (b) facsimile transmission; (c) registered or certified mail, postage prepaid, return receipt requested; or (d) overnight delivery service requiring acknowledgment of receipt. Any such notice or communication shall be sent to the appropriate party at its address or facsimile number given below (or at such other address or facsimile number for such party as shall be specified by notice given hereunder):
To Ameris:
Ameris Bancorp
24 2 nd Avenue, SE
Moultrie, Georgia 31768
Fax No. (229) 890-2235
Attn: Chief Executive Officer
with a copy (which shall not constitute notice to Ameris) to:
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Fax No.: (404) 525-2224
Attn: Steven E. Fox, Esq.
To Director:
[NAME]
[ADDRESS AND FAX NUMBER]
All such notices and communications shall be deemed received upon (a) actual receipt thereof by the addressee; (b) actual delivery thereof to the appropriate address as evidenced by an acknowledged receipt; or (c) in the case of a facsimile transmission, upon transmission thereof by the sender and confirmation of receipt. In the case of notices or communications sent by facsimile transmission, the sender shall contemporaneously mail a copy of the notice or communication to the addressee at the address provided for above; provided, however, that such mailing shall in no way alter the time at which the facsimile notice or communication is deemed received.
10. Successors in Interest . This Agreement shall be binding upon, and shall inure to the benefit of and be enforceable by, the parties hereto and their respective heirs, legal representatives, successors and assigns, and any reference to a party hereto shall also be a reference to any such heir, legal representative, successor or assign.
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11. Number; Gender . Whenever the context so requires, the singular number shall include the plural and the plural shall include the singular, and the gender of any pronoun shall include the other genders.
12. Captions . The titles and captions contained in this Agreement are inserted herein only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. Unless otherwise specified to the contrary, all references to Sections are references to Sections of this Agreement.
13. Controlling Law; Consent to Jurisdiction .
13.1 This Agreement, and all disputes between the parties under or related to this Agreement or the facts and circumstances leading to its execution, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws of the State of Georgia, without regard to the application of Georgia principles of conflicts of laws.
13.2 Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Georgia State court, or Federal court of the United States of America, sitting in Georgia, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (a) agrees not to commence any such action or proceeding except in such courts; (b) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Georgia State court or, to the extent permitted by law, in such Federal court; (c) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Georgia State or Federal court; and (d) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Georgia State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by law.
14. Integration; Amendment . This Agreement and the documents executed pursuant hereto or in connection herewith supersede all negotiations, agreements and understandings among the parties with respect to the subject matter hereof and constitutes the entire agreement among the parties hereto. This Agreement may not be amended, modified or supplemented except by written agreement of the parties hereto.
15. Severability . Any provision hereof which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, the parties hereto waive any provision of law which renders any such provision prohibited or unenforceable in any respect. In the event that any provision of this Agreement should ever be deemed to exceed the time, geographic, product or service or any other limitations permitted by applicable law, then such provision shall be deemed reformed to the maximum extent permitted by applicable law.
16. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement or the terms hereof to produce or account for more than one of such counterparts. Executed counterparts of this Agreement may be delivered via facsimile transmission.
17. Enforcement of Certain Rights . Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person other than the parties hereto, and their respective heirs, legal representatives, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, or result in such person being deemed a third party beneficiary of this Agreement.
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18. Attorneys Fees . If either party hereto brings any action, suit, counterclaim, appeal or arbitration for any relief against the other party hereto, declaratory or otherwise, to enforce the terms hereof or to declare rights hereunder (collectively, an Action), the prevailing party in such action shall be entitled to payment of its reasonable attorneys fees and costs incurred in bringing and prosecuting such Action and/or enforcing any judgment, order, ruling, or award (collectively, a Decision) granted therein, all of which shall be deemed to have accrued on the date of commencement of such Action. Any Decision entered in such Action shall contain a specific provision providing for the recovery of attorneys fees and costs incurred in enforcing such Decision.
[Signatures next page]
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IN WITNESS WHEREOF , Director has duly executed and delivered this Agreement, and Ameris has caused this Agreement to be duly executed and delivered on its behalf by an officer thereunto duly authorized, all as of the date first above written.
[NAME OF DIRECTOR] | ||
AMERIS BANCORP | ||
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MATTERS AS TO WHICH PURCHASER COUNSEL WILL OPINE
1. Purchaser is a corporation duly organized and validly existing under the laws of the State of Georgia with corporate power and authority (a) to conduct its business as described in the Proxy Statement and (b) to own and use its Assets.
2. Purchaser Bank is a corporation duly organized and validly existing under the laws of the State of Georgia with corporate power and authority (a) to conduct its business as described in the Proxy Statement and (b) to own and use its Assets. The deposits of Purchaser Bank are insured by the Federal Deposit Insurance Corporation to the extent provided by law.
3. Purchasers authorized shares consist of 30,000,000 shares of Common Stock, $1.00 par value per share, of which shares were outstanding as of , 2006, and 5,000,000 shares of Preferred Stock, none of which were outstanding as of , 2006. The outstanding shares of Purchaser Common Stock have been duly authorized and validly issued, were not issued in violation of any statutory preemptive rights of shareholders, and are fully paid and nonassessable. To our knowledge, except as Previously Disclosed, there are no options, subscriptions, warrants, calls, rights or commitments obligating Purchaser to issue equity securities or acquire its equity securities. The shares of Purchaser Common Stock to be issued to the shareholders of Target upon consummation of the Merger have been registered under the 1933 Act, and when issued in accordance with the Agreement, will be validly issued, fully paid and nonassessable.
4. The execution and delivery by Purchaser of the Agreement do not, and if Purchaser 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 Purchaser or, to our knowledge, result in any breach of, or default or acceleration under, any Material Contract or Order to which Purchaser is a party or by which Purchaser is bound.
5. The execution and delivery by Purchaser Bank of the Bank Merger Agreement do not, and if Purchaser Bank were now to perform its obligations under the Bank Merger Agreement such performance would not, result in any violation of the Articles of Incorporation or Bylaws of Purchaser Bank or, to our knowledge, result in any breach of, or default or acceleration under, any Material Contract or Order to which Purchaser Bank is a party or by which Purchaser Bank is bound.
6. Purchaser has duly authorized the execution and delivery of the Agreement and all performance by Purchaser thereunder and has duly executed and delivered the Agreement.
7. The Agreement is enforceable against Purchaser.
8. Purchaser Bank has duly authorized the execution and delivery of the Bank Merger Agreement and all performance by Purchaser Bank thereunder and has duly executed and delivered the Bank Merger Agreement.
9. The Bank Merger Agreement is enforceable against Purchaser Bank.
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Title 33Corporations, Partnerships and Associations
CHAPTER 13.
DISSENTERS RIGHTS
ARTICLE 1.
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SECTION 33-13-101. Definitions.
In this chapter:
(1) Corporation means the issuer of the shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer.
(2) Dissenter means a shareholder who is entitled to dissent from corporate action under Section 33-13-102 and who exercises that right when and in the manner required by Sections 33-13-200 through 33-13-280.
(3) Fair value, with respect to a dissenters shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. The value of the shares is to be determined by techniques that are accepted generally in the financial community.
(4) Interest means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.
(5) Record shareholder means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
(6) Beneficial shareholder means the person who is a beneficial owner of shares held by a nominee as the record shareholder.
(7) Shareholder means the record shareholder or the beneficial shareholder.
SECTION 33-13-102. Right to dissent.
(A) A shareholder is entitled to dissent from, and obtain payment of the fair value of, his shares in the event of any of the following corporate actions:
(1) consummation of a plan of merger to which the corporation is a party (i) if shareholder approval is required for the merger by Section 33-11-103 or the articles of incorporation and the shareholder is entitled to vote on the merger or (ii) if the corporation is a subsidiary that is merged with its parent under Section 33-11-104 or 33-11-108 or if the corporation is a parent that is merged with its subsidiary under Section 33-11-108;
(2) consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares are to be acquired, if the shareholder is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale must be distributed to the shareholders within one year after the date of sale;
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(4) an amendment of the articles of incorporation that materially and adversely affects rights in respect of a dissenters shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any matter, or to cumulate votes, other than a limitation by dilution through issuance of shares or other securities with similar voting rights; or
(v) reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under Section 33-6-104; or
(5) any corporate action to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares;
(6) the conversion of a corporation into a limited liability company pursuant to Section 33-11-111 or conversion of a corporation into either a general partnership or limited partnership pursuant to Section 33-11-113;
(7) the consummation of a plan of conversion to a limited liability company pursuant to Section 33-11-111 or to a partnership or limited partnership pursuant to Section 33-11-113.
(B) Notwithstanding subsection (A), no dissenters rights under this section are available for shares of any class or series of shares which, at the record date fixed to determine shareholders entitled to receive notice of a vote at the meeting of shareholders to act upon the agreement of merger or exchange, were either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.
SECTION 33-13-103. Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters rights as to fewer than all the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf he asserts dissenters rights. The rights of a partial dissenter under this subsection are determined as if the shares to which he dissents and his other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters rights as to shares held on his behalf only if he dissents with respect to all shares of which he is the beneficial shareholder or over which he has power to direct the vote. A beneficial shareholder asserting dissenters rights to shares held on his behalf shall notify the corporation in writing of the name and address of the record shareholder of the shares, if known to him.
ARTICLE 2.
PROCEDURE FOR EXERCISE OF DISSENTERS RIGHTS
SECTION 33-13-200. Notice of dissenters rights.
(a) If proposed corporate action creating dissenters rights under Section 33-13-102 is submitted to a vote at a shareholders meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters rights under this chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters rights under Section 33-13-102 is taken without a vote of shareholders, the corporation shall notify in writing all shareholders entitled to assert dissenters rights that the action was taken and send them the dissenters notice described in Section 33-13-220.
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SECTION 33-13-210. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters rights under Section 33-13-102 is submitted to a vote at a shareholders meeting, a shareholder who wishes to assert dissenters rights (1) must give to the corporation before the vote is taken written notice of his intent to demand payment for his shares if the proposed action is effectuated and (2) must not vote his shares in favor of the proposed action. A vote in favor of the proposed action cast by the holder of a proxy solicited by the corporation shall not disqualify a shareholder from demanding payment for his shares under this chapter.
(b) A shareholder who does not satisfy the requirements of subsection (a) is not entitled to payment for his shares under this chapter.
SECTION 33-13-220. Dissenters notice.
(a) If proposed corporate action creating dissenters rights under Section 33-13-102 is authorized at a shareholders meeting, the corporation shall deliver a written dissenters notice to all shareholders who satisfied the requirements of Section 33-13-210(a).
(b) The dissenters notice must be delivered no later than ten days after the corporate action was taken and must:
(1) state where the payment demand must be sent and where certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent transfer of the shares is to be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and requires that the person asserting dissenters rights certify whether or not he or, if he is a nominee asserting dissenters rights on behalf of a beneficial shareholder, the beneficial shareholder acquired beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment demand, which may not be fewer than thirty nor more than sixty days after the date the subsection (a) notice is delivered and set a date by which certificates for certificated shares must be deposited, which may not be earlier than twenty days after the demand date; and
(5) be accompanied by a copy of this chapter.
SECTION 33-13-230. Shareholders payment demand.
(a) A shareholder sent a dissenters notice described in Section 33-13-220 must demand payment, certify whether he (or the beneficial shareholder on whose behalf he is asserting dissenters rights) acquired beneficial ownership of the shares before the date set forth in the dissenters notice pursuant to Section 33-13-220(b)(3), and deposit his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates under subsection (a) retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not comply substantially with the requirements that he demand payment and deposit his share certificates where required, each by the date set in the dissenters notice, is not entitled to payment for his shares under this chapter.
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SECTION 33-13-240. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from the date the demand for payment for them is received until the proposed corporate action is taken or the restrictions are released under Section 33-13-260.
(b) The person for whom dissenters rights are asserted as to uncertificated shares retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.
SECTION 33-13-250. Payment.
(a) Except as provided in Section 33-13-270, as soon as the proposed corporate action is taken, or upon receipt of a payment demand, the corporation shall pay each dissenter who substantially complied with Section 33-13-230 the amount the corporation estimates to be the fair value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) the corporations balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders equity for that year, and the latest available interim financial statements, if any;
(2) a statement of the corporations estimate of the fair value of the shares and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenters right to demand additional payment under Section 33-13-280; and
(5) a copy of this chapter.
SECTION 33-13-260. Failure to take action.
(a) If the corporation does not take the proposed action within sixty days after the date set for demanding payment and depositing share certificates, the corporation, within the same sixty-day period, shall return the deposited certificates and release the transfer restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer restrictions, the corporation takes the proposed action, it must send a new dissenters notice under Section 33-13-220 and repeat the payment demand procedure.
SECTION 33-13-270. After-acquired shares.
(a) A corporation may elect to withhold payment required by section 33-13-250 from a dissenter as to any shares of which he (or the beneficial owner on whose behalf he is asserting dissenters rights) was not the beneficial owner on the date set forth in the dissenters notice as the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action, unless the beneficial ownership of the shares devolved upon him by operation of law from a person who was the beneficial owner on the date of the first announcement.
(b) To the extent the corporation elects to withhold payment under subsection (a), after taking the proposed corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the fair value and interest were calculated, and a statement of the dissenters right to demand additional payment under Section 33-13-280.
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SECTION 33-13-280. Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate of the fair value of his shares and amount of interest due and demand payment of his estimate (less any payment under Section 33-13-250) or reject the corporations offer under Section 33-13-270 and demand payment of the fair value of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section 33-13-250 or offered under Section 33-13-270 is less than the fair value of his shares or that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or to offer payment under Section 33-13-270 within sixty days after the date set for demanding payment; or
(3) corporation, having failed to take the proposed action, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within sixty days after the date set for demanding payment.
(b) A dissenter waives his right to demand additional payment under this section unless he notifies the corporation of his demand in writing under subsection (a) within thirty days after the corporation made or offered payment for his shares.
ARTICLE 3.
JUDICIAL APPRAISAL OF SHARES
SECTION 33-13-300. Court action.
(a) If a demand for additional payment under Section 33-13-280 remains unsettled, the corporation shall commence a proceeding within sixty days after receiving the demand for additional payment and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the sixty-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of the county where the corporations principal office (or, if none in this State, its registered office) is located. If the corporation is a foreign corporation without a registered office in this State, it shall commence the proceeding in the county in this State where the principal office (or, if none in this State, the registered office) of the domestic corporation merged with or whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of this State) whose demands remain unsettled parties to the proceeding as in an action against their shares and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under subsection (b) is plenary and exclusive. The court may appoint persons as appraisers to receive evidence and recommend decisions on the question of fair value. The appraisers have the powers described in the order appointing them or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of his shares, plus interest, exceeds the amount paid by the corporation.
SECTION 33-13-310. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Section 33-13-300 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The
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court shall assess the costs against the corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if the court finds the corporation did not comply substantially with the requirements of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.
(d) In a proceeding commenced by dissenters to enforce the liability under Section 33-13-300(a) of a corporation that has failed to commence an appraisal proceeding within the sixty-day period, the court shall assess the costs of the proceeding and the fees and expenses of dissenters counsel against the corporation and in favor of the dissenters.
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August 15, 2006
Board of Directors
Islands Bancorp
2348 Boundary Street
Beaufort, SC 29902
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of the outstanding shares of common stock of Islands Bancorp (Islands) of the consideration to be received by the shareholders of Islands (the consideration) in the Merger (the Merger) of Islands with Ameris Bancorp (Ameris) pursuant to the Agreement and Plan of Merger dated as of August 15, 2006 by and between Islands and Ameris (the Agreement). Unless otherwise defined, capitalized terms used in this opinion are those used in the Agreement.
Pursuant to the Agreement, the Target Stock Price to be received by holders of Islands common stock for each share of Islands common stock will be $22.50 unless the Tangible Capital of Islands is less than $6,150,000 but greater than or equal to $6,000,000, in which case it will be $22.25. Islands holders will be able to elect to receive their consideration as either (i) cash, (ii) shares of Ameris common stock, or (iii) a combination of cash and Ameris common stock. Unless exercised by the holder prior to closing, warrants to purchase Islands common stock will be exchanged for either (i) a cash amount equal to the difference between the Target Stock Price and the exercise price of the warrants or (ii) shares of Ameris common stock equal to the value of the difference between the Target Stock Price and the exercise price of the warrants. Unless exercised by the holder prior to closing, options to purchase Islands common stock will be exchanged for a cash amount equal to the difference between the Target Stock Price and the exercise price. The terms of the transaction are more fully set forth in the Agreement.
For purposes of this opinion and in connection with our review of the proposed transaction, we have, among other things:
1. Participated in discussions with representatives of Islands and Ameris concerning Islands and Ameris financial condition, businesses, assets, earnings, prospects, and such senior managements views as to its future financial performance;
2. Reviewed the terms of the Agreement;
3. Reviewed certain financial statements, both audited (where available) and unaudited, and related financial information of Islands, including its audited financial statements for the three years ended December 31, 2005, 2004 and 2003, unaudited financial statements for the quarters ended March 31, 2006 and June 30, 2006, as well as other internally and externally generated reports and documents;
4. Reviewed certain financial statements, both audited (where available) and unaudited, and related financial information of Ameris, including its audited financial statements for the two years ended December 31, 2005 and 2004 and unaudited financial statements for the quarters ended March 31, 2006 and June 30, 2006, as well as other internally and externally generated reports and documents;
5. Reviewed certain financial forecasts and projections of Islands and Ameris, prepared by their respective management teams;
6. Reviewed historical trading activity of Ameris common stock; and
7. Reviewed certain of the financial terms, to the extent publicly available, of certain recent business combinations involving other financial institutions.
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Board of Directors
Islands Bancorp
August 15, 2006
Page 2
We have assumed and relied, without independent verification, upon the accuracy and completeness of all of the financial and other information that has been provided to us by Islands, Ameris, and their respective representatives, and of the publicly available information that was reviewed by us. We are not experts in the evaluation of allowances for loan losses and have not independently verified such allowances, and have relied on and assumed that the aggregate allowances for loan losses set forth in the balance sheets of each of Islands and Ameris at June 30, 2006 are adequate to cover such losses and complied fully with applicable law, regulatory policy and sound banking practice as of the date of such financial statements. We were not retained to and we did not conduct a physical inspection of any of the properties or facilities of Islands or Ameris, did not make any independent evaluation or appraisal of the assets, liabilities or prospects of Islands or Ameris, were not furnished with any such evaluation or appraisal, and did not review any individual credit files. Our opinion is necessarily based on economic, market, and other conditions as in effect on, and the information made available to us as of, the date hereof.
Howe Barnes Hoefer & Arnett, Inc., as part of its investment banking business, is regularly engaged in the valuation of banks and bank holding companies, thrifts and thrift holding companies, and various other financial services companies, in connection with mergers and acquisitions, initial and secondary offerings of securities, and valuations for other purposes. In rendering this fairness opinion, we have acted on behalf of the Board of Directors of Islands and will receive a fee for our services.
Our opinion as expressed herein is limited to the fairness, from a financial point of view, of the consideration to be paid to holders of Islands common stock in the Merger and does not address Islands underlying business decision to proceed with the Merger. Furthermore, our opinion as expressed herein does not address the ability of the Merger to be consummated, the satisfaction of the conditions precedent contained in the Agreement, or the likelihood of the Merger receiving regulatory approval. Although we have been retained on behalf of the Board of Directors of Islands, our opinion does not constitute a recommendation to any director of Islands as to how such director should vote with respect to the Agreement.
Except as hereinafter provided, this opinion may not be disclosed, communicated, reproduced, disseminated, quoted or referred to at any time, to any third party or in any manner or for any purpose whatsoever without our prior written consent, which consent will not be unreasonably withheld, based upon review by us of the content of any such public reference, which shall be satisfactory to us in our reasonable judgment, although this opinion may be included in its entirety in the proxy statement of Islands used to solicit stockholder approval of the Merger so long as any description of or reference to us or this opinion and the related analysis in such filing is in a form acceptable to us. This letter is addressed and directed to the Board of Directors of Islands in your consideration of the Merger and is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote with respect to the Merger. The opinion herein expressed is intended solely for the benefit of the Board of Directors in connection with the matters addressed herein and may not be relied upon by any other person or entity, or for any other purpose without our written consent.
Subject to the foregoing and based on our experience as investment bankers, our activities as described above, and other factors we have deemed relevant, we are of the opinion as of the date hereof that the consideration is fair, from a financial point of view, to the holders of Islands common stock.
Sincerely, |
H OWE B ARNES H OEFER & A RNETT , I NC . |
/s/ W ILLIAM J. W AGNER |
William J. Wagner |
First Vice President and Managing Director |
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
x | Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For fiscal year ended DECEMBER 31, 2005
¨ | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
COMMISSION FILE NUMBER 000-29267
ISLANDS BANCORP
(Name of small business issuer in its charter)
SOUTH CAROLINA | 57-1082388 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
|
2348 BOUNDARY STREET, BEAUFORT, SC | 29902 | |
(Address of Principal Executive Offices) | (Zip Code) |
(843) 521-1968
(Issuers 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, NO PAR VALUE PER SHARE.
Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ¨
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that registrant was required to file such reports) and (2) has been subject to such filing requirements for past 90 days. Yes x No ¨
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ¨
Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No ¨
State issuers revenue for its most recent fiscal year: $4,337,576
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days: THE AGGREGATE NUMBER OF SHARES OF THE COMPANYS COMMON STOCK HELD BY NON-AFFILIATES AS OF MARCH 13, 2006 WAS 487,442. THERE IS NO PUBLIC TRADING MARKET FOR THE COMPANYS COMMON STOCK. BASED ON THE LAST SALE OF THE COMPANYS COMMON STOCK KNOWN TO MANAGEMENT, WHICH OCCURRED ON MARCH 6, 2006 AT $14.00 PER SHARE, THE AGGREGATE MARKET VALUE OF THE COMPANYS COMMON STOCK HELD BY NON-AFFILIATES IS $6,824,188.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date. 740,260 SHARES OF COMMON STOCK WERE OUTSTANDING AS OF MARCH 13, 2006.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended December 31, 2005 are incorporated by reference into Parts I and II. Portions of the Proxy Statement for the Annual Meeting of Shareholders, scheduled to be held on April 25, 2006, are incorporated by reference into Part III.
Transitional Small Business Disclosure format (check one): Yes ¨ No x
Page
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ITEM 3. |
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ITEM 4. |
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ITEM 5. |
MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS |
D-28 | ||
ITEM 6. |
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ITEM 7. |
D-28 | |||
ITEM 8. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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ITEM 8A. |
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ITEM 8B. |
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ITEM 9. |
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ITEM 10. |
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ITEM 11. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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ITEM 12. |
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ITEM 13. |
D-31 | |||
ITEM 14. |
D-31 |
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ITEM 1. DESCRIPTION OF BUSINESS
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Various matters discussed in this Annual Report on Form 10-KSB may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Islands Bancorp (the Company) or Islands Community Bank, N.A. (Islands Community or the Bank) to be materially different from the results described in such forward-looking statements.
Actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation:
| lack of sustained growth in the economy of Beaufort County; |
| the inability of the Bank to achieve and maintain regulatory capital standards; |
| changes in the legislative and regulatory environment; |
| the effects of changes in interest rates on the level and composition of deposits, loan demand, the value of loan collateral, and interest rate risks; and |
| the effects of competition from commercial banks, thrifts, consumer finance companies, and other financial institutions operating in our market area and elsewhere. |
All forward-looking statements attributable to the Company or the Bank are expressly qualified in their entirety by these cautionary statements. Both the Company and the Bank disclaim any intent or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. Our actual results may differ significantly from those we discuss in these forward-looking statements.
For other factors, risks and uncertainties that could cause our actual results to differ materially from estimates and projections contained in these forward-looking statements, please read the Risk Factors section of this Report beginning on page 6.
ISLANDS BANCORP
Islands Bancorp is a South Carolina corporation that was incorporated on July 23, 1999 to organize and serve as the holding company for Islands Community, a national bank. The Bank began operations as a community bank on July 9, 2001. The Bank emphasizes prompt, personalized customer service to the individuals and businesses located in Beaufort County, South Carolina, including the city of Beaufort, and its neighboring islands and communities.
The Company was organized because we believe it provides flexibility that would otherwise not be available to the Bank. For example, the holding company structure makes it easier to raise capital for the Bank because the Company is able to issue securities without the need for prior banking regulatory approval, and the proceeds of debt securities issued by the Company can be invested in the Bank as primary capital.
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ISLANDS COMMUNITY
GENERAL
Islands Community operates as a full-service commercial bank. The Bank offers personal and business checking accounts, money market accounts, savings accounts and various certificates of deposit and individual retirement accounts. The Bank also offers commercial, real estate, installment and other consumer loans. The Banks real estate loans include commercial real estate, construction and development and residential real estate loans. In addition, the Bank provides such services as cashiers checks, safe-deposit boxes, travelers checks, banking by mail, online banking and billpay, direct deposit and U.S. Savings Bonds. The Bank also offers MasterCard(R) and Visa(R) credit card services through a correspondent bank as an agent.
PHILOSOPHY
Through our localized management and ownership we believe we are uniquely situated to provide responsive service and quality financial products that are tailored to meet the needs of the individuals and small- to medium-sized businesses located throughout our market area. We believe that local ownership and control allows the Bank to serve its customers more efficiently, helping us to grow both our deposit base and loan portfolio. We have adopted this philosophy in order to attract customers and acquire market share now controlled by other financial institutions operating in our market area.
MARKET AREA AND COMPETITION
Our primary market area consists of a large portion of Beaufort County, which includes the city of Beaufort and the adjacent communities of Port Royal and Burton. It also includes the islands that are northeast of the Broad River and south of the Coosaw River. Some of the major islands in our market area are Ladys Island, Fripp Island, Parris Island, St. Helena Island, Hunting Island, Port Royal Island, Dataw Island and Harbor Island. The city of Beaufort serves as the commercial and retail center for communities in the southern corner of South Carolina and is considered a key economic focal point of the Beaufort County area.
We believe an attractive opportunity exists in our primary market area for a locally headquartered community bank that focuses on personalized service to individuals and businesses. The banking industry in our primary market area has experienced significant consolidation in recent years principally as the result of the liberalization of interstate banking and branching laws. Consequently, many of our areas former community banks have been acquired by large regional financial institutions headquartered outside our market area.
The Bank competes with other commercial banks, savings and loan associations, credit unions, money market mutual funds and other financial institutions conducting business in the Beaufort County market and elsewhere. Many of the Banks competitors have equal or greater financial or banking related resources than the Company and the Bank. According to information provided by the Federal Deposit Insurance Corporation (the FDIC), as of June 30, 2005, the Beaufort County area was served by 19 banking and savings institutions with 62 offices. These competitors offer the same or similar products and services as the Bank. Currently, the Banks three largest competitors in terms of market share are Wachovia Bank, N.A., Bank of America, N.A. and South Carolina B&T, N.A.
The Bank operates a loan production office near the Citadel Mall in Charleston, South Carolina. This limited service office does not accept deposits and offers small business loans guaranteed by the U.S. Small Business Administration. The Charleston market was selected because of the size of the market and the close proximity to our home office. The Charleston loan production office is not expected to cause a material impact on the Banks overall operation or safety and soundness while providing an opportunity to generate fee income.
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LENDING SERVICES
LENDING POLICY. The Bank offers a full range of lending products, including commercial, real estate and consumer loans to individuals and small and medium-sized businesses and professional concerns. The Bank generally intends to allocate its loan portfolio as follows:
LOAN CLASSIFICATION |
PERCENTAGE | ||
Real estate loans |
70 | % | |
Consumer loans |
10 | % | |
Commercial loans. |
20 | % |
LOAN APPROVAL AND REVIEW. The Bank has established loan approval policies that provide for various levels of officer lending authority. When the amount of total loans to a single borrower exceeds that individual officers lending authority, an officer with a higher lending limit or the Banks Loan Committee determines whether to approve the loan request. The Bank does not make any loans to any of its directors or executive officers unless its board of directors approves the loan, and the terms of the loan are no more favorable than would be available to any other applicant.
LENDING LIMITS. The Banks lending activities are subject to a variety of lending limits imposed by federal law. Different limits apply in certain circumstances based on the type of loan or the nature of the borrower, including the borrowers relationship to the Bank. In general, however, the Bank may loan any one borrower a maximum amount equal to either of the following:
| 15% of the Banks capital and surplus; or |
| 25% of its capital and surplus if the amount that exceeds 15% is fully secured by readily marketable collateral. |
Islands Community has not yet established any minimum or maximum loan limits other than the statutory lending limits described above. The Bank may sell loan participations to other financial institutions in order to meet the lending needs of loan customers requiring extensions of credit above the Banks limits.
CREDIT RISKS. The principal economic risk associated with each category of loans that the Bank makes is the creditworthiness of the borrower. Borrower creditworthiness is affected by general economic conditions and the strength of the relevant business market segment. General economic factors affecting a borrowers ability to repay include interest, inflation and employment rates, as well as other factors affecting a borrowers customers, suppliers and employees.
REAL ESTATE LOANS. The Bank makes commercial real estate loans, construction and development loans, and residential real estate loans. These loans include commercial loans where the Bank takes a security interest in real estate out of an abundance of caution and not as the principal collateral for the loan, but excludes home equity loans, which are classified as consumer loans. The Bank competes for real estate loans with competitors who are well established in the Beaufort County area and have greater resources and lending limits. As a result, we may have to charge lower interest rates to attract borrowers.
| COMMERCIAL REAL ESTATE. The Bank offers commercial real estate loans to developers of both commercial and residential properties. The Bank manages its credit risk by actively monitoring such measures as advance rate, cash flow, collateral value and other appropriate credit factors. Risks associated with commercial real estate loans include the general risk of the failure of each commercial borrower, which will be different for each type of business and commercial entity. We evaluate each business on an individual basis and attempt to determine its business risks and credit profile. Management attempts to reduce credit risks in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 80 percent. In addition, we may also require personal guarantees of the principal owners. |
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| CONSTRUCTION AND DEVELOPMENT LOANS. Construction and development loans are made both on a pre-sold and speculative basis. If the borrower has entered into an arrangement to sell the property prior to beginning construction, the loan is considered to be on a pre-sold basis. If the borrower has not entered into an agreement to sell the property prior to beginning construction, the loan is considered to be on a speculative basis. Residential and commercial construction loans are made to builders and developers and to consumers who wish to build their own home. The term of construction and development loans generally are limited to 18 months, although payments may be structured on a longer amortization basis. The ratio of the loan principal to the value of the collateral as established by independent appraisal do not exceed 75 percent. Speculative loans are based on the borrowers financial strength and cash flow position. Loan proceeds are disbursed based on the percentage of completion and only after the project has been inspected by an experienced construction lender or appraiser. These loans generally command higher rates and fees commensurate with the risks warranted in the construction lending field. The risk in construction lending depends upon the performance of the builder in building the project to the plans and specifications of the borrower and the Banks ability to administer and control all phases of the construction disbursements. Upon completion of the construction, management anticipates that the mortgage will be converted to a permanent loan and may be sold to an investor in the secondary mortgage market. |
| RESIDENTIAL REAL ESTATE LOANS. Residential real estate loans are made to qualified individuals for the purchase of existing single-family residences in our primary market area. These loans conform to the Banks appraisal policy and real estate lending policy which detail maximum loan-to-value ratios and maturities. We believe these loan-to-value ratios are sufficient to compensate for fluctuations in real estate market value and to minimize losses that could result from a downturn in the residential real estate market. Mortgage loans that do not conform to the Banks policies are sold in the secondary markets. The risk of these loans depends on the salability of the loan to national investors and on interest rate changes. The Bank limits interest rate risk and credit risk on these loans by locking in the interest rate for each loan with the secondary market investor and receiving the investors underwriting approval before originating the loan. The Bank retains loans for its portfolio when it has sufficient liquidity to fund the needs of the established customers and when rates are favorable to retain the loans. The loan underwriting standards and policies are generally the same for both loans sold in the secondary market and those retained in the Banks portfolio. |
CONSUMER AND INSTALLMENT LOANS. Consumer loans include lines of credit and term loans secured by second mortgages on the residences of borrowers for a variety of purposes including home improvements, education and other personal expenditures. Consumer loans also include installment loans to individuals for personal, family and household purposes, including automobile loans to individuals and pre-approved lines of credit. Consumer loans generally involve more risk than first mortgage loans because the collateral for a defaulted loan may not provide an adequate source of repayment of the principal due to damage to the collateral or other loss of value while the remaining deficiency often does not warrant further collection efforts. In addition, consumer loan performance depends upon the borrowers continued financial stability and is, therefore, more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Various federal and state laws also limit the amount that can be recovered.
COMMERCIAL LOANS. Commercial lending activities are directed principally toward businesses whose demand for funds falls within the Banks anticipated lending limits. This category of loans includes loans made to individuals, partnerships, and corporate borrowers. The loans are obtained for a variety of business purposes. Particular emphasis is placed on loans to small to medium-sized professional firms, retail and wholesale businesses, light industry and manufacturing concerns operating in and around the primary market area. The Bank considers small businesses to include commercial, professional and retail businesses with annual gross sales of less than $15 million or annual operating costs of less than $3 million. Within small business lending, the Bank focuses on niches in the market and offers small business loans utilizing government enhancements, such as the Small Business Administrations 7(a) program. The types of commercial and small business loans provided include principally term loans with variable interest rates secured by equipment, inventory, receivables
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and real estate, as well as secured and unsecured working capital lines of credit. Risks of these types of loans depend on the general business conditions of the local economy and the local business borrowers ability to sell its products and services in order to generate sufficient business profits to repay the loan under the agreed upon terms and conditions. Personal guarantees may be obtained from the principals of business borrowers and third parties to further support the borrowers ability to service the debt and reduce the risk of nonpayment.
INVESTMENTS. In addition to loans, the Bank makes other investments, primarily in obligations of the United States or obligations guaranteed as to principal and interest by the United States and other taxable securities. No investment held by the Bank exceeds any applicable limitation imposed by law or regulation. Our asset and liability management committee reviews the investment portfolio on an ongoing basis to ascertain investment profitability and to verify compliance with the Banks investment policies.
DEPOSITS. The Bank offers a full range of interest-bearing and noninterest-bearing accounts, including commercial and retail checking accounts, money market accounts, individual retirement accounts, savings accounts, and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposits. All deposit accounts are insured by the FDIC up to the maximum amount permitted by law. The Banks transaction accounts and time certificates are tailored to its principal market area at competitive rates. The sources of deposits are residents, businesses and employees of businesses within the Banks primary market area. These deposits are obtained through personal solicitation by the Banks officers and directors, direct mail solicitations, and advertisements published in the local media.
ASSET AND LIABILITY MANAGEMENT. The Banks primary assets consists of its loan portfolio and its investment accounts. Its liabilities consist primarily of its deposits. Our objective is to support asset growth primarily through growth of core deposits, which include deposits of all categories made by individuals, partnerships, corporations and other entities. Consistent with the requirements of prudent banking necessary to maintain liquidity, we seek to match maturities and rates of loans and the investment portfolio with those of deposits, although exact matching is not always possible. Management seeks to invest the largest portion of the Banks assets in real estate, consumer and commercial loans. The Banks investment account consists primarily of marketable securities of the United States Government and federal agencies, generally with varied maturities.
The Banks asset/liability mix is monitored on a regular basis with a monthly report detailing interest-sensitive assets and interest-sensitive liabilities prepared and presented to the board of directors. The objective of this policy is to control interest-sensitive assets and liabilities so as to minimize the impact of substantial movements in interest rates on the Banks earnings.
EMPLOYEES
At December 31, 2005, the Company and the Bank employed 18 full-time employees and two part-time employees. Islands Bancorp does not have any employees other than its officers who are also employees of the Bank. The Company considers its relationship with its employees to be excellent.
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RISK FACTORS
An investment in our common stock involves a significant degree of risk. If any of the following risks or other risks, which have not been identified or which we may believe are immaterial or unlikely, actually occur, our business, financial condition and results of operations could be harmed. In such a case, the trading price of our common stock could decline, and you may lose all or part of your investment. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY AND GROWTH.
Bank holding companies and banks are subject to extensive state and federal government supervision and regulation. Changes in state and federal banking laws and regulations or in federal monetary policies could adversely affect our ability to maintain profitability and continue to grow. For example, new legislation or regulation could limit the manner in which we may conduct our business, including our ability to obtain financing, attract deposits, make loans and achieve satisfactory interest spreads. Many of these regulations are intended to protect depositors, the public and the FDIC, not shareholders. In addition, the burden imposed by federal and state regulations may place us at a competitive disadvantage compared to competitors who are less regulated. The laws, regulations, interpretations and enforcement policies that apply to us have been subject to significant, and sometimes retroactively applied, changes in recent years, and may change significantly in the future. Future legislation or government policy may also adversely affect the banking industry or our operations.
INDUSTRY COMPETITION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY.
Competition in the banking and financial services industry is intense, and our profitability depends upon our continued ability to compete in our market area. We compete with national, regional and community banks, savings and loan associations, credit unions, finance companies, mutual funds, insurance companies and brokerage and investment banking firms operating locally and elsewhere. In addition, because the Gramm-Leach-Bliley Act now permits banks, securities firms and insurance companies to affiliate, a number of larger financial institutions and other corporations offering wider variety of financial services than we currently offer could enter and aggressively compete in the market we currently serve. Many of these competitors have substantially greater resources, lending limits and operating histories than we do and may offer services that we do not or cannot provide.
UNEXPECTED CHANGES IN INTEREST RATES MAY DECREASE OUR NET INTEREST INCOME.
If we are unsuccessful in managing interest rate fluctuations, our net interest income could decrease materially. Our operations depend substantially on our net interest income, which is the difference between the interest income earned on our interest-earning assets and the interest expense paid on our interest-bearing liabilities. Like most depository institutions, our earnings and net interest income are affected by changes in market interest rates and other economic factors beyond our control.
AN ECONOMIC DOWNTURN, ESPECIALLY IN COASTAL SOUTH CAROLINA, COULD HAVE AN ADVERSE EFFECT ON THE QUALITY OF OUR LOAN PORTFOLIO AND OUR FINANCIAL PERFORMANCE.
Economic recession over a prolonged period or other economic problems in Beaufort County, South Carolina or in our state or nation generally could have a material adverse impact on the quality of our loan portfolio and the demand for our products and services. For example, a downturn in the local economy could make it more difficult for borrowers to repay their loans, which could lead to loan losses. This could in turn reduce our net income and profitability.
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IF THE VALUE OF REAL ESTATE IN OUR CORE MARKET WERE TO DECLINE MATERIALLY, A SIGNIFICANT PORTION OF OUR LOAN PORTFOLIO COULD BECOME UNDER-COLLATERALIZED, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
With most of our loans concentrated in Beaufort County, South Carolina, a decline in local economic conditions could adversely affect the values of our real estate collateral. Consequently, a decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse.
In addition to considering the financial strength and cash flow characteristics of borrowers, we often secure loans with real estate collateral. At December 31, 2005, approximately 79.4% of our loans had real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected.
OUR BUSINESS STRATEGY INCLUDES THE CONTINUATION OF GROWTH PLANS, AND OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE NEGATIVELY AFFECTED IF WE FAIL TO GROW OR FAIL TO MANAGE OUR GROWTH EFFECTIVELY.
We intend to continue pursuing a growth strategy for our business. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in growth stages of development. We cannot assure you we will be able to expand our market presence in our existing markets or successfully enter new markets or that any such expansion will not adversely affect our results of operations. Failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations, or future prospects, and could adversely affect our ability to successfully implement our business strategy. Also, if our growth occurs more slowly than anticipated or declines, our results of operations could be materially adversely affected.
Our ability to grow successfully will depend on a variety of factors including the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas and our ability to manage our growth. While we believe we have the internal systems in place to manage our future growth, there can be no assurance that growth opportunities will be available or growth will be managed successfully.
OPENING NEW OFFICES MAY NOT RESULT IN INCREASED ASSETS OR REVENUES FOR US.
The investment necessary for branch expansion may negatively impact our efficiency ratio. There is a risk that we will be unable to manage our growth, as the process of opening new branches may divert our time and resources. There is also risk that we may fail to open any additional branches, and a risk that, if we do open these branches, they may not be profitable which would negatively impact our results of operations.
ADDITIONAL GROWTH MAY REQUIRE US TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, BUT THAT CAPITAL MAY NOT BE AVAILABLE WHEN IT IS NEEDED, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. We will, at some point, need to raise additional capital to support our continued growth. Our ability to raise additional capital, when needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, there is no assurance of our ability to raise additional capital, when needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired.
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THERE IS NO ACTIVE TRADING MARKET FOR OUR STOCK AND IT IS UNLIKELY THAT AN ACTIVE TRADING MARKET WILL DEVELOP.
There is no public trading market for our common stock, and an active trading market is not likely to develop in the foreseeable future. Accordingly, shareholders who desire to dispose of all or a portion of their shares of common stock may not be able to do so except by private direct negotiations with third parties, assuming that third parties are willing to purchase their shares.
ANTI-TAKEOVER PROVISIONS IN OUR ARTICLES OF INCORPORATION AND STATE CORPORATE LAWS COULD DETER OR PREVENT TAKE-OVER ATTEMPTS BY A POTENTIAL PURCHASER OF OUR COMMON STOCK AND DEPRIVE SHAREHOLDERS OF THE OPPORTUNITY TO OBTAIN A TAKEOVER PREMIUM FOR THEIR SHARES.
In many cases, shareholders receive a premium for their shares when a company is purchased by another. Various provisions in our articles of incorporation and bylaws and state corporate laws could deter and make it more difficult for a third party to bring about a merger, sale of control, or similar transaction without approval of our board of directors. These provisions tend to perpetuate existing management. As a result, you may be deprived of opportunities to sell some or all of your shares at prices that represent a premium over market prices. These provisions, which could make it less likely that a change in control will occur, include:
| provisions in our articles of incorporation establishing three classes of directors with staggered terms, which means that only one-third of the members of the board of directors is elected each year and each director serves for a term of three years. |
| provisions in our articles of incorporation authorizing the board of directors to issue a series of preferred stock without shareholder action, which issuance could discourage a third party from attempting to acquire, or make it more difficult for a third party to acquire, a controlling interest in the Company. |
| provisions in our bylaws relating to meetings of shareholders which limit who may call a meeting and what matters will be voted upon. |
| state law provisions that require two-thirds of the shareholders to approve mergers and similar transactions, and amendments to the articles of incorporation. |
OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A SIGNIFICANT PORTION OF OUR OUTSTANDING COMMON STOCK AND CAN INFLUENCE SHAREHOLDER DECISIONS.
As of March 13, 2005, our directors and executive officers beneficially owned or controlled 388,147 shares, including shares subject to exercisable warrants and options, representing approximately 44.3% of our outstanding common stock. As a result of their ownership, the directors and executive officers have the ability, if they voted their shares in concert, to influence the outcome of all matters submitted to our stockholders for approval, including the election of directors.
SUPERVISION AND REGULATION
Both the Company and the Bank are subject to extensive state and federal banking regulations that impose restrictions on and provide for general regulatory oversight of their operations. These laws are generally intended to protect depositors and not shareholders. The following discussion describes the material elements of the regulatory framework that applies to us.
ISLANDS BANCORP
Since the Company owns all of the capital stock of the Bank, it is a bank holding company under the federal Bank Holding Company Act of 1956 (the BHC Act) and the South Carolina Banking and Branching Efficiency Act. As a result, the Company is primarily subject to the supervision, examination, and reporting requirements of the BHC Act and the regulations of the Board of Governors of the Federal Reserve System (the Federal Reserve).
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ACQUISITIONS OF BANKS. The BHC Act requires every bank holding company to obtain the Federal Reserves prior approval before doing any of the following:
| acquiring direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the Banks voting shares; |
| acquiring all or substantially all of the assets of any bank; or |
| merging or consolidating with any other bank holding company. |
Additionally, the BHC Act provides that the Federal Reserve may not approve any of these transactions if it would result in or tend to create a monopoly or, substantially lessen competition or otherwise function as a 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 community to be served. The Federal Reserves consideration of financial resources generally focuses on capital adequacy, which is discussed below.
Under the BHC Act, if adequately capitalized and adequately managed, the Company or any other bank holding company located in South Carolina may purchase a bank located outside of South Carolina. Conversely, an adequately capitalized and adequately managed bank holding company located outside of South Carolina may purchase a bank located inside South Carolina. In each case, however, restrictions may be placed on the acquisition of a bank that has only been in existence for a limited amount of time or will result in specified concentrations of deposits. For example, South Carolina law prohibits a bank holding company from acquiring control of a financial institution until the target financial institution has been in existence and has had continuous operations for five years. As a result, no bank holding company may acquire control of the Company or the Bank until after the fifth anniversary of the date that the Bank began business.
CHANGE IN BANK CONTROL. Subject to various exceptions, the BHC Act and the Change in Bank Control Act, together with related regulations, require Federal Reserve approval prior to any person or company acquiring control of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person or company acquires 10% or more, but less than 25%, of any class of voting securities and either of the following:
| the bank holding company has registered securities under Section 12 of the Securities Act of 1934; or |
| no other person owns a greater percentage of that class of voting securities immediately after the transaction. |
Our common stock is registered under Section 12 the Securities Exchange Act of 1934 (the Exchange Act). The regulations provide a procedure for challenging the rebuttable presumption of control.
PERMITTED ACTIVITIES. Bank holding companies are generally prohibited under the BHC Act, from engaging in or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in any activity other than the following:
| banking or managing or controlling banks; and |
| an activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking. |
Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include:
| factoring accounts receivable; |
| making, acquiring, brokering or servicing loans and usual related activities; |
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| leasing personal or real property; |
| operating a non-bank depository institution, such as a savings association; |
| trust company functions; |
| financial and investment advisory activities; |
| conducting discount securities brokerage activities; |
| underwriting and dealing in government obligations and money market instruments; |
| providing specified management consulting and counseling activities; |
| performing selected data processing services and support services; |
| acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and |
| performing selected insurance underwriting activities. |
Despite prior approval, the Federal Reserve may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding companys continued ownership, activity or control constitutes a serious risk to the financial safety, soundness, or stability of it or any of its bank subsidiaries.
In addition to the permissible bank holding company activities listed above, a bank holding company may qualify and elect to become a financial holding company under the Gramm-Leach-Bliley Financial Services Modernization Act of 1999. A financial holding company may engage in additional activities that are financial in nature or incidental or complementary to financial activity. The BHC Act expressly lists the following activities as financial in nature:
| lending, trust and other banking activities; |
| insuring, guaranteeing, or indemnifying against loss or harm, or providing and issuing annuities, and acting as principal, agent, or broker for these purposes, in any state; |
| providing financial, investment, or advisory services; |
| issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly; |
| underwriting, dealing in or making a market in securities; |
| other activities that the Federal Reserve may determine to be so closely related to banking or managing or controlling banks as to be a proper incident to managing or controlling banks; |
| foreign activities permitted outside of the United States if the Federal Reserve has determined them to be usual in connection with banking operations abroad; |
| merchant banking through securities or insurance affiliates; and |
| insurance company portfolio investments. |
To qualify to become a financial holding company, the Bank and any other depository institution subsidiary of the Company must be well capitalized and well managed and must have a Community Reinvestment Act rating of at least satisfactory. Additionally, the Company must file an election with the Federal Reserve to become a financial holding company and must provide the Federal Reserve with 30 days written notice prior to engaging in a permitted financial activity. We currently have no plans to elect to become a financial holding company.
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SUPPORT OF SUBSIDIARY INSTITUTIONS. Under Federal Reserve policy, the Company is expected to act as a source of financial strength for the Bank and to commit resources to support the Bank. This support may be required at times when, without this Federal Reserve policy, the Company might not be inclined to provide it. In addition, any capital loans made by the Company to the Bank will be repaid only after its deposits and various other obligations are repaid in full. In the unlikely event of the Companys bankruptcy, any commitment by it to a federal bank regulatory agency to maintain the capital of the Bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.
SOUTH CAROLINA STATE REGULATION. As a bank holding company registered under the South Carolina Banking and Branching Efficiency Act, the Company is subject to limitations on sale or merger and to regulation by the South Carolina Board of Financial Institutions. Prior to acquiring the capital stock of a national bank, we are not required to obtain the approval of the Board, but we must notify them at least 15 days prior to doing so. Prior to engaging in the acquisition of nonbanking institutions or state chartered banks, we must receive the Boards approval, and we must file periodic reports with respect to our financial condition and operations, management and intercompany relationships between Islands Bancorp and its subsidiaries.
ISLANDS COMMUNITY
As a national bank, the Bank is primarily subject to the supervision, examination and reporting requirements of the National Bank Act and the regulations of the Office of the Comptroller of the Currency (the OCC). The OCC regularly examines the Banks operations and has the authority to approve or disapprove mergers, the establishment of branches and similar corporate actions. The OCC also has the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law. Additionally, the Banks deposits are insured by the FDIC to the maximum extent provided by law. The Bank is also subject to numerous state and federal statutes and regulations that affect its business, activities and operations.
BRANCHING. National banks are required by the National Bank Act to adhere to branching laws applicable to state banks in the states in which their main office is located. Under current South Carolina law, the Bank may open branch offices throughout South Carolina with the prior approval of the OCC. In addition, with prior regulatory approval, the Bank may acquire branches of existing banks located in South Carolina. The Bank and any other national or state-chartered bank generally may branch across state lines by merging with banks in other states if allowed by the applicable states laws. South Carolina law, with limited exceptions, currently permits branching across state lines through interstate mergers.
Under the Federal Deposit Insurance Act, states may opt-in and allow out-of-state banks to branch into their state by establishing a new start-up branch in the state. Currently, South Carolina has not opted-in to this provision. Therefore, interstate merger is the only method through which a bank located outside of South Carolina may branch into South Carolina. This provides a limited barrier of entry into the South Carolina banking market, which protects us from an important segment of potential competition. However, because South Carolina has elected not to opt-in, our ability to establish a new start-up branch in another state may be limited. Many states that have elected to opt-in have done so on a reciprocal basis, meaning that an out-of-state bank may establish a new start-up branch only if its home state has also elected to opt-in. Consequently, until South Carolina changes its election, the only way we will be able to branch into states that have elected to opt-in on a reciprocal basis will be through interstate merger.
PROMPT CORRECTIVE ACTION. The FDIC Improvement Act of 1991 established a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) in which all institutions are placed. The federal banking agencies have specified by regulation the relevant capital level for each category. Federal banking regulators are required to take various mandatory supervisory actions and are authorized to take
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other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized.
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 regulator. A bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to various limitations. The controlling holding companys obligation to fund a capital restoration plan is limited to the lesser of 5% of an undercapitalized subsidiarys assets at the time it became undercapitalized 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 under an accepted capital restoration plan or with FDIC approval. The regulations also establish procedures for downgrading an institution to a lower capital category based on supervisory factors other than capital.
FDIC INSURANCE ASSESSMENTS. The FDIC has adopted a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The system assigns an institution to one of three capital categories: (1) well capitalized; (2) adequately capitalized; and (3) undercapitalized. These three categories are substantially similar to the prompt corrective action categories described above, with the undercapitalized category including institutions that are undercapitalized, significantly undercapitalized, and critically undercapitalized for prompt corrective action purposes. The FDIC also assigns an institution to one of three supervisory subgroups based on a supervisory evaluation that the institutions primary federal regulator provides to the FDIC and information that the FDIC determines to be relevant to the institutions financial condition and the risk posed to the deposit insurance funds. Assessments range from 0 to 27 cents per $100 of deposits, depending on the institutions capital group and supervisory subgroup. In addition, the FDIC imposes assessments to help pay off the $780 million in annual interest payments on the $8 billion Financing Corporation bonds issued in the late 1980s as part of the government rescue of the thrift industry. This assessment rate is adjusted quarterly and is set at 1.32 cents per $100 of deposits for the first quarter of 2006.
The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires that, in connection with examinations of financial institutions within their respective jurisdictions, the Federal Reserve, the FDIC, or the OCC shall evaluate the record of each financial institution in meeting the credit needs of its local community, including low and moderate-income neighborhoods. These facts are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Since the Banks aggregate assets do not exceed $250 million, under the Gramm-Leach-Bliley Act, we are subject to a Community Reinvestment Act examination only once every 60 months if we receive an outstanding rating, once every 48 months if we receive a satisfactory rating and as needed if our rating is less than satisfactory. Additionally, we must publicly disclose the terms of various Community Reinvestment Act-related agreements.
OTHER REGULATIONS. Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. For example, under the Servicemembers Civil Relief Act, which amended the Soldiers and Sailors Civil Relief Act of 1940, a lender is generally prohibited from charging an annual interest rate in excess of 6% on any obligation of a borrower who is on active duty with the United States military.
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The Banks loan operations are also subject to federal laws applicable to credit transactions, such as the following:
| The Federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; |
| The Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; |
| The Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; |
| The Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; |
| The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and |
| The rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws. |
The deposit operations of the Bank are subject to the following:
| The Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and |
| The Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve to implement that act, which govern automatic deposits to and withdrawals from deposit accounts and customers rights and liabilities arising from the use of automated teller machines and other electronic banking services. |
CAPITAL ADEQUACY
The Company and the Bank are required to comply with the capital adequacy standards established by the Federal Reserve (in the case of the Company) and the OCC (in the case of the Bank). The Federal Reserve has established a risk-based and a leverage measure of capital adequacy for bank holding companies. Since the Companys consolidated total assets do not exceed $150 million, under the Federal Reserves capital guidelines, its capital adequacy is measured on a bank-only basis, as opposed to a consolidated basis. The Bank is also subject to risk-based and leverage capital requirements adopted by the OCC, which are substantially similar to those adopted by the Federal Reserve for bank holding companies.
The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profiles 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, such as letters of credit and unfunded loan commitments, are assigned to broad risk categories, each with appropriate risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted assets is 8%. Total capital consists of two components, Tier 1 Capital and Tier 2 Capital. Tier 1 Capital generally consists of common stock, minority interests in the equity accounts of consolidated subsidiaries, noncumulative perpetual preferred stock, and a limited amount of qualifying cumulative perpetual preferred stock and trust preferred securities, less goodwill and other specified intangible assets. Tier 1 Capital must equal at least 4% of risk-weighted assets. Tier 2 Capital generally consists of subordinated debt, other preferred stock, and a limited amount of loan loss reserves. The total amount of Tier 2 Capital is limited to 100% of Tier 1 Capital. At December 31, 2005, our ratio of total capital to risk-weighted assets was 11.70% and our ratio of Tier 1 Capital to risk-weighted assets was 10.48%.
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In addition, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio of Tier 1 Capital to average assets, less goodwill and other specified intangible assets, of 3% for bank holding companies that meet specified criteria, including having the highest regulatory rating and implementing the Federal Reserves risk-based capital measure for market risk. All other bank holding companies generally are required to maintain a leverage ratio of at least 4%. At December 31, 2005, our leverage ratio was 9.06%. 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 reliance on intangible assets. The Federal Reserve considers the leverage ratio and other indicators of capital strength in evaluating proposals for expansion or new activities.
Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business. As described above, significant additional restrictions can be imposed on FDIC-insured depository institutions that fail to meet applicable capital requirements. See Prompt Corrective Action.
PAYMENT OF DIVIDENDS
The Company is a legal entity separate and distinct from the Bank. The principal source of the Companys cash flow, including cash flow to pay dividends to its shareholders, are dividends that the Bank pays to the Company as its sole shareholder. Statutory and regulatory limitations apply to the Banks payment of dividends to the Company, as well as to the Companys payment of dividends to its shareholders.
The Bank is required by federal law to obtain prior approval of the OCC for payments of dividends if the total of all dividends declared by our board of directors in any year will exceed (1) the total of the Banks net profits for that year, plus (2) the Banks retained net profits of the preceding two years, less any required transfers to surplus. The payment of dividends by the Company and the Bank may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory guidelines.
In addition, the OCC may require, after notice and a hearing, that the Bank stop or refrain from engaging in any practice it considers unsafe or unsound. The federal banking agencies have indicated that paying dividends that deplete a depository institutions capital base to an inadequate level would be an unsafe and unsound banking practice. Under the FDIC Improvement Act of 1991, a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. 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. See Prompt Corrective Action.
RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES
The Company and the Bank are subject to the provisions of Section 23A of the Federal Reserve Act. Section 23A places limits on the amount of the following:
| a banks loans or extensions of credit to affiliates; |
| a banks investment in affiliates; |
| assets a bank may purchase from affiliates, except for real and personal property exempted by the Federal Reserve; |
| loans or extensions of credit to third parties collateralized by the securities or obligations of affiliates; and |
| a banks guarantee, acceptance or letter of credit issued on behalf of an affiliate. |
D-16
The total amount of the above transactions is limited in amount, as to any one affiliate, to 10% of a banks capital and surplus and, as to all affiliates combined, to 20% of a banks capital and surplus. In addition to the limitation on the amount of these transactions, each of the above transactions must also meet specified collateral requirements. The Bank must also comply with other provisions designed to avoid the taking of low-quality assets.
The Company and the Bank are also subject to the provisions of Section 23B of the Federal Reserve Act which, among other things, prohibit an institution from engaging in the above transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.
The Bank is also subject to restrictions on extensions of credit to its executive officers, directors, principal shareholders and their related interests. These extensions of credit (1) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (2) must not involve more than the normal risk of repayment or present other unfavorable features.
PRIVACY
Financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of transactions requested by the consumer or when the financial institution is jointly sponsoring a product or service with a nonaffiliated third party. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers.
CONSUMER CREDIT REPORTING
On December 4, 2003, President George W. Bush signed the Fair and Accurate Credit Transactions Act amending the federal Fair Credit Reporting Act. These amendments to the Fair Credit Reporting Act (the FCRA Amendments) became effective in 2004.
The FCRA Amendments include, among other things:
| requirements for financial institutions to develop policies and procedures to identify potential identity theft and, upon the request of a consumer, place a fraud alert in the consumers credit file stating that the consumer may be the victim of identity theft or other fraud; |
| for entities that furnish information to consumer reporting agencies (which would include the Bank), requirements to implement procedures and policies regarding the accuracy and integrity of the furnished information, and regarding the correction of previously furnished information that is later determined to be inaccurate; and |
| a requirement for mortgage lenders to disclose credit scores to consumers. |
The FCRA Amendments also prohibit a business that receives consumer information from an affiliate from using that information for marketing purposes unless the consumer is first provided a notice and an opportunity to direct the business not to use the information for such marketing purposes (the opt-out), subject to certain exceptions. We do not share consumer information among our affiliated companies for marketing purposes, except as allowed under exceptions to the notice and opt-out requirements. Because no affiliate of the Company is currently sharing consumer information with any other affiliate of the Company for marketing purposes, the limitations on sharing of information for marketing purposes do not have a significant impact on the Company.
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ANTI-TERRORISM LEGISLATION
The Bank is subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the USA PATRIOT Act), as it amended the Bank Secrecy Act and the rules and regulations of the Office of Foreign Assets Control (the OFAC). These statutes and related rules and regulations impose requirements and limitations on specific financial transactions and account relationships and are intended to guard against money laundering and terrorism financing. The Bank has established a customer identification program pursuant to Section 326 of the USA PATRIOT Act and the Bank Secrecy Act, and otherwise has implemented policies and procedures to comply with the foregoing rules.
FEDERAL DEPOSIT INSURANCE REFORM
On February 8, 2006, President Bush signed the Federal Deposit Insurance Reform Act of 2005 (FDIRA). The FDIC must adopt rules implementing the various provisions of FDIRA by November 5, 2006.
Among other things, FDIRA changes the Federal deposit insurance system by:
| raising the coverage level for retirement accounts to $250,000; |
| indexing deposit insurance coverage levels for inflation beginning in 2012; |
| prohibiting undercapitalized financial institutions from accepting employee benefit plan deposits; |
| merging the Bank Insurance Fund and Savings Association Insurance Fund into a new Deposit Insurance Fund (the DIF); and |
| providing credits to financial institutions that capitalized the FDIC prior to 1996 to offset future assessment premiums. |
FDIRA also authorizes the FDIC to revise the current risk-based assessment system, subject to notice and comment and caps the amount of the DIF at 1.50% of domestic deposits. The FDIC must issue cash dividends, awarded on a historical basis, for the amount of the DIF over the 1.50% ratio. Additionally, if the DIF exceeds 1.35% of domestic deposits at year-end, the FDIC must issue cash dividends, awarded on a historical basis, for half of the amount of the excess.
PROPOSED LEGISLATION AND REGULATORY ACTION
New regulations and statutes are regularly proposed that contain wide-ranging potential changes to the structures, regulations and competitive relationships of financial institutions operating and doing business in the United States. We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which our business may be affected by any new regulation or statute.
EFFECT OF GOVERNMENTAL MONETARY POLICIES
Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserves monetary policies have had, and are likely to 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 curb inflation or combat a recession. The monetary policies of the Federal Reserve affect the levels of bank loans, investments and deposits through its control over the issuance of United States government securities, its regulation of the discount rate applicable to member banks and its influence over reserve requirements to which member banks are subject. We cannot predict the nature or impact of future changes in monetary and fiscal policies.
D-18
SELECTED STATISTICAL INFORMATION
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following is a presentation of the average consolidated balance sheet of the Company for the years ended December 31, 2005 and 2004. This presentation includes all major categories of interest-earning assets and interest-bearing liabilities: ($ in thousands)
The following is a presentation of an analysis of the net interest earnings of the Company for the period indicated with respect to each major category of interest-earning asset and each major category of interest-bearing liability: ($ in thousands)
1 | At December 31, 2005 and 2004, loans on non-accrual status totaled $313,000 and $249,000. |
2 | Interest earned on net loans includes $238,000 and $141,000 in loan fees for the years ended December 31, 2005 and 2004, respectively. |
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RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
The effect on interest income, interest expense and net interest income in the period indicated from changes in average balance and rate from the corresponding prior period is shown below. The effect of a change in average balance has been determined by applying the average rate in the earlier period to the change in average balance. The effect of a change in average rate has been determined by applying the change in average rate to the average balance in the earlier period. Changes resulting from average balance/rate variances are allocated proportionately between the change in volume and the change in rate. ($ in thousands)
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INVESTMENT PORTFOLIO
As of December 31, 2005, investment securities comprised approximately 4.0% of the Banks assets. The Bank invests primarily in direct obligations of the United States, obligations guaranteed as to principal and interest by the United States, and obligations of agencies of the United States. In addition, the Bank enters into Federal funds transactions with its principal correspondent banks, and generally acts as a net seller of such funds. At December 31, 2005, the Bank was a net seller of funds in the Federal funds market. The sale of Federal funds amounts to a short-term loan from the Bank to another bank.
The following table presents, for the date indicated, the book value of the Banks investments. All securities held at December 31, 2005 and 2004 were categorized as available-for-sale. ($ in thousands)
December 31, | ||||||
2005 | 2004 | |||||
U.S. Agency |
$ | 1,499 | $ | 504 | ||
U.S. Agency Pools |
804 | 1,368 | ||||
FRB/FHLB stock |
356 | 316 | ||||
Total |
$ | 2,659 | $ | 2,188 | ||
The following table indicates as of December 31, 2005 the amount of investments due in (i) one year or less, (ii) one to five years, (iii) five to ten years, and (iv) over ten years:
LOAN PORTFOLIO
The Bank engages in a full complement of lending activities, including commercial/industrial, consumer and real estate loans. As of December 31, 2005, the Bank had a legal lending limit for unsecured loans of up to $970,000 to any one person.
While risk of loss in the Banks loan portfolio is primarily tied to the credit quality of its various borrowers, risk of loss may also increase due to factors beyond the Banks control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the Banks real estate portfolio. Of the Banks target areas of lending activities, commercial loans are generally considered to have greater risk than real estate loans or consumer installment loans.
The Bank participates with other banks with respect to loans that exceed the Banks lending limits. Management does not believe that loan participations pose any greater risk of loss than loans that the Bank originates.
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The following is a description of each of the major categories of loans in the Banks loan portfolio:
COMMERCIAL, FINANCIAL AND AGRICULTURAL LOANS
Commercial lending is directed principally towards businesses whose demands for funds fall within the Banks legal lending limits and which are potential deposit customers of the Bank. This category of loans includes loans made to individual, partnership or corporate borrowers, and obtained for a variety of business purposes. Particular emphasis is placed on loans to small- and medium-sized businesses. The primary repayment risk for commercial loans is the failure of the business due to economic or financial factors. Although the Bank typically looks to a commercial borrowers cash flow as the principal source of repayment for such loans, many commercial loans are secured by inventory, equipment, accounts receivable, and other assets.
CONSUMER LOANS
The Banks consumer loans consist primarily of installment loans to individuals for personal, family and household purposes, including automobile loans to individuals and pre-approved lines of credit. This category of loans also includes lines of credit and term loans secured by second mortgages on the residences of borrowers for a variety of purposes, including home improvements, education and other personal expenditures. In evaluating these loans the Bank reviews the borrowers level and stability of income and past credit history and the impact of these factors on the ability of the borrower to repay the loan in a timely manner. In addition, the Bank maintains a proper margin between the loan amount and collateral value.
REAL ESTATE LOANS
The Banks real estate loans consist of residential first and second mortgage loans, residential construction loans and
commercial real estate loans to a limited degree. These loans are made consistent with the Banks appraisal policy and real estate lending policy which detail maximum loan-to-value ratios and maturities. These loan-to-value ratios are
TYPES OF LOANS
The following table presents various categories of loans contained in the Banks loan portfolio as of the date indicated: ($ in thousands)
As of December 31, | ||||||||
Type of Loan |
2005 | 2004 | ||||||
Domestic: |
||||||||
Commercial, financial and agricultural |
$ | 8,640 | $ | 6,390 | ||||
Real estateconstruction |
17,082 | 11,085 | ||||||
Real estatemortgage |
25,995 | 18,974 | ||||||
Installment and other loans to individuals |
2,592 | 4,974 | ||||||
Subtotal |
54,309 | 41,423 | ||||||
Less: Allowance for possible loan losses |
(679 | ) | (488 | ) | ||||
Total (net of allowance) |
$ | 53,630 | $ | 40,935 | ||||
D-22
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
The following is a presentation of an analysis of maturities of certain loans as of December 31, 2005: ($ in thousands)
Type of Loan |
Due in 1 year or less |
Due after
1 to 5 years |
Due
5 years |
Total | ||||||||
Commercial, financial, and agricultural |
$ | 2,315 | $ | 3,838 | $ | 2,487 | $ | 8,640 | ||||
Real estateconstruction |
13,196 | 3,887 | | 17,083 | ||||||||
Total |
$ | 15,511 | $ | 7,725 | $ | 2,487 | $ | 25,723 | ||||
RISK ELEMENTS
For the above loans, the following is a presentation of an analysis of sensitivities to changes in interest rates as of December 31, 2005:
Type of Loan |
Due in 1 year or less |
Due after
1 to 5 years |
Due
5 years |
Total | ||||||||
Predetermined interest rate |
$ | 9,212 | $ | 5,153 | $ | | $ | 14,365 | ||||
Floating interest rate |
6,299 | 2,572 | 2,487 | 11,358 | ||||||||
Total |
$ | 15,511 | $ | 7,725 | $ | 2,487 | $ | 25,723 | ||||
The Company considers impaired loans to include all restructured loans, loans on which the accrual of interest has been discontinued, loans that are not performing in accordance with agreed upon terms, and all other loans that are performing according to the loan agreement but may have substantive indications of potential credit weakness. At December 31, 2005 and 2004, the total recorded investment in impaired loans, all of which had allowances determined in accordance with FASB Statements No. 114 and No. 118, totaled approximately $460,000 and $816,000, respectively. The average recorded investment in impaired loans was approximately $533,000 and $663,000, respectively, for the years ended December 31, 2005 and 2004. The allowance for loan losses related to impaired loans was approximately $69,000 and $170,000 at December 31, 2005 and 2004, respectively. Interest income recognized on impaired loans for the years ended December 31, 2005 and 2004 was approximately $32,000 and $40,000, respectively. The amount of interest recognized on impaired loans using the cash method of accounting was not material for the years ended December 31, 2005 and 2004. Loans on non-accrual status at December 31, 2005 and 2004 had outstanding balances of $313,000 and $249,000, respectively. Interest recognized on non-accruing loans at December 31, 2005 and 2004 was approximately $9,000 and $3,000, respectively. The Company has no commitments to lend additional funds to borrowers whose loans have been modified.
As of December 31, 2005, there were no loans not disclosed above that were classified for regulatory purposes as doubtful, substandard or special mention which (i) represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources, or (ii) represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.
Accrual of interest is discontinued on a loan when management determines upon consideration of economic and business factors affecting collection efforts that collection of interest is doubtful. At December 31, 2005, three loans with an aggregate principal of approximately $107,000 were over 90 days past due but still accruing interest, compared with two such loans with an aggregate principal of $28,000 at December 31, 2004. As of December 31, 2005, no loans were considered to be troubled-debt restructured. As of December 31, 2005,
D-23
three loans with an aggregate balance of approximately $313,000 were on non-accrual status, compared to one such loan with an aggregate principal of approximately $249,000 as of December 31, 2004. Of the three loans on non-accrual at December 31, 2005, one loan for approximately $110,000 is fully guaranteed by the SBA, and the Bank anticipates receiving payment for the full amount.
SUMMARY OF LOAN LOSS EXPERIENCE
An analysis of the Banks loss experience is furnished in the following table for the periods indicated, as well as a breakdown of the allowance for possible loan losses: ($ in thousands)
ANALYSIS OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
Years Ended December 31, | ||||||||
Type of Loan |
2005 | 2004 | ||||||
Balance at beginning of period |
$ | 488 | $ | 326 | ||||
Charge-offs: |
||||||||
Real estate loans |
| | ||||||
Installment and other loans to individuals |
(15 | ) | (30 | ) | ||||
Commercial loans |
(19 | ) | | |||||
Recoveries |
| 1 | ||||||
Net charge-offs |
(34 | ) | (29 | ) | ||||
Provision charged to operations |
225 | 191 | ||||||
Balance at end of period |
$ | 679 | $ | 488 | ||||
Ratio of net charge-offs during the period to average loans outstanding during the period |
0.07 | % | 0.09 | % | ||||
At December 31, 2005 and 2004, the allowance was allocated as follows: ($ in thousands)
In considering the adequacy of the Companys allowance for possible loan losses, management has considered the fact that, as of December 31, 2005, 15.9% of outstanding loans are commercial loans, which includes commercial, industrial and agricultural loans. Commercial loans generally have greater risk than other categories of loans. However, 92% of the commercial loans at December 31, 2005 were made on a secured basis. Management believes that the secured condition of the majority of its commercial loan portfolio significantly reduces the risk of loss inherently present in commercial loans.
Real estate mortgage loans comprised 47.9% of outstanding loans at December 31, 2005. The loans in this category represent residential and commercial real estate mortgages where the amount of the original loan generally does not exceed 85% of the appraised value of the collateral. These loans are considered by management to be well secured with a low risk of loss.
D-24
The Companys consumer loan portfolio is also well secured. At December 31, 2005, the majority of the Companys consumer loans were secured by collateral primarily consisting of automobiles, boats and other personal property.
A review of the loan portfolio by an independent firm is conducted annually. The purpose of this review is to assess the risk in the loan portfolio and to determine the adequacy of the allowance for loan losses. The review includes analyses of historical performance, the level of non-performing and classified loans, loan volume and activity, review of loan files and consideration of economic conditions and other pertinent information. In addition to the above review, the Banks primary regulator, the Office of the Comptroller of the Currency (the OCC), also conducts an annual examination of the loan portfolio. Information provided from the above two independent sources, together with information provided by Bank management and other information known to members of the Board, is utilized by the Board to monitor, on a quarterly basis, the loan portfolio and the adequacy of the loan loss reserve. Specifically, the Board attempts to identify risks inherent in the loan portfolio (e.g., problem loans, potential problem loans and loans to be charged off), assess the overall quality and collectibility of the loan portfolio, and determine amounts of the allowance for loan losses and the provision for loan losses to be reported based on the results of their review.
DEPOSITS
The Bank offers a full range of interest-bearing and noninterest-bearing accounts, including commercial and retail checking accounts, money market accounts, individual retirement and Keogh accounts, regular interest-bearing statement savings accounts and certificates of deposit with a range of maturity date options. The sources of deposits are residents, businesses and employees of businesses within the Banks market area and are obtained through the personal solicitation by the Banks officers and directors, and advertisements published in the local media. In addition, the Bank uses the internet to obtain deposits from institutions located elsewhere. The Bank pays competitive interest rates on time and savings deposits up to the maximum permitted by law or regulation. In addition, the Bank has implemented a service charge fee schedule competitive with other financial institutions in the Banks market area, covering such matters as maintenance fees on checking accounts, per item processing fees on checking accounts and returned check charges.
The following table presents, for the periods indicated, the average amount of and average rate paid on each of the following deposit categories: ($ in thousands)
Year Ended December 31, | ||||||||||||
2005 | 2004 | |||||||||||
Average
Amount |
Average
Rate Paid |
Average
Amount |
Average
Rate Paid |
|||||||||
Noninterest-bearing demand deposits |
$ | 6,220 | | $ | 3,996 | | ||||||
NOW/MMDA/savings deposits |
8,188 | 1.66 | % | 7,342 | 1.21 | % | ||||||
Time deposits |
35,798 | 3.34 | % | 22,467 | 2.81 | % |
The following table indicates the amounts outstanding of time certificates of deposit of $100,000 or more and respective maturities at December 31, 2005:
Time Certificates of Deposit |
At
December 31, 2005 |
||
3 months or less |
$ | 3,913 | |
3-6 months |
3,037 | ||
6-12 months |
2,661 | ||
Over 12 months |
3,737 | ||
Total |
$ | 13,348 | |
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RETURN ON EQUITY AND ASSETS
Returns on average consolidated assets and average consolidated equity for the period indicated were as follows:
Year Ended
December 31, |
||||||
2005 | 2004 | |||||
Return on average assets |
.93 | % | .37 | % | ||
Return on average equity |
9.83 | % | 2.91 | % | ||
Average equity to average assets ratio |
9.43 | % | 12.50 | % | ||
Dividend payout ratio |
| % | | % |
ITEM 2. DESCRIPTION OF PROPERTIES
Our main office is located adjacent to Beaufort Plaza at 2348 Boundary Street, Beaufort, South Carolina. We purchased a former Wachovia Bank office located at this site. The office is a one-story banking facility with approximately 7,600 square feet. We completed renovations of the main office building in November 2002. The total cost of the renovations was approximately $1,350,000.
In addition, we purchased approximately 2.3 acres of land at 131 Sea Island Parkway on Ladys Island, South Carolina. Initially, we planned to construct our main office on this site. However, we decided to locate the main office at the Boundary Street location because we believe it provides the Bank with greater visibility and is more accessible to our customers. We intend to keep the Ladys Island location as a future branch site. The Bank will be required to seek regulatory approval prior to establishing a branch at this location.
Our Charleston loan production office is located in a 500-square-foot leased office at 3 Southpark Circle, Suite 260, Charleston, South Carolina. Rent for the office is $667 per month under a lease that is cancelable with 30 days prior notice.
In 2005, we purchased approximately 1.25 acres of land in Bluffton Township, known as Okatie Center, Phase 1B, for the purpose of constructing a future branch location. The Bank will be required to seek regulatory approval prior to establishing a branch at this location.
On November 15, 2005, the Company terminated the employment of William B. Gossett as the president and chief executive officer of the Company and the Bank. Mr. Gossetts employment was terminated for cause under specific provisions of his employment agreement as a result of regulatory actions stemming from the 2005 Office of the Comptroller of the Currency (OCC) examination of the Bank. Among other things, the OCC commented on managements failure to properly address issues noted in prior exam reports. As a result of the OCC examination, each Board member has signed a Commitment Letter with the OCC agreeing to take proper action to correct all noted issues. Currently, all of the noted issues have been or are being corrected and the OCC has commented favorably on the progress being made by the Bank. We believe the Commitment Letter will not have a material adverse effect on our operations.
On February 1, 2006, Mr. Gossett, a principal security holder of the Company, filed a claim with the U.S. Department of Labor Occupational Safety and Health Administration against the Company and the Bank under 18 U.S.C 1514A. Mr. Gossett alleges that his termination was in retaliation against him for raising what the Company determined were minor concerns regarding his ability to provide the certifications of the principal executive and financial officer which were required to be filed with the Companys Report on Form 10-QSB for the quarter ended September 30, 2005. Prior to filing the Form 10-QSB in question, however, Mr. Gossetts concerns were fully resolved and he provided the required certifications. The Form 10-QSB in question was timely filed and fully complied with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended.
D-26
Mr. Gossett claims that he is entitled to receive an amount equal to two times his salary as in effect at the time of his termination, or approximately $323,000, together with attorney fees and the reinstatement of options to acquire 19,581 shares of the Companys stock, which were forfeited upon his termination. Under the terms of his employment agreement dated July 27, 1999, Mr. Gossett is not entitled to these payments or reinstatement of his options since we believe he was properly terminated for cause.
The Company believes that Mr. Gossetts allegations are without merit and is vigorously contesting his claim.
We do not believe Mr. Gossetts claim represents a material proceeding to which the Company is a party. Accordingly, there are no material pending legal 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. Additionally, the Company is unaware of any material proceedings, pending or contemplated, in which any existing or proposed 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.
D-27
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The response to this Item is partially included in the Companys 2005 Annual Report to Shareholders under the heading Corporate and Shareholder Information and is incorporated herein by reference.
The Company issued no unregistered securities during the fiscal year ended December 31, 2005 and did not repurchase any of its shares of common stock during the fourth quarter of 2005.
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS
The response to this Item is included in the Companys 2005 Annual Report to Shareholders under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.
The following financial statements are included in the Companys 2005 Annual Report to Shareholders and are incorporated herein by reference.
| Report of Independent Certified Public Accountants |
| Consolidated Balance Sheets as of December 31, 2005 and 2004 |
| Consolidated Statements of Earnings for the Years Ended December 31, 2005 and 2004 |
| Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2005 and 2004 |
| Consolidated Statements of Changes in Shareholders Equity for the Years Ended December 31, 2005 and 2004 |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2005 and 2004 |
| Notes to Consolidated Financial Statements |
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 8A. CONTROLS AND PROCEDURES
As of the end of the period covered by this Annual Report on Form 10-KSB, our principal executive officer and our principal financial officer have evaluated the effectiveness of our disclosure controls and procedures (Disclosure Controls). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act), are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and our principal financial officer, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
D-28
system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based upon their controls evaluation, our principal executive officer and our principal financial officer have concluded that our Disclosure Controls are effective at a reasonable assurance level.
There have been no changes in our internal controls over financial reporting during the past fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Effective as of January 24, 2006, the Company and the Bank entered into a Change in Control Agreement with Carol J. Nelson, the chief financial officer of the Company and the Bank. The agreement provides that, in the event (a) Ms. Nelson is terminated by the Company without cause (as defined in the agreement) or (b) Ms. Nelson resigns her employment for good reason (as defined in the agreement) at any time within the 13-month period following a change in control of the Company (as defined in the agreement), Ms. Nelson is entitled to a lump sum severance payment (the Severance Payment) equal to two times the sum of her salary as in effect at the effective time of the termination of employment and the amount of bonus earned during the prior calendar year. In addition, Ms. Nelson is also entitled to receive the Severance Payment in the event that she resigns her employment for any reason during the thirteenth month following a change in control of the Company. The agreement also provides that if Ms. Nelson is terminated for any reason during the 13-month period following a change in control of the Company, Ms. Nelson will not solicit customers or employees from the Company or the Bank for a 12-month period following her termination.
D-29
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The responses to this Item are included in the Companys Proxy Statement for the 2006 Annual Meeting of Shareholders under the following headings and are incorporated herein by reference:
Proposal: Election of DirectorsClass I Director Nominees, Class II Continuing Directors and Class III Continuing Directors;
Executive Officers; and
Section 16(a) Beneficial Ownership Reporting Compliance.
The Company has a Code of Ethics that applies to the Companys principal executive officer and its principal financial and accounting officer. The Company will provide a copy of the Code of Ethics free of charge to any shareholder upon written request to the Company.
ITEM 10. EXECUTIVE COMPENSATION
The responses to this Item are included in the Companys Proxy Statement for the 2006 Annual Meeting of Shareholders, under the heading Compensation, and are incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The responses to this Item are partially included in the Companys Proxy Statement for the 2006 Annual Meeting of Shareholders, under the heading Security Ownership of Certain Beneficial Owners and Management, and are incorporated herein by reference.
The following table sets forth information regarding the number of shares subject to options issued and reserved for future issuance under the Islands Bancorp 2002 Stock Incentive Plan and warrants issued to the Companys directors. The Stock Incentive Plan was approved by the Board of Directors of the Company on March 19, 2002 and was approved by the shareholders of the Company on April 23, 2002. The Company does not maintain any other equity compensation plans.
Number of securities to
be issued upon exercise of outstanding options |
Weighted-average
exercise price of outstanding options |
Number of shares
remaining available for future issuance under the Plan (excludes outstanding options) |
||||||
Equity compensation plans approved by security holders |
34,919 | $ | 10.14 | 62,986 | ||||
Equity compensation plans not approved by security holders |
200,105 | (1) | 10.00 | | ||||
Total |
235,024 | $ | 10.02 | 62,986 |
(1) | Represents warrants issued to the Companys directors on July 6, 2001. The warrants became exercisable in equal one-third (1/3) annual increments beginning on July 6, 2002 and are now fully exercisable. Exercisable warrants will remain exercisable for the ten-year period following the date of issuance or for 90 days after the warrant holder ceases to be a director of the Company, whichever is shorter. The exercise price of each warrant is subject to adjustment for stock splits, recapitalizations or other similar events. Additionally, if the Banks capital falls below the minimum level, as determined by the OCC, the Company may be directed to require the directors to exercise or forfeit their warrants. |
D-30
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to this Item are included in the Companys Proxy Statement for the 2006 Annual Meeting of Shareholders, under the headings Relationships and Related Transactions and Compensation, and are incorporated herein by reference.
3.1 | Articles of Incorporation (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
3.2 | Bylaws (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
4.1 | Specimen Stock Certificate (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
4.2 | See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and Bylaws defining rights of holders of common stock | |
10.1* | Employment Agreement dated as of July 27, 1999 between the Islands Bancorp and William B. Gossett (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
10.2 | Form of Organizers Warrant Agreement (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
10.3 | Islands Bancorp 2002 Stock Incentive Plan (incorporated herein by reference to Appendix A of Exhibit 99.1 to the Companys Annual Report on Form 10-KSB filed April 1, 2002) | |
10.3.1 | Form of Incentive Stock Option Award under the Islands Bancorp 2002 Stock Incentive Plan | |
10.3.2 | Form of Non-qualified Stock Option Award under the Islands Bancorp 2002 Stock Incentive Plan | |
10.5 | Purchase and Sale Agreement by and between Crescent Resources, LLC and Islands Community Bank, N.A., dated April 14, 2005 and as amended June 28, 2005 and July 28, 2005 (incorporated herein by reference to the Companys Quarterly Report on Form 10-QSB filed November 15, 2005) | |
10.6 | Change in Control Agreement between Carol J. Nelson, Islands Bancorp and Islands Community Bank, N.A., dated as of January 24, 2006 | |
13.1 | Islands Bancorp 2005 Annual Report to Shareholders. Except with respect to those portions specifically incorporated by reference into this Report, the Companys 2005 Annual Report to Shareholders is not deemed to be filed as part of this Report | |
22.1 | Subsidiaries of Islands Bancorp | |
24.1 | Power of Attorney (appears on the signature pages to this Annual Report on Form 10-KSB) | |
31.1 | Certification Pursuant to Section 301 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* | Compensatory plan or arrangement. |
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The responses to this Item are included in the Companys Proxy Statement for the 2006 Annual Meeting of Shareholders under the heading Independent Public Accountants.
D-31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Islands Bancorp has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
ISLANDS BANCORP | ||
By: |
/s/ J OHN R. P ERRILL |
|
John R. Perrill Acting Chief Executive Officer |
||
Date: |
March 21, 2006 |
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 John R. Perrill and D. Martin Goodman, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her 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, 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 they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Islands Bancorp and in the capacities and on the dates indicated.
SIGNATURE |
TITLE |
DATE |
||
/s/ L OUIS O. D ORE Louis O. Dore |
Director |
March 21, 2006 | ||
Paul M. Dunnavant, III |
Treasurer and Director |
|||
/s/ M ARTHA B. F ENDER Martha B. Fender |
Vice Chairman and Director |
March 21, 2006 | ||
/s/ D ARYL A. F ERGUSON Daryl A. Ferguson |
Director |
March 21, 2006 | ||
/s/ D. M ARTIN G OODMAN D. Martin Goodman |
Chairman of the Board of Directors |
March 21, 2006 | ||
/s/ S TANCEL E. K IRKLAND , S R . Stancel E. Kirkland, Sr. |
Director |
March 21, 2006 | ||
/s/ C ARL E. L IPSCOMB Carl E. Lipscomb |
Director |
March 21, 2006 |
D-32
SIGNATURE |
TITLE |
DATE |
||
/s/ E DWARD J. M C N EIL , J R . Edward J. McNeil, Jr. |
Secretary and Director |
March 21, 2006 | ||
/s/ J IMMY L EE M ULLINS , S R . Jimmy Lee Mullins, Sr. |
Director |
March 21, 2006 | ||
/s/ C AROL J. N ELSON Carol J. Nelson** |
Chief Financial Officer |
March 21, 2006 | ||
/s/ F RANCES K. N ICHOLSON Frances K. Nicholson |
Director |
March 21, 2006 | ||
/s/ J OHN R. P ERRILL John R. Perrill* |
Acting Chief Executive Officer |
March 21, 2006 | ||
Dr. Narayan Shenoy |
Director |
|||
/s/ J. F RANK W ARD J. Frank Ward |
Director |
March 21, 2006 | ||
/s/ B RUCE K. W YLES Bruce K. Wyles |
Director |
March 21, 2006 |
* | Principal Executive Officer |
** | Principal Financial and Accounting Officer |
D-33
EXHIBIT INDEX
3.1 | Articles of Incorporation (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
3.2 | Bylaws (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
4.1 | Specimen Stock Certificate (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
4.2 | See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and Bylaws defining rights of holders of common stock | |
10.1* | Employment Agreement dated as of July 27, 1999 between the Islands Bancorp and William B. Gossett (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
10.2 | Form of Organizers Warrant Agreement (incorporated herein by reference to the Companys Registration Statement on Form SB-2, Registration No. 333-92653, filed December 13, 1999) | |
10.3 | Islands Bancorp 2002 Stock Incentive Plan (incorporated herein by reference to Appendix A of Exhibit 99.1 to the Companys Annual Report on Form 10-KSB filed April 1, 2002) | |
10.3.1 | Form of Incentive Stock Option Award under the Islands Bancorp 2002 Stock Incentive Plan | |
10.3.2 | Form of Non-qualified Stock Option Award under the Islands Bancorp 2002 Stock Incentive Plan | |
10.5 | Purchase and Sale Agreement by and between Crescent Resources, LLC and Islands Community Bank, N.A., dated April 14, 2005 and as amended June 28, 2005 and July 28, 2005 (incorporated herein by reference to the Companys Quarterly Report on Form 10-QSB filed November 15, 2005) | |
10.6 | Change in Control Agreement between Carol J. Nelson, Islands Bancorp and Islands Community Bank, N.A., dated as of January 24, 2006 | |
13.1 | Islands Bancorp 2005 Annual Report to Shareholders. Except with respect to those portions specifically incorporated by reference into this Report, the Companys 2005 Annual Report to Shareholders is not deemed to be filed as part of this Report | |
22.1 | Subsidiaries of Islands Bancorp | |
24.1 | Power of Attorney (appears on the signature pages to this Annual Report on Form 10-KSB) | |
31.1 | Certification Pursuant to Section 301 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* | Compensatory plan or arrangement. |
D-34
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of Islands Bancorp (the Company) and its financial condition and results of operations should be read in conjunction with the Companys consolidated financial statements and related notes included elsewhere herein.
The Company was formed for the purpose of becoming a bank holding company by owning the capital stock of Islands Community Bank, N.A. (the Bank). Because the primary activity of the Company is the ownership and operation of the Bank, the Companys financial performance has been determined primarily by the operation of the Bank. Accordingly, the discussion below relates principally to the operations of the Bank.
CRITICAL ACCOUNTING POLICIES
The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States and to general practices within the banking industry. The following is a description of the accounting policies applied by the Company which are deemed critical. Critical accounting policies are defined as policies that are very important to the presentation of the Companys financial condition and results of operations, and that require managements most difficult, subjective, or complex judgments. The Companys financial results could differ significantly if different judgments or estimates are applied in the application of the policies.
Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities in order to prepare the consolidated financial statements in conformity with generally accepted accounting principles. Management has determined that the accounting for the allowance for loan losses is a critical accounting policy with respect to the determination of financial condition and reporting results of operations.
The collectibility of loans is reflected through the Companys estimate of the allowance for loan losses. The Company performs periodic and systematic detailed reviews of its lending portfolio to assess overall collectibility. This analysis includes consideration of historical performance, current economic conditions, the level of nonperforming loans, loan concentrations, and a review of certain individual loans. The Companys allowance for loan losses provides for probable losses based upon evaluations of known and inherent risks in the loan portfolio.
Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions. In addition, the regulatory agencies, as an integral part of their examination process, periodically review the allowance. These agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.
FINANCIAL CONDITION
For the year ended December 31, 2005, total assets increased by $18,223,000, ending the year at $66,207,000 compared to $47,984,000 at December 31, 2004. The primary contributor to the increase in assets was the Companys loan portfolio, which increased by $12,887,000 during 2005, ending the year at $54,310,000 as compared to $41,423,000 at December 31, 2004. Loan demand in the Companys primary market area of Beaufort County remained strong in 2005, and the Bank added an additional lender to further service this area. During 2005, the investment portfolio increased by $467,000, and federal funds sold increased by $4,053,000, as deposits increased in excess of the demand for loans.
D-35
Total deposits increased $18,008,000 to $58,135,000 at December 31, 2005. This growth is a result of an increase of $2,141,000 in noninterest-bearing demand, an increase of $1,226,000 in interest-bearing demand, savings and money market accounts, and an increase of $14,641,000 in certificates of deposit. As interest rates increased throughout 2005, the Bank began offering a 5% 17-month certificate of deposit which was attractive to local depositors.
For the year ended December 31, 2004, total assets increased by $15,559,000 and ended 2004 at $47,984,000. The major component of the increase was the loan portfolio, which increased by $14,749,000 as the Bank continued to grow and add customers. Federal funds sold increased by $774,000, and investment securities decreased by $165,000, as the Bank was able to invest the majority of new funds into loans. Total deposits increased by $14,471,000, with growth in all deposit categories. Noninterest-bearing demand deposits increased by $1,965,000, interest-bearing demand and money market accounts increased by $1,277,000, and certificates of deposit increased by $11,229,000.
RESULTS OF OPERATIONS
The Companys results of operations are impacted by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Because interest rates are determined by market forces and economic conditions beyond the control of the Company, the ability to generate net interest income depends on the Companys ability to maintain an adequate spread between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities, such as deposits and borrowings. Thus, net interest income is a key performance measure of income.
NET INTEREST INCOME
The Company reported net interest income of $2,469,000 for the year ended December 31, 2005, compared to $1,551,000 in 2004. The increase in net interest income was due to both an increase in the volume of average earning assets and an increase in yields.
Average earning assets increased $17,481,000 during 2005, due primarily to an increase of $14,960,000 in average outstanding loans. For the year ended December 31, 2005, the yield on average earning assets was 7.11% compared to 6.29% during 2004. The increase in the yield on average earning assets can be attributed to the increases in the prime rate which began in 2004 and continued throughout 2005. Average interest-bearing liabilities increased by $14,575,000 in 2005 primarily due to an increase of $13,331,000 in average outstanding certificates of deposit. The Banks cost of funds for 2005 was 3.04% compared to 2.46% for 2004. The interest rate spread, which is the difference between the yield on earning assets and the rate paid on liabilities, increased to 4.07% for the year ended December 31, 2005, compared to 3.83% for 2004. The net interest margin, which is net interest income divided by average earning assets, increased to 4.53% in 2005 compared to 4.19% in 2004.
Net interest income in 2004 was $1,551,000 compared to $1,067,000 in 2003. This increase can be attributed primarily to an $11,124,000 increase in average outstanding loans due to continuing strong loan demand in the Companys primary market area, combined with a decrease in the Banks cost of funds. The increase in average loans was funded primarily with deposits, as average interest-bearing deposits increased by $8,551,000 in 2004. The interest rate paid on average interest-bearing liabilities was 2.46% in 2004 compared to 2.67% in 2003.
D-36
The table below shows the yearend average balances for each category of interest-earning asset and interest-bearing liability and the average rate of interest earned or paid (dollars in thousands).
PROVISION FOR LOAN LOSSES
The Companys allowance for loan losses was $679,000 at December 31, 2005, compared to $488,000 at December 31, 2004, representing 1.25% and 1.18% of yearend outstanding loans as of 2005 and 2004, respectively. The allowance for loan losses reflects managements assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance for loan losses that management believes will be adequate in light of anticipated risks and loan losses.
The allowance for loan losses is established through charges to expense in the form of a provision for loan losses. Loan losses and recoveries are charged and credited directly to the allowance. The provision for loan losses was $225,000 in 2005 compared to $191,000 in 2004. The provision for loan losses reflects managements estimate of probable loan losses inherent in the portfolio and the creation of an allowance for loan losses adequate to absorb such losses.
While it is the Banks policy to charge off in the current period loans for which a loss is considered probable, there are additional risks of future losses which cannot be quantified precisely or attributed to particular loans or classes of loans. Because these risks include the state of the economy, managements judgment as to the adequacy of the allowance is necessarily approximate and imprecise. After review of all relevant matters affecting loan collectibility, management believes the allowance for loan losses is adequate.
NONINTEREST INCOME
The following table summarizes the major components of noninterest income for the years ended December 31, 2005 and 2004 (dollars in thousands).
Year Ended December 31, | ||||||
2005 | 2004 | |||||
Service charges on deposit accounts |
$ | 158 | $ | 133 | ||
Gains on sales of loans |
164 | 181 | ||||
Mortgage loan brokerage fees |
69 | 44 | ||||
Other income |
74 | 60 | ||||
Total noninterest income |
$ | 465 | $ | 418 | ||
D-37
Noninterest income for 2005 was $465,000 compared to $418,000 for the year ended December 31, 2004.
Service charges on deposit accounts increased by $25,000 as the Banks deposit base continued to grow. Gains on sales of SBA loans decreased by $96,000 due to less secondary market activity in 2005; however, gains on sales of mortgage loans
increased by $79,000 as the Bank hired an experienced mortgage lender. Mortgage loan brokerage fees increased by $25,000 in 2005 due to increased productivity by the mortgage department. Other income increased by $14,000 primarily due to increases
NONINTEREST EXPENSE
The following table summarizes the major components of noninterest expense for the years ended December 31, 2005 and 2004 (dollars in thousands).
Year Ended December 31, | ||||||
2005 | 2004 | |||||
Salaries and employee benefits |
$ | 1,034 | $ | 884 | ||
Data processing and ATM expense |
181 | 159 | ||||
Depreciation expense |
154 | 141 | ||||
Professional fees |
257 | 71 | ||||
Supplies and printing |
34 | 33 | ||||
Taxes and insurance |
52 | 42 | ||||
Utilities and telephone |
32 | 28 | ||||
Advertising and public relations |
77 | 49 | ||||
Other operating expenses |
150 | 128 | ||||
Total noninterest expense |
$ | 1,971 | $ | 1,535 | ||
The largest component of noninterest expense is salaries and benefits, which increased to $1,034,000 as of December 31, 2005 compared to $884,000 in 2004. This increase was primarily due to an increase in the number of employees, normal salary increases, and increases in health insurance and other employee benefits. Data processing and ATM expense increased by $22,000 due to continued increases in the Banks customer base and increased transaction activity. Depreciation expense increased by $13,000 primarily due to replacement of the Banks main server and additional equipment needed to support the increase in staff. Professional services increased by $186,000 due to increased audit expenses, legal expenses, and expenses related to executive officer changes. Other operating expenses increased in line with the overall growth of the Bank during the year.
As a percentage of total average assets, noninterest expense was 3.4% and 3.8% for 2005 and 2004, respectively. The efficiency ratio (noninterest expense divided by net interest income plus other income) was 67% for the year ended December 31, 2005 compared to 78% in 2004.
INTEREST RATE SENSITIVITY
The Companys objective is to manage assets and liabilities to provide a satisfactory, consistent level of profitability within the framework of established policies. Interest rate sensitivity refers to the responsiveness of interest-earning assets and interest-bearing liabilities to changes in market interest rates. The rate sensitive position, or gap, is the difference in the volume of rate sensitive assets and liabilities at a given time interval. A negative gap (more liabilities repricing than assets) generally indicates that a banks net interest income will decrease if interest rates rise and will increase if interest rates fall. A positive gap generally indicates that a banks net interest income will decrease if interest rates fall and will increase if interest rates rise. The general objective of gap management is to manage rate sensitive assets and liabilities so as to reduce the impact of interest rate fluctuations on the net interest margin.
D-38
The interest rate sensitivity position at December 31, 2005 is presented in the following table. The difference between rate sensitive assets and rate sensitive liabilities, or the interest rate sensitivity gap, is shown at the bottom of the table (dollars in thousands.) However, income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates.
Within
3 months |
After
3 mos
|
After
6 mos
1 year |
After
1 yr
5 years |
After 5 years |
Total | ||||||||||||||||
EARNING ASSETS |
|||||||||||||||||||||
Loans |
$ | 25,302 | $ | 7,072 | $ | 5,623 | $ | 16,093 | $ | 219 | $ | 54,309 | |||||||||
Securities |
| | | 1,500 | 1,159 | 2,659 | |||||||||||||||
Federal funds sold and other |
4,969 | | | | | 4,969 | |||||||||||||||
Total earning assets |
$ | 30,271 | $ | 7,072 | $ | 5,623 | $ | 17,593 | $ | 1,378 | $ | 61,937 | |||||||||
INTEREST BEARING LIABILITIES |
|||||||||||||||||||||
Interest bearing demand deposits and savings |
$ | 8,341 | $ | | $ | | $ | | $ | | $ | 8,341 | |||||||||
Certificates under $100M |
4,855 | 5,010 | 7,213 | 12,850 | | 29,928 | |||||||||||||||
Certificates $100M and over |
3,913 | 3,037 | 2,561 | 3,837 | | 13,348 | |||||||||||||||
Borrowings |
| | 700 | 1,000 | | 1,700 | |||||||||||||||
Total interest-bearing liabilities |
$ | 17,109 | $ | 8,047 | $ | 10,474 | $ | 17,687 | $ | | $ | 53,317 | |||||||||
Interest rate sensitivity gap |
13,162 | (975 | ) | (4,851 | ) | (94 | ) | 1,378 | 8,620 | ||||||||||||
Cumulative gap |
13,162 | 12,187 | 7,336 | 7,242 | 8,620 | 8,620 | |||||||||||||||
Interest rate sensitivity gap ratio |
1.77 | .88 | .54 | .99 | N/A | 1.16 | |||||||||||||||
Cumulative interest rate sensitivity gap ratio |
1.77 | 1.48 | 1.20 | 1.11 | 1.16 | 1.16 |
Adjustable rate loans are shown in the above table in the period in which interest rates are next scheduled to adjust rather than in the period in which they are due, and fixed rate loans are included in the periods in which they are anticipated to be repaid based on scheduled maturities. The Banks savings accounts and interest-bearing demand accounts (NOW and money market deposit accounts), which are generally subject to immediate withdrawal, are included in the three months or less category; however, historical experience has proven these deposits to be more stable over the course of a year. The table does not necessarily indicate the impact of general interest rate movements on the net interest margin since the repricing of various categories of assets and liabilities is subject to competitive pressures and the needs of the Banks customers.
LIQUIDITY
The Bank must maintain, on a daily basis, sufficient funds to cover the withdrawals from depositors accounts and to supply new borrowers with funds. To meet these obligations, the Bank keeps cash on hand, maintains account balances with its correspondent banks, and purchases and sells federal funds and other short-term investments. Asset and liability maturities are monitored in an attempt to match these to meet liquidity needs.
Liquidity represents the ability to provide steady sources of funds for loan commitments and investment activities, as well as to maintain sufficient funds to cover deposit withdrawals and payment of debt and operating obligations. These funds can be obtained by converting assets to cash or by attracting new deposits. The Companys primary source of liquidity is its ability to maintain and increase core deposits of the Bank.
D-39
Below are the pertinent liquidity balances and ratios at December 31, 2005 and 2004:
December 31 | ||||||||
2005 | 2004 | |||||||
Cash and cash equivalents |
$ | 5,840 | $ | 1,540 | ||||
Securities available for sale |
$ | 2,659 | $ | 2,188 | ||||
CDs over $100,000 to total deposits ratio |
23.0 | % | 22.5 | % | ||||
Brokered deposits |
0 | 0 | ||||||
Loan to deposit ratio |
93 | % | 103 | % |
At December 31, 2005, cash and cash equivalents totaled $5,840,000, representing 8.8% of total assets. Securities available for sale provide a secondary source of liquidity and totaled $2,659,000 at December 31, 2005. Scheduled loan payments are a relatively stable source of funds, but loan payoffs and deposit flows can fluctuate significantly since they are influenced by interest rates, competition and general economic conditions.
At December 31, 2005, large denomination certificates represented 23.0% of total deposits. Large denomination CDs are generally more volatile than other deposits. As a result, management continually monitors the competitiveness of the rates it pays on its large denomination certificates and periodically adjusts its rates in accordance with market demands. Significant withdrawals of large denomination certificates may have a material adverse effect on the Banks liquidity.
At December 31, 2005, the Company had loan commitments outstanding of $10,019,000. Because these commitments generally have fixed expiration dates and may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Bank maintains relationships with correspondent banks that can provide funds to it on short notice if needed. The Bank currently has arrangements with correspondent banks for short-term unsecured advances up to $5,040,000.
CAPITAL ADEQUACY
There are two primary measures of capital adequacy for banks and bank holding companies: (i) risk-based capital ratios and (ii) the leverage ratio.
Risk-based capital guidelines measure the amount of a banks required capital in relation to the degree of risk perceived in its assets and its off-balance sheet items. Under the risk-based capital guidelines, capital is divided into two tiers. Tier 1 capital generally consists of common shareholders equity, non-cumulative perpetual preferred stock, a limited amount of qualifying cumulative perpetual preferred stock and minority interest, less goodwill and other specified intangibles. Tier 2 capital consists of a limited amount of the allowance for possible loan losses, hybrid capital instruments, term subordinated debt and intermediate term preferred stock. Banks are required to maintain a minimum risk-based capital ratio of 8.0%, with at least 4.0% consisting of Tier 1 capital.
The second measure of capital adequacy relates to the leverage ratio. The leverage ratio is computed by dividing Tier 1 capital by total average assets. For banks not receiving the highest safety and soundness rating by their primary regulator, the minimum leverage ratio should be 3.0% plus an additional cushion of at least 1 to 2 percent, depending upon risk profiles and other factors.
D-40
The table below shows the Bank and Companys regulatory capital ratios at December 31, 2005:
The above ratios indicate that the capital positions of the Company and the Bank are sound and that the organization is well positioned for future growth.
D-41
BEAUFORT, SOUTH CAROLINA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2005 AND 2004
D-42
D-44 | ||
D-42 | ||
D-45 | ||
D-46 | ||
D-47 | ||
D-48 | ||
D-49 |
D-43
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Islands Bancorp
Beaufort, South Carolina
We have audited the accompanying consolidated balance sheets of Islands Bancorp and subsidiary, (the Company), as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in shareholders equity and cash flows for each of the two years in the period ended December 31, 2005. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Islands Bancorp, and subsidiary at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
/s/ Francis & Co., CPAs
Atlanta, Georgia
February 23, 2006
D-44
BEAUFORT, SOUTH CAROLINA
CONSOLIDATED BALANCE SHEETS
As of December 31, | ||||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Cash and due from banks |
$ | 871,491 | $ | 730,629 | ||||
Interest-bearing deposits in other banks |
133,713 | 27,480 | ||||||
Federal funds sold |
4,834,905 | 782,000 | ||||||
Total cash and cash equivalents |
5,840,109 | 1,540,109 | ||||||
Securities: |
||||||||
Available-for-sale at fair value |
2,625,535 | 2,158,126 | ||||||
Loans, net |
53,630,260 | 40,934,809 | ||||||
Property and equipment, net |
3,333,014 | 2,800,967 | ||||||
Other assets |
777,794 | 549,692 | ||||||
Total Assets |
$ | 66,206,712 | $ | 47,983,703 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
Liabilities: | ||||||||
Deposits: |
||||||||
Non-interest bearing deposits |
$ | 6,518,928 | $ | 4,378,127 | ||||
Interest bearing deposits |
51,616,172 | 35,749,189 | ||||||
Total deposits |
58,135,100 | 40,127,316 | ||||||
FHLB advances |
1,700,000 | 2,200,000 | ||||||
Other liabilities |
568,423 | 390,354 | ||||||
Total Liabilities |
60,403,523 | 42,717,670 | ||||||
Commitments and Contingencies | ||||||||
Shareholders Equity: | ||||||||
Common stock, zero par value, 10,000,000 shares authorized; 652,705 shares issued and outstanding |
6,213,061 | 6,213,061 | ||||||
Retained (deficit) |
(387,558 | ) | (927,289 | ) | ||||
Accumulated other comprehensive (loss), net of tax |
(22,314 | ) | (19,739 | ) | ||||
Total Shareholders Equity |
5,803,189 | 5,266,033 | ||||||
Total Liabilities and Shareholders Equity |
$ | 66,206,712 | $ | 47,983,703 | ||||
Refer to notes to the consolidated financial statements.
D-45
BEAUFORT, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended
December 31, |
||||||
2005 | 2004 | |||||
Interest Income: |
||||||
Interest and fees on loans |
$ | 3,683,095 | $ | 2,253,670 | ||
Interest on investment securities |
83,053 | 57,803 | ||||
Interest on federal funds sold |
106,596 | 16,048 | ||||
Total interest income |
3,872,744 | 2,327,521 | ||||
Interest Expense: |
||||||
Interest on deposits and borrowings |
1,404,089 | 776,684 | ||||
Net interest income |
2,468,655 | 1,550,837 | ||||
Provision for possible loan losses |
225,000 | 190,413 | ||||
Net interest income after provision for possible loan losses |
2,243,655 | 1,360,424 | ||||
Other Income: |
||||||
Service fees on deposit accounts |
158,110 | 133,089 | ||||
Gain on sale of loans |
163,492 | 181,300 | ||||
Mortgage loan brokerage fees |
68,957 | 43,342 | ||||
Other income |
74,273 | 60,175 | ||||
Total other income |
464,832 | 417,906 | ||||
Other Expenses: |
||||||
Salaries and benefits |
1,034,156 | 884,490 | ||||
Data processing and ATM |
180,827 | 158,959 | ||||
Depreciation |
153,506 | 140,707 | ||||
Professional fees |
257,269 | 71,027 | ||||
Other operating expenses |
344,831 | 279,865 | ||||
Total other expenses |
1,970,589 | 1,535,048 | ||||
Income before income tax expense |
737,898 | 243,282 | ||||
Income tax expense |
198,167 | 94,434 | ||||
Net Income |
$ | 539,731 | $ | 148,848 | ||
Basic income per share |
$ | .83 | $ | .23 | ||
Diluted income per share |
$ | .80 | $ | .23 | ||
Weighted average number of shares outstanding: |
||||||
Basic |
652,705 | 652,705 | ||||
Diluted |
674,702 | 652,705 | ||||
Refer to notes to the consolidated financial statements.
D-46
BEAUFORT, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
Common Stock |
Retained
(Deficit) |
Accumulated Other
Comprehensive
|
Total | ||||||||||||||
No. of
Shares |
Common
Stock |
||||||||||||||||
Balance, December 31, 2003 |
652,705 | $ | 6,213,061 | $ | (1,076,137 | ) | $ | (20,827 | ) | $ | 5,116,097 | ||||||
Comprehensive income: |
|||||||||||||||||
Net income, 2004 |
| | 148,848 | | 148,848 | ||||||||||||
Net unrealized gain, securities |
| | | 1,088 | 1,088 | ||||||||||||
Total comprehensive income |
| | 148,848 | 1,088 | 149,936 | ||||||||||||
Balance, December 31, 2004 |
652,705 | 6,213,061 | (927,289 | ) | (19,739 | ) | 5,266,033 | ||||||||||
Comprehensive income: |
|||||||||||||||||
Net income, 2005 |
| | 539,731 | | 539,731 | ||||||||||||
Net unrealized (loss), securities |
| | | (2,575 | ) | (2,575 | ) | ||||||||||
Total comprehensive income |
| | 539,731 | (2,575 | ) | 537,156 | |||||||||||
Balance, December 31, 2005 |
652,705 | $ | 6,213,061 | $ | (387,558 | ) | $ | (22,314 | ) | $ | 5,803,189 | ||||||
Refer to notes to the consolidated financial statements.
D-47
BEAUFORT, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31, |
||||||||
2005 | 2004 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 539,731 | $ | 148,848 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Provision for possible loan losses |
225,000 | 190,413 | ||||||
Depreciation |
153,506 | 140,707 | ||||||
Net amortization on securities |
22,066 | 6,223 | ||||||
(Increase) in receivables and other assets |
(228,102 | ) | (89,201 | ) | ||||
Increase in payables and other liabilities |
178,069 | 238,107 | ||||||
Net cash provided by operating activities |
890,270 | 635,097 | ||||||
Cash flows from investing activities: |
||||||||
Principal reduction, securities, AFS |
1,046,084 | 756,470 | ||||||
Purchase of securities, AFS |
(1,538,134 | ) | (597,005 | ) | ||||
(Increase) in loans, net |
(12,920,451 | ) | (14,778,462 | ) | ||||
(Purchase) of property and equipment |
(685,553 | ) | 26,517 | |||||
Net cash used by investing activities |
(14,098,054 | ) | (14,592,480 | ) | ||||
Cash flows from financing activities: |
||||||||
Increase in deposits |
18,007,784 | 14,470,762 | ||||||
(Decrease)/increase in borrowed funds |
(500,000 | ) | 700,000 | |||||
Net cash provided by financing activities |
17,507,784 | 15,170,762 | ||||||
Net increase in cash and cash equivalents |
4,300,000 | 1,213,379 | ||||||
Cash and cash equivalents, beginning of year |
1,540,109 | 326,730 | ||||||
Cash and cash equivalents, end of year |
$ | 5,840,109 | $ | 1,540,109 | ||||
SUPPLEMENTAL INFORMATION: |
||||||||
Income taxes paid |
$ | 223,850 | $ | | ||||
Interest paid |
$ | 1,334,965 | $ | 752,273 | ||||
Refer to notes to the consolidated financial statements.
D-48
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 1ORGANIZATION OF THE BUSINESS
Islands Bancorp (the Company) is a one-bank holding company with respect to Islands Community Bank, N.A., Beaufort, South Carolina, (the Bank). The Company was incorporated on July 23, 1999, and principal operations commenced on July 9, 2001, when the Bank opened for business. The Bank engages in the business of obtaining deposits and providing commercial, consumer and real estate loans to the general public.
The Company is authorized to issue up to 10.0 million shares of its zero par value per share common stock. In the public offering that was completed in early 2001, 652,155 shares of the Companys common stock were sold and issued. Proceeds from the offering, net of selling expenses, amounted to $6,207,561. At December 31, 2005 and 2004, there were 652,705 shares of common stock issued and outstanding.
The Company is also authorized to issue of up to 2.0 million shares of preferred stock. The Companys Board of Directors may, without further action by the shareholders, direct the issuance of preferred stock for any proper corporate purpose with preferences, voting powers, conversion rights, qualifications, special or relative rights and privileges which could adversely affect the voting power or other rights of shareholders of common stock. At December 31, 2005 and 2004, there were no shares of the Companys preferred stock issued or outstanding.
The Companys Articles of Incorporation and Bylaws contain certain provisions that might be deemed to have potential defensive anti takeover effects. These certain provisions include: (i) provisions relating to meetings of shareholders which limit who may call meetings and what matters will be voted upon; (ii) the ability of the Board of Directors to issue additional shares of authorized preferred stock without shareholder approval, thus retaining the ability to dilute any potential acquirer attempting to gain control by purchasing Company stock; (iii) a staggered Board of Directors, limiting the ability to change the members of the Board in a timely manner, and (iv) a provision that requires two-thirds of the shareholders to approve mergers and similar transactions, and amendments to the articles of incorporation.
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Reclassification. The consolidated financial statements include the accounts of the Company and its subsidiary. The Bank is a voting interest entity under U.S. generally accepted accounting principles. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation; such reclassifications had no impact on net income or shareholders equity.
Basis of Accounting. The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles and to general practices within the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for possible loan losses, the fair value of financial instruments, and the status of contingencies.
Cash, Due from Banks and Federal Funds Sold. The Company maintains deposit relationships with other financial institutions in amounts that exceed federal deposit insurance coverage. Furthermore, federal funds sold
D-49
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
are essentially uncollateralized loans to other financial institutions. Management regularly evaluates the credit risks associated with the counterparties to these transactions and believes that the Company is not exposed to any significant credit risks on the above accounts.
Securities. Securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and are reported at amortized cost. Securities held for current resale are classified as trading securities and are reported at fair value, with unrealized gains and losses included in earnings. Securities to be held for indefinite periods of time are classified as available-for-sale and carried at fair value with the unrealized holding gains/losses reported as a component of other comprehensive income, net of tax. Generally, in the available-for-sale category are securities that are held to meet investment objectives such as interest rate risk, liquidity management and asset-liability management strategies among others. The classification of investment securities as held-to-maturity, trading or available-for-sale is determined at the date of purchase. The Company does not have any held-to-maturity or trading securities as of December 31, 2005 and 2004. Securities with limited marketability, such as stock in the Federal Reserve Bank and the Federal Home Loan Bank, are carried at cost.
Interest income includes amortization of purchase premiums and discounts. Realized gains and losses are derived from the amortized cost of the security sold. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Loans. Loans are reported at the principal balance outstanding net of unearned discounts. Interest income on loans is reported on the level-yield method and includes amortization of deferred loan fees and costs over the loan term. Loan commitment fees for commitment periods greater than one year are deferred and amortized into fee income on a straight-line basis over the commitment period.
The accrual of interest on loans is discontinued when, in managements opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the agreement, including scheduled principal and interest payments. Impairment is evaluated on an individual loan basis. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loans existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectibility of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.
SBA Loans. At times, the Bank originates loans to customers under Small Business Administration (SBA) programs that generally provide for SBA guarantees of 50% to 85% of each loan. Periodically, the Bank sells the
D-50
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
guaranteed portion of certain SBA loans to investors and retains the unguaranteed portion and servicing rights. Gains on these sales are earned through the sale of the guaranteed portion of the loan for an amount in excess of the adjusted carrying value of the portion of the loan sold. At the time of sale, the Bank allocates the carrying value of such loans between the portion sold, the portion retained, and a value assigned to servicing rights. The difference between the adjusted carrying value of the portion retained and the face amount of the portion retained is amortized to interest income over the life or anticipated life of the related loan.
Allowance for Possible Loan Losses. The allowance for possible loan losses (the Allowance) represents managements estimate of probable losses inherent in the loan portfolio. The Allowance is established through provisions charged to operations. Loans deemed to be uncollectible are charged against the Allowance, and subsequent recoveries, if any, are credited to the Allowance. The adequacy of the Allowance is based on managements evaluation of the loan portfolio under current economic conditions, past loan loss experience, adequacy of underlying collateral, changes in the nature and volume of the loan portfolio, review of specific problem loans, and such other factors which, in managements judgment, deserve recognition in estimating loan losses. The evaluation for the adequacy of the Allowance is inherently subjective, as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. Various regulatory agencies, as an integral part of their examination process, periodically review the Companys Allowance. Such agencies may require the Company to recognize additions to the Allowance based on their judgments about information available to them at the time of their examination.
The Companys allowance for possible loan losses consists of three elements: (i) specific valuation allowances established for probable losses on specific loans; (ii) historical valuation allowances calculated based on historical loan loss experience for similar loans with similar characteristics and trends; and (iii) unallocated general valuation allowances determined based on general economic conditions and other qualitative risk factors both internal and external to the Company.
Property and Equipment. Building, leasehold improvements, furniture, and equipment are stated at cost, net of accumulated depreciation. Land is carried at cost. Depreciation is computed principally by the straight-line method based on the estimated useful lives of the related assets. Maintenance and repairs are charged to operations, while major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts, and gain or loss is included in operations. The Company had no capitalized lease obligations at December 31, 2005 and 2004.
Other Real Estate. Other real estate represents property acquired by the Company in satisfaction of a loan. Other real estate is carried at the lower of: (i) cost or (ii) fair value less estimated selling costs. Fair value is determined on the basis of current appraisals, comparable sales and other estimates of value obtained principally from independent sources. Any excess of the loan balance at the time of foreclosure over the fair value of the real estate held as collateral is treated as a loan loss and charged against the allowance for loan losses. Gain or loss on the sale of the property and any subsequent adjustments to reflect changes in fair value of the property are reflected in the income statement. Recoverable costs relating to the development and improvement of the property are capitalized whereas routine holding costs are charged to expense. The Company had no other real estate at December 31, 2005 and 2004.
Income Taxes. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the
D-51
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
differences between the book and tax bases of the various balance sheet assets and liabilities and gives recognition to changes in tax rates and laws.
A valuation allowance for deferred tax assets is required when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realization of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income (in the near-term based on current projections), and tax planning strategies.
The operating results of the Company and its subsidiary are included in consolidated income tax returns.
Stock-Based Compensation. Employee compensation expense under stock option plans is reported only if options are granted below market price at grant date in accordance with the intrinsic value method of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations by accounting standards setters. Because the exercise price of the Companys employee stock options equals the market price of the underlying stock on the measurement date, which is generally the date of grant, no compensation expense is recognized on options granted. Compensation expense for non-vested stock awards is based on the market price of the stock on the measurement date, which is generally the date of grant, and is recognized ratably over the service period of the award.
Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation, as amended by SFAS 148, requires pro forma disclosures of net income and earnings per share for companies not adopting its fair value accounting method for stock-based employee compensation. The pro forma disclosures as required under SFAS 123 and 148 are presented below.
The pro-forma (fair value) was estimated at the date of grant using a Black-Scholes option pricing model (BLSC Model). BLSC Model requires the input of highly subjective assumptions, including the expected stock price volatility, and risk-free interest rates. Since changes in the subjective assumptions can materially affect the fair value estimate, in managements opinion, existing models (such as the BLSC Model) do not necessarily provide a reliable single measure of the fair value of the Companys options and warrants.
D-52
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
Below are details concerning the input assumptions utilized in conjunction with BLSC Model to produce the estimates for pro-forma (fair value) income for the periods below.
Year Ended December 31, | ||||||
2005 | 2004 | |||||
Risk-free interest rate |
4.25 | % | | % | ||
Dividend yield |
| | ||||
Volatility factor |
12.0 | % | | % | ||
Weighted average life of option |
10 yrs | |
The Company expects to adopt the provisions of SFAS No. 123, Share-Based Payment (Revised 2004), on January 1, 2006. Among other things, SFAS 123R eliminates the ability to account for stock-based compensation using APB 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant.
Cash and Cash Equivalents. For purposes of reporting cash flows, cash and cash equivalents include cash on hand, deposits with other financial institutions that have an initial maturity of less than 90 days, federal funds sold and resell agreements. Net cash flows are reported for loans, loans held for sale, deposit transactions, and short-term borrowings.
Operating Segments. The Company determined, in accordance with Financial Accounting Standards No. 131, Disclosure about Segment of an Enterprise and Related Information, that it is a single reportable entity. The Companys business activities are confined to community banking.
Earnings Per Share. Basic earnings per share is determined by dividing net income by the weighted-average number of common shares outstanding. Diluted income per share is determined by dividing net income by the weighted average number of common shares outstanding increased by the number of common shares that would be issued assuming exercise of stock options. This also assumes that only options with an exercise price below the existing market price will be exercised. In computing net income per share, the Company uses the treasury stock method.
Comprehensive Income. Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. Comprehensive income for calendar years 2005 and 2004 are shown in the consolidated statements of changes in shareholders equity.
Recent Accounting Pronouncements. SFAS No. 154, Accounting Changes and Error Corrections, a Replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS 154 establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to a newly adopted accounting principle. Previously, most changes in accounting principle were recognized by including the cumulative effect of changing to the new accounting principle in net income of the period of the change. Under SFAS 154, retrospective application requires (i) the cumulative effect of the change to the new accounting principle on periods prior to those presented to be reflected in the carrying amounts of assets and liabilities as of the beginning of the first period presented, (ii) an offsetting adjustment, if any, to be made to the opening balance of retained earnings (or other appropriate components of equity) for that period, and (iii) financial statements for each individual prior period presented to be adjusted to
D-53
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
reflect the direct period-specific effects of applying the new accounting principle. Special retroactive application rules apply in situations where it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Indirect effects of a change in accounting principle are required to be reported in the period in which the accounting change is made. SFAS 154 carries forward the guidance in APB Opinion 20 Accounting Changes, requiring justification of a change in accounting principle on the basis of preferability. SFAS 154 also carries forward without change the guidance contained in APB Opinion 20, for reporting the correction of an error in previously issued financial statements and for a change in an accounting estimate. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Corporation does not expect SFAS 154 will significantly impact its financial statements upon its adoption on January 1, 2006.
SFAS No. 123, Share-Based Payment (Revised 2004). SFAS 123R establishes standards for the accounting for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of the equity instruments. SFAS 123R eliminates the ability to account for stock-based compensation using APB 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the measurement date, which is generally the date of the grant. SFAS 123R was to be effective for the Company on July 1, 2005; however, the required implementation date was delayed until January 1, 2006. The Company will transition to fair-value based accounting for stock-based compensation using a modified version of prospective application (modified prospective application). Under modified prospective application, as it is applicable to the Company, SFAS 123R applies to new awards and to awards modified, repurchased, or cancelled after January 1, 2006. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered (generally referring to non-vested awards) that are outstanding as of January 1, 2006 must be recognized as the remaining requisite service is rendered during the period of and/or the periods after the adoption of SFAS 123R. The attribution of compensation cost for those earlier awards will be based on the same method and on the same grant-date fair values previously determined for the pro forma disclosures required for companies that did not adopt the fair value accounting method for stock-based employee compensation.
FASB Staff Position (FSP) No. 115-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. FSP 115-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. If, after consideration of all available evidence to evaluate the realizable value of its investment, impairment is determined to be other-than-temporary, then an impairment loss should be recognized equal to the difference between the investments cost and its fair value. FSP 115-1 nullifies certain provisions of Emerging Issues Task Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, while retaining the disclosure requirements of EITF 03-1 which were adopted in 2003. FSP 115-1 is effective for reporting periods beginning after December 15, 2005. The Company does not expect FSP 115-1 will significantly impact its financial statements upon its adoption on January 1, 2006.
NOTE 3FEDERAL FUNDS SOLD
The Bank is required to maintain legal cash reserves computed by applying prescribed percentages to its various types of deposits. When the Banks cash reserves are in excess of the required amount, the Bank may lend the excess to other banks on a daily basis. At December 31, 2005 and 2004, federal funds sold were $4,834,905 and $782,000, respectively.
D-54
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
NOTE 4SECURITIES AVAILABLE-FOR-SALE
The amortized costs and estimated market values of securities available-for-sale as of December 31, 2005 follow:
Description |
Amortized
Costs |
Gross Unrealized |
Estimated
Market Values |
||||||||||
Gains | Losses | ||||||||||||
U.S. Agency |
$ | 1,498,738 | $ | | $ | (14,363 | ) | $ | 1,484,375 | ||||
U.S. Agency pool |
804,606 | | (19,446 | ) | 785,160 | ||||||||
Other securities |
356,000 | | | 356,000 | |||||||||
Total securities |
$ | 2,659,344 | $ | | $ | (33,809 | ) | $ | 2,625,535 | ||||
Other securities include FRB and FHLB stock. Since no ready market exists for these securities, FRB and FHLB stock are reported at cost.
The amortized costs and estimated market values of securities available-for-sale as of December 31, 2004 follow:
The amortized costs and estimated market values of securities available-for-sale at December 31, 2005, by contractual maturity, are shown in the following chart. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
No securities were sold by the Company in either calendar year 2005 or 2004, and none of the securities was pledged as of December 31, 2005 and 2004.
D-55
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
Information pertaining to securities with gross unrealized losses at December 31, 2005 and 2004, aggregated by investment category and further segregated by the length of time (less than or over twelve months) that the securities have been in a continuous loss position follows:
Unrealized losses in the securities portfolio amounted to $33,809 (2005) and $30,781 (2004) representing 1.29% (2005) and 1.43% (2004) of the total portfolio. All of the unrealized losses relate to U.S. Agency securities and U.S. government corporations. These unrealized losses were caused by fluctuations in market interest rates, rather than concerns over the credit quality of the issuers. The Company believes that the U.S. Agencies and government corporations will continue to honor their interest payments on time as well as the full debt at maturity. Because the unrealized losses are due to fluctuations in the interest rate, and no credit-worthiness factors exist, the Company believes that the investments are not considered other-than-temporarily impaired.
NOTE 5LOANS
The composition of net loans by major loan category, as of December 31, 2005 and 2004, follows:
December 31, | ||||||||
2005 | 2004 | |||||||
Commercial, financial, agricultural |
$ | 8,640,354 | $ | 6,389,530 | ||||
Real estateconstruction |
17,082,585 | 11,084,783 | ||||||
Real estatemortgage |
25,994,861 | 18,973,750 | ||||||
Installment |
2,591,801 | 4,974,601 | ||||||
Loans, gross |
54,309,601 | 41,422,664 | ||||||
Deduct: |
||||||||
Allowance for loan losses |
(679,341 | ) | (487,855 | ) | ||||
Loans, net |
$ | 53,630,260 | $ | 40,934,809 | ||||
D-56
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
The Company considers impaired loans to include all restructured loans, loans on which the accrual of interest has been discontinued, loans that are not performing in accordance with agreed upon terms, and all other loans that are performing according to the loan agreement but may have substantive indication of potential credit weakness. At December 31, 2005 and 2004, the total recorded investment in impaired loans, all of which had allowances determined in accordance with FASB Statements No. 114 and No. 118, amounted to approximately $459,951 and $816,137, respectively. The average recorded investment in impaired loans amounted to approximately $532,764 and $663,119, respectively, for the years ended December 31, 2005 and 2004. The allowance for loan losses related to impaired loans amounted to approximately $68,993 and $169,648 at December 31, 2005 and 2004, respectively. Interest income recognized on impaired loans for the years ended December 31, 2005 and 2004 amounted to $31,975 and $39,597, respectively. The amount of interest recognized on impaired loans using the cash method of accounting was not material for the years ended December 31, 2005 and 2004. Loans on non-accrual status at December 31, 2005 and 2004 had outstanding balances of $313,148 and $249,202, respectively. Interest recognized on non-accruing loans at December 31, 2005 and 2004 was $9,136 and $3,347 respectively. The Company has no commitments to lend additional funds to borrowers whose loans have been modified.
NOTE 6ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is a valuation reserve available to absorb future loan charge-offs. The Allowance is increased by provisions charged to operating expenses and by recoveries of loans which were previously written-off. The Allowance is decreased by the aggregate loan balances, if any, which were deemed uncollectible during the year.
Individual consumer loans are predominantly undersecured, and the allowance for possible losses associated with these loans has been established accordingly. Real estate, receivables, inventory, machinery, equipment, or financial instruments generally secure the majority of the non-consumer loan categories. The amount of collateral obtained is based upon managements evaluation of the borrower.
Activity within the Allowance account for the years ended December 31, 2005 and 2004 follows:
D-57
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
NOTE 7PROPERTY AND EQUIPMENT
Components of property and equipment included in the consolidated balance sheets at December 31, 2005 and 2004 follow:
December 31, | ||||||||
2005 | 2004 | |||||||
Land |
$ | 1,383,911 | $ | 750,614 | ||||
Building |
1,872,135 | 1,872,135 | ||||||
Furniture, equipment |
625,223 | 572,967 | ||||||
Property and equipment, gross |
3,881,269 | 3,195,716 | ||||||
Deduct: |
||||||||
Accumulated depreciation |
(548,255 | ) | (394,749 | ) | ||||
Property and equipment, net |
$ | 3,333,014 | $ | 2,800,967 | ||||
Depreciation expense for the years ended December 31, 2005 and 2004 amounted to $153,506 and $140,707, respectively. Depreciation is charged to operations over the estimated useful lives of the assets. The estimated useful lives and methods of depreciation for the principal items follow:
Type of Asset |
Life in Years | Depreciation Method | ||
Furniture and equipment |
3 to 7 | Straight-line | ||
Building |
5 to 40 | Straight-line |
At December 31, 2005 and 2004, included under Land in the above table are investments in the amount of $1,180,125 and $546,828, respectively. The investments relate to two (2005) and one (2004) tracts of land that the Company intends to utilize for future expansion.
NOTE 8COMMITMENTS AND CONTINGENCIES
In the normal course of business, there are various outstanding commitments to extend credit in the form of unused loan commitments and standby letters of credit that are not reflected in the consolidated financial statements. Since commitments may expire without being exercised, these amounts do not necessarily represent future funding requirements. The Company uses the same credit and collateral policies in making commitments as those it uses in making loans.
At December 31, 2005 and 2004, the Company had unused loan commitments of approximately $10,019,119 and $6,094,763, respectively. Additionally, standby letters of credit of approximately $176,920 and $344,087 were outstanding at December 31, 2005 and 2004, respectively. The majority of these commitments are collateralized by various assets. No material losses are anticipated as a result of these transactions.
The Company and its subsidiary are subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of the Company and its subsidiary.
On July 27, 1999, the Company entered into an employment agreement (the Agreement) with its President and Chief Executive Officer (the CEO) regarding his employment with the Company and the Bank. Upon
D-58
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
expiration of the initial term of the Agreement in July 2004, the Agreement automatically renewed for additional two-year terms unless either party notified the other of its intent not to renew at least 180 days prior to the then-current term. On November 15, 2005, pursuant to the terms of the Agreement, the Company terminated the CEOs employment. Under the Agreement, the CEO received an annual salary and bonus if certain performance criteria were met. He was also provided with an automobile, life insurance coverage, club dues, retirement, medical and other benefit programs.
Please refer to Note 14 concerning warrants and options earned by directors and Bank personnel.
NOTE 9BORROWINGS
During calendar year 2005 and 2004, the Bank obtained funds, in the form of borrowings, from the Federal Home Loan Bank (the FHLB). These borrowings are secured by specific first lien residential mortgages held by the Bank. Additional information on the advances are provided below:
Outstanding Borrowings December 31, |
Interest Rate |
First Possible
Interest
|
Is
Principal
|
Maturity Date |
|||||||||
2005 | 2004 | ||||||||||||
$ | 700,000 | $ | 700,000 | 4.42 | % | Monthly | No | 9/14/06 | |||||
1,000,000 | 1,000,000 | 3.64 | % | N/A | No | 9/24/08 | |||||||
| 500,000 | 2.32 | % | N/A | No | 12/22/05 | |||||||
$ | 1,700,000 | $ | 2,200,000 | N/A | N/A | N/A | N/A | ||||||
Note that the interest rate on the $700,000 advance adjusts monthly and is 4.42% as of
NOTE 10DEPOSITS
The following details deposit accounts at December 31, 2005 and 2004:
December 31, | ||||||
2005 | 2004 | |||||
Non-interest bearing deposits |
$ | 6,518,928 | $ | 4,378,127 | ||
Interest bearing deposits: |
||||||
NOW accounts |
2,697,994 | 2,055,427 | ||||
Money market accounts |
4,764,716 | 4,383,644 | ||||
Savings |
877,809 | 675,421 | ||||
Time, less than $ 100,000 |
29,927,537 | 19,604,665 | ||||
Time, $100,000 and over |
13,348,116 | 9,030,032 | ||||
Total interest bearing deposits |
51,616,172 | 35,749,189 | ||||
Total deposits |
$ | 58,135,100 | $ | 40,127,316 | ||
D-59
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
At December 31, 2005, the scheduled maturities of all certificates of deposit were as follows:
Year Ending December 31, |
Amount | ||
2006 |
$ | 26,588,958 | |
2007 |
14,548,823 | ||
2008 |
1,911,352 | ||
2009 |
223,858 | ||
2010 |
2,662 | ||
Total |
$ | 43,275,653 | |
NOTE 11INTEREST ON DEPOSITS AND BORROWINGS
A summary of interest expense for the years ended December 31, 2005 and 2004 follows:
December 31, | ||||||
2005 | 2004 | |||||
NOW accounts |
$ | 30,826 | $ | 24,026 | ||
Money market accounts |
97,035 | 58,407 | ||||
Savings |
7,949 | 6,108 | ||||
Time, less than $ 100,000 |
834,459 | 447,335 | ||||
Time, $100,000 and over |
360,520 | 183,773 | ||||
Other borrowings |
73,300 | 57,035 | ||||
Total interest on deposits and other borrowings |
$ | 1,404,089 | $ | 776,684 | ||
NOTE 12OTHER OPERATING EXPENSES
A summary of other operating expenses for the years ended December 31, 2005 and 2004 follows:
NOTE 13INCOME TAXES
As of December 31, 2005 and 2004, the Companys provision for income taxes consisted of the following:
December 31, | ||||||
2005 | 2004 | |||||
Current |
$ | 129,129 | $ | | ||
Deferred |
69,038 | 94,434 | ||||
Federal income tax expense |
$ | 198,167 | $ | 94,434 | ||
D-60
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
The Companys provision for income taxes differs from the amounts computed by applying the federal income tax statutory rates to income before income taxes. A reconciliation of federal statutory income taxes to the Companys actual income tax provision follows:
The tax effects of the temporary differences that comprise the net deferred tax assets at December 31, 2005, and 2004 are presented below:
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the projection for future taxable income over the periods which the temporary differences resulting in the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of those deductible differences, net of the existing valuation allowance at December 31, 2005.
NOTE 14RELATED PARTY TRANSACTIONS
Directors Warrants. The Directors of the Company received an aggregate total of 210,115 stock warrants, or approximately one stock warrant for each one share of the Companys common stock purchased by the directors in the initial public offering. Each warrant entitles its holder to purchase one share of the Companys common stock for $10.00. As of December 31, 2005, all warrants were fully vested. All unexercised warrants will expire on July 8, 2011. During calendar years 2005 and 2004, no warrants were granted, exercised, or forfeited. There were 200,105 warrants outstanding at December 31, 2005 and 2004.
D-61
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
Options. The Company has a stock option plan with 97,905 shares of options authorized. During calendar year 2005, 1,000 stock options were granted at an exercise price of $10.00 per share and with a vesting period of three years. In addition, 5,000 stock options were granted at an exercise price of $11.00 per share and with an immediate vesting. No stock options were granted during calendar year 2004. During calendar years 2005 and 2004, no stock options were exercised. In calendar year 2005, 19,581 options were forfeited. No stock options were forfeited during calendar year 2004. Of the 54,500 stock options granted since inception, 34,919 are outstanding and 27,280 are fully vested at December 31, 2005. The average exercise price of an option as of December 31, 2005 and 2004 is $10.14 and $10.00, respectively. At December 31, 2005 and 2004, 62,986 and 49,405 options, respectively, were available for grant.
Borrowings and Deposits by Directors and Executive Officers. Certain directors, principal officers and companies with which they are affiliated are customers of and have banking transactions with the Bank in the ordinary course of business. As of December 31, 2005 and 2004, loans outstanding to directors, their related interests and executive officers aggregated $3,499,034 and $2,818,192, respectively. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with unrelated parties. In the opinion of management, loans to related parties did not involve more than normal credit risk or present other unfavorable features.
A summary of the related party loan transactions during the calendar years 2005 and 2004 follows:
Deposits by directors and their related interests, as of December 31, 2005 and 2004 approximated $1,178,711 and $598,407, respectively.
NOTE 15CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer loans to customers in Beaufort County, South Carolina, and surrounding counties. The ability of the majority of the Companys customers to honor their contractual loan obligations is dependent on economic conditions prevailing at the time in Beaufort County and the surrounding counties.
Approximately 79.4% of the Companys loan portfolio is concentrated in loans secured by real estate, of which a substantial portion is secured by real estate in the Companys primary market area. Accordingly, the ultimate collectibility of the loan portfolio is susceptible to changes in market conditions in the Companys primary market area. The other significant concentrations of credit by type of loan are set forth under Note 5.
The Company, as a matter of policy, does not generally extend credit to any single borrower or group of related borrowers in excess of 15% of the Banks statutory capital, or approximately $970,000.
D-62
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
NOTE 16REGULATORY MATTERS
The Company is governed by various regulatory agencies. The FRB regulates bank holding companies and their nonbanking subsidiaries. National banks are primarily regulated by the OCC. The FDIC also regulates all federally-insured banks. The Companys banking subsidiary includes a national bank, which is insured by the FDIC.
Various requirements and restrictions under federal and state laws regulate the operations of the Company. These laws, among other things, require the maintenance of reserves against deposits, impose certain restrictions on the nature and terms of the loans, restrict investments and other activities, and regulate mergers and the establishment of branches and related operations. The ability of the parent company to pay cash dividends to its shareholders and service debt may be dependent upon cash dividends from its subsidiary bank. The subsidiary bank is subject to limitations under federal law in the amount of dividends it may declare. At December 31, 2005, none of the subsidiary banks capital accounts was available for dividend declaration without prior regulatory approval.
The banking industry is also affected by the monetary and fiscal policies of regulatory authorities, including the FRB. Through open market securities transactions, variations in the discount rate, the establishment of reserve requirements and the regulation of certain interest rates payable by member banks, the FRB exerts considerable influence over the cost and availability of funds obtained for lending and investing. Changes in interest rates, deposit levels and loan demand are influenced by the changing conditions in the national economy and in the money markets, as well as the effect of actions by monetary and fiscal authorities. Pursuant to the FRBs reserve requirements, the Bank was required to maintain certain cash reserves in the amount of $50,000 at December 31, 2005.
The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Companys financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the companys assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.
Qualitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes that the Company and the Bank, as of December 31, 2005, meet all capital adequacy requirements to which they are subject.
As of December 31, 2005, the Bank was considered to be Well Capitalized. There are no conditions or events since December 31, 2005 that management believes have changed the Banks Well Capitalized category. To be categorized as Adequately Capitalized or Well Capitalized, the Bank must maintain the following capital ratios:
Adequately
Capitalized |
Well
Capitalized |
|||||
Total risk-based capital ratio |
8.0 | % | 10.0 | % | ||
Tier 1 risk-based capital ratio |
4.0 | % | 6.0 | % | ||
Tier 1 leverage ratio |
4.0 | % | 5.0 | % |
D-63
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
The Companys and the Banks actual capital amounts and ratios are presented in the following table:
(Dollars in thousands) |
Actual | Minimum Regulatory Capital Guidelines for Banks | ||||||||||||||||||||||
Adequately Capitalized | Well Capitalized | |||||||||||||||||||||||
AMOUNT | RATIO | AMOUNT | RATIO | AMOUNT | RATIO | |||||||||||||||||||
AS OF DECEMBER 31, 2005: |
||||||||||||||||||||||||
Total capital-risk-based (to risk-weighted assets): |
||||||||||||||||||||||||
Bank |
$ | 6,477 | 11.7 | % | $ | 4,418 | ³ | 8 | % | $ | 5,523 | ³ | 10 | % | ||||||||||
Consolidated |
6,504 | 11.8 | % | 4,418 | ³ | 8 | % | N/A | ³ | N/A | ||||||||||||||
Tier 1 capital-risk-based (to risk-weighted assets): |
||||||||||||||||||||||||
Bank |
$ | 5,798 | 10.5 | % | $ | 2,209 | ³ | 4 | % | $ | 3,314 | ³ | 6 | % | ||||||||||
Consolidated |
5,825 | 10.5 | % | 2,209 | ³ | 4 | % | N/A | N/A | |||||||||||||||
Tier 1 capital-leverage (to average assets): |
||||||||||||||||||||||||
Bank |
$ | 5,798 | 9.1 | % | $ | 2,556 | ³ | 4 | % | $ | 3,195 | ³ | 5 | % | ||||||||||
Consolidated |
5,825 | 9.1 | % | 2,556 | ³ | 4 | % | N/A | N/A |
(Dollars in thousands) |
Actual | Minimum Regulatory Capital Guidelines for Banks | ||||||||||||||||||||||
Adequately Capitalized | Well Capitalized | |||||||||||||||||||||||
AMOUNT | RATIO | AMOUNT | RATIO | AMOUNT | RATIO | |||||||||||||||||||
AS OF DECEMBER 31, 2004: |
||||||||||||||||||||||||
Total capital-risk-based (to risk-weighted assets): |
||||||||||||||||||||||||
Bank |
$ | 5,646 | 13.8 | % | $ | 3,266 | ³ | 8 | % | $ | 4,082 | ³ | 10 | % | ||||||||||
Consolidated |
5,674 | 13.9 | % | 3,266 | ³ | 8 | % | N/A | ³ | N/A | ||||||||||||||
Tier 1 capital-risk-based (to risk-weighted assets): |
||||||||||||||||||||||||
Bank |
$ | 5,158 | 12.6 | % | $ | 1,633 | ³ | 4 | % | $ | 2,449 | ³ | 6 | % | ||||||||||
Consolidated |
5,186 | 12.7 | % | 1,633 | ³ | 4 | % | N/A | ³ | N/A | ||||||||||||||
Tier 1 capital-leverage (to average assets): |
||||||||||||||||||||||||
Bank |
$ | 5,158 | 10.9 | % | $ | 1,885 | ³ | 4 | % | $ | 2,357 | ³ | 5 | % | ||||||||||
Consolidated |
5,186 | 11.0 | % | 1,885 | ³ | 4 | % | N/A | N/A |
NOTE 17DIVIDENDS
The primary source of funds available to the Company to pay cash dividends and other expenses is from the Bank. Bank regulatory authorities impose restrictions on the amounts of dividends that may be declared by the Bank. For example, the Bank may not pay cash dividends until it is cumulatively profitable. Cash dividends to shareholders are not expected for the foreseeable future.
D-64
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
NOTE 18PARENT COMPANY FINANCIAL INFORMATION
This information should be read in conjunction with the other notes to the consolidated financial statements.
Parent Company Balance Sheets
December 31, | ||||||||
2005 | 2004 | |||||||
Assets: |
||||||||
Cash |
$ | 27,566 | $ | 27,837 | ||||
Investment in Bank |
5,775,623 | 5,238,196 | ||||||
Total Assets |
$ | 5,803,189 | $ | 5,266,033 | ||||
Liabilities and Shareholders Equity: |
||||||||
Total Liabilities |
$ | | $ | | ||||
Shareholders Equity: |
||||||||
Common stock |
6,213,061 | 6,213,061 | ||||||
Retained (deficit) |
(387,558 | ) | (927,289 | ) | ||||
Accumulated other comprehensive income |
(22,314 | ) | (19,739 | ) | ||||
Total Shareholders equity |
5,803,189 | 5,266,033 | ||||||
Total Liabilities and Shareholders equity |
$ | 5,803,189 | $ | 5,266,033 | ||||
Parent Company Statements of Operations
Year Ended December 31, | |||||||
2005 | 2004 | ||||||
Income: |
|||||||
Interest income |
$ | 429 | $ | 305 | |||
Total revenues |
429 | 305 | |||||
Expenses: |
|||||||
Total expenses |
700 | | |||||
Income/(loss) before equity in undistributed earnings of Bank |
(271 | ) | 305 | ||||
Equity in undistributed earnings of Bank |
540,002 | 148,543 | |||||
Net income |
$ | 539,731 | $ | 148,848 | |||
D-65
ISLANDS BANCORP
BEAUFORT, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004(Continued)
Parent Company Statements of Cash Flows
Year Ended December 31, | ||||||||
2005 | 2004 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 539,731 | $ | 148,848 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Equity in undistributed earnings of Bank |
(540,002 | ) | (148,543 | ) | ||||
Net cash used by operating activities |
(271 | ) | 305 | |||||
Cash flows from investing activities: |
||||||||
Net cash from investing activities |
| | ||||||
Cash flows from financing activities: |
||||||||
Net cash from financing activities |
| | ||||||
Net (decrease)/increase in cash and cash equivalents |
(271 | ) | 305 | |||||
Cash and cash equivalents, beginning of the year |
27,837 | 27,532 | ||||||
Cash and cash equivalents, end of year |
$ | 27,566 | $ | 27,837 | ||||
D-66
CORPORATE AND SHAREHOLDER INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS
LOUIS O. DORE Attorney Louis O. Dore, P.A. |
J. FRANK WARD Realtor SCN Realty |
|
MARTHA B. FENDER President and Business Owner Coastal Carolina Realty, Inc. |
PAUL M. DUNNAVANT, III Chief Financial Officer Holmes Timber, Inc. & Atlantic Coast Homes, Inc. |
|
D. MARTIN GOODMAN Restaurateur Area Manager University of South Carolina Small Business Development Center |
DARYL A. FERGUSON Investor |
|
STANCEL E. KIRKLAND, SR., ESQ. Business Owner Managing Member of Bull Point Plantation
EDWARD J. MCNEIL, JR., MD President and Physician Internal Medicine Healthcare, P.A.
CAROL J. NELSON Senior Vice President Chief Financial Officer Islands Bancorp
FRANCES K. NICHOLSON Managing Partner Nicholson Investments, LLC |
JOHN R. PERRILL Acting Chief Executive Officer Islands Bancorp
CARL E. LIPSCOMB Realtor Hilton Head Luxury Homes
JIMMY LEE MULLINS, SR. President and Chief Executive Officer Mullins Trucking Company, Inc.
NARAYAN SHENOY, MD Partner & Anesthesiologist Critical Health Systems, Inc.
BRUCE K. WYLES, DDS Dentist |
COPIES OF FORM 10-KSB
A copy of the Companys 2005 Annual Report on Form 10-KSB can be obtained free of charge on the Securities and Exchange Commissions website (www.sec.gov) or by calling Ms. Carol Nelson at the Bank at (843) 521-1968.
MARKET FOR THE COMPANYS COMMON STOCK
There is no public market for the Companys common stock. Very few trades took place during calendar year 2005 and 2004. During 2005 and 2004 all trades known to management were at $10.00 per share, with the exception of one trade which took place on December 8, 2005 at $11.00 per share.
D-67
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission File No. 33-31013 - A
ISLANDS BANCORP
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
South Carolina | 57-1082388 | |
(State of incorporation) |
(I.R.S. Employer Identification No.) |
2348 Boundary Street, Beaufort SC 29902
(Address of principal executive offices)
(843) 521-1968
(Issuers telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x
State the number of shares outstanding of each of the issuers classes of common equity as of the latest practicable date:
740,260 SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE, ON AUGUST 8, 2006
Transitional Small Business Disclosure Format (check one): Yes ¨ No x
INDEX
E-2
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JUNE 30, 2006 |
DECEMBER 31,
2005 |
|||||||
(UNAUDITED) | ||||||||
ASSETS |
||||||||
Cash and cash equivalents |
||||||||
Cash and due from banks |
$ | 1,240 | $ | 871 | ||||
Interest bearing deposits in banks |
103 | 134 | ||||||
Federal funds sold |
156 | 4,835 | ||||||
Total cash and cash equivalents |
1,499 | 5,840 | ||||||
Securities available for sale |
3,123 | 2,269 | ||||||
Nonmarketable equity securities, at cost |
392 | 356 | ||||||
Total securities |
3,515 | 2,625 | ||||||
Loans |
61,072 | 54,310 | ||||||
Less allowance for loan losses |
736 | 679 | ||||||
Loans, net |
60,336 | 53,631 | ||||||
Premises and equipment, net |
3,269 | 3,333 | ||||||
Other assets |
674 | 778 | ||||||
Total assets |
$ | 69,293 | $ | 66,207 | ||||
LIABILITIES |
||||||||
Deposits |
||||||||
Noninterest bearing |
$ | 7,767 | $ | 6,519 | ||||
Interest bearing |
52,299 | 51,616 | ||||||
Total deposits |
60,066 | 58,135 | ||||||
Other borrowings |
1,700 | 1,700 | ||||||
Other liabilities |
592 | 569 | ||||||
Total liabilities |
62,358 | 60,404 | ||||||
SHAREHOLDERS EQUITY |
||||||||
Common stock, zero par value; 10,000,000 shares authorized, 740,260 and 652,705 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively |
7,089 | 6,213 | ||||||
Retained deficit |
(119 | ) | (388 | ) | ||||
Accumulated other comprehensive income (loss) |
(35 | ) | (22 | ) | ||||
Total shareholders equity |
6,935 | 5,803 | ||||||
Total liabilities and shareholders equity |
$ | 69,293 | $ | 66,207 | ||||
See notes to condensed consolidated financial statements.
E-3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005 (UNAUDITED)
(DOLLARS IN THOUSANDS)
See notes to condensed consolidated financial statements.
E-4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005 (UNAUDITED)
(DOLLARS IN THOUSANDS)
COMMON STOCK |
RETAINED
DEFICIT |
ACCUMULATED
OTHER COMPREHENSIVE INCOME |
TOTAL | ||||||||||||||
SHARES | AMOUNT | ||||||||||||||||
BALANCE, DECEMBER 31, 2004 |
652,705 | $ | 6,213 | $ | (927 | ) | $ | (20 | ) | $ | 5,266 | ||||||
Net income |
| | 245 | | 245 | ||||||||||||
Other comprehensive income |
| | | 6 | 6 | ||||||||||||
Comprehensive income |
| | 245 | 6 | 251 | ||||||||||||
BALANCE, JUNE 30, 2005 |
652,705 | $ | 6,213 | $ | (682 | ) | $ | (14 | ) | $ | 5,517 | ||||||
BALANCE, DECEMBER 31, 2005 |
652,705 | $ | 6,213 | $ | (388 | ) | $ | (22 | ) | $ | 5,803 | ||||||
Net income |
| | 254 | | 254 | ||||||||||||
Other comprehensive income |
| | | (13 | ) | (13 | ) | ||||||||||
Comprehensive income |
| | 254 | (13 | ) | 241 | |||||||||||
Stock-based compensation |
| | 15 | | 15 | ||||||||||||
Exercise of director warrants |
87,555 | 876 | | | 876 | ||||||||||||
BALANCE, JUNE 30, 2006 |
740,260 | $ | 7,089 | $ | (119 | ) | $ | (35 | ) | $ | 6,935 | ||||||
See notes to condensed consolidated financial statements.
E-5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005 (UNAUDITED)
(DOLLARS IN THOUSANDS)
See notes to condensed consolidated financial statements.
E-6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with the requirements for interim financial statements and, accordingly, they are condensed and omit disclosures which would substantially duplicate those contained in the most recent annual report on Form 10-KSB. The financial statements, as of June 30, 2006 and for the interim periods ended June 30, 2006 and 2005, are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation. The financial information as of December 31, 2005 has been derived from the audited financial statements as of that date. For further information, refer to the financial statements and the notes included in the Companys Annual Report on Form 10-KSB for the year ended December 31, 2005.
NOTE 2RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The following is a summary of recent authoritative pronouncements that could impact the accounting, reporting, and/or disclosure of financial information by the Company.
In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 155, Accounting for Certain Hybrid Financial Instrumentsan amendment of FASB Statements No. 133 and 140. This Statement amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The Company does not believe that the adoption of SFAS No. 155 will have a material impact on its financial position, results of operations and cash flows.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assetsan amendment of FASB Statement No. 140. This Statement amends FASB No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract; requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable; permits an entity to choose its subsequent measurement methods for each class of separately recognized servicing assets and servicing liabilities; at its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under SFAS No. 115, provided that the available-for-sale securities are identified in some manner as offsetting the entitys exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value; and requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. An entity should adopt SFAS No. 156 as of the beginning of its first fiscal year that begins after September 15, 2006. The Company does not believe the adoption of SFAS No. 156 will have a material impact on its financial position, results of operations and cash flows.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Companys financial position, results of operations and cash flows.
E-7
ISLANDS BANCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
NOTE 3STOCK-BASED COMPENSATION
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), Accounting for Stock-Based Compensation, to account for compensation costs under its stock option plan. The Company previously utilized the intrinsic value method under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (as amended) (APB 25). Under the intrinsic value method prescribed by APB 25, no compensation costs were recognized for the Companys stock options because the option exercise price in its plan equals the market price on the date of grant. Prior to January 1, 2006, the Company only disclosed the pro forma effects on net income and earnings per share as if the fair value recognition provisions of SFAS 123(R) had been utilized.
In adopting SFAS No. 123, the Company elected to use the modified prospective method to account for the transition from the intrinsic value method to the fair value recognition method. Under the modified prospective method, compensation cost is recognized from the adoption date forward for all new stock options granted and for any outstanding unvested awards as if the fair value method had been applied to those awards as of the date of grant. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period (in thousands, except per share amounts).
E-8
ISLANDS BANCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
NOTE 4EARNINGS PER SHARE
A reconciliation of the numerators and denominators used to calculate basic and diluted earnings per share for the three and six month periods ended June 30, 2006 and 2005 are as follows (in thousands, except share and per share amounts):
THREE MONTHS ENDED JUNE 30, 2006 | ||||||||
INCOME
(NUMERATOR) |
SHARES
(DENOMINATOR) |
PER SHARE
AMOUNT |
||||||
BASIC EARNINGS PER SHARE |
||||||||
Income available to common shareholders |
$ | 139 | 740,260 | $ | 0.19 | |||
EFFECT OF DILUTIVE SECURITIES |
||||||||
Stock options and warrants |
| 43,052 | ||||||
DILUTED EARNINGS PER SHARE |
||||||||
Income available to common shareholders plus assumed conversions |
$ | 139 | 783,312 | $ | 0.18 | |||
THREE MONTHS ENDED JUNE 30, 2005 | ||||||||
INCOME
(NUMERATOR) |
SHARES
(DENOMINATOR) |
PER SHARE
AMOUNT |
||||||
BASIC EARNINGS PER SHARE |
||||||||
Income available to common shareholders |
$ | 120 | 652,705 | $ | 0.18 | |||
EFFECT OF DILUTIVE SECURITIES |
||||||||
Stock options and warrants |
| | ||||||
DILUTED EARNINGS PER SHARE |
||||||||
Income available to common shareholders plus assumed conversions |
$ | 120 | 652,705 | $ | 0.18 | |||
E-9
ISLANDS BANCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2006 | ||||||||
INCOME
(NUMERATOR) |
SHARES
(DENOMINATOR) |
PER SHARE
AMOUNT |
||||||
BASIC EARNINGS PER SHARE |
||||||||
Income available to common shareholders |
$ | 254 | 711,848 | $ | 0.36 | |||
EFFECT OF DILUTIVE SECURITIES |
||||||||
Stock options and warrants |
| 40,383 | ||||||
DILUTED EARNINGS PER SHARE |
||||||||
Income available to common shareholders plus assumed conversions |
$ | 254 | 752,231 | $ | 0.34 | |||
NOTE 5COMPREHENSIVE INCOME
Comprehensive income includes net income and other comprehensive income, which is defined as nonowner related transactions in equity. The following table sets forth the amounts of other comprehensive income included in equity along with the related tax effect for the three and six month periods ended June 30, 2006 and 2005 (in thousands):
THREE MONTHS ENDED JUNE 30, 2006 | |||||||||||
PRE-TAX
AMOUNT |
(EXPENSE)
BENEFIT |
NET-OF-TAX
AMOUNT |
|||||||||
Unrealized gains (losses) on securities: |
|||||||||||
Unrealized holding gains (losses) arising during the period |
$ | (17 | ) | $ | 6 | $ | (11 | ) | |||
Plus: reclassification adjustment for gains (losses) realized in net income |
| | | ||||||||
Net unrealized gains (losses) on securities |
(17 | ) | 6 | (11 | ) | ||||||
Other comprehensive income (loss) |
$ | (17 | ) | $ | 6 | $ | (11 | ) | |||
E-10
ISLANDS BANCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2005 | |||||||||
PRE-TAX
AMOUNT |
(EXPENSE)
BENEFIT |
NET-OF-TAX
AMOUNT |
|||||||
Unrealized gains (losses) on securities: |
|||||||||
Unrealized holding gains (losses) arising during the period |
$ | | $ | | $ | | |||
Plus: reclassification adjustment for gains (losses) realized in net income |
| | | ||||||
Net unrealized gains (losses) on securities |
| | | ||||||
Other comprehensive income |
$ | | $ | | $ | | |||
Accumulated other comprehensive income consists solely of the unrealized gain (loss) on securities
NOTE 6STOCK BASED COMPENSATION PLAN
On March 19, 2002, the Company established the Islands Bancorp 2002 Stock Incentive Plan (Stock Plan) that provides for the granting of options to purchase up to 97,905 shares of the Companys common stock to directors, officers, or employees of the Company. The per-share exercise price of the stock options granted is determined by the Stock Plans Administrative Committee. As of June 30, 2006, there were 57,036 shares available for grant.
During the six months ended June 30, 2006, there were 1,000 options granted with an exercise price of $11.00 and a vesting period of three years, and 4,950 options granted with an exercise price of $11.00 which were fully vested on July 1, 2006.
E-11
ISLANDS BANCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
Fair values were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for the 2006 and 2005 grants:
2006 | 2005 | |||||
Dividend yield |
0.00 | % | 0.00 | % | ||
Expected volatility |
5.00 | % | 12.00 | % | ||
Risk-free interest rate |
4.29 | % | 4.25 | % | ||
Expected life |
10 | 10 |
The following is a summary of the activity under the Stock Plan for the three months ending June 30, 2006:
Three Months Ended June 30, 2006 |
Options |
Weighted Avg. Exercise Price |
|||
Balance at April 1, 2006 |
40,869 | $ | 10.27 | ||
Granted |
| | |||
Exercised |
| | |||
Cancelled |
| | |||
Balance at June 30, 2006 |
40,869 | $ | 10.27 | ||
Options Exercisable at June 30, 2006 |
27,614 | $ | 10.18 |
The following is a summary of the activity under the Stock Plan for the six months ending June 30, 2006:
Six Months Ended June 30, 2006 |
Options |
Weighted Avg. Exercise Price |
|||
Balance at January 1, 2006 |
34,919 | $ | 10.14 | ||
Granted |
5,950 | $ | 11.00 | ||
Exercised |
| | |||
Cancelled |
| | |||
Balance at June 30, 2006 |
40,869 | $ | 10.27 | ||
Options Exercisable at June 30, 2006 |
27,614 | $ | 10.18 |
The Directors of the Company received an aggregate total of 200,105 stock warrants, or approximately one stock warrant for each one share of the Companys common stock purchased by the directors in the initial public offering. Each warrant entitles its holder to purchase one share of the Companys common stock for $10.00. As of June 30, 2006, all warrants were fully vested. All unexercised warrants will expire on July 6, 2011.
During the six months ending June 30, 2006, 87,555 warrants were exercised at an average exercise price of $10.00. There were no warrants exercised during the six months ending June 30, 2005. No warrants were granted or forfeited in either year. There were 112,550 warrants outstanding at June 30, 2006.
E-12
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is a discussion of the Companys financial condition as of June 30, 2006 compared to December 31, 2005, and the results of operations for the three and six months ended June 30, 2006 compared to the same periods in 2005. This discussion should be read in conjunction with our condensed financial statements and accompanying notes appearing in this report and in conjunction with the financial statements and related notes and disclosures in our Annual Report on Form 10-KSB for the year ended December 31, 2005. This report contains forward-looking statements relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of management, as well as assumptions made by and information currently available to management. The words expect, estimate, anticipate, believe, project, intend, plan, and similar expressions are intended to identify forward-looking statements. Our actual results may differ materially from the results discussed in the forward-looking statements, and our operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in our filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
NET INTEREST INCOME
For the six months ended June 30, 2006, net interest income, the major component of net income, increased $370,000, or 33%, to $1,487,000 as compared to $1,117,000 for the same period in 2005. Interest and fee income from loans increased $667,000, or 40%, for the six months ended June 30, 2006 compared to the same period in 2005. Average loans outstanding were $56,852,000 for the first six months of 2006 compared to $45,879,000 for the same period in 2005. In addition, loan portfolio yields increased from 7.31% for the first six months of 2005 to 8.26% for the same period in 2006 due to the rising interest rate environment during this time. Interest expense for the six months ended June 30, 2006 was $985,000 as compared to $608,000 for the same period in 2005. Average interest-bearing liabilities increased from $43,797,000 during the first six months of 2005 to $55,331,000 for the same period in 2006. The average rate paid on interest-bearing liabilities increased from 2.80% during the first six months of 2005 to 3.60% for the same period in 2006. The interest rate spread, which is the difference between the yield on earning assets and the rate paid on liabilities, was 4.26% for the six months ended June 30, 2006, compared to 4.01% for the same period in 2005. The net interest margin, which is net interest income divided by average earning assets, was 4.72% for the first six months of 2006 compared to 4.41% for the same period in 2005.
For the three months ended June 30, 2006, net interest income increased $219,000, or 38%, to $789,000 as compared to $570,000 for the same period in 2005. Interest and fee income from loans increased $356,000, or 41%, for the three months ended June 30, 2006 compared to the same period in 2005 as the Bank continued to experience growth in the loan portfolio along with an increase in the average yield on loans. Average loans outstanding were $47,440,000 during the second quarter of 2005 compared to $57,569,000 for the same period in 2006. Interest expense for the three months ended June 30, 2006 was $500,000 as compared to $328,000 for the same period in 2005. Average interest-bearing liabilities increased from $45,473,000 during the second quarter of 2005 to $54,968,000 for the same period in 2006, along with an increase in the average rate paid.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses is the charge to operating earnings that management believes is necessary to maintain the allowance for loan losses at an adequate level to reflect the losses inherent in the loan portfolio. For the six months ended June 30, 2006, the provision charged to expense was $63,000, as compared to $115,000 for the same period in 2005. For the three months ended June 30, 2006, the provision charged to expense was $20,000, as compared to $58,000 for the same period in 2005. The allowance for loan losses represents 1.21% of gross loans at June 30, 2006 compared to 1.23% at June 30, 2005.
E-13
There are risks inherent in making all loans, including risks with respect to the period of time over which loans may be repaid, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral. The Company maintains an allowance for loan losses based on, among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Managements judgment about the adequacy of the allowance is based upon a number of estimates and assumptions about present conditions and future events which are believed to be reasonable, but which may not prove to be accurate. Thus, there is a risk that charge-offs in future periods could exceed the allowance for loan losses or that substantial additional increases in the allowance for loan losses could be required. Additions to the allowance for loan losses would result in a decrease of net income and possibly capital.
NONINTEREST INCOME
Noninterest income for the six months ended June 30, 2006 was $214,000, a decrease of $34,000 from the comparable period in 2005. Service charges on deposit accounts totaled $74,000 for the six months ended June 30, 2006, as compared to $85,000 for the same period in 2005. The decrease in service charges was primarily due to a decrease in overdraft and NSF fees. Gains on sales of loans decreased by $37,000 and totaled $52,000 for the six months ended June 30, 2006 compared to $89,000 for the comparable period in 2005. The decrease is due to a reduction in gains on sales of SBA loans combined with an increase in mortgage loans closed in the brokers name. Other income increased by $14,000 and totaled $88,000 for the six months ended June 30, 2006 compared to $74,000 for the comparable period in 2005. The increase was primarily due to an increase in secondary market mortgage broker fees, partially offset by a decrease in SBA servicing income.
Noninterest income for the three months ended June 30, 2006 was $99,000, a decrease of $1,000 from the comparable period in 2005. Service charges on deposit accounts totaled $37,000 for the three months ended June 30, 2006, as compared to $40,000 for the same period in 2005, with the decrease due to a reduction in overdraft and NSF fees. Gains on sales of loans decreased by $27,000 and totaled $19,000 for the three months ended June 30, 2006 compared to $46,000 for the comparable period in 2005, with the decrease due to a reduction in gains on sales of SBA loans combined with an increase in mortgage loans closed in the brokers name. Other income increased by $31,000 and totaled $43,000 for the three months ended June 30, 2006 compared to $12,000 for the comparable period in 2005, with the increase primarily due to an increase in secondary market mortgage broker fees.
NONINTEREST EXPENSE
Noninterest expense for the six months ended June 30, 2006 was $1,226,000, an increase of $353,000 from the comparable period in 2005. Salaries and employee benefits totaled $603,000 for the six months ended June 30, 2006, an increase of $95,000 from the comparable period in 2005. The increase was primarily due to an increase in the number of employees, normal salary increases and increases in employee benefits expense. In addition, in 2006 the Company recorded $15,000 in compensation expense related to stock options as discussed in Note 3 above. Net occupancy expense totaled $140,000 for the six months ended June 30, 2006, an increase of $32,000 from the comparable period in 2005. The increase was primarily due to increased depreciation expense and increases in maintenance and repairs. Other noninterest expense totaled $483,000 for the six months ended June 30, 2006, an increase of $226,000 from the comparable period in 2005. The increase was primarily due to increases in data processing and advertising expenses as a result of the Banks growth, increases in other professional services such as technology support, and an increase in legal fees related to advice regarding changes in our executive management team, strategic planning, and preparation and review of additional filings with the SEC.
Noninterest expense for the three months ended June 30, 2006 was $643,000, an increase of $221,000 from the comparable period in 2005. Salaries and employee benefits totaled $321,000 for the three months ended June 30, 2006, an increase of $73,000 from the comparable period in 2005. The increase was primarily due to increases in the number of employees, salary increases, increased employee benefits expense and compensation
E-14
expense related to stock options. Net occupancy expense totaled $72,000 for the three months ended June 30, 2006, an increase of $17,000 from the comparable period in 2005, with the increase primarily due to increased depreciation expense and increases in maintenance and repairs. Other noninterest expense totaled $250,000 for the three months ended June 30, 2006, an increase of $131,000 from the comparable period in 2005. The increase was again primarily due to increases in data processing, advertising, technology support and legal fees.
INCOME TAXES
Income tax expense for the six months ended June 30, 2006 was $158,000 as compared to $132,000 for the same period in 2005. Income tax expense for the three months ended June 30, 2006 was $86,000 as compared to $68,000 for the same period in 2005. All of the Companys net operating losses have been utilized for tax purposes, and the Company is now fully taxable for both Federal and state income tax purposes.
NET INCOME
The combination of the above factors resulted in net income for the six months ended June 30, 2006 of $254,000 as compared to net income of $245,000 for the same period in 2005. For the three months ended June 30, 2006, net income was $139,000 as compared to $120,000 for the same period in 2005.
FINANCIAL CONDITION
ASSETS AND LIABILITIES
During the first six months of 2006, total assets increased $3,086,000, or 4.7%, when compared to December 31, 2005. The primary growth in assets was composed of an increase in loans of $6,762,000, or 12.5%, during the first six months of 2006. Total deposits increased $1,931,000, or 3.3%, from December 31, 2005 to June 30, 2006. Federal funds sold decreased by $4,679,000 during the first six months of 2006 in order to fund the increase in loans in excess of deposit growth.
INVESTMENT SECURITIES
Securities available for sale increased from $2,269,000 at December 31, 2005 to $3,123,000 at June 30, 2006 primarily due to the purchase of SCM securities now that income earned by the Bank is fully taxable. All of the Banks marketable investment securities were designated as available-for-sale at June 30, 2006. The increase of $36,000 in nonmarketable equity securities was due to a required purchase of additional FHLB stock.
LOANS
Balances within the major loan categories as of June 30, 2006 and December 31, 2005 are as follows (in thousands):
JUNE 30,
2006 |
DECEMBER 31,
2005 |
|||||
Real estateconstruction |
$ | 21,634 | $ | 17,082 | ||
Real estatemortgage |
31,076 | 25,995 | ||||
Commercial and industrial |
5,878 | 8,640 | ||||
Consumer and other |
2,484 | 2,593 | ||||
$ | 61,072 | $ | 54,310 | |||
The Bank continued its trend of loan growth during the first six months of 2006. Outstanding loans increased $6,762,000, or 12.5%, during the period. As shown above, the main component of growth in the loan portfolio was real estatemortgage loans which increased 19.5%, or $5,081,000, from December 31, 2005 to June 30, 2006.
E-15
RISK ELEMENTS IN THE LOAN PORTFOLIO
The following is a summary of risk elements in the loan portfolio (in thousands):
JUNE 30,
2006 |
DECEMBER 31,
2005 |
|||||
Nonaccrual loans |
$ | 471 | $ | 313 | ||
Accruing loans more than 90 days past due |
$ | 22 | $ | 107 | ||
Loans identified by internal loan review: |
||||||
Criticized |
$ | 1,396 | $ | 1,546 | ||
Classified |
$ | 496 | $ | 551 |
Criticized loans have potential weaknesses that deserve close attention and could, if uncorrected, result in deterioration of the prospects for repayment or the Banks credit position at a future date. Classified loans are inadequately protected by the sound worth and paying capacity of the borrower or any collateral and there is a distinct possibility or probability that a loss could occur if the deficiencies are not corrected.
ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is as follows (dollars in thousands):
SIX MONTHS ENDED JUNE 30, | ||||||||
2006 | 2005 | |||||||
Balance, beginning of period |
$ | 679 | $ | 488 | ||||
Provision for loan losses |
63 | 115 | ||||||
Net loans (charged-off) recovered |
(6 | ) | | |||||
Balance, end of period |
$ | 736 | $ | 603 | ||||
Loans outstanding, end of period |
$ | 61,072 | $ | 48,969 | ||||
Allowance for loan losses to loans outstanding |
1.21 | % | 1.23 | % |
DEPOSITS
Balances within the major deposit categories as of June 30, 2006 and December 31, 2005 are as follows (in thousands):
JUNE 30,
2006 |
DECEMBER 31,
2005 |
|||||
Noninterest-bearing demand deposits |
$ | 7,767 | $ | 6,519 | ||
Interest-bearing demand deposits |
10,944 | 7,463 | ||||
Savings deposits |
965 | 878 | ||||
Time deposits $100,000 and over |
13,985 | 13,348 | ||||
Other time deposits |
26,405 | 29,927 | ||||
$ | 60,066 | $ | 58,135 | |||
At June 30, 2006, total deposits had increased by $1,931,000, or 3.3%, from December 31, 2005. The largest increase was in interest-bearing demand deposits, which increased $3,481,000 from December 31, 2005 to June 30, 2006. This increase is primarily due to increases in balances maintained in the Banks business checking accounts.
E-16
LIQUIDITY
The Bank meets its liquidity needs through scheduled maturities of loans and investments and through pricing policies designed to attract interest-bearing deposits. The level of liquidity is measured by the loan-to-total borrowed funds (which includes deposits) ratio, which was 98.9% and 90.8% at June 30, 2006 and December 31, 2005, respectively.
At June 30, 2006, the Companys primary sources of liquidity included cash, Federal funds sold and securities available-for-sale. The Bank also has lines of credit available with correspondent banks to purchase federal funds for periods from one to 30 days. At June 30, 2006, unused lines of credit totaled $5,440,000.
OFF-BALANCE SHEET RISK
Through its operations, the Bank has made contractual commitments to extend credit in the ordinary course of its business activities. These commitments are legally binding agreements to lend money to the Banks customers at predetermined interest rates for a specified period of time. At June 30, 2006, the Bank had issued commitments to extend credit of $10,349,000 and standby letters of credit totaling $129,000.
Based on historical experience, many of the commitments and letters of credit will expire unfunded. Accordingly, the above amounts do not necessarily reflect the Banks need for funds in the future.
The Bank evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on its credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, commercial and residential real estate.
CRITICAL ACCOUNTING POLICIES
The Company has adopted various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of its financial statements. The significant accounting policies are described in the notes to the consolidated financial statements at December 31, 2005 as filed in the Annual Report on Form 10-KSB. Certain accounting policies involve significant judgments and assumptions which have a material impact on the carrying value of certain assets and liabilities. Management considers these accounting policies to be critical accounting policies. The judgments and assumptions used are based on historical experience and other factors, which management believes to be reasonable under the circumstances. Because of the nature of the judgments and assumptions, actual results could differ from these judgments and estimates which could have a major impact on the carrying values of assets and liabilities and results of operations.
Management believes the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of our consolidated financial statements. Refer to the portions of our 2005 Annual Report on Form 10-KSB and this Form 10-QSB that address the allowance for loan losses for a description of our processes and methodology for determining the allowance for loan losses.
CAPITAL RESOURCES
Total shareholders equity increased from $5,803,000 at December 31, 2005 to $6,935,000 at June 30, 2006. The increase is primarily due to net income of $254,000 and the exercise of director warrants totaling $876,000.
The Federal Reserve guidelines contain an exemption from the capital requirements for small bank holding companies. On March 31, 2006, the Federal Reserve changed the definition of a small bank holding company to bank holding companies with less than $500 million in total assets (an increase from $150 million under the prior rule). However, bank holding companies will not qualify under the new definition if they (i) are engaged in
E-17
significant nonbanking activities either directly or indirectly through a subsidiary, (ii) conduct significant off-balance sheet activities, including securitizations or managing or administering assets for third parties, or (iii) have a material amount of debt or equity securities (including trust preferred securities) outstanding that are registered with the SEC. Although we have less than $500 million in assets, it is unclear at this point whether we otherwise meet the requirements for qualifying as a small bank holding company. According to the Federal Reserve Board, the revision of the criterion to exclude any bank holding company that has outstanding a material amount of SEC-registered debt or equity securities reflects the fact that SEC registrants typically exhibit a degree of complexity of operations and access to multiple funding sources that warrants excluding them from the new policy statement and subjecting them to the capital guidelines. In the adopting release for the new rule, the Federal Reserve Board stated that what constitutes a material amount of SEC-registered debt or equity for a particular bank holding company depends on the size, activities and condition of the relevant bank holding company. In lieu of using fixed measurable parameters of materiality across all institutions, the rule provides the Federal Reserve with supervisory flexibility in determining, on a case-by-case basis, the significance or materiality of activities or securities outstanding such that a bank holding company should be excluded from the policy statement and subject to the capital guidelines. Until the Federal Reserve provides further guidance on the new rules, it will be unclear whether our holding company will be subject to the exemption from the capital requirements for small bank holding companies. Regardless, our bank falls under these minimum capital requirements as set per bank regulatory agencies.
Banks and bank holding companies are also required to maintain capital at a minimum level based on total assets, which is known as the leverage ratio. The minimum requirement for the leverage ratio is 3%; however all but the highest rated institutions are required to maintain ratios 100 to 200 basis points above the minimum. The Bank exceeded its minimum regulatory capital ratios as of June 30, 2006, as well as the ratios to be considered well capitalized.
The following table summarizes the Banks risk-based capital at June 30, 2006:
Shareholders equity |
$ | 6,801,000 | ||
Plus: unrealized losses on securities held for sale |
35,000 | |||
Less: disallowed servicing assets |
(8,000 | ) | ||
Tier 1 capital |
6,828,000 | |||
Plus: allowance for loan losses(1) |
736,000 | |||
Total capital |
$ | 7,564,000 | ||
Risk-weighted assets |
$ | 60,942,000 | ||
Risk-based capital ratios |
||||
Tier 1 capital (to risk-weighted assets) |
11.20 | % | ||
Total capital (to risk-weighted assets) |
12.41 | % | ||
Tier 1 capital (to total average assets) |
10.02 | % |
(1) | Limited to 1.25% of risk-weighted assets. |
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ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-QSB, our principal executive officer and our principal financial officer have evaluated the effectiveness of our disclosure controls and procedures (Disclosure Controls). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act), are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and our principal financial officer, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based upon their controls evaluation, our principal executive officer and our principal financial officer have concluded that our Disclosure Controls are effective at a reasonable assurance level.
There have been no changes in our internal controls over financial reporting during the past fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
E-19
As previously reported in the Companys quarterly report on Form 10-QSB for the quarter ended March 31, 2006, the Company terminated the employment of former President and Chief Executive Officer William B. Gossett on November 15, 2005. On February 1, 2006, Mr. Gossett, a principal security holder of the Company, filed a claim with the U.S. Department of Labor Occupational Safety and Health Administration (OSHA) against the Company and the Bank under 18 U.S.C. 1514A alleging that the Company and the Bank did not have cause to terminate his employment.
During the quarter ended June 30, 2006, Mr. Gossetts claims, and the Companys defenses, were investigated by OSHA. As a result of this investigation, OSHA determined that there was no reasonable cause to believe that the Company violated the applicable regulations. As permitted under U. S. Department of Labor regulations, Mr. Gossett elected to appeal the findings and requested a hearing before an administrative law judge which was scheduled to begin on August 22, 2006. Thereafter, Mr. Gossett notified the Company that he intends to file suit in federal court concerning this matter and requested that the administrative hearing be cancelled. The Company believes that Mr. Gossetts allegations are without merit and will vigorously defend the suit.
Apart from the foregoing, there are no material pending legal 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. Additionally, the Company is unaware of any material proceedings, pending or contemplated, in which any existing or proposed 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
At the Companys Annual Meeting of Shareholders held on April 25, 2006, the following Class I directors were reelected as directors to serve an additional three-year term ending in 2009.
Votes For | Votes Against | Votes Withheld | ||||
Louis O. Dore |
431,616 | 68,637 | 0 | |||
Martha B. Fender |
431,616 | 68,637 | 0 | |||
D. Martin Goodman |
431,616 | 68,637 | 0 | |||
Jimmy Lee Mullins, Sr. |
431,116 | 69,137 | 0 |
The following directors did not stand for reelection as their term of office continued: Paul M. Dunnavant, Daryl A. Ferguson, Stancel E. Kirkland Sr., Edward J. McNeil Jr., Frances K. Nicholson, Carl E. Lipscomb, Narayan Shenoy, J. Frank Ward, and Bruce K. Wyles.
Exhibit 31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Exhibit 31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Exhibit 32 |
| Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
E-20
ISLANDS BANCORP
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
By: |
/s/ J OHN R. P ERRILL |
|||
John R. Perrill Acting Chief Executive Officer |
||||
Date: August 9, 2006 | By: |
/s/ C AROL J. N ELSON |
||
Carol J. Nelson Chief Financial Officer |
E-21
ISLANDS BANCORP
INDEX TO EXHIBITS
Exhibit
Number |
Description |
|
31.1 | Rule 13a-14(a) Certification of the Chief Executive Officer. | |
31.2 | Rule 13a-14(a) Certification of the Chief Financial Officer. | |
32 | Section 1350 Certifications. |
E-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Moultrie, State of Georgia, on this 27th day of October, 2006.
AMERIS BANCORP | ||
By: |
/s/ E DWIN W. H ORTMAN , J R . |
|
Edwin W. Hortman, Jr. President and Chief Executive Officer |
KNOW ALL MEN BY THESE PRESENTS , that each of the undersigned officers and directors of Ameris Bancorp hereby constitutes and appoints each of Edwin W. Hortman, Jr. and Dennis J. Zember Jr., his attorney-in-fact and agent, each with full power of substitution and resubstitution for him in any and all capacities, to sign any or all amendments or post-effective amendments to this registration statement, and to file the same, with exhibits thereto and other documents in connection therewith, in connection with the registration of the shares of the registrants common stock under the Securities Act of 1933, with the Securities and Exchange Commission, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorney-in-fact and agent or his substitute may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
Name |
Title |
Date |
||
/s/ E DWIN W. H ORTMAN , J R . Edwin W. Hortman, Jr. |
President and Chief Executive Officer (Principal Executive Officer) |
October 27, 2006 | ||
/s/ D ENNIS J. Z EMBER J R . Dennis J. Zember Jr. |
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
October 27, 2006 | ||
/s/ J OHNNY W. F LOYD Johnny W. Floyd |
Director |
October 27, 2006 | ||
/s/ J. R AYMOND F ULP J. Raymond Fulp |
Director |
October 27, 2006 | ||
/s/ K ENNETH J. H UNNICUTT Kenneth J. Hunnicutt |
Director |
October 27, 2006 | ||
/s/ D ANIEL B. J ETER Daniel B. Jeter |
Director |
October 27, 2006 | ||
/s/ G LENN A. K IRBO Glenn A. Kirbo |
Director |
October 27, 2006 | ||
/s/ R OBERT P. L YNCH Robert P. Lynch |
Director |
October 27, 2006 | ||
/s/ B ROOKS S HELDON Brooks Sheldon |
Director |
October 27, 2006 | ||
/s/ E UGENE M. V EREEN , J R . Eugene M. Vereen, Jr. |
Director |
October 27, 2006 | ||
/s/ H ENRY C. W ORTMAN Henry C. Wortman |
Director |
October 27, 2006 |
EXHIBIT NO. |
DESCRIPTION |
|
2.1 | Agreement and Plan of Merger by and among the Registrant, American Banking Company, Islands Bancorp and Islands Community Bank, N.A. (included as Appendix A to the Proxy Statement/Prospectus set forth in Part I of the Registration Statement). | |
2.2 | Form of Bank Merger Agreement by and between American Banking Company and Islands Community Bank, N.A. (included as Exhibit 1.2 to Appendix A to the Proxy Statement/Prospectus set forth in Part I of the Registration Statement). | |
3.1 | Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 2.1 to the Registrants Regulation A Offering Statement on Form 1-A (File No. 24A-2630) filed August 14, 1987). | |
3.2 | Amendment to Amended Articles of Incorporation of the Registrant dated May 26, 1995 (incorporated by reference to Exhibit 3.1.1 to the Registrants Annual Report on Form 10-K filed March 28, 1996). | |
3.3 | Amendment to Amended Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 4.3 to the Registrants Registration on Form S-4 (Registration No. 333-08301) filed with the Commission on July 17, 1996). | |
3.4 | Articles of Amendment to the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.5 to the Registrants Annual Report on Form 10-K filed with the Commission on March 25, 1998). | |
3.5 | Articles of Amendment to the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.7 to the Registrants Annual Report on Form 10-K filed with the Commission on March 26, 1999). | |
3.6 | Articles of Amendment to the Articles of Incorporation of the Registrant dated May 17, 2001 (incorporated by reference to Exhibit 3.9 to the Registrants Annual Report on Form 10-K filed with the Commission on March 31, 2003). | |
3.7 | Articles of Amendment to the Articles of Incorporation of the Registrant dated December 1, 2005 (incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed with the Commission on December 1, 2005). | |
3.8 | Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed with the Commission on March 14, 2005). | |
4.1 | Placement Agreement between the Registrant, Ameris Statutory Trust I, FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc. dated September 13, 2006. | |
4.2 | Subscription Agreement between the Registrant, Ameris Statutory Trust I and First Tennessee Bank National Association dated September 20, 2006. | |
4.3 | Subscription Agreement between the Registrant, Ameris Statutory Trust I and TWE, Ltd. dated September 20, 2006. | |
4.4 | Indenture between the Registrant and Wilmington Trust Company dated September 20, 2006. | |
4.5 | Amended and Restated Declaration of Trust between the Registrant, the Administrators of Ameris Statutory Trust I signatory thereto and Wilmington Trust Company dated September 20, 2006. | |
4.6 | Guarantee Agreement between the Registrant and Wilmington Trust Company dated September 20, 2006. | |
4.7 | Floating Rate Junior Subordinated Deferrable Interest Debenture dated September 20, 2006 issued to Ameris Statutory Trust I. | |
5.1 | Form of opinion of Rogers & Hardin LLP regarding legality of securities being registered (including its consent). |
EXHIBIT NO. |
DESCRIPTION |
|
8.1 | Opinion of Rogers & Hardin LLP regarding certain tax matters (including its consent). | |
8.2 | Opinion of Powell Goldstein LLP regarding certain tax matters (including its consent). | |
10.1 | Deferred Compensation Agreement for Kenneth J. Hunnicutt dated December 16, 1986 (incorporated by reference to Exhibit 5.3 to the Registrants Regulation A Offering Statement on Form 1-A filed with the Commission on August 14, 1987). | |
10.2 | Executive Salary Continuation Agreement dated February 14, 1984 (incorporated by reference to Exhibit 10.6 to the Registrants Annual Report on Form 10-KSB filed with the Commission on March 27, 1989). | |
10.3 | 1992 Incentive Stock Option Plan and Option Agreement for Kenneth J. Hunnicutt (incorporated by reference to Exhibit 10.7 to the Registrants Annual Report on Form 10-KSB filed with the Commission on March 30, 1993). | |
10.4 | ABC Bancorp Omnibus Stock Ownership and Long-Term Incentive Plan (incorporated by reference to Exhibit 10.17 to the Registrants Annual Report on Form 10-K filed with the Commission on March 25, 1998). | |
10.5 | Form of Rights Agreement between the Registrant and SunTrust Bank dated as of February 17, 1998 (incorporated by reference to Exhibit 10.18 to the Registrants Annual Report on Form 10-K filed with the Commission on March 25, 1998). | |
10.6 | ABC Bancorp 2000 Officer/Director Stock Bonus Plan (incorporated by reference to Exhibit 10.19 to the Registrants Annual Report on Form 10-K filed with the Commission on Mach 29, 2000). | |
10.7 | Commission Agreement by and between the Registrant and Jerry L. Keen dated as of September 12, 2002 (incorporated by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q filed with the Commission on November 14, 2002). | |
10.8 | Asset Purchase Agreement by and between Southland Bank and MBNA America Bank, N.A. dated as of December 19, 2002 (incorporated by reference to Exhibit 10.16 to the Registrants Annual Report on Form 10-K filed with the Commission on March 31, 2003). | |
10.9 | Interim Servicing Agreement by and between Southland Bank and MBNA America Bank, N.A. dated as of December 19, 2002 (incorporated by reference to Exhibit 10.17 to the Registrants Annual Report on Form 10-K filed with the Commission on March 31, 2003). | |
10.10 | Joint Marketing Agreement by and between the Registrant and MBNA America Bank, N.A. dated as of December 19, 2002 (incorporated by reference to Exhibit 10.18 to the Registrants Annual Report on Form 10-K filed with the Commission on March 31, 2003). | |
10.11 | Executive Employment Agreement with Jon S. Edwards dated as of July 1, 2003 (incorporated by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q filed with the Commission on November 12, 2003). | |
10.12 | Executive Employment Agreement with Edwin W. Hortman, Jr. dated as of December 31, 2003 (incorporated by reference to Exhibit 10.19 to the Registrants Annual Report on Form 10-K filed with the Commission on March 15, 2004). | |
10.13 | Executive Employment Agreement with Cindi H. Lewis dated as of December 31, 2003 (incorporated by reference to Exhibit 10.20 to the Registrants Annual Report on Form 10-K filed with the Commission on March 15, 2004). | |
10.14 | Executive Employment Agreement with Thomas T. Dampier dated as of May 18, 2004 (incorporated by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q filed with the Commission on August 9, 2004). | |
10.15 | Executive Consulting Agreement with Kenneth J. Hunnicutt dated as of January 1, 2005 (incorporated by reference to Exhibit 10.16 to the Registrants Annual Report on Form 10-K filed with the Commission on March 16, 2005). |
EXHIBIT NO. |
DESCRIPTION |
|
10.16 | Amendment No. 1 to Executive Employment Agreement with Edwin W. Hortman, Jr. dated as of March 10, 2005 (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the Commission on March 14, 2005). | |
10.17 | ABC Bancorp 2005 Omnibus Stock Ownership and Long-Term Incentive Plan (incorporated by reference to Appendix A to the Registrants Definitive Proxy Statement filed with the Commission on April 18, 2005). | |
10.18 | Executive Employment Agreement with Dennis J. Zember, Jr. dated as of May 5, 2005 (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K/A filed with the Commission on May 11, 2005). | |
10.19 | Executive Employment Agreement with Johnny R. Myers dated May 11, 2005 (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the Commission on May 16, 2005). | |
10.20 | Revolving Credit Agreement with SunTrust Bank dated as of December 14, 2005 (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the Commission on December 20, 2005). | |
10.21 | Security Agreement with SunTrust Bank dated as of December 14, 2005 (incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the Commission on December 20, 2005). | |
10.22 | Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 4.2 to the Registrants Registration Statement on Form S-8 (Registration No. 333-131244) filed with the Commission on January 24, 2006). | |
10.23 | Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 4.3 to the Registrants Registration Statement on Form S-8 (Registration No. 333-131244) filed with the Commission on January 24, 2006). | |
10.24 | Form of Restricted Stock Agreement (incorporated by reference to Exhibit 4.4 to the Registrants Registration Statement on Form S-8 (Registration No. 333-131244) filed with the Commission on January 24, 2006). | |
10.25 | Form of Affiliate Agreement to be executed by the affiliates of Islands Bancorp (included as Exhibit 7.10 to Appendix A to the Proxy Statement/Prospectus set forth in Part I of the Registration Statement). | |
10.26 | Form of Shareholder Voting Agreement by and among the Registrant and the shareholders of Islands Bancorp signatory thereto (included as Exhibit 7.14 to Appendix A to the Proxy Statement/Prospectus set forth in Part I of the Registration Statement). | |
10.27 | Form of Non-Competition and Non-Disclosure Agreement between the Registrant and the directors of Islands Bancorp (included as Exhibit 8.2(f) to Appendix A to the Proxy Statement/Prospectus set forth in Part I of the Registration Statement). | |
10.28 | Executive Employment Agreement with C. Johnson Hipp, III dated September 5, 2006 (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the Commission on September 8, 2006). | |
13.1 | Registrants Annual Report on Form 10-K for the year ended December 31, 2005 (incorporated by reference). | |
13.2 | Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (incorporated by reference). | |
13.3 | Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (incorporated by reference). |
EXHIBIT NO. |
DESCRIPTION |
|
21.1 | Schedule of subsidiaries of the Registrant. | |
23.1 | Consents of Rogers & Hardin LLP are contained in its opinions filed as Exhibits 5.1 and 8.1 hereto. | |
23.2 | Consent of Powell Goldstein LLP is contained in its opinion filed as Exhibit 8.2 hereof. | |
23.3 | Consent of Mauldin & Jenkins, Certified Public Accountants, LLC. | |
23.4 | Consent of Francis and Company, CPAs. | |
23.5 | Consent of Howe Barnes Hoefer & Arnett, Inc. | |
24.1 | A Power of Attorney relating to this Registration Statement is set forth on the signature pages to this Registration Statement. | |
99.1 | Opinion of Howe Barnes Hoefer & Arnett, Inc. dated August 15, 2006 (included as Appendix C to the Proxy Statement/Prospectus set forth in Part I of the Registration Statement). | |
99.2 | Form of Proxy Card for the Special Meeting of Shareholders of Islands Bancorp. |
Exhibit 4.1
AMERIS BANCORP
36,000 Capital Securities
Floating Rate Capital Securities
(Liquidation Amount $1,000.00 per Capital Security)
PLACEMENT AGREEMENT
September 13, 2006
FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Ladies and Gentlemen:
Ameris Bancorp, a Georgia corporation (the Company), and its financing subsidiary, Ameris Statutory Trust I, a Delaware statutory trust (the Trust, and hereinafter together with the Company, the Offerors), hereby confirm their agreement (this Agreement) with you as placement agents (the Placement Agents), as follows:
Section 1. Issuance and Sale of Securities.
1.1. Introduction . The Offerors propose to issue and sell at the Closing (as defined in Section 2.3.1 hereof) 36,000 of the Trusts Floating Rate Capital Securities, with a liquidation amount of $1,000.00 per capital security (the Capital Securities), to First Tennessee Bank National Association, a national banking association organized under the laws of the United States of America and TWE, Ltd., a company with limited liability established under the laws of the Cayman Islands (the Purchasers) pursuant to the terms of Subscription Agreements entered into, or to be entered into on or prior to the Closing Date (as defined in Section 2.3.1 hereof), between the Offerors and the Purchasers (the Subscription Agreements), the forms of which are attached hereto as Exhibit A-1 and Exhibit A-2 and incorporated herein by this reference.
1.2. Operative Agreements . The Capital Securities shall be fully and unconditionally guaranteed on a subordinated basis by the Company with respect to distributions and amounts payable upon liquidation, redemption or repayment (the Guarantee) pursuant and subject to the Guarantee Agreement (the Guarantee Agreement), to be dated as of the Closing Date and executed and delivered by the Company and Wilmington Trust Company (WTC), as trustee (the Guarantee Trustee), for the benefit from time to time of the holders of the Capital Securities. The entire proceeds from the sale by the Trust to the holders of the Capital Securities shall be combined with the entire proceeds from the sale by
the Trust to the Company of its common securities (the Common Securities), and shall be used by the Trust to purchase $37,114,000.00 in principal amount of the Floating Rate Junior Subordinated Deferrable Interest Debentures (the Debentures) of the Company. The Capital Securities and the Common Securities for the Trust shall be issued pursuant to an Amended and Restated Declaration of Trust among WTC, as Delaware trustee (the Delaware Trustee), WTC, as institutional trustee (the Institutional Trustee), the Administrators named therein, and the Company, to be dated as of the Closing Date and in substantially the form heretofore delivered to the Placement Agents (the Trust Agreement). The Debentures shall be issued pursuant to an Indenture (the Indenture), to be dated as of the Closing Date, between the Company and WTC, as indenture trustee (the Indenture Trustee). The documents identified in this Section 1.2 and in Section 1.1 are referred to herein as the Operative Documents.
1.3. Rights of Purchasers . The Capital Securities shall be offered and sold by the Trust directly to the Purchasers without registration of any of the Capital Securities, the Debentures or the Guarantee under the Securities Act of 1933, as amended (the Securities Act), or any other applicable securities laws in reliance upon exemptions from the registration requirements of the Securities Act and other applicable securities laws. The Offerors agree that this Agreement shall be incorporated by reference into the Subscription Agreements and the Purchasers shall be entitled to each of the benefits of the Placement Agents and the Purchasers under this Agreement and shall be entitled to enforce obligations of the Offerors under this Agreement as fully as if the Purchasers were parties to this Agreement. The Offerors and the Placement Agents have entered into this Agreement to set forth their understanding as to their relationship and their respective rights, duties and obligations.
1.4. Legends . Upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Capital Securities and Debentures certificates shall each contain a legend as required pursuant to any of the Operative Documents.
Section 2. Purchase of Capital Securities.
2.1. Exclusive Rights; Purchase Price . From the date hereof until the Closing Date (which date may be extended by mutual agreement of the Offerors and the Placement Agents), the Offerors hereby grant to the Placement Agents the exclusive right to arrange for the sale of the Capital Securities to the Purchasers at a purchase price of $1,000.00 per Capital Security.
2.2. Subscription Agreements . The Offerors hereby agree to evidence their acceptance of the subscription by countersigning a copy of each of the Subscription Agreements and returning the same to the Placement Agents.
2.3. Closing and Delivery of Payment .
2.3.1. Closing; Closing Date . The sale and purchase of the Capital Securities by the Offerors to the Purchasers shall take place at a closing (the Closing) at the offices of Lewis, Rice & Fingersh, L.C., at 10:00 a.m. (St. Louis time) on September 20, 2006, or such other business day as may be agreed upon by the Offerors and the Placement Agents (the Closing Date); provided , however , that in no event shall the Closing Date occur later than September 29, 2006 unless consented to by the Purchasers. Payment by the Purchasers shall be payable in the manner set forth in the Subscription Agreements and shall be made prior to or on the Closing Date.
2.3.2. Delivery . The certificates for the Capital Securities shall be in definitive form, each registered in the name of the applicable Purchaser, or Purchaser designee, and in the aggregate amount of the Capital Securities purchased by the Purchaser.
2
2.3.3. Transfer Agent . Not less than two full business days prior to the Closing Date, a global Capital Securities certificate in definitive form shall be made available by or on behalf of the Offerors to the Placement Agents and the Institutional Trustee for inspection and delivery to the Depository Trust Company (DTC) or its custodian.
2.4. Costs and Expenses . Whether or not this Agreement is terminated or the sale of the Capital Securities is consummated, the Company hereby covenants and agrees that it shall pay or cause to be paid (directly or by reimbursement) all reasonable costs and expenses incident to the performance of the obligations of the Offerors under this Agreement, including all fees, expenses and disbursements of counsel and accountants for the Offerors; all reasonable expenses incurred by the Offerors incident to the preparation, execution and delivery of the Trust Agreement, the Indenture, and the Guarantee; and all other reasonable costs and expenses incident to the performance of the obligations of the Company hereunder and under the Trust Agreement.
2.5. Failure to Close . If any of the conditions to the Closing specified in this Agreement shall not have been fulfilled to the satisfaction of the Placement Agents or if the Closing shall not have occurred on or before 10:00 a.m. (St. Louis time) on September 29, 2006, then each party hereto, notwithstanding anything to the contrary in this Agreement, shall be relieved of all further obligations under this Agreement without thereby waiving any rights it may have by reason of such nonfulfillment or failure; provided , however , that the obligations of the parties under Sections 2.4, 7.5 and 9 shall not be so relieved and shall continue in full force and effect.
Section 3. Closing Conditions . The obligations of the Purchasers and the Placement Agents on the Closing Date shall be subject to the accuracy, at and as of the Closing Date, of the representations and warranties of the Offerors contained in this Agreement, to the accuracy, at and as of the Closing Date, of the statements of the Offerors made in any certificates pursuant to this Agreement, to the performance by the Offerors of their respective obligations under this Agreement, to compliance, at and as of the Closing Date, by the Offerors with their respective agreements herein contained, and to the following further conditions:
3.1. Opinions of Counsel . On the Closing Date, the Placement Agents shall have received the following favorable opinions, each dated as of the Closing Date: (a) from Rogers & Hardin LLP, counsel for the Offerors and addressed to the Purchasers, the Placement Agents and WTC in substantially the form set forth on Exhibit B-1 attached hereto and incorporated herein by this reference, (b) from Richards, Layton & Finger, P.A., special Delaware counsel to the Offerors and addressed to the Purchasers, the Placement Agents and the Offerors, in substantially the form set forth on Exhibit B-2 attached hereto and incorporated herein by this reference and (c) from Lewis, Rice & Fingersh, L.C., special tax counsel to the Offerors, and addressed to the Placement Agents and the Offerors, addressing the items set forth on Exhibit B-3 attached hereto and incorporated herein by this reference, subject to the receipt by Lewis, Rice & Fingersh, L.C. of a representation letter from the Company in the form set forth in Exhibit B-3 completed in a manner reasonably satisfactory to Lewis, Rice & Fingersh, L.C. (collectively, the Offerors Counsel Opinions). In rendering the Offerors Counsel Opinions, counsel to the Offerors may rely as to factual matters upon certificates or other documents furnished by officers, directors and trustees of the Offerors (copies of which shall be delivered to the Placement Agents and the Purchasers) and by government officials, and upon such other documents as counsel to the Offerors may, in their reasonable opinion, deem appropriate as a basis for the Offerors Counsel Opinions. Counsel to the Offerors may specify the jurisdictions in which they are admitted to practice and that they are not admitted to practice in any other jurisdiction and are not experts in the law of any other jurisdiction. If the Offerors counsel is not admitted to practice in the State of New York, the opinion of Offerors counsel may assume, for purposes of the opinion, that the laws of the State of New York are substantively identical, in all respects material to the opinion, to the internal laws of the state in which such counsel is
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admitted to practice. Such Offerors Counsel Opinions shall not state that they are to be governed or qualified by, or that they are otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
3.2. Officers Certificate . At the Closing Date, the Purchasers and the Placement Agents shall have received certificates from an authorized officer of the Company, dated as of the Closing Date, stating that (i) the representations and warranties of the Offerors set forth in Section 5 hereof are true and correct as of the Closing Date and that the Offerors have complied with all agreements and satisfied all conditions on their part to be performed or satisfied at or prior to the Closing Date, (ii) since the date of this Agreement the Offerors have not incurred any liability or obligation, direct or contingent, or entered into any material transactions, other than in the ordinary course of business, which is material to the Offerors, and (iii) covering such other matters as the Placement Agents may reasonably request.
3.3. Administrators Certificate . At the Closing Date, the Purchasers and the Placement Agents shall have received a certificate of one or more Administrators of the Trust, dated as of the Closing Date, stating that the representations and warranties of the Trust set forth in Section 5 are true and correct as of the Closing Date and that the Trust has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Date.
3.4. Purchase Permitted by Applicable Laws; Legal Investment . The purchase of and payment for the Capital Securities as described in this Agreement and pursuant to the Subscription Agreements shall (a) not be prohibited by any applicable law or governmental regulation, (b) not subject the Purchasers or the Placement Agents to any penalty or, in the reasonable judgment of the Purchasers and the Placement Agents, other onerous conditions under or pursuant to any applicable law or governmental regulation, and (c) be permitted by the laws and regulations of the jurisdictions to which the Purchasers and the Placement Agents are subject.
3.5. Consents and Permits . The Company and the Trust shall have received all consents, permits and other authorizations, and made all such filings and declarations, as may be required from any person or entity pursuant to any law, statute, regulation or rule (federal, state, local and foreign), or pursuant to any agreement, order or decree to which the Company or the Trust is a party or to which either is subject, in connection with the transactions contemplated by this Agreement.
3.6. Information . Prior to or on the Closing Date, the Offerors shall have furnished to the Placement Agents such further information, certificates, opinions and documents addressed to the Purchasers and the Placement Agents, which the Placement Agents may reasonably request, including, without limitation, a complete set of the Operative Documents or any other documents or certificates required by this Section 3; and all proceedings taken by the Offerors in connection with the issuance, offer and sale of the Capital Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Placement Agents.
If any condition specified in this Section 3 shall not have been fulfilled when and as required in this Agreement, or if any of the opinions or certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Placement Agents, this Agreement may be terminated by the Placement Agents by notice to the Offerors at any time at or prior to the Closing Date. Notice of such termination shall be given to the Offerors in writing or by telephone or facsimile confirmed in writing.
Section 4. Conditions to the Offerors Obligations . The obligations of the Offerors to sell the Capital Securities to the Purchasers and consummate the transactions contemplated by this Agreement shall be subject to the accuracy, at and as of the Closing Date, of the representations and warranties of the Placement Agents contained in this Agreement and to the following further conditions:
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4.1. Executed Agreement . The Offerors shall have received from the Placement Agents an executed copy of this Agreement.
4.2. Fulfillment of Other Obligations . The Placement Agents shall have fulfilled all of their other obligations and duties required to be fulfilled under this Agreement prior to or at the Closing.
Section 5. Representations and Warranties of the Offerors . Except as set forth on the Disclosure Schedule (as defined in Section 11.1) attached hereto, if any, the Offerors jointly and severally represent and warrant to the Placement Agents and the Purchasers as of the date hereof and as of the Closing Date as follows:
5.1. Securities Law Matters .
(a) Neither the Company nor the Trust, nor any of their Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act (Regulation D)), nor any person acting on any of their behalf has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration under the Securities Act of any of the Capital Securities, the Guarantee or the Debentures (collectively, the Securities).
(b) Neither the Company nor the Trust, nor any of their Affiliates, nor any person acting on its or their behalf has (i) other than the Placement Agents, offered for sale or solicited offers to purchase the Securities, (ii) engaged in any form of offering, general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of any of the Securities, or (iii) engaged or will engage in any directed selling efforts within the meaning of Regulation S of the Securities Act (Regulation S) with respect to the Securities.
(c) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving effect to the offering and sale of the Capital Securities and the consummation of the transactions described in this Agreement, will be an investment company or an entity controlled by an investment company, in each case within the meaning of Section 3(a) of the Investment Company Act of 1940, as amended (the Investment Company Act), without regard to Section 3(c) of the Investment Company Act.
(e) Neither the Company nor the Trust has paid or agreed to pay to any person or entity (other than the Placement Agents) any compensation for soliciting another to purchase any of the Securities.
5.2. Organization, Standing and Qualification of the Trust . The Trust has been duly created and is validly existing in good standing as a statutory trust under the Delaware Statutory Trust Act (the Statutory Trust Act) with the power and authority to own property and to conduct the business it transacts and proposes to transact and to enter into and perform its obligations under the Operative Documents. The Trust is duly qualified to transact business as a foreign entity and is in good standing in each jurisdiction in which such qualification is necessary, except where the failure to so qualify or be in good standing would not have a material adverse effect on the Trust. The Trust is not a party to or otherwise bound by any agreement other than the Operative Documents. The Trust is and will, under current law, be classified for federal income tax purposes as a grantor trust and not as an association taxable as a corporation.
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5.3. Trust Agreement . The Trust Agreement has been duly authorized by the Company and, on the Closing Date, will have been duly executed and delivered by the Company and the Administrators of the Trust, and, assuming due authorization, execution and delivery by the Delaware Trustee and the Institutional Trustee, will be a valid and binding obligation of the Company and such Administrators, enforceable against them in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation and other laws relating to or affecting creditors rights generally, and (b) general principles of equity (regardless of whether considered and applied in a proceeding in equity or at law) (Bankruptcy and Equity). Each of the Administrators of the Trust is an employee or a director of the Company or of a financial institution subsidiary of the Company and has been duly authorized by the Company to execute and deliver the Trust Agreement.
5.4. Guarantee Agreement and the Indenture . Each of the Guarantee and the Indenture has been duly authorized by the Company and, on the Closing Date, will have been duly executed and delivered by the Company, and, assuming due authorization, execution and delivery by the Guarantee Trustee, in the case of the Guarantee, and by the Indenture Trustee, in the case of the Indenture, will be a valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to Bankruptcy and Equity.
5.5. Capital Securities and Common Securities . The Capital Securities and the Common Securities have been duly authorized by the Trust Agreement and, when issued and delivered against payment therefor on the Closing Date to the Purchasers, in the case of the Capital Securities, and to the Company, in the case of the Common Securities, will be validly issued and represent undivided beneficial interests in the assets of the Trust. None of the Capital Securities or the Common Securities is subject to preemptive or other similar rights. On the Closing Date, all of the issued and outstanding Common Securities will be directly owned by the Company free and clear of any pledge, security interest, claim, lien or other encumbrance.
5.6. Debentures . The Debentures have been duly authorized by the Company and, at the Closing Date, will have been duly executed and delivered to the Indenture Trustee for authentication in accordance with the Indenture, and, when authenticated in the manner provided for in the Indenture and delivered against payment therefor by the Trust, will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture enforceable against the Company in accordance with their terms, subject to Bankruptcy and Equity.
5.7. Power and Authority . This Agreement has been duly authorized, executed and delivered by the Company and the Trust and constitutes the valid and binding obligation of the Company and the Trust, enforceable against the Company and the Trust in accordance with its terms, subject to Bankruptcy and Equity.
5.8. No Defaults . The Trust is not in violation of the Trust Agreement or, to the knowledge of the Administrators, any provision of the Statutory Trust Act. The execution, delivery and performance by the Company or the Trust of this Agreement or the Operative Documents to which it is a party, and the consummation of the transactions contemplated herein or therein and the use of the proceeds therefrom, will not conflict with or constitute a breach of, or a default under, or result in the creation or imposition of any lien, charge or other encumbrance upon any property or assets of the Trust, the Company or any of the Companys Subsidiaries (as defined in Section 5.11 hereof) pursuant to any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Trust, the Company or any of its Subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of any of them is subject, except for a conflict, breach, default, lien, charge or encumbrance which could not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect nor will such action result in any violation of the Trust Agreement or the Statutory Trust Act or require the
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consent, approval, authorization or order of any court or governmental agency or body. As used herein, the term Material Adverse Effect means any one or more effects that individually or in the aggregate are material and adverse to the Offerors ability to consummate the transactions contemplated herein or in the Operative Documents or any one or more effects that individually or in the aggregate are material and adverse to the condition (financial or otherwise), earnings, affairs, business, prospects or results of operations of the Company and its Subsidiaries taken as whole, whether or not occurring in the ordinary course of business.
5.9. Organization, Standing and Qualification of the Company . The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Georgia, with all requisite corporate power and authority to own its properties and conduct the business it transacts and proposes to transact, and is duly qualified to transact business and is in good standing as a foreign corporation in each jurisdiction where the nature of its activities requires such qualification, except where the failure of the Company to be so qualified would not, singly or in the aggregate, have a Material Adverse Effect.
5.10. Subsidiaries of the Company . Each of the Companys significant subsidiaries (as defined in Section 1-02(w) of Regulation S-X to the Securities Act (the Significant Subsidiaries)) is listed in Exhibit C attached hereto and incorporated herein by this reference. Each Significant Subsidiary has been duly organized and is validly existing and in good standing under the laws of the jurisdiction in which it is chartered or organized, with all requisite power and authority to own its properties and conduct the business it transacts and proposes to transact, and is duly qualified to transact business and is in good standing as a foreign entity in each jurisdiction where the nature of its activities requires such qualification, except where the failure of any such Significant Subsidiary to be so qualified would not, singly or in the aggregate, have a Material Adverse Effect. All of the issued and outstanding shares of capital stock of the Significant Subsidiaries (a) have been duly authorized and are validly issued, (b) are fully paid and nonassessable, and (c) are wholly owned, directly or indirectly, by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, restriction upon voting or transfer, preemptive rights, claim, equity or other defect.
5.11. Permits . The Company and each of its subsidiaries (as defined in Section 1-02(x) of Regulation S-X to the Securities Act) (the Subsidiaries) have all requisite power and authority, and all necessary authorizations, approvals, orders, licenses, certificates and permits of and from regulatory or governmental officials, bodies and tribunals, to own or lease their respective properties and to conduct their respective businesses as now being conducted, except such authorizations, approvals, orders, licenses, certificates and permits which, if not obtained and maintained, would not, singly or in the aggregate, have a Material Adverse Effect, and neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such authorizations, approvals, orders, licenses, certificates or permits which, singly or in the aggregate, if the failure to be so licensed or approved is the subject of an unfavorable decision, ruling or finding, would, singly or in the aggregate, have a Material Adverse Effect; and the Company and its Subsidiaries are in compliance with all applicable laws, rules, regulations and orders and consents, the violation of which would, singly or in the aggregate, have a Material Adverse Effect.
5.12. Conflicts, Authorizations and Approvals . Neither the Company nor any of its Subsidiaries is in violation of its respective articles or certificate of incorporation, charter or by-laws or similar organizational documents or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which either the Company or any of its Subsidiaries is a party, or by which it or any of them may be bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject, the effect of which violation or default in performance or observance would have, singly or in the aggregate, a Material Adverse Effect.
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5.13. Holding Company Registration and Deposit Insurance . The Company is duly registered (i) as a bank holding company or financial holding company under the Bank Holding Company Act of 1956, as amended, and the regulations of the Board of Governors of the Federal Reserve System (the Federal Reserve) or (ii) as a savings and loan holding company under the Home Owners Loan Act of 1933, as amended, and the regulations of the Office of Thrift Supervision (the OTS), and the deposit accounts of the Companys Subsidiary depository institutions are insured by the Federal Deposit Insurance Corporation (FDIC) to the fullest extent permitted by law and the rules and regulations of the FDIC, and no proceedings for the termination of such insurance are pending or threatened.
5.14. Financial Statements .
(a) The consolidated balance sheets of the Company and all of its Subsidiaries as of December 31, 2005 and December 31, 2004 and related consolidated income statements and statements of changes in shareholders equity for the three years ended December 31, 2005 together with the notes thereto, and the consolidated balance sheets of the Company and all of its Subsidiaries as of June 30, 2006 and the related consolidated income statements and statements of changes in shareholders equity for the six months then ended, copies of each of which have been provided to the Placement Agents (together, the Financial Statements), have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be disclosed therein) and fairly present in all material respects the financial position and the results of operations and changes in shareholders equity of the Company and all of its Subsidiaries as of the dates and for the periods indicated (subject, in the case of interim financial statements, to normal recurring year-end adjustments, none of which shall be material). The books and records of the Company and all of its Subsidiaries have been, and are being, maintained in all material respects in accordance with generally accepted accounting principles and any other applicable legal and accounting requirements and reflect only actual transactions.
(b) The information in the Companys most recently filed (i) FR Y-9C filed with the Federal Reserve if the Company is a bank holding company, (ii) FR Y-9SP filed with the Federal Reserve if the Company is a small bank holding company or (iii) H-(b)11 filed with the OTS if the Company is a savings and loan holding company (the Regulatory Report), previously provided to the Placement Agents fairly presents in all material respects the financial position of the Company and, where applicable, all of its Subsidiaries as of the end of the period represented by such Regulatory Report.
(c) Since the respective dates of the Financial Statements and the Regulatory Report, there has been no material adverse change or development with respect to the financial condition or earnings of the Company and all of its Subsidiaries, taken as a whole.
(d) The accountants of the Company who certified the Financial Statements are independent public accountants of the Company and its Subsidiaries within the meaning of the Securities Act and the rules and regulations thereunder.
5.15. Exchange Act Reporting . The reports filed with the Securities and Exchange Commission (the Commission) by the Company under the Securities Exchange Act of 1934, as amended (the 1934 Act) and the regulations thereunder at the time they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and such reports did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.
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5.16. Regulatory Enforcement Matters . Neither the Company nor any of its Subsidiaries is subject or is party to, or has received any notice or advice that any of them may become subject or party to, any investigation with respect to, any cease-and-desist order, agreement, consent agreement, memorandum of understanding or other regulatory enforcement action, proceeding or order with or by, or is a party to any commitment letter or similar undertaking to, or is subject to any directive by, or has been since January 1, 2003, a recipient of any supervisory letter from, or since January 1, 2003, has adopted any board resolutions at the request of, any Regulatory Agency (as defined below) that currently restricts in any material respect the conduct of their business or that in any material manner relates to their capital adequacy, their credit policies, their ability or authority to pay dividends or make distributions to their shareholders or make payments of principal or interest on their debt obligations, their management or their business (each, a Regulatory Agreement), nor has the Company or any of its Subsidiaries been advised since January 1, 2003, by any Regulatory Agency that it is considering issuing or requesting any such Regulatory Agreement. There is no material unresolved violation, criticism or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Company or any of its Subsidiaries. As used herein, the term Regulatory Agency means any federal or state agency charged with the supervision or regulation of depository institutions, bank, financial or savings and loan holding companies, or engaged in the insurance of depository institution deposits, or any court, administrative agency or commission or other governmental agency, authority or instrumentality having supervisory or regulatory authority with respect to the Company or any of its Subsidiaries. Neither the Company nor any of the Subsidiaries is currently unable to pay dividends or make distributions to its shareholders with respect to any class of its equity securities, or prohibited from paying principal or interest on its debt obligations, due to a restriction or limitation, whether by statute, contract or otherwise, and, in the reasonable judgment of the Companys management, neither the Company nor any of the Subsidiaries will be unable in the foreseeable future to pay dividends or make distributions with respect to any class of equity securities, or be prohibited from paying principal or interest on its debt obligations, due to a restriction or limitation, whether by statute, contract or otherwise.
5.17. No Material Change . Since December 31, 2005, there has been no material adverse change or development with respect to the condition (financial or otherwise), earnings, affairs, business, prospects or results of operations of the Company or its Subsidiaries on a consolidated basis, whether or not arising in the ordinary course of business.
5.18. No Undisclosed Liabilities . Neither the Company nor any of its Subsidiaries has any material liability, whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including any liability for taxes (and there is no past or present fact, situation, circumstance, condition or other basis for any present or future action, suit, proceeding, hearing, charge, complaint, claim or demand against the Company or its Subsidiaries giving rise to any such liability), except (i) for liabilities set forth in the Financial Statements and (ii) normal fluctuation in the amount of the liabilities referred to in clause (i) above occurring in the ordinary course of business of the Company and all of its Subsidiaries since the date of the most recent balance sheet included in the Financial Statements.
5.19. Litigation . No charge, investigation, action, suit or proceeding is pending or, to the knowledge of the Offerors, threatened, against or affecting the Company or its Subsidiaries or any of their respective properties before or by any courts or any regulatory, administrative or governmental official, commission, board, agency or other authority or body, or any arbitrator, wherein an unfavorable decision, ruling or finding could have, singly or in the aggregate, a Material Adverse Effect.
5.20. Deferral of Interest Payments on Debentures . The Company has no present intention to exercise its option to defer payments of interest on the Debentures as provided in the Indenture. The Company believes that the likelihood that it would exercise its right to defer payments of interest on the
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Debentures as provided in the Indenture at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Companys ability to declare or pay dividends or distributions on, or to redeem, purchase, acquire or make a liquidation payment with respect to, any of the Companys capital stock and on the Companys ability to make any payments of principal, interest or premium on, or repay, repurchase or redeem, any of its debt securities that rank pari passu in all respects with, or junior in interest to, the Debentures.
Section 6. Representations and Warranties of the Placement Agents . Each Placement Agent represents and warrants to the Offerors as to itself (but not as to the other Placement Agent) as follows:
6.1. Organization, Standing and Qualification .
(a) FTN Financial Capital Markets is a division of First Tennessee Bank National Association, a national banking association duly organized, validly existing and in good standing under the laws of the United States, with full power and authority to own, lease and operate its properties and conduct its business as currently being conducted. FTN Financial Capital Markets is duly qualified to transact business as a foreign corporation and is in good standing in each other jurisdiction in which it owns or leases property or conducts its business so as to require such qualification and in which the failure to so qualify would, individually or in the aggregate, have a material adverse effect on the condition (financial or otherwise), earnings, business, prospects or results of operations of FTN Financial Capital Markets.
(b) Keefe, Bruyette & Woods, Inc. is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, with full power and authority to own, lease and operate its properties and conduct its business as currently being conducted. Keefe, Bruyette & Woods, Inc. is duly qualified to transact business as a foreign corporation and is in good standing in each other jurisdiction in which it owns or leases property or conducts its business so as to require such qualification and in which the failure to so qualify would, individually or in the aggregate, have a material adverse effect on the condition (financial or otherwise), earnings, business, prospects or results of operations of Keefe, Bruyette & Woods, Inc.
6.2. Power and Authority . The Placement Agent has all requisite power and authority to enter into this Agreement, and this Agreement has been duly and validly authorized, executed and delivered by the Placement Agent and constitutes the legal, valid and binding agreement of the Placement Agent, enforceable against the Placement Agent in accordance with its terms, subject to Bankruptcy and Equity and except as any indemnification or contribution provisions thereof may be limited under applicable securities laws.
6.3. General Solicitation . In the case of the offer and sale of the Capital Securities, no form of general solicitation or general advertising was used by the Placement Agent or its representatives including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
6.4. Purchasers . The Placement Agent has made such reasonable inquiry as is necessary to determine that each Purchaser is acquiring the Capital Securities for its own account, except as contemplated in Section 7.8 hereto, and that the Purchasers do not intend to distribute the Capital Securities in contravention of the Securities Act or any other applicable securities laws.
6.5. Qualified Purchasers . The Placement Agent has not offered or sold and will not arrange for the offer or sale of the Capital Securities except (i) to those the Placement Agent reasonably believes are accredited investors (as defined in Rule 501 of Regulation D), (ii) in an offshore transaction
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complying with Rule 903 of Regulation S, or (iii) in any other manner that does not require registration of the Capital Securities under the Securities Act. In connection with each such sale, the Placement Agent has taken or will take reasonable steps to ensure that the purchasers is aware that (a) such sale is being made in reliance on an exemption under the Securities Act and (b) future transfers of the Capital Securities will not be made except in compliance with applicable securities laws.
6.6. Offering Circulars . Neither the Placement Agent nor its representatives will include any non-public information about the Company, the Trust or any of their Affiliates in any registration statement, prospectus, offering circular or private placement memorandum used in connection with any purchase of Capital Securities without the prior written consent of the Trust and the Company.
Section 7. Covenants of the Offerors . The Offerors covenant and agree with the Placement Agents and the Purchasers as follows:
7.1. Compliance with Representations and Warranties . During the period from the date of this Agreement to the Closing Date, the Offerors shall use their best efforts and take all action necessary or appropriate to cause their representations and warranties contained in Section 5 hereof to be true as of the Closing Date, after giving effect to the transactions contemplated by this Agreement, as if made on and as of the Closing Date.
7.2. Sale and Registration of Securities . The Offerors and their Affiliates shall not nor shall any of them permit any person acting on their behalf (other than the Placement Agents), to directly or indirectly (i) sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) that would or could be integrated with the sale of the Capital Securities in a manner that would require the registration under the Securities Act of the Securities or (ii) make offers or sales of any such Security, or solicit offers to buy any such Security, under circumstances that would require the registration of any of such Securities under the Securities Act.
7.3. Use of Proceeds . The Trust shall use the proceeds from the sale of the Capital Securities and the Common Securities to purchase the Debentures from the Company.
7.4. Investment Company . The Offerors shall not engage, or permit any Subsidiary to engage, in any activity which would cause it or any Subsidiary to be an investment company under the provisions of the Investment Company Act.
7.5. Reimbursement of Expenses . If the sale of the Capital Securities provided for herein is not consummated (i) because any condition set forth in Section 3 hereof is not satisfied, or (ii) because of any refusal, inability or failure on the part of the Company or the Trust to perform any agreement herein or comply with any provision hereof other than by reason of a breach by the Placement Agents, the Company shall reimburse the Placement Agents upon demand for all of their pro rata share of out-of-pocket expenses (including reasonable fees and disbursements of counsel) in an amount not to exceed $50,000.00 that shall have been incurred by them in connection with the proposed purchase and sale of the Capital Securities. Notwithstanding the foregoing, the Company shall have no obligation to reimburse the Placement Agents for their out-of-pocket expenses if the sale of the Capital Securities fails to occur because the Placement Agents fail to fulfill a condition set forth in Section 4.
7.6. Directed Selling Efforts, Solicitation and Advertising . In connection with any offer or sale of any of the Securities, the Offerors shall not, nor shall either of them permit any of their Affiliates or any person acting on their behalf, other than the Placement Agents, to (i) engage in any directed selling efforts within the meaning of Regulation S, or (ii) engage in any form of general solicitation or general advertising (as defined in Regulation D).
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7.7. Compliance with Rule 144A(d)(4) under the Securities Act . So long as any of the Securities are outstanding and are restricted securities within the meaning of Rule 144(a)(3) under the Securities Act, the Offerors will, during any period in which they are not subject to and in compliance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), or the Offerors are not exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder of such restricted securities and to each prospective purchaser (as designated by such holder) of such restricted securities, upon the request of such holder or prospective purchaser in connection with any proposed transfer, any information required to be provided by Rule 144A(d)(4) under the Securities Act, if applicable. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such holders, from time to time of such restricted securities. The information provided by the Offerors pursuant to this Section 7.7 will not, at the date thereof, contain any untrue statement of a 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.
7.8. Quarterly Reports . Within 50 days of the end of each calendar year quarter and within 100 days of the end of each calendar year during which the Debentures are issued and outstanding, the Offerors shall submit to The Bank of New York a completed quarterly report in the form attached hereto as Exhibit D , with a copy provided to First Tennessee during the period when it holds any of the Capital Securities.
7.9. Book-Entry Registration . Each Offeror will cooperate with the Placement Agents and use all commercially reasonable efforts to make the Capital Securities, and in the event the Debentures are distributed to holders of the Capital Securities, to make the Debentures, eligible for clearance and settlement as book-entry securities through the facilities of DTC, and will execute, deliver and comply with all representations made to, and agreements with, DTC and Nasdaqs PORTAL system.
Section 8. Covenants of the Placement Agents . The Placement Agents covenant and agree with the Offerors that, during the period from the date of this Agreement to the Closing Date, the Placement Agents shall use their best efforts and take all action necessary or appropriate to cause their representations and warranties contained in Section 6 to be true as of Closing Date, after giving effect to the transactions contemplated by this Agreement, as if made on and as of the Closing Date. The Placement Agents further covenant and agree not to engage in hedging transactions with respect to the Capital Securities unless such transactions are conducted in compliance with the Securities Act.
Section 9. Indemnification .
9.1. Indemnification Obligation . The Offerors shall jointly and severally indemnify and hold harmless the Placement Agents and the Purchasers and each of their respective agents, employees, officers and directors and each person that controls either of the Placement Agents or the Purchasers within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and agents, employees, officers and directors or any such controlling person of either of the Placement Agents or the Purchasers (each such person or entity, an Indemnified Party) from and against any and all losses, claims, damages, judgments, liabilities or expenses, joint or several, to which such Indemnified Party may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Offerors), insofar as such losses, claims, damages, judgments, liabilities or expenses (or actions in respect thereof) arise out of, or are based upon, or relate to, in whole or in part, (a) any untrue statement or alleged untrue statement of a material fact contained in any information (whether written or oral) or documents executed in favor of, furnished or made available to the Placement Agents or the Purchasers by the Offerors, or (b) any omission or alleged omission to state
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in any information (whether written or oral) or documents executed in favor of, furnished or made available to the Placement Agents or the Purchasers by the Offerors a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Indemnified Party for any legal and other expenses as such expenses are reasonably incurred by such Indemnified Party in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, judgments, liability, expense or action described in this Section 9.1. In addition to their other obligations under this Section 9, the Offerors hereby agree that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of, or based upon, or related to the matters described above in this Section 9.1, they shall reimburse each Indemnified Party on a quarterly basis for all reasonable legal or other expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, each Indemnified Party shall promptly return such amounts to the Offerors together with interest, determined on the basis of the prime rate (or other commercial lending rate for borrowers of the highest credit standing) announced from time to time by First Tennessee Bank National Association (the Prime Rate). Any such interim reimbursement payments which are not made to an Indemnified Party within 30 days of a request for reimbursement shall bear interest at the Prime Rate from the date of such request.
9.2. Conduct of Indemnification Proceedings . Promptly after receipt by an Indemnified Party under this Section 9 of notice of the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made against the Offerors under this Section 9, notify the Offerors in writing of the commencement thereof; but, subject to Section 9.4, the omission to so notify the Offerors shall not relieve them from any liability pursuant to Section 9.1 which the Offerors may have to any Indemnified Party unless and to the extent that the Offerors did not otherwise learn of such action and such failure by the Indemnified Party results in the forfeiture by the Offerors of substantial rights and defenses. In case any such action is brought against any Indemnified Party and such Indemnified Party seeks or intends to seek indemnity from the Offerors, the Offerors shall be entitled to participate in, and, to the extent that they may wish, to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Party; provided , however , if the defendants in any such action include both the Indemnified Party and the Offerors and the Indemnified Party shall have reasonably concluded that there may be a conflict between the positions of the Offerors and the Indemnified Party in conducting the defense of any such action or that there may be legal defenses available to it and/or other Indemnified Parties which are different from or additional to those available to the Offerors, the Indemnified Party shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Party. Upon receipt of notice from the Offerors to such Indemnified Party of their election to so assume the defense of such action and approval by the Indemnified Party of counsel, the Offerors shall not be liable to such Indemnified Party under this Section 9 for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof unless (i) the Indemnified Party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso in the preceding sentence (it being understood, however, that the Offerors shall not be liable for the expenses of more than one separate counsel representing the Indemnified Parties who are parties to such action), or (ii) the Offerors shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel of such Indemnified Party shall be at the expense of the Offerors.
9.3. Contribution . If the indemnification provided for in this Section 9 is required by its terms, but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an Indemnified Party under Section 9.1 in respect of any losses, claims, damages, liabilities or expenses
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referred to herein or therein, then the Offerors shall contribute to the amount paid or payable by such Indemnified Party as a result of any losses, claims, damages, judgments, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Offerors, on the one hand, and the Indemnified Party, on the other hand, from the offering of such Capital Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Offerors, on the one hand, and the Placement Agents, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein or other breaches which resulted in such losses, claims, damages, judgments, liabilities or expenses, as well as any other relevant equitable considerations. The respective relative benefits received by the Offerors, on the one hand, and the Placement Agents, on the other hand, shall be deemed to be in the same proportion, in the case of the Offerors, as the total price paid to the Offerors for the Capital Securities sold by the Offerors to the Purchasers (net of the compensation paid to the Placement Agents hereunder, but before deducting expenses), and in the case of the Placement Agents, as the compensation received by them, bears to the total of such amounts paid to the Offerors and received by the Placement Agents as compensation. The relative fault of the Offerors and the Placement Agents shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Offerors or the Placement Agents and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The provisions set forth in Section 9.2 with respect to notice of commencement of any action shall apply if a claim for contribution is made under this Section 9.3; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 9.2 for purposes of indemnification. The Offerors and the Placement Agents agree that it would not be just and equitable if contribution pursuant to this Section 9.3 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 9.3. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages, judgments, liabilities or expenses referred to in this Section 9.3 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. In no event shall the liability of the Placement Agents hereunder be greater in amount than the dollar amount of the compensation (net of payment of all expenses) received by the Placement Agents upon the sale of the Capital Securities giving rise to such obligation. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.
9.4. Additional Remedies . The indemnity and contribution agreements contained in this Section 9 are in addition to any liability that the Offerors may otherwise have to any Indemnified Party.
9.5. Additional Indemnification . The Company shall indemnify and hold harmless the Trust against all loss, liability, claim, damage and expense whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.
Section 10. Rights and Responsibilities of Placement Agents .
10.1. Reliance . In performing their duties under this Agreement, the Placement Agents shall be entitled to rely upon any notice, signature or writing which they shall in good faith believe to be genuine and to be signed or presented by a proper party or parties. The Placement Agents may rely upon any opinions or certificates or other documents delivered by the Offerors or their counsel or designees to either the Placement Agents or the Purchasers.
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10.2. Rights of Placement Agents . In connection with the performance of their duties under this Agreement, the Placement Agents shall not be liable for any error of judgment or any action taken or omitted to be taken unless the Placement Agents were grossly negligent or engaged in willful misconduct in connection with such performance or non-performance. No provision of this Agreement shall require the Placement Agents to expend or risk their own funds or otherwise incur any financial liability on behalf of the Purchasers in connection with the performance of any of their duties hereunder. The Placement Agents shall be under no obligation to exercise any of the rights or powers vested in them by this Agreement.
Section 11. Miscellaneous .
11.1. Disclosure Schedule . The term Disclosure Schedule, as used herein, means the schedule, if any, attached to this Agreement that sets forth items the disclosure of which is necessary or appropriate as an exception to one or more representations or warranties contained in Section 5 hereof; provided , that any item set forth in the Disclosure Schedule as an exception to a representation or warranty shall be deemed an admission by the Offerors that such item represents an exception, fact, event or circumstance that is reasonably likely to result in a Material Adverse Effect. The Disclosure Schedule shall be arranged in paragraphs corresponding to the section numbers contained in Section 5. Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the immediately preceding sentence, the mere listing (or inclusion of a copy) of a document or other item in the Disclosure Schedule shall not be deemed adequate to disclose an exception to a representation or warranty made herein unless the representation or warranty has to do with the existence of the document or other item itself. Information provided by the Company in response to any due diligence questionnaire shall not be deemed part of the Disclosure Schedule and shall not be deemed to be an exception to one or more representations or warranties contained in Section 5 hereof unless such information is specifically included on the Disclosure Schedule in accordance with the provisions of this Section 11.1.
11.2. Legal Expenses . At Closing, the Placement Agents shall provide a credit for the Offerors transaction-related legal expenses in the amount of $10,000.00.
11.3. Non-Disclosure . Except as required by applicable law, including without limitation securities laws and regulations promulgated thereunder, (i) the Offerors shall not, and will cause their advisors and representatives not to, issue any press release or other public statement regarding the transactions contemplated by this Agreement or the Operative Documents prior to or on the Closing Date and (ii) following the Closing Date, the Offerors shall not include in any press release, other public statement or other communication regarding the transactions contemplated by this Agreement or the Operative Documents, any reference to the Placement Agents, WTC, the Purchasers, the term PreTS or any derivations thereof, or the terms and conditions of this Agreement or the Operative Documents. Notwithstanding anything to the contrary, the Offerors may (1) consult any tax advisor regarding U.S. federal income tax treatment or tax structure of the transaction contemplated under this Agreement and the Operative Documents and (2) disclose to any and all persons, without limitation of any kind, the U.S. Federal income tax structure (in each case, within the meaning of Treasury Regulation § 1.6011-4) of the transaction contemplated under this Agreement and the Operative Documents and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and tax structure. For this purpose, tax structure is limited to any facts relevant to the U.S. federal income tax treatment of the transaction and does not include information relating to identity of the parties.
11.4. Notices . Prior to the Closing, and thereafter with respect to matters pertaining to this Agreement only, all notices and other communications provided for or permitted hereunder shall be made
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in writing by hand-delivery, first-class mail, telex, telecopier or overnight air courier guaranteeing next day delivery:
if to the Placement Agents, to:
FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Telecopier: 901-435-4706
Telephone: 800-456-5460
Attention: James D. Wingett
and
Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Telecopier: 212-403-2000
Telephone: 212-403-1004
Attention: Mitchell Kleinman, General Counsel
with a copy to:
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Telecopier: 314-241-6056
Telephone: 314-444-7600
Attention: Thomas C. Erb, Esq.
and
Sidley Austin Brown & Wood LLP
787 7th Avenue
New York, New York 10019
Telecopier: 212-839-5599
Telephone: 212-839-5300
Attention: Renwick Martin, Esq.
if to the Offerors, to:
Ameris Bancorp
24 Second Avenue SE
Moultrie, Georgia 31776
Telecopier: 229-890-2235
Telephone: 229-890-6386
Attention: Cindi Lewis
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with a copy to:
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
229 Peachtree Street NE
Telecopier: 404-525-2224
Telephone: 404-522-4700
Attention: Steven E. Fox, Esq.
All such notices and communications shall be deemed to have been duly given (i) at the time delivered by hand, if personally delivered, (ii) five business days after being deposited in the mail, postage prepaid, if mailed, (iii) when answered back, if telexed, (iv) the next business day after being telecopied, or (v) the next business day after timely delivery to a courier, if sent by overnight air courier guaranteeing next day delivery. From and after the Closing, the foregoing notice provisions shall be superseded by any notice provisions of the Operative Documents under which notice is given. The Placement Agents, the Offerors, and their respective counsel, may change their respective notice addresses from time to time by written notice to all of the foregoing persons.
11.5. Parties in Interest, Successors and Assigns . Except as expressly set forth herein, this Agreement is made solely for the benefit of the Placement Agents, the Purchasers and the Offerors and any person controlling the Placement Agents, the Purchasers or the Offerors and their respective successors and assigns; and no other person shall acquire or have any right under or by virtue of this Agreement. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties.
11.6. Counterparts . This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
11.7. Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
11.8. Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF LAWS) OF THE STATE OF NEW YORK.
11.9. Entire Agreement . This Agreement, together with the Operative Documents and the other documents delivered in connection with the transactions contemplated by this Agreement, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, together with the Operative Documents and the other documents delivered in connection with the transaction contemplated by this Agreement, supersedes all prior agreements and understandings between the parties with respect to such subject matter.
11.10. Severability . In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that all of the Placement Agents and the Purchasers rights and privileges shall be enforceable to the fullest extent permitted by law.
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11.11. Survival . The Placement Agents and the Offerors, respectively, agree that the representations, warranties and agreements made by each of them in this Agreement and in any certificate or other instrument delivered pursuant hereto shall remain in full force and effect and shall survive the delivery of, and payment for, the Capital Securities.
Signatures appear on the following page
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If this Agreement is satisfactory to you, please so indicate by signing the acceptance of this Agreement and deliver such counterpart to the Offerers whereupon this Agreement will become binding between us in accordance with its terms.
Very truly yours, | ||
AMERIS BANCORP | ||
By: |
/s/ Edwin W. Hortman Jr. |
|
Name: | Edwin W. Hortman Jr. | |
Title: | President & CEO | |
AMERIS STATUTORY TRUST I | ||
By: |
/s/ Edwin W. Hortman Jr. |
|
Name: | Edwin W. Hortman Jr. | |
Title: | Administrator |
CONFIRMED AND ACCEPTED, | ||
as of the date first set forth above | ||
FTN FINANCIAL CAPITAL MARKETS, a division of First Tennessee Bank National Association, as a Placement Agent |
||
By: |
/s/ James D. Wingett |
|
Name: | James D. Wingett | |
Title: | Senior Vice President | |
KEEFE, BRUYETTE & WOODS, INC., a New York corporation, as a Placement Agent |
||
By: |
/s/ Peter J. Wirth |
|
Name: | Peter J. Wirth | |
Title: | Managing Director |
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EXHIBIT A-1
FORM OF SUBSCRIPTION AGREEMENT
AMERIS STATUTORY TRUST I
AMERIS BANCORP
SUBSCRIPTION AGREEMENT
September 20, 2006
THIS SUBSCRIPTION AGREEMENT (this Agreement) made among Ameris Statutory Trust I (the Trust), a statutory trust created under the Delaware Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. §§ 3801, et seq .), Ameris Bancorp, a Georgia corporation, with its principal offices located at 24 Second Avenue SE, Moultrie, Georgia 31776 (the Company and, collectively with the Trust, the Offerors), and First Tennessee Bank National Association (the Purchaser).
RECITALS:
A. The Trust desires to issue 36,000 of its Floating Rate Capital Securities (the Capital Securities), liquidation amount $1,000.00 per Capital Security, representing an undivided beneficial interest in the assets of the Trust (the Offering), to be issued pursuant to an Amended and Restated Declaration of Trust (the Declaration) by and among the Company, Wilmington Trust Company (WTC), the administrators named therein, and the holders (as defined therein), which Capital Securities are to be guaranteed by the Company with respect to distributions and payments upon liquidation, redemption and otherwise pursuant to the terms of a Guarantee Agreement between the Company and WTC, as trustee (the Guarantee); and
B. The proceeds from the sale of the Capital Securities will be combined with the proceeds from the sale by the Trust to the Company of its common securities, and will be used by the Trust to purchase an equivalent amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company (the Debentures) to be issued by the Company pursuant to an indenture to be executed by the Company and WTC, as trustee (the Indenture); and
C. In consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to purchase from the Trust 18,000 Capital Securities at a price equal to $1,000.00 per Capital Security (the Purchase Price) and the Trust agrees to sell such Capital Securities to the Purchaser for said Purchase Price. The rights and preferences of the Capital Securities are set forth in the Declaration. The Purchase Price is payable in immediately available funds on September 20, 2006, or such other business day as may be designated by the Purchaser, but in no event later than September 29, 2006 (the Closing Date). The Offerors shall provide the Purchaser wire transfer instructions no later than 3 days prior to the Closing Date.
1.2. The Placement Agreement, dated September 13, 2006 (the Placement Agreement), among the Offerors and the placement agents identified therein (the Placement Agents) includes certain
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representations and warranties, covenants and conditions to closing and certain other matters governing the Offering. The Placement Agreement is hereby incorporated by reference into this Agreement and the Purchaser shall be entitled to each of the benefits of the Placement Agents and the Purchaser under the Placement Agreement and shall be entitled to enforce the obligations of the Offerors under such Placement Agreement as fully as if the Purchaser were a party to such Placement Agreement.
1.3. Anything herein or in the Placement Agreement notwithstanding, the Offerors acknowledge and agree that, so long as Purchaser holds some or all of the Capital Securities, the Purchaser may in its discretion from time to time transfer or sell, or sell or grant participation interests in, some or all of such Capital Securities to one or more parties, provided that any such transaction complies, as applicable, with the registration requirements of the Securities Act of 1933, as amended (the Securities Act) and any other applicable securities laws, is pursuant to an exemption therefrom, or is otherwise not subject thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that none of the Capital Securities, the Debentures nor the Guarantee have been registered under the Securities Act or any other applicable securities law, are being offered for sale by the Trust in transactions not requiring registration under the Securities Act, and may not be offered, sold, pledged or otherwise transferred by the Purchaser except in compliance with the registration requirements of the Securities Act or any other applicable securities laws, pursuant to an exemption therefrom or in a transaction not subject thereto.
2.2. The Purchaser represents and warrants that, except as contemplated under Section 1.3 hereof, it is purchasing the Capital Securities for its own account, for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or other applicable securities laws, subject to any requirement of law that the disposition of its property be at all times within its control and subject to its ability to resell such Capital Securities pursuant to an effective registration statement under the Securities Act or under Rule 144A or any other exemption from registration available under the Securities Act or any other applicable securities law.
2.3. The Purchaser represents and warrants that neither the Offerors nor the Placement Agents are acting as a fiduciary or financial or investment adviser for the Purchaser.
2.4. The Purchaser represents and warrants that it is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the Offerors or of the Placement Agents.
2.5. The Purchaser represents and warrants that (a) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisers in connection herewith to the extent it has deemed necessary, (b) it has had a reasonable opportunity to ask questions of and receive answers from officers and representatives of the Offerors concerning their respective financial condition and results of operations and the purchase of the Capital Securities, and any such questions have been answered to its satisfaction, (c) it has had the opportunity to review all publicly available records and filings concerning the Offerors and it has carefully reviewed such records and filings that it considers relevant to making an investment decision, and (d) it has made its own investment decisions based upon its own judgment, due diligence and advice from such advisers as it has deemed necessary and not upon any view expressed by the Offerors or the Placement Agents.
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2.6. The Purchaser represents and warrants that it is a qualified institutional buyer as defined under Rule 144A under the Securities Act. If the Purchaser is a dealer of the type described in paragraph (a)(1)(ii) of Rule 144A under the Securities Act, it owns and invests on a discretionary basis not less than U.S. $25,000,000.00 in securities of issuers that are not affiliated with it. The Purchaser is not a participant-directed employee plan, such as a 401(k) plan, or any other type of plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, unless investment decisions with respect to the plan are made solely by the fiduciary, trustee or sponsor of such plan.
2.7. The Purchaser represents and warrants that on each day from the date on which it acquires the Capital Securities through and including the date on which it disposes of its interests in the Capital Securities, either (i) it is not (a) an employee benefit plan (as defined in Section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended ( ERISA )) which is subject to the provisions of Part 4 of Subtitle B of Title I of ERISA, or any entity whose underlying assets include the assets of any such plan (an ERISA Plan ), (b) any other plan (as defined in Section 4975(e)(1) of the United States Internal Revenue Code of 1986, as amended (the Code )) which is subject to the provisions of Section 4975 of the Code or any entity whose underlying assets include the assets of any such plan (a Plan ), (c) an entity whose underlying assets include the assets of any such ERISA Plan or other Plan by reason of Department of Labor regulation section 2510.3-101 or otherwise, or (d) a governmental or church plan that is subject to any federal, state or local law which is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code (a Similar Law ); or (ii) the purchase, holding and disposition of the Capital Securities by it will satisfy the requirements for exemptive relief under Prohibited Transaction Class Exemption ( PTCE ) 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 or a similar exemption, or, in the case of a plan subject to a Similar Law, will not result in a non-exempt violation of such Similar Law.
2.8. The Purchaser represents and warrants that it is acquiring the Capital Securities as principal for its own account for investment and, except as contemplated under Section 1.3 hereof, not for sale in connection with any distribution thereof. It was not formed solely for the purpose of investing in the Capital Securities, and additional capital or similar contributions were not specifically solicited from any person owning a beneficial interest in it for the purpose of enabling it to purchase any Capital Securities. The Purchaser is not a (i) partnership, (ii) common trust fund or (iii) special trust, pension, profit sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made or the allocation of any investment among such partners, beneficiaries or participants, and except as contemplated under Section 1.3 hereof, it agrees that it shall not hold the Capital Securities for the benefit of any other person and shall be the sole beneficial owner thereof for all purposes and that it shall not sell participation interests in the Capital Securities or enter into any other arrangement pursuant to which any other person shall be entitled to a beneficial interest in the distribution on the Capital Securities. The Capital Securities purchased directly or indirectly by the Purchaser constitute an investment of no more than 40% of its assets. The Purchaser understands and agrees that any purported transfer of the Capital Securities to a purchaser which would cause the representations and warranties of Section 2.6 and this Section 2.8 to be inaccurate shall be null and void ab initio and the Offerors retain the right to resell any Capital Securities sold to non-permitted transferees.
2.9. The Purchaser represents and warrants that it has full power and authority to execute and deliver this Agreement, to make the representations and warranties specified herein, and to consummate the transactions contemplated herein and it has full right and power to subscribe for Capital Securities and perform its obligations pursuant to this Agreement.
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2.10. The Purchaser represents and warrants that no filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any governmental body, agency or court having jurisdiction over the Purchaser, other than those that have been made or obtained, is necessary or required for the performance by the Purchaser of its obligations under this Agreement or to consummate the transactions contemplated herein.
2.11. The Purchaser represents and warrants that this Agreement has been duly authorized, executed and delivered by the Purchaser.
2.12. The Purchaser understands and acknowledges that the Company will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements and agrees that, if any of the acknowledgments, representations, warranties or agreements deemed to have been made by it by its purchase of the Capital Securities are no longer accurate, it shall promptly notify the Company.
2.13. The Purchaser understands that no public market exists for any of the Capital Securities, and that it is unlikely that a public market will ever exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, international courier or delivered by hand against written receipt therefor, or by facsimile transmission and confirmed by telephone, to the following addresses, or such other address as may be furnished to the other parties as herein provided:
To the Offerors: | Ameris Bancorp | |
24 Second Avenue SE | ||
Moultrie, Georgia 31776 | ||
Attention: Cindi Lewis | ||
Fax: 229-890-2235 | ||
To the Purchaser: | First Tennessee Bank National Association | |
845 Crossover Lane, Suite 150 | ||
Memphis, Tennessee 38117 | ||
Attention: David Work | ||
Fax: 901-435-7983 |
Unless otherwise expressly provided herein, notices shall be deemed to have been given on the date of mailing, except notice of change of address, which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser, this Agreement shall become a binding obligation of the Purchaser with respect to the purchase of Capital Securities as herein provided.
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3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that all of the Offerors and the Purchasers rights and privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
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IN WITNESS WHEREOF , this Agreement is agreed to and accepted as of the day and year first written above.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION | ||
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AMERIS BANCORP | ||
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AMERIS STATUTORY TRUST I | ||
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Title: | Administrator |
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EXHIBIT A-2
FORM OF SUBSCRIPTION AGREEMENT
AMERIS STATUTORY TRUST I
AMERIS BANCORP
SUBSCRIPTION AGREEMENT
September 20, 2006
THIS SUBSCRIPTION AGREEMENT (this Agreement) made among Ameris Statutory Trust I (the Trust), a statutory trust created under the Delaware Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. §§ 3801, et seq. ), Ameris Bancorp, a Georgia corporation, with its principal offices located at 24 Second Avenue SE, Moultrie, Georgia 31776 (the Company and, collectively with the Trust, the Offerors), and TWE, Ltd. (the Purchaser).
RECITALS:
A. The Trust desires to issue 36,000 of its Floating Rate Capital Securities (the Capital Securities), liquidation amount $1,000.00 per Capital Security, representing an undivided beneficial interest in the assets of the Trust (the Offering), to be issued pursuant to an Amended and Restated Declaration of Trust (the Declaration) by and among the Company, Wilmington Trust Company (WTC), the administrators named therein, and the holders (as defined therein), which Capital Securities are to be guaranteed by the Company with respect to distributions and payments upon liquidation, redemption and otherwise pursuant to the terms of a Guarantee Agreement between the Company and WTC, as trustee (the Guarantee); and
B. The proceeds from the sale of the Capital Securities will be combined with the proceeds from the sale by the Trust to the Company of its common securities, and will be used by the Trust to purchase an equivalent amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company (the Debentures) to be issued by the Company pursuant to an indenture to be executed by the Company and WTC, as trustee (the Indenture); and
C. In consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to purchase from the Trust 18,000 Capital Securities at a price equal to $1,000.00 per Capital Security (the Purchase Price) and the Trust agrees to sell such Capital Securities to the Purchaser for said Purchase Price. The rights and preferences of the Capital Securities are set forth in the Declaration. The Purchase Price is payable in immediately available funds on September 20, 2006, or such other business day as may be designated by the Purchaser, but in no event later than September 29, 2006 (the Closing Date). The Offerors shall provide the Purchaser wire transfer instructions no later than 3 days prior to the Closing Date.
1.2. The certificate for the Capital Securities shall be delivered by the Trust on the Closing Date to the Purchaser or its designee.
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1.3. The Placement Agreement, dated September 13, 2006 (the Placement Agreement), among the Offerors and the Placement Agents identified therein includes certain representations and warranties, covenants and conditions to closing and certain other matters governing the Offering. The Placement Agreement is hereby incorporated by reference into this Agreement and the Purchaser shall be entitled to each of the benefits of the Placement Agents and the Purchaser under the Placement Agreement and shall be entitled to enforce the obligations of the Offerors under such Placement Agreement as fully as if the Purchaser were a party to such Placement Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that neither the Capital Securities, the Debentures nor the Guarantee have been registered under the Securities Act of 1933, as amended (the Securities Act), or any other applicable securities law, are being offered for sale by the Trust in transactions not requiring registration under the Securities Act, and may not be offered, sold, pledged or otherwise transferred by the Purchaser except in compliance with the registration requirements of the Securities Act or any other applicable securities laws, pursuant to an exemption therefrom or in a transaction not subject thereto.
2.2. The Purchaser represents, warrants and certifies that (i) it is not a U.S. person as such term is defined in Rule 902 under the Securities Act, (ii) it is not acquiring the Capital Securities for the account or benefit of any such U.S. person, (iii) the offer and sale of Capital Securities to the Purchaser constitutes an offshore transaction under Regulation S of the Securities Act, and (iv) it will not engage in hedging transactions with regard to the Capital Securities unless such transactions are conducted in compliance with the Securities Act and the Purchaser agrees to the legends and transfer restrictions set forth on the Capital Securities certificate.
2.3. The Purchaser represents and warrants that it is purchasing the Capital Securities for its own account, for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or other applicable securities laws, subject to any requirement of law that the disposition of its property be at all times within its control and subject to its ability to resell such Capital Securities pursuant to an effective registration statement under the Securities Act or under Rule 144A or any other exemption from registration available under the Securities Act or any other applicable Securities law.
2.4. The Purchaser represents and warrants that it has full power and authority to execute and deliver this Agreement, to make the representations and warranties specified herein, and to consummate the transactions contemplated herein and it has full right and power to subscribe for Capital Securities and perform its obligations pursuant to this Agreement.
2.5. The Purchaser, a Cayman Islands Company whose business includes issuance of certain notes and acquiring the Capital Securities and other similar securities, represents and warrants that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of purchasing the Capital Securities, has had the opportunity to ask questions of, and receive answers and request additional information from, the Offerors and is aware that it may be required to bear the economic risk of an investment in the Capital Securities.
2.6. The Purchaser represents and warrants that no filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any governmental body, agency or court having jurisdiction over the Purchaser, other than those that have been made or obtained, is necessary or required for the performance by the Purchaser of its obligations under this Agreement or to consummate the transactions contemplated herein.
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2.7. The Purchaser represents and warrants that this Agreement has been duly authorized, executed and delivered by the Purchaser.
2.8. The Purchaser represents and warrants that (i) the Purchaser is not in violation or default of any term of its Memorandum of Association or Articles of Association, of any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is a party or by which it is bound or of any judgment, decree, order, writ or, to its knowledge, any statute, rule or regulation applicable to the Purchaser which would prevent the Purchaser from performing any material obligation set forth in this Agreement; and (ii) the execution, delivery and performance of and compliance with this Agreement, and the consummation of the transactions contemplated herein, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term, or the suspension, revocation, impairment, forfeiture or non-renewal of any permit, license, authorization or approval applicable to the Purchaser, its business or operations or any of its assets or properties which would prevent the Purchaser from performing any material obligations set forth in this Agreement.
2.9. The Purchaser represents and warrants that the Purchaser is an exempted company with limited liability duly incorporated, validly existing and in good standing under the laws of the jurisdiction where it is organized, with full power and authority to perform its obligations under this Agreement.
2.10. The Purchaser understands and acknowledges that the Company will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements and agrees that, if any of the acknowledgments, representations, warranties or agreements deemed to have been made by it by its purchase of the Capital Securities are no longer accurate, it shall promptly notify the Company.
2.11. The Purchaser understands that no public market exists for any of the Capital Securities, and that it is unlikely that a public market will ever exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, international courier or delivered by hand against written receipt therefor, or by facsimile transmission and confirmed by telephone, to the following addresses, or such other address as may be furnished to the other parties as herein provided:
To the Offerors: | Ameris Bancorp | |
24 Second Avenue SE | ||
Moultrie, Georgia 31776 | ||
Attention: Cindi Lewis | ||
Fax: 229-890-2235 | ||
To the Purchaser: | TWE, Ltd. | |
c/o Maples Finance Limited | ||
P.O. Box 1093 GT | ||
Queensgate House | ||
South Church Street | ||
George Town, Grand Cayman | ||
Cayman Islands | ||
Attention: The Directors | ||
Fax: 345-945-7100 |
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Unless otherwise expressly provided herein, notices shall be deemed to have been given on the date of mailing, except notice of change of address, which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser, this Agreement shall become a binding obligation of the Purchaser with respect to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that all of the Offerors and the Purchasers rights and privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
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IN WITNESS WHEREOF , I have set my hand the day and year first written above.
TWE, LTD. | ||
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IN WITNESS WHEREOF , this Subscription Agreement is agreed to and accepted as of the day and year first written above.
AMERIS BANCORP | ||
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AMERIS STATUTORY TRUST I |
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EXHIBIT B-1
FORM OF COMPANY COUNSEL OPINION
September 20, 2006
First Tennessee Bank National Association | FTN Financial Capital Markets | |
845 Crossover Lane, Suite 150 | 845 Crossover Lane, Suite 150 | |
Memphis, Tennessee 38117 | Memphis, Tennessee 38117 | |
TWE, Ltd. | Keefe, Bruyette & Woods, Inc. | |
c/o Maples Finance Limited | 787 7th Avenue, 4th Floor | |
P. O. Box 1093 GT Queensgate House South Church Street George Town, Grand Cayman Cayman Islands |
New York, New York 10019 | |
Wilmington Trust Company |
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Rodney Square North | ||
1100 North Market Street | ||
Wilmington, Delaware 19890-1600 |
Ladies and Gentlemen:
We have acted as counsel to Ameris Bancorp (the Company), a Georgia corporation in connection with a certain Placement Agreement, dated September 13, 2006, (the Placement Agreement), between the Company and Ameris Statutory Trust I (the Trust), on one hand, and FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc. (the Placement Agents), on the other hand. Pursuant to the Placement Agreement, and subject to the terms and conditions stated therein, the Trust will issue and sell to First Tennessee Bank National Association and TWE, Ltd. (the Purchasers), $36,000,000.00 aggregate principal amount of Floating Rate Capital Securities (liquidation amount $1,000.00 per capital security) (the Capital Securities).
Capitalized terms used herein and not otherwise defined shall have the same meanings ascribed to them in the Placement Agreement.
The law covered by the opinions expressed herein is limited to the law of the United States of America and of the State of Georgia.
We have made such investigations of law as, in our judgment, were necessary to render the following opinions. We have also reviewed (a) the Companys Articles of Incorporation, as amended, and its By-Laws, as amended; and (b) such corporate documents, records, information and certificates of the Company and the Subsidiaries, certificates of public officials or government authorities and other documents as we have deemed necessary or appropriate as a basis for the opinions hereinafter expressed. As to certain facts material to our opinions, we have relied, with your permission, upon statements, certificates or representations, including those delivered or made in connection with the above-referenced transaction, of officers and other representatives of the Company and the Subsidiaries and the Trust.
As used herein, the phrases to the best of our knowledge or known to us or other similar phrases mean the actual knowledge of the attorneys who have had active involvement in the transactions described above or who have prepared or signed this opinion letter, or who otherwise have devoted substantial attention to legal matters for the Company.
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Based upon and subject to the foregoing and the further qualifications set forth below, we are of the opinion as of the date hereof that:
1. The Company is 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 Bank Holding Company Act of 1956, as amended. Each of the Significant Subsidiaries is validly existing and in good standing under the laws of its jurisdiction of organization. Each of the Company and the Significant Subsidiaries has full corporate power and authority to own or lease its properties and to conduct its business as such business is currently conducted in all material respects. To the best of our knowledge, all outstanding shares of capital stock of the Significant Subsidiaries have been duly authorized and validly issued, and are fully paid and nonassessable except to the extent such shares may be deemed assessable under 12 U.S.C. Section 1831o or 12 U.S.C. Section 55, and are owned of record and beneficially, directly or indirectly, by the Company.
2. The issuance, sale and delivery of the Debentures in accordance with the terms and conditions of the Placement Agreement and the Operative Documents have been duly authorized by all necessary actions of the Company. The issuance, sale and delivery of the Debentures by the Company and the issuance, sale and delivery of the Capital Securities and the Common Securities by the Trust do not give rise to any preemptive or other rights to subscribe for or to purchase any shares of capital stock or equity securities of the Company or the Significant Subsidiaries pursuant to the corporate Articles of Incorporation or Charter, By-Laws or other governing documents of the Company or the Significant Subsidiaries, or, to the best of our knowledge, any agreement or other instrument to which either the Company or the Subsidiaries is a party or by which the Company or the Significant Subsidiaries may be bound.
3. The Company has all requisite corporate power to enter into and perform its obligations under the Placement Agreement and the Subscription Agreements, and the Placement Agreement and the Subscription Agreements have been duly and validly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, except as the enforcement thereof may be limited by general principles of equity and by bankruptcy or other laws affecting creditors rights generally, and except as the indemnification and contribution provisions thereof may be limited under applicable laws and certain remedies may not be available in the case of a non-material breach.
4. Each of the Indenture, the Trust Agreement and the Guarantee Agreement has been duly authorized, executed and delivered by the Company, and is a valid and legally binding obligation of the Company enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, receivership, moratorium and other laws affecting the rights and remedies of creditors generally and of general principles of equity.
5. The Debentures have been duly authorized, executed and delivered by the Company, are entitled to the benefits of the Indenture and are legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to the effect of bankruptcy, insolvency, reorganization, receivership, moratorium and other laws affecting the rights and remedies of creditors generally and of general principles of equity.
6. To the best of our knowledge, neither the Company, the Trust, nor any of the Subsidiaries is in breach or violation of, or default under, with or without notice or lapse of time or both, its Articles of Incorporation or Charter, By-Laws or other governing documents (including without limitation, the Trust Agreement). The execution, delivery and performance of the Placement Agreement and the Operative Documents and the consummation of the transactions contemplated by the Placement Agreement and the Operative Documents do not and will not (i) result in the creation or imposition of any material lien,
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claim, charge, encumbrance or restriction upon any property or assets of the Company or the Subsidiaries, or (ii) conflict with, constitute a material breach or violation of, or constitute a material default under, with or without notice or lapse of time or both, any of the terms, provisions or conditions of (A) the Articles of Incorporation or Charter, By-Laws or other governing documents of the Company or the Subsidiaries, or (B) to the best of our knowledge, any material contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease, franchise, license or any other agreement or instrument to which the Company or the Subsidiaries is a party or by which any of them or any of their respective properties may be bound or (C) any order, decree, judgment, franchise, license, permit, rule or regulation of any court, arbitrator, government, or governmental agency or instrumentality, domestic or foreign, known to us having jurisdiction over the Company or the Subsidiaries or any of their respective properties which, in the case of each of (i) or (ii) above, is material to the Company and the Subsidiaries on a consolidated basis.
7. Except for filings, registrations or qualifications that may be required by applicable securities laws, no authorization, approval, consent or order of, or filing, registration or qualification with, any person (including, without limitation, any court, governmental body or authority) is required under the laws of the State of Georgia in connection with the transactions contemplated by the Placement Agreement and the Operative Documents in connection with the offer and sale of the Capital Securities as contemplated by the Placement Agreement and the Operative Documents.
8. To the best of our knowledge (i) no action, suit or proceeding at law or in equity is pending or threatened to which the Company, the Trust or the Subsidiaries are or may be a party, and (ii) no action, suit or proceeding is pending or threatened against or affecting the Company, the Trust or the Subsidiaries or any of their properties, before or by any court or governmental official, commission, board or other administrative agency, authority or body, or any arbitrator, wherein an unfavorable decision, ruling or finding could reasonably be expected to have a material adverse effect on the consummation of the transactions contemplated by the Placement Agreement and the Operative Documents or the issuance and sale of the Capital Securities as contemplated therein or the condition (financial or otherwise), earnings, affairs, business, or results of operations of the Company, the Trust and the Subsidiaries on a consolidated basis.
9. Assuming the truth and accuracy of the representations and warranties of the Placement Agents in the Placement Agreement and the Purchasers in the Subscription Agreements, it is not necessary in connection with the offering, sale and delivery of the Capital Securities, the Debentures and the Guarantee Agreement (or the Guarantee) to register the same under the Securities Act of 1933, as amended, under the circumstances contemplated in the Placement Agreement and the Subscription Agreements.
10. Neither the Company nor the Trust is or after giving effect to the offering and sale of the Capital Securities and the consummation of the transactions described in the Placement Agreement will be, an investment company or an entity controlled by an investment company, in each case within the meaning of the Investment Company Act of 1940, as amended, without regard to Section 3(c) of such Act.
The opinion expressed in the first two sentences of numbered paragraph 1 of this opinion is based solely upon certain certificates and confirmations issued by the applicable governmental officer or authority with respect to each of the Company and the Significant Subsidiaries.
With respect to the foregoing opinions, since no member of this firm is actively engaged in the practice of law in the States of Delaware or New York, we do not express any opinions as to the laws of such states and have (i) relied, with your approval, upon the opinion of Richards, Layton & Finger, P.A. with respect to matters of Delaware law and (ii) assumed, with your approval and without rendering any opinion to such effect, that the laws of the State of New York, in all respects material to this opinion, are substantively identical to the laws of the State of Georgia, without regard to conflict of law provisions.
The opinions expressed herein are rendered to you solely pursuant to Section 3.1(a) of the Placement Agreement. As such, they may be relied upon by you only and may not be used or relied upon by any other person for any purpose whatsoever without our prior written consent.
Very truly yours,
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EXHIBIT B-2
FORM OF DELAWARE COUNSEL OPINION
To Each of the Persons
Listed on Schedule A Hereto
Re: | Ameris Statutory Trust I |
Ladies and Gentlemen:
We have acted as special Delaware counsel for Ameris Statutory Trust I, a Delaware statutory trust (the Trust), in connection with the matters set forth herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following:
(a) The Certificate of Trust of the Trust (the Certificate of Trust), as filed in the office of the Secretary of State of the State of Delaware (the Secretary of State) on September 11, 2006;
(b) The Declaration of Trust, dated as of September 11, 2006, among Ameris Bancorp, a Georgia corporation (the Company), Wilmington Trust Company, a Delaware banking corporation (WTC), as trustee and the administrators named therein (the Administrators);
(c) The Amended and Restated Declaration of Trust of the Trust, dated as of September 20, 2006 (including the form of Capital Securities Certificate attached thereto as Exhibits A-1 and A-2 and the terms of the Capital Securities attached as Annex I) (the Declaration of Trust), among the Company, as sponsor, WTC, as Delaware trustee (the Delaware Trustee) and institutional trustee (the Institutional Trustee), the Administrators and the holders, from time to time, of undivided beneficial interests in the assets of the Trust;
(d) The Placement Agreement, dated September 13, 2006 (the Placement Agreement), among the Company, the Trust, and FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc., as placement agents;
(e) The Subscription Agreements, dated September 20, 2006 (the Subscription Agreement), among (i) the Trust, the Company and TWE, Ltd. and (ii) the Trust, the Company and First Tennessee Bank National Association (the documents identified in items (c) through (e) being collectively referred to as the Operative Documents);
(f) The Capital Securities being issued on the date hereof (the Capital Securities);
(g) The Common Securities being issued on the date hereof (the Common Securities) (the documents identified in items (f) and (g) being collectively referred to as the Trust Securities); and
(h) A Certificate of Good Standing for the Trust, dated September 19, 2006, obtained from the Secretary of State.
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Capitalized terms used herein and not otherwise defined are used as defined in the Declaration of Trust, except that reference herein to any document shall mean such document as in effect on the date hereof. This opinion is being delivered pursuant to Section 3.1 of the Placement Agreement.
For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (h) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (h) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Declaration of Trust constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation, and termination of the Trust, and that the Declaration of Trust and the Certificate of Trust are in full force and effect and have not been amended further, (ii) that there are no proceedings pending or contemplated, for the merger, consolidation, liquidation, dissolution or termination of the Trust, (iii) except to the extent provided in paragraph 1 below, the due creation, due formation or due organization, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation, formation or organization, (iv) that each party to the documents examined by us is qualified to do business in each jurisdiction where such qualification is required generally or necessary in order for such party to enforce its rights under the documents examined by us, (v) the legal capacity of each natural person who is a party to the documents examined by us, (vi) except to the extent set forth in paragraph 2 below, that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (vii) except to the extent provided in paragraph 3 below, that each of the parties to the documents examined by us has duly authorized, executed and delivered such documents, (viii) the receipt by each Person to whom a Capital Security is to be issued by the Trust (the Capital Security Holders) of a Capital Security Certificate for the Capital Security and the payment for the Capital Securities acquired by it, in accordance with the Declaration of Trust and the Subscription Agreement, (ix) that the Capital Securities are issued and sold to the Holders of the Capital Securities in accordance with the Declaration of Trust and the Subscription Agreement, (x) the receipt by the Person (the Common Securityholder) to whom the common securities of the Trust representing common undivided beneficial interests in the assets of the Trust (the Common Securities and, together with the Capital Securities, the Trust Securities) are to be issued by the Trust of a Common Security Certificate for the Common Securities and the payment for the Common Securities acquired by it, in accordance with the Declaration of Trust, (xi) that the Common Securities are issued and sold to the Common Securityholder in accordance with the Declaration of Trust, (xii) that each of the parties to the documents reviewed by us has agreed to and received the stated consideration for the incurrence of its obligations under such documents, (xiii) that each of the documents reviewed by us (other than the Declaration of Trust) is a legal, valid, binding and enforceable obligation of the parties thereto in accordance with the terms thereof and (xiv) that the Trust derives no income from or connected with sources within the State of Delaware and has no assets, activities (other than having a trustee and the filing of documents with the Secretary of State) or employees in the State of Delaware. We have not participated in the preparation of any offering materials with respect to the Trust Securities and assume no responsibility for its contents.
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This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder that are currently in effect.
We express no opinion as to (i) the effect of suretyship defenses, or defenses in the nature thereof, with respect to the obligations of any applicable guarantor, joint obligor, surety, accommodation party, or other secondary obligor or any provisions of the Declaration of Trust with respect to indemnification or contribution and (ii) the accuracy or completeness of any exhibits or schedules to the Operative Documents. No opinion is given herein as to the choice of law or internal substantive rules of law that any court or other tribunal may apply to the transactions contemplated by the Operative Documents.
We express no opinion as to the enforceability of any particular provision of the Declaration of Trust or the other Operative Documents relating to remedies after default.
We express no opinion as to the enforceability of any particular provision of any of the Operative Documents relating to (i) waivers of rights to object to jurisdiction or venue, or consents to jurisdiction or venue, (ii) waivers of rights to (or methods of) service of process, or rights to trial by jury, or other rights or benefits bestowed by operation of law, (iii) waivers of any applicable defenses, setoffs, recoupments, or counterclaims, (iv) waivers or variations of provisions which are not capable of waiver or variation under the Uniform Commercial Code (UCC) of the State, (v) the grant of powers of attorney to any person or entity, or (vi) exculpation or exoneration clauses, indemnity clauses, and clauses relating to releases or waivers of unmatured claims or rights.
We have made no examination of, and no opinion is given herein as to the Trustees or the Trusts title to or other ownership rights in, or the existence of any liens, charges or encumbrances on, or adverse claims against, any asset or property held by the Institutional Trustee or the Trust. We express no opinion as to the creation, validity, attachment, perfection or priority of any mortgage, security interest or lien in any asset or property held by the Institutional Trustee or the Trust.
We express no opinion as to the effect of events occurring, circumstances arising, or changes of law becoming effective or occurring, after the date hereof on the matters addressed in this opinion letter, and we assume no responsibility to inform you of additional or changed facts, or changes in law, of which we may become aware.
We express no opinion as to any requirement that any party to the Operative Documents (or any other persons or entities purportedly entitled to the benefits thereof) qualify or register to do business in any jurisdiction in order to be able to enforce its rights thereunder or obtain the benefits thereof.
Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good standing as a statutory trust under the Delaware Statutory Trust Act (12 Del. C . § 3801, et seq .) (the Act). All filings required under the laws of the State of Delaware with respect to the creation and valid existence of the Trust as a statutory trust have been made.
B-2-3
2. Under the Declaration of Trust and the Act, the Trust has the trust power and authority to (A) execute and deliver the Operative Documents, (B) perform its obligations under such Operative Documents and (C) issue the Trust Securities.
3. The execution and delivery by the Trust of the Operative Documents, and the performance by the Trust of its obligations thereunder, have been duly authorized by all necessary trust action on the part of the Trust.
4. The Declaration of Trust constitutes a legal, valid and binding obligation of the Company, the Trustees and the Administrators, and is enforceable against the Company, the Trustees and the Administrators, in accordance with its terms.
5. Each of the Operative Documents constitutes a legal, valid and binding obligation of the Trust, enforceable against the Trust, in accordance with its terms.
6. The Capital Securities have been duly authorized for issuance by the Declaration of Trust, and, when duly executed and delivered to and paid for by the purchasers thereof in accordance with the Declaration of Trust, the Subscription Agreement and the Placement Agreement, the Capital Securities will be validly issued, fully paid and, subject to the qualifications set forth in paragraph 8 below, nonassessable undivided beneficial interests in the assets of the Trust and will entitle the Capital Securities Holders to the benefits of the Declaration of Trust. The issuance of the Capital Securities is not subject to preemptive or other similar rights under the Act or the Declaration of Trust.
7. The Common Securities have been duly authorized for issuance by the Declaration of Trust and, when duly executed and delivered to the Company as Common Security Holder in accordance with the Declaration of Trust, will be validly issued, fully paid and, subject to paragraph 8 below and Section 9.1(b) of the Declaration of Trust (which provides that the Holder of the Common Securities are liable for debts and obligations of Trust), nonassessable undivided beneficial interests in the assets of the Trust and will entitle the Common Security Holder to the benefits of the Declaration of Trust. The issuance of the Common Securities is not subject to preemptive or other similar rights under the Act or the Declaration of Trust.
8. Under the Declaration of Trust and the Act, the Holders of the Capital Securities, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Holders of the Capital Securities and the Holder of the Common Securities may be obligated, pursuant to the Declaration of Trust, (A) to provide indemnity and/or security in connection with and pay taxes or governmental charges arising from transfers or exchanges of Capital Security Certificates and the issuance of replacement Capital Security Certificates, and (B) to provide security or indemnity in connection with requests of or directions to the Institutional Trustee to exercise its rights and powers under the Declaration of Trust.
9. Neither the execution, delivery and performance by the Trust of the Operative Documents, nor the consummation by the Trust of any of the transactions contemplated thereby, requires the consent or approval of, the authorization of, the withholding of objection on the part of, the giving of notice to, the filing, registration or qualification with, or the taking of any other action in respect of, any governmental authority or agency of the State of Delaware, other than the filing of the Certificate of Trust with the Secretary of State (which Certificate of Trust has been duly filed).
10. Neither the execution, delivery and performance by the Trust of the Trust Documents, nor the consummation by the Trust of the transactions contemplated thereby, (i) is in
B-2-4
violation of the Declaration of Trust or of any law, rule or regulation of the State of Delaware applicable to the Trust or (ii) to the best of our knowledge, without independent investigation, violates, contravenes or constitutes a default under, or results in a breach of or in the creation of any lien (other than as permitted by the Operative Documents) upon any property of the Trust under any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument to which the Trust is a party or by which it is bound.
11. Assuming that the Trust will not be taxable as a corporation for federal income tax purposes, but rather will be classified for such purposes as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, the Trust will not be subject to any tax, fee or governmental charge under the laws of the State of Delaware.
The opinions expressed in paragraph 4, 5, 6, 7 and 8 above are subject, as to enforcement, to the effect upon the Declaration of Trust of (i) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance and transfer, and other similar laws relating to or affecting the rights and remedies of creditors generally, (ii) principles of equity, including applicable law relating to fiduciary duties (regardless of whether considered and applied in a proceeding in equity or at law), and (iii) the effect of applicable public policy on the enforceability of provisions relating to indemnification or contribution.
Circular 230 Notice. Any advice contained in this communication with respect to any federal tax matter was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that the Internal Revenue Service may impose on the taxpayer. If any such advice is made to any person other than to our client for whom the advice was prepared, the advice expressed above is being delivered to support the promotion or marketing (by a person other than Richards, Layton & Finger) of the transaction or matter discussed or referenced, and such taxpayer should seek advice based on the taxpayers particular circumstances from an independent tax advisor.
In basing the opinions set forth herein on our knowledge, the words our knowledge signify that no information has come to the attention of the attorneys in the firm who are directly involved in the representation of the Trust in this transaction that would give us actual knowledge that any such opinions are not accurate. Except as otherwise stated herein, we have undertaken no independent investigation or verification of such matters.
We consent to your relying as to matters of Delaware law upon this opinion in connection with the Placement Agreement. We also consent to Lewis, Rice & Fingersh, L.C.s and Rogers & Hardin LLPs relying as to matters of Delaware law upon this opinion in connection with opinions to be rendered by them on the date hereof pursuant to the Placement Agreement. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
B-2-5
SCHEDULE A
Wilmington Trust Company
FTN Financial Capital Markets
Keefe, Bruyette & Woods, Inc.
First Tennessee Bank National Association
TWE, Ltd.
Ameris Bancorp
B-2-6
EXHIBIT B-3
TAX COUNSEL OPINION ITEMS
1. | The Debentures will be classified as indebtedness of the Company for U.S. federal income tax purposes. |
2. | The Trust will be characterized as a grantor trust and not as an association taxable as a corporation for U.S. federal income tax purposes. |
B-3-1
Lewis, Rice & Fingersh, L.C.
500 N. Broadway, Suite 2000
St. Louis, Missouri 63102
Re: | Representations Concerning the Issuance of Junior Subordinated Deferrable Interest Debentures (the Debentures) to Ameris Statutory Trust I (the Trust) and Sale of Trust Securities (the Trust Securities) of the Trust |
Ladies and Gentlemen:
In accordance with your request, Ameris Bancorp (the Company) hereby makes the following representations in connection with the preparation of your opinion letter as to the United States federal income tax consequences of the issuance by the Company of the Debentures to the Trust and the sale of the Trust Securities.
Company hereby represents that:
1. The sole assets of the Trust will be the Debentures, any interest paid on the Debentures to the extent not distributed, proceeds of the Debentures, or any of the foregoing.
2. The Company intends to use the net proceeds from the sale of the Debentures for general corporate purposes.
3. The Trust was not formed to conduct any trade or business and is not authorized to conduct any trade or business. The Trust exists for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using the proceeds from the sale of Trust Securities to acquire the Debentures, and (iii) engaging only in activities necessary or incidental thereto.
4. The Company has not entered into an agency agreement with the Trust or authorized the trustee to act as its agent in dealing with third parties. To the Companys knowledge, after due inquiry, the Trust has not acted as the agent of the Company or of anyone else in dealing with third parties.
5. The Trust was formed to facilitate direct investment in the assets of the Trust, and the existence of multiple classes of ownership is incidental to that purpose. There is no intent to provide holders of such interests in the Trust with diverse interests in the assets of the Trust.
6. The Company intends to create a debtor-creditor relationship between the Company, as debtor, and the Trust, as a creditor, upon the issuance and sale of the Debentures to the Trust by the Company. The Company will (i) record and at all times continue to reflect the Debentures as indebtedness on its separate books and records for financial accounting purposes, and (ii) treat the Debentures as indebtedness for all United States tax purposes.
7. During each year, the Trusts income will consist solely of payments made by the Company with respect to the Debentures. Such payments will not be derived from the active conduct of a financial business by the Trust. Both the Companys obligation to make such payments and the measurement of the amounts payable by the Company are defined by the terms of the Debentures. Neither the Companys obligation to make such payments nor the measurement of the amounts payable by the Company is dependent on income or profits of Company or any affiliate of the Company.
B-3-2
8. The Company expects that it will be able to make, and will make, timely payment of amounts identified by the Debentures as principal and interest in accordance with the terms of the Debentures with available capital or accumulated earnings.
9. The Company presently has no intention to defer interest payments on the Debentures, and it considers the likelihood of such a deferral to be remote because, if it were to exercise its right to defer payments of interest with respect to the Debentures, it would not be permitted to declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any capital stock of the Company or any affiliate of the Company (other than payments of dividends or distributions to the Company or payments of dividends from direct or indirect subsidiaries of the Company to their parent corporations, which also shall be direct or indirect subsidiaries of the Company) or make any payment of principal of or interest or premium, if any, on or repay, repurchase, or redeem any debt securities of the Company or any affiliate of the Company that rank pari passu in all respects with or junior in interest to the Debentures, in each case subject to limited exceptions stated in Section 2.11 of the Indenture to be entered into in connection with the issuance of the Debentures.
10. The Company has no present intention (a) to take the position that a deferral of interest payments on the Debentures is not a remote contingency, or (b) to make an explicit disclosure on the Companys tax return, under Reg. § 1.1275-2(h)(5) that its determination as holder with respect to remote contingency status is different from its determination as issuer.
11. Immediately after the issuance of the Debentures, the debt-to-equity ratio of the Company (as determined for financial accounting purposes, but excluding deposit liabilities from the Companys debt) will be within standard depository institution industry norms and, in any event, will be no higher than four to one (4 : 1).
12. To the best of our knowledge, the Company is currently in compliance with all federal, state, and local capital requirements, except to the extent that failure to comply with any such requirements would not have a material adverse effect on the Company and its affiliates.
13. The Company will not issue any class of common stock or preferred stock senior to the Debentures during their term.
14. The Internal Revenue Service has not challenged the interest deduction on any class of the Companys subordinated debt in the last ten (10) years on the basis that such debt constitutes equity for federal income tax purposes.
The above representations are accurate as of the date below and will continue to be accurate through the issuance of the Trust Securities, unless you are otherwise notified by us in writing. The undersigned understands that you will rely on the foregoing in connection with rendering certain legal opinions, and possesses the authority to make the representations set forth in this letter on behalf of the Company.
Very truly yours, | ||||
AMERIS BANCORP | ||||
Date: September 15, 2006 | By: |
|
||
Title: |
|
B-3-3
EXHIBIT C
SIGNIFICANT SUBSIDIARIES
American Banking Company
C-1
EXHIBIT D
FORM OF QUARTERLY REPORT
TWE, Ltd. | The Bank of New York | |
c/o Maples Finance Limited | Collateralized Debt Obligation Group | |
P.O. Box 1093 GT | 101 Barclay Street, 8E | |
Queensgate House | New York, New York 10286 | |
South Church Street | Attention: Franco B. Talavera | |
George Town | CDO Relationship Manager | |
Grand Cayman, Cayman Islands | ||
Attention: The Directors |
BANK HOLDING COMPANY
As of [March 31, June 30, September 30 or December 31], 20
Tier 1 to Risk Weighted Assets |
% | ||
Ratio of Double Leverage |
% | ||
Non-Performing Assets to Loans and OREO |
% | ||
Ratio of Reserves to Non-Performing Loans |
% | ||
Ratio of Net Charge-Offs to Loans |
% | ||
Return on Average Assets (annualized)** |
% | ||
Net Interest Margin (annualized)** |
% | ||
Efficiency Ratio |
% | ||
Ratio of Loans to Assets |
% | ||
Ratio of Loans to Deposits |
% | ||
Total Assets |
$ | ||
Year to Date Income |
$ |
* | A table describing the quarterly report calculation procedures is provided on page D-2 |
** | To annualize Return on Average Assets and Net Interest Margin do the following: |
1 st Quarter-multiply income statement item by 4, then divide by balance sheet item(s)
2 nd Quarter-multiply income statement item by 2,then divide by balance sheet item(s)
3 rd Quarter-divide income statement item by 3, then multiply by 4, then divide by balance sheet item(s)
4 th Quarter-should already be an annual number
NO ADJUSTMENT SHOULD BE MADE TO BALANCE SHEET ITEMS
D-1
Financial Definitions
Report Item |
Corresponding FRY-9C or LP Line Items with Line Item corresponding Schedules |
Description of Calculation |
||
Tier 1 Capital to Risk Weighted Assets | BHCK7206 Schedule HC-R | Tier 1 Risk Ratio: Core Capital (Tier 1)/ Risk- Adjusted Assets | ||
Ratio of Double Leverage |
(BHCP0365)/(BHCP3210) Schedule PC in the LP |
Total equity investments in subsidiaries divided by the total equity capital. This field is calculated at the parent company level. Subsidiaries include bank, bank holding company, and nonbank subsidiaries. | ||
Non-Performing Assets to Loans and OREO | (BHCK5525-BHCK3506+BHCK5526- BHCK3507+BHCK2744)/(BHCK2122+BHCK2 744) Schedules HC-C, HC-M & HC-N | Total Nonperforming Assets (NPLs+Foreclosed Real Estate+Other Nonaccrual & Repossessed Assets)/ Total Loans + Foreclosed Real Estate | ||
Ratio of Reserves to Non-Performing Loans | (BHCK3123+BHCK3128)/(BHCK5525- BHCK3506+BHCK5526-BHCK3507) Schedules HC & HC-N | Total Loan Loss and Allocated Transfer Risk Reserves/ Total Nonperforming Loans (Nonaccrual + Restructured) | ||
Ratio of Net Charge-Offs to Loans | (BHCK4635-BHCK4605)/(BHCK3516) Schedules HI-B & HC-K | Net charge offs for the period as a percentage of average loans. | ||
Return on Assets | (BHCK4340/BHCK3368) Schedules HI & HC-K | Net Income as a percentage of Assets. | ||
Net Interest Margin | (BHCK4519)/(BHCK3515+BHCK3365+BHCK 3516+BHCK3401+BHCKB985) Schedules HI Memorandum and HC-K | (Net Interest Income Fully Taxable Equivalent, if available / Average Earning Assets) | ||
Efficiency Ratio |
(BHCK4093)/(BHCK4519+BHCK4079)
Schedule HI |
(Noninterest Expense)/ (Net Interest Income Fully Taxable Equivalent, if available, plus Noninterest Income) | ||
Ratio of Loans to Assets |
(BHCKB528+BHCK5369)/BHCK2170)
Schedule HC |
Total Loans & Leases (Net of Unearned Income & Gross of Reserve)/ Total Assets | ||
Ratio of Loans to Deposits | (BHCKB528+BHCK5369)/(BHDM6631+BHD M6636+BHFN6631+BHFN6636) Schedule HC | Total Loans & Leases (Net of Unearned Income & Gross of Reserve)/ Total Deposits (Includes Domestic and Foreign Deposits) | ||
Total Assets |
(BHCK2170) Schedule HC |
The sum of total assets. Includes cash and balances due from depository institutions; securities; federal funds sold and securities purchased under agreements to resell; loans and lease financing receivables; trading assets; premises and fixed assets; other real estate owned; investments in unconsolidated subsidiaries and associated companies; customers liability on acceptances outstanding; intangible assets; and other assets. | ||
Net Income |
(BHCK4300) Schedule HI |
The sum of income (loss) before extraordinary items and other adjustments and extraordinary items; and other adjustments, net of income taxes. |
D-2
D ISCLOSURE S CHEDULE
T O
P LACEMENT A GREEMENT
AMONG
A MERIS B ANCORP ,
A MERIS S TATUTORY T RUST I,
FTN F INANCIAL C APITAL M ARKETS
AND
K EEFE , B RUYETTE & W OODS , I NC .
D ATED A S O F S EPTEMBER 13, 2006
Capitalized terms used but not otherwise defined in this Disclosure Schedule shall have the meanings ascribed to such terms in the above-referenced agreement (the Agreement). This Disclosure Schedule is qualified in its entirety by reference to specific provisions of the Agreement, and is not intended to constitute, and shall not be construed as constituting, representations or warranties of the Offerors, except as and to the extent provided in the Agreement. Except as provided in the Agreement, inclusion of information herein shall not be construed as an admission that such information is material to the business of the Company.
Section 5.10 Subsidiaries of the Company
Pursuant to a Security Agreement dated as of December 14, 2005, the Company has pledged all of the outstanding shares of the common stock of American Banking Company, a wholly-owned subsidiary of the Company, to SunTrust Bank in connection with that certain Revolving Credit Agreement between the Company and SunTrust Bank dated as of December 14, 2005.
Section 5.19 Litigation
On June 15, 2006, a Houston County, Alabama jury entered a verdict in a civil action against Southland Bank, a former subsidiary of the Company that earlier in 2006 was merged with and into the Companys subsidiary, American Banking Company, and one of Southland Banks employees in the amount of approximately $7.1 million. The plaintiffs in this action had unsuccessfully applied to Southland Bank for a business loan. The plaintiffs sued Southland Bank and the employee for actual and punitive damages alleging a number of purported causes of action, including breach of contract, negligent failure to provide a loan and fraud, among other things, based on the banks denial of the loan application. The verdict assesses compensatory damages in the amount of $2.1 million and punitive damages against Southland Bank in the amount of $5 million. The defendants have filed post-trial motions for judgment in their favor as a matter of law, as well as motions for a new trial and to alter or vacate the verdict and judgment. Those motions are pending. It is anticipated that any potential financial obligation that the Company or its Subsidiaries might have to the plaintiffs in this action will be covered by existing insurance.
* * * * *
1
Exhibit 4.2
AMERIS STATUTORY TRUST I
AMERIS BANCORP
SUBSCRIPTION AGREEMENT
September 20, 2006
THIS SUBSCRIPTION AGREEMENT (this Agreement) made among Ameris Statutory Trust I (the Trust), a statutory trust created under the Delaware Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. §§ 3801, et seq .), Ameris Bancorp, a Georgia corporation, with its principal offices located at 24 Second Avenue SE, Moultrie, Georgia 31776 (the Company and, collectively with the Trust, the Offerors), and First Tennessee Bank National Association (the Purchaser).
RECITALS:
A. The Trust desires to issue 36,000 of its Floating Rate Capital Securities (the Capital Securities), liquidation amount $1,000.00 per Capital Security, representing an undivided beneficial interest in the assets of the Trust (the Offering), to be issued pursuant to an Amended and Restated Declaration of Trust (the Declaration) by and among the Company, Wilmington Trust Company (WTC), the administrators named therein, and the holders (as defined therein), which Capital Securities are to be guaranteed by the Company with respect to distributions and payments upon liquidation, redemption and otherwise pursuant to the terms of a Guarantee Agreement between the Company and WTC, as trustee (the Guarantee); and
B. The proceeds from the sale of the Capital Securities will be combined with the proceeds from the sale by the Trust to the Company of its common securities, and will be used by the Trust to purchase an equivalent amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company (the Debentures) to be issued by the Company pursuant to an indenture to be executed by the Company and WTC, as trustee (the Indenture); and
C. In consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to purchase from the Trust 18,000 Capital Securities at a price equal to $1,000.00 per Capital Security (the Purchase Price) and the Trust agrees to sell such Capital Securities to the Purchaser for said Purchase Price. The rights and preferences of the Capital Securities are set forth in the Declaration. The Purchase Price is payable in immediately available funds on September 20, 2006, or such other business day as may be designated by the Purchaser, but in no event later than September 29, 2006 (the Closing Date). The Offerors shall provide the Purchaser wire transfer instructions no later than 1 day following the date hereof.
1.2. The Placement Agreement, dated September 13, 2006 (the Placement Agreement), among the Offerors and the placement agents identified therein (the Placement Agents) includes certain representations and warranties, covenants and conditions to closing and certain other matters governing the Offering. The Placement Agreement is hereby incorporated by reference into this Agreement and the Purchaser shall be entitled to each of the benefits of the Placement Agents and the Purchaser under the Placement Agreement and shall be entitled to enforce the obligations of the Offerors under such Placement Agreement as fully as if the Purchaser were a party to such Placement Agreement.
1
1.3. Anything herein or in the Placement Agreement notwithstanding, the Offerors acknowledge and agree that, so long as Purchaser holds some or all of the Capital Securities, the Purchaser may in its discretion from time to time transfer or sell, or sell or grant participation interests in, some or all of such Capital Securities to one or more parties, provided that any such transaction complies, as applicable, with the registration requirements of the Securities Act of 1933, as amended (the Securities Act) and any other applicable securities laws, is pursuant to an exemption therefrom, or is otherwise not subject thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that none of the Capital Securities, the Debentures or the Guarantee have been registered under the Securities Act or any other applicable securities law, are being offered for sale by the Trust in transactions not requiring registration under the Securities Act, and may not be offered, sold, pledged or otherwise transferred by the Purchaser except in compliance with the registration requirements of the Securities Act or any other applicable securities laws, pursuant to an exemption therefrom or in a transaction not subject thereto.
2.2. The Purchaser represents and warrants that, except as contemplated under Section 1.3 hereof, it is purchasing the Capital Securities for its own account, for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or other applicable securities laws, subject to any requirement of law that the disposition of its property be at all times within its control and subject to its ability to resell such Capital Securities pursuant to an effective registration statement under the Securities Act or under Rule 144A or any other exemption from registration available under the Securities Act or any other applicable securities law.
2.3. The Purchaser represents and warrants that neither the Offerors nor the Placement Agents are acting as a fiduciary or financial or investment adviser for the Purchaser.
2.4. The Purchaser represents and warrants that it is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the Offerors or of the Placement Agents.
2.5. The Purchaser represents and warrants that (a) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisers in connection herewith to the extent it has deemed necessary, (b) it has had a reasonable opportunity to ask questions of and receive answers from officers and representatives of the Offerors concerning their respective financial condition and results of operations and the purchase of the Capital Securities, and any such questions have been answered to its satisfaction, (c) it has had the opportunity to review all publicly available records and filings concerning the Offerors and it has carefully reviewed such records and filings that it considers relevant to making an investment decision, and (d) it has made its own investment decisions based upon its own judgment, due diligence and advice from such advisers as it has deemed necessary and not upon any view expressed by the Offerors or the Placement Agents.
2.6. The Purchaser represents and warrants that it is a qualified institutional buyer as defined under Rule 144A under the Securities Act. If the Purchaser is a dealer of the type described in paragraph (a)(1)(ii) of Rule 144A under the Securities Act, it owns and invests on a discretionary basis not less than U.S. $25,000,000.00 in securities of issuers that are not affiliated with it. The Purchaser is
2
not a participant-directed employee plan, such as a 401(k) plan, or any other type of plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, unless investment decisions with respect to the plan are made solely by the fiduciary, trustee or sponsor of such plan.
2.7. The Purchaser represents and warrants that on each day from the date on which it acquires the Capital Securities through and including the date on which it disposes of its interests in the Capital Securities, either (i) it is not (a) an employee benefit plan (as defined in Section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended ( ERISA )) which is subject to the provisions of Part 4 of Subtitle B of Title I of ERISA, or any entity whose underlying assets include the assets of any such plan (an ERISA Plan ), (b) any other plan (as defined in Section 4975(e)(1) of the United States Internal Revenue Code of 1986, as amended (the Code )) which is subject to the provisions of Section 4975 of the Code or any entity whose underlying assets include the assets of any such plan (a Plan ), (c) an entity whose underlying assets include the assets of any such ERISA Plan or other Plan by reason of Department of Labor regulation section 2510.3-101 or otherwise, or (d) a governmental or church plan that is subject to any federal, state or local law which is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code (a Similar Law ); or (ii) the purchase, holding and disposition of the Capital Securities by it will satisfy the requirements for exemptive relief under Prohibited Transaction Class Exemption ( PTCE ) 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 or a similar exemption, or, in the case of a plan subject to a Similar Law, will not result in a non-exempt violation of such Similar Law.
2.8. The Purchaser represents and warrants that it is acquiring the Capital Securities as principal for its own account for investment and, except as contemplated under Section 1.3 hereof, not for sale in connection with any distribution thereof. It was not formed solely for the purpose of investing in the Capital Securities, and additional capital or similar contributions were not specifically solicited from any person owning a beneficial interest in it for the purpose of enabling it to purchase any Capital Securities. The Purchaser is not a (i) partnership, (ii) common trust fund or (iii) special trust, pension, profit sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made or the allocation of any investment among such partners, beneficiaries or participants, and except as contemplated under Section 1.3 hereof, it agrees that it shall not hold the Capital Securities for the benefit of any other person and shall be the sole beneficial owner thereof for all purposes and that it shall not sell participation interests in the Capital Securities or enter into any other arrangement pursuant to which any other person shall be entitled to a beneficial interest in the distribution on the Capital Securities. The Capital Securities purchased directly or indirectly by the Purchaser constitute an investment of no more than 40% of its assets. The Purchaser understands and agrees that any purported transfer of the Capital Securities to a purchaser which would cause the representations and warranties of Section 2.6 and this Section 2.8 to be inaccurate shall be null and void ab initio and the Offerors retain the right to resell any Capital Securities sold to non-permitted transferees.
2.9. The Purchaser represents and warrants that it has full power and authority to execute and deliver this Agreement, to make the representations and warranties specified herein, and to consummate the transactions contemplated herein and it has full right and power to subscribe for Capital Securities and perform its obligations pursuant to this Agreement.
2.10. The Purchaser represents and warrants that no filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any governmental body, agency or court having jurisdiction over the Purchaser, other than those that have been made or obtained, is necessary or required for the performance by the Purchaser of its obligations under this Agreement or to consummate the transactions contemplated herein.
3
2.11. The Purchaser represents and warrants that this Agreement has been duly authorized, executed and delivered by the Purchaser.
2.12. The Purchaser understands and acknowledges that the Company will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements and agrees that, if any of the acknowledgments, representations, warranties or agreements deemed to have been made by it by its purchase of the Capital Securities are no longer accurate, it shall promptly notify the Company.
2.13. The Purchaser understands that no public market exists for any of the Capital Securities, and that it is unlikely that a public market will ever exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, international courier or delivered by hand against written receipt therefor, or by facsimile transmission and confirmed by telephone, to the following addresses, or such other address as may be furnished to the other parties as herein provided:
To the Offerors: | Ameris Bancorp 24 | |
Second Avenue SE | ||
Moultrie, Georgia 31776 | ||
Attention: Cindi Lewis | ||
Fax: 229-890-2235 | ||
To the Purchaser: | First Tennessee Bank National Association | |
845 Crossover Lane, Suite 150 | ||
Memphis, Tennessee 38117 | ||
Attention: David Work | ||
Fax: 901-435-7983 |
Unless otherwise expressly provided herein, notices shall be deemed to have been given on the date of mailing, except notice of change of address, which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser, this Agreement shall become a binding obligation of the Purchaser with respect to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
4
3.5. The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that all of the Offerors and the Purchasers rights and privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
5
IN WITNESS WHEREOF , this Agreement is agreed to and accepted as of the day and year first written above.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION | ||
By: |
/s/ David S. Work |
|
Print Name: | David S. Work | |
Title: | Executive Vice President |
AMERIS BANCORP | ||
By: |
/s/ Edwin W. Hortman Jr. |
|
Name: | Edwin W. Hortman Jr. | |
Title: | President & CEO | |
AMERIS STATUTORY TRUST I | ||
By: |
/s/ Edwin W. Hortman Jr. |
|
Name: | Edwin W. Hortman Jr. | |
Title: | Administrator |
6
Exhibit 4.3
AMERIS STATUTORY TRUST I
AMERIS BANCORP
SUBSCRIPTION AGREEMENT
September 20, 2006
THIS SUBSCRIPTION AGREEMENT (this Agreement) made among Ameris Statutory Trust I (the Trust), a statutory trust created under the Delaware Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. §§ 3801, et seq .), Ameris Bancorp, a Georgia corporation, with its principal offices located at 24 Second Avenue SE, Moultrie, Georgia 31776 (the Company and, collectively with the Trust, the Offerors), and TWE, Ltd. (the Purchaser).
RECITALS:
A. The Trust desires to issue 36,000 of its Floating Rate Capital Securities (the Capital Securities), liquidation amount $1,000.00 per Capital Security, representing an undivided beneficial interest in the assets of the Trust (the Offering), to be issued pursuant to an Amended and Restated Declaration of Trust (the Declaration) by and among the Company, Wilmington Trust Company (WTC), the administrators named therein, and the holders (as defined therein), which Capital Securities are to be guaranteed by the Company with respect to distributions and payments upon liquidation, redemption and otherwise pursuant to the terms of a Guarantee Agreement between the Company and WTC, as trustee (the Guarantee); and
B. The proceeds from the sale of the Capital Securities will be combined with the proceeds from the sale by the Trust to the Company of its common securities, and will be used by the Trust to purchase an equivalent amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company (the Debentures) to be issued by the Company pursuant to an indenture to be executed by the Company and WTC, as trustee (the Indenture); and
C. In consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to purchase from the Trust 18,000 Capital Securities at a price equal to $1,000.00 per Capital Security (the Purchase Price) and the Trust agrees to sell such Capital Securities to the Purchaser for said Purchase Price. The rights and preferences of the Capital Securities are set forth in the Declaration. The Purchase Price is payable in immediately available funds on September 20, 2006, or such other business day as may be designated by the Purchaser, but in no event later than September 29, 2006 (the Closing Date). The Offerors shall provide the Purchaser wire transfer instructions no later than 1 day following the date hereof.
1.2. The Placement Agreement, dated September 13, 2006 (the Placement Agreement), among the Offerors and the placement agents identified therein (the Placement Agents) includes certain representations and warranties, covenants and conditions to closing and certain other matters governing the Offering. The Placement Agreement is hereby incorporated by reference into this Agreement and the Purchaser shall be entitled to each of the benefits of the Placement Agents and the Purchaser under the Placement Agreement and shall be entitled to enforce the obligations of the Offerors under such Placement Agreement as fully as if the Purchaser were a party to such Placement Agreement.
1
1.3. Anything herein or in the Placement Agreement notwithstanding, the Offerors acknowledge and agree that, so long as Purchaser holds some or all of the Capital Securities, the Purchaser may in its discretion from time to time transfer or sell, or sell or grant participation interests in, some or all of such Capital Securities to one or more parties, provided that any such transaction complies, as applicable, with the registration requirements of the Securities Act of 1933, as amended (the Securities Act) and any other applicable securities laws, is pursuant to an exemption therefrom, or is otherwise not subject thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that neither the Capital Securities, the Debentures nor the Guarantee have been registered under the Securities Act of 1933, as amended (the Securities Act), or any other applicable securities law, are being offered for sale by the Trust in transactions not requiring registration under the Securities Act, and may not be offered, sold, pledged or otherwise transferred by the Purchaser except in compliance with the registration requirements of the Securities Act or any other applicable securities laws, pursuant to an exemption therefrom or in a transaction not subject thereto.
2.2. The Purchaser represents, warrants and certifies that (i) it is not a U.S. person as such term is defined in Rule 902 under the Securities Act, (ii) it is not acquiring the Capital Securities for the account or benefit of any such U.S. person, (iii) the offer and sale of Capital Securities to the Purchaser constitutes an offshore transaction under Regulation S of the Securities Act, and (iv) it will not engage in hedging transactions with regard to the Capital Securities unless such transactions are conducted in compliance with the Securities Act and the Purchaser agrees to the legends and transfer restrictions set forth on the Capital Securities certificate.
2.3. The Purchaser represents and warrants that it is purchasing the Capital Securities for its own account, for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or other applicable securities laws, subject to any requirement of law that the disposition of its property be at all times within its control and subject to its ability to resell such Capital Securities pursuant to an effective registration statement under the Securities Act or under Rule 144A or any other exemption from registration available under the Securities Act or any other applicable Securities law.
2.4. The Purchaser represents and warrants that it has full power and authority to execute and deliver this Agreement, to make the representations and warranties specified herein, and to consummate the transactions contemplated herein and it has full right and power to subscribe for Capital Securities and perform its obligations pursuant to this Agreement.
2.5. The Purchaser, a Cayman Islands Company whose business includes issuance of certain notes and acquiring the Capital Securities and other similar securities, represents and warrants that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of purchasing the Capital Securities, has had the opportunity to ask questions of, and receive answers and request additional information from, the Offerors and is aware that it may be required to bear the economic risk of an investment in the Capital Securities.
2.6. The Purchaser represents and warrants that no filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any governmental body, agency or court having jurisdiction over the Purchaser, other than those that have been made or obtained, is necessary or required for the performance by the Purchaser of its obligations under this Agreement or to consummate the transactions contemplated herein.
2
2.7. The Purchaser represents and warrants that this Agreement has been duly authorized, executed and delivered by the Purchaser.
2.8. The Purchaser represents and warrants that (i) the Purchaser is not in violation or default of any term of its Memorandum of Association or Articles of Association, of any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is a party or by which it is bound or of any judgment, decree, order, writ or, to its knowledge, any statute, rule or regulation applicable to the Purchaser which would prevent the Purchaser from performing any material obligation set forth in this Agreement; and (ii) the execution, delivery and performance of and compliance with this Agreement, and the consummation of the transactions contemplated herein, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term, or the suspension, revocation, impairment, forfeiture or non-renewal of any permit, license, authorization or approval applicable to the Purchaser, its business or operations or any of its assets or properties which would prevent the Purchaser from performing any material obligations set forth in this Agreement.
2.9. The Purchaser represents and warrants that the Purchaser is an exempted company with limited liability duly incorporated, validly existing and in good standing under the laws of the jurisdiction where it is organized, with full power and authority to perform its obligations under this Agreement.
2.10. The Purchaser understands and acknowledges that the Company will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements and agrees that, if any of the acknowledgments, representations, warranties or agreements deemed to have been made by it by its purchase of the Capital Securities are no longer accurate, it shall promptly notify the Company.
2.11. The Purchaser understands that no public market exists for any of the Capital Securities, and that it is unlikely that a public market will ever exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, international courier or delivered by hand against written receipt therefor, or by facsimile transmission and confirmed by telephone, to the following addresses, or such other address as may be furnished to the other parties as herein provided:
To the Offerors: | Ameris Bancorp | |
24 Second Avenue SE | ||
Moultrie, Georgia 31776 | ||
Attention: Cindi Lewis | ||
Fax: 229-890-2235 | ||
To the Purchaser: | TWE, Ltd. | |
c/o Maples Finance Limited | ||
P.O. Box 1093 GT | ||
Queensgate House | ||
South Church Street | ||
George Town, Grand Cayman | ||
Cayman Islands | ||
Attention: The Directors | ||
Fax: 345-945-7100 |
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Unless otherwise expressly provided herein, notices shall be deemed to have been given on the date of mailing, except notice of change of address, which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser, this Agreement shall become a binding obligation of the Purchaser with respect to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that all of the Offerors and the Purchasers rights and privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
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IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the day and year first written above.
IWE, LTD. | ||
By: | FRAPEZA CAPITAL MANAGEMENT, LLC | |
Its: | PORTFOLIO MANAGER |
By: |
/s/ Steven N. Stein |
|
Print Name: | Steven N. Stein | |
Title: | Managing Director |
AMERIS BANCORP | ||
By: |
/s/ Edwin W. Hortman, Jr. |
|
Name: | Edwin W. Hortman, Jr. | |
Title: | President & CEO | |
AMERIS STATUTORY TRUST I | ||
By: |
/s/ Edwin W. Hortman, Jr. |
|
Name: | Edwin W. Hortman, Jr. | |
Title: | Administrator |
5
Exhibit 4.4
AMERIS BANCORP,
as Issuer
INDENTURE
Dated as of September 20, 2006
WILMINGTON TRUST COMPANY,
as Trustee
FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE 2036
TABLE OF CONTENTS
Page | ||||
ARTICLE I. DEFINITIONS |
1 | |||
Section 1.1. |
Definitions. | 1 | ||
ARTICLE II. DEBENTURES |
8 | |||
Section 2.1. |
Authentication and Dating | 8 | ||
Section 2.2. |
Form of Trustees Certificate of Authentication | 9 | ||
Section 2.3. |
Form and Denomination of Debentures | 9 | ||
Section 2.4. |
Execution of Debentures | 9 | ||
Section 2.5. |
Exchange and Registration of Transfer of Debentures. | 10 | ||
Section 2.6. |
Mutilated, Destroyed, Lost or Stolen Debentures | 12 | ||
Section 2.7. |
Temporary Debentures. | 12 | ||
Section 2.8. |
Payment of Interest and Additional Interest. | 13 | ||
Section 2.9. |
Cancellation of Debentures Paid, etc | 14 | ||
Section 2.10. |
Computation of Interest. | 14 | ||
Section 2.11. |
Extension of Interest Payment Period | 15 | ||
Section 2.12. |
CUSIP Numbers. | 16 | ||
Section 2.13. |
Global Debentures. | 17 | ||
ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY |
18 | |||
Section 3.1. |
Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures. | 18 | ||
Section 3.2. |
Offices for Notices and Payments, etc | 19 | ||
Section 3.3. |
Appointments to Fill Vacancies in Trustees Office | 19 | ||
Section 3.4. |
Provision as to Paying Agent | 20 | ||
Section 3.5. |
Certificate to Trustee. | 20 | ||
Section 3.6. |
Additional Sums. | 21 | ||
Section 3.7. |
Compliance with Consolidation Provisions | 21 | ||
Section 3.8. |
Limitation on Dividends. | 21 | ||
Section 3.9. |
Covenants as to the Trust | 22 | ||
Section 3.10. |
Additional Junior Indebtedness. | 22 | ||
ARTICLE IV. SECURITYHOLDERS LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE |
22 | |||
Section 4.1. |
Securityholders Lists. | 22 | ||
Section 4.2. |
Preservation and Disclosure of Lists | 22 | ||
ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT |
23 | |||
Section 5.1. |
Events of Default. | 23 | ||
Section 5.2. |
Payment of Debentures on Default; Suit Therefor | 25 | ||
Section 5.3. |
Application of Moneys Collected by Trustee. | 26 | ||
Section 5.4. |
Proceedings by Securityholders | 27 | ||
Section 5.5. |
Proceedings by Trustee | 27 | ||
Section 5.6. |
Remedies Cumulative and Continuing; Delay or Omission Not a Waiver | 27 |
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Section 5.7. |
Direction of Proceedings and Waiver of Defaults by Majority of Securityholders. | 28 | ||
Section 5.8. |
Notice of Defaults | 28 | ||
Section 5.9. |
Undertaking to Pay Costs. | 28 | ||
ARTICLE VI. CONCERNING THE TRUSTEE |
29 | |||
Section 6.1. |
Duties and Responsibilities of Trustee. | 29 | ||
Section 6.2. |
Reliance on Documents, Opinions, etc | 30 | ||
Section 6.3. |
No Responsibility for Recitals, etc. | 30 | ||
Section 6.4. |
Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures | 31 | ||
Section 6.5. |
Moneys to be Held in Trust. | 31 | ||
Section 6.6. |
Compensation and Expenses of Trustee. | 31 | ||
Section 6.7. |
Officers Certificate as Evidence | 32 | ||
Section 6.8. |
Eligibility of Trustee | 32 | ||
Section 6.9. |
Resignation or Removal of Trustee | 32 | ||
Section 6.10. |
Acceptance by Successor Trustee | 33 | ||
Section 6.11. |
Succession by Merger, etc. | 34 | ||
Section 6.12. |
Authenticating Agents. | 34 | ||
ARTICLE VII. CONCERNING THE SECURITYHOLDERS |
35 | |||
Section 7.1. |
Action by Securityholders. | 35 | ||
Section 7.2. |
Proof of Execution by Securityholders | 36 | ||
Section 7.3. |
Who Are Deemed Absolute Owners | 36 | ||
Section 7.4. |
Debentures Owned by Company Deemed Not Outstanding. | 36 | ||
Section 7.5. |
Revocation of Consents; Future Holders Bound. | 36 | ||
ARTICLE VIII. SECURITYHOLDERS MEETINGS |
37 | |||
Section 8.1. |
Purposes of Meetings | 37 | ||
Section 8.2. |
Call of Meetings by Trustee | 37 | ||
Section 8.3. |
Call of Meetings by Company or Securityholders | 37 | ||
Section 8.4. |
Qualifications for Voting | 37 | ||
Section 8.5. |
Regulations. | 38 | ||
Section 8.6. |
Voting. | 38 | ||
Section 8.7. |
Quorum; Actions | 38 | ||
ARTICLE IX. SUPPLEMENTAL INDENTURES |
39 | |||
Section 9.1. |
Supplemental Indentures without Consent of Securityholders | 39 | ||
Section 9.2. |
Supplemental Indentures with Consent of Securityholders. | 40 | ||
Section 9.3. |
Effect of Supplemental Indentures | 41 | ||
Section 9.4. |
Notation on Debentures. | 41 | ||
Section 9.5. |
Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee. | 41 | ||
ARTICLE X. REDEMPTION OF SECURITIES |
41 | |||
Section 10.1. |
Optional Redemption | 41 | ||
Section 10.2. |
Special Event Redemption | 42 | ||
Section 10.3. |
Notice of Redemption; Selection of Debentures. | 42 | ||
Section 10.4. |
Payment of Debentures Called for Redemption. | 42 |
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ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE |
43 | |||
Section 11.1. |
Company May Consolidate, etc., on Certain Terms | 43 | ||
Section 11.2. |
Successor Entity to be Substituted | 43 | ||
Section 11.3. |
Opinion of Counsel to be Given to Trustee. | 44 | ||
ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE |
44 | |||
Section 12.1. |
Discharge of Indenture | 44 | ||
Section 12.2. |
Deposited Moneys to be Held in Trust by Trustee. | 44 | ||
Section 12.3. |
Paying Agent to Repay Moneys Held | 44 | ||
Section 12.4. |
Return of Unclaimed Moneys | 45 | ||
ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS |
45 | |||
Section 13.1. |
Indenture and Debentures Solely Corporate Obligations. | 45 | ||
ARTICLE XIV. MISCELLANEOUS PROVISIONS |
45 | |||
Section 14.1. |
Successors | 45 | ||
Section 14.2. |
Official Acts by Successor Entity | 45 | ||
Section 14.3. |
Surrender of Company Powers. | 45 | ||
Section 14.4. |
Addresses for Notices, etc. | 45 | ||
Section 14.5. |
Governing Law. | 46 | ||
Section 14.6. |
Evidence of Compliance with Conditions Precedent | 46 | ||
Section 14.7. |
Table of Contents, Headings, etc. | 46 | ||
Section 14.8. |
Execution in Counterparts. | 46 | ||
Section 14.9. |
Separability | 46 | ||
Section 14.10. |
Assignment. | 46 | ||
Section 14.11. |
Acknowledgment of Rights. | 46 | ||
ARTICLE XV. SUBORDINATION OF DEBENTURES |
47 | |||
Section 15.1. |
Agreement to Subordinate. | 47 | ||
Section 15.2. |
Default on Senior Indebtedness. | 47 | ||
Section 15.3. |
Liquidation, Dissolution, Bankruptcy | 47 | ||
Section 15.4. |
Subrogation | 48 | ||
Section 15.5. |
Trustee to Effectuate Subordination. | 49 | ||
Section 15.6. |
Notice by the Company. | 49 | ||
Section 15.7. |
Rights of the Trustee; Holders of Senior Indebtedness | 50 | ||
Section 15.8. |
Subordination May Not Be Impaired | 50 | ||
Exhibit A |
Form of Floating Rate Junior Subordinated Deferrable Interest Debenture | |||
Exhibit B |
Form of Certificate to Trustee |
iii
THIS INDENTURE, dated as of September 20, 2006, between Ameris Bancorp, a Georgia corporation (the Company ), and Wilmington Trust Company, a Delaware banking corporation, as debenture trustee (the Trustee ).
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036 (the Debentures ) under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and
WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed;
NOW, THEREFORE, This Indenture Witnesseth:
In consideration of the premises, and the purchase of the Debentures by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions . The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term generally accepted accounting principles means such accounting principles as are generally accepted in the United States at the time of any computation. The words herein, hereof and hereunder and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
Acceleration Event of Default means an Event of Default under Section 5.1(a), (d), (e) or (f), whatever the reason for such Acceleration Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.
Additional Interest has the meaning set forth in Section 2.11.
Additional Junior Indebtedness means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the Company, under debt securities (or guarantees in respect of debt securities) initially issued after the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Subsidiary of the Company in connection with the issuance by that entity of preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or, if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided , however , that the inability of the Company to treat all or any portion of the Additional Junior Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if such inability results from the Company having cumulative preferred stock, minority interests in consolidated
1
subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter accord Tier 1 capital treatment (including the Debentures) in excess of the amount which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines.
Additional Sums has the meaning set forth in Section 3.6.
Affiliate has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.
Applicable Depositary Procedures means, with respect to any transfer or transaction involving a Global Debenture or beneficial interest therein, the rules and procedures of the Depositary for such Debenture, in each case to the extent applicable to such transaction and as in effect from time to time.
Authenticating Agent means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12.
Bankruptcy Law means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
Board of Directors means the board of directors or the executive committee or any other duly authorized designated officers of the Company.
Board Resolution means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee.
Business Day means any day other than a Saturday, Sunday or any other day on which banking institutions in New York City or Wilmington, Delaware are permitted or required by any applicable law or executive order to close.
Capital Securities means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided , however , that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.
Capital Securities Guarantee means the guarantee agreement that the Company enters into with Wilmington Trust Company, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.
Capital Treatment Event means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Capital Securities as Tier 1 Capital (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or if the Company is not a bank holding company or is otherwise not subject to the Federal Reserves risk-based capital adequacy guidelines, such guidelines applied to the Company as if the Company were
2
subject to such guidelines); provided , however , that the inability of the Company to treat all or any portion of the liquidation amount of the Capital Securities as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further , however , that the distribution of Debentures in connection with the liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.
Certificate means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.
Common Securities means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided , however , that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.
Company means Ameris Bancorp, a Georgia corporation, and, subject to the provisions of Article XI, shall include its successors and assigns.
Coupon Rate has the meaning set forth in Section 2.8.
Debenture or Debentures has the meaning stated in the first recital of this Indenture.
Debenture Register has the meaning specified in Section 2.5.
Declaration means the Amended and Restated Declaration of Trust of the Trust, as amended or supplemented from time to time.
Default means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.
Defaulted Interest has the meaning set forth in Section 2.8.
Depositary means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Company or any successor thereto. The initial Depositary will be DTC.
Depositary Participant means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depositary effects book-entry transfers and pledges of securities deposited with the Depositary.
Determination Date has the meaning set forth in Section 2.10.
Distribution Period means (i) with respect to interest paid on the first Interest Payment Date, the period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2006 and (ii) thereafter, with respect to interest paid on each successive Interest Payment Date, the period beginning on (and including) the preceding Interest Payment Date and ending on (but excluding) such current Interest Payment Date.
DTC means the Depository Trust Company, a New York corporation.
3
Event of Default means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated.
Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation.
Extension Period has the meaning set forth in Section 2.11.
Federal Reserve means the Board of Governors of the Federal Reserve System, or its designated district bank, as applicable, and any successor federal agency that is primarily responsible for regulating the activities of bank holding companies.
Global Debenture means a security that evidences all or part of the Debentures, the ownership and transfers of which shall be made through book entries by a Depositary.
Indenture means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.
Institutional Trustee has the meaning set forth in the Declaration.
Interest Payment Date means March 15, June 15, September 15 and December 15 of each year during the term of this Indenture, or if such day is not a Business Day, then the next succeeding Business Day (it being understood that interest accrues for any such non-Business Day), commencing in December 2006.
Interest Rate means for the Distribution Period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2006 the rate per annum of 7.02%, and for each Distribution Period beginning on or after the Interest Payment Date in December 2006, the Coupon Rate for such Distribution Period.
Investment Company Event means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be considered an investment company that is required to be registered under the Investment Company Act of 1940, as amended which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.
Liquidation Amount means the stated amount of $1,000.00 per Trust Security.
Maturity Date means December 15, 2036.
Officers Certificate means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.
Opinion of Counsel means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.
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OTS means the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of savings and loan holding companies.
The term outstanding , when used with reference to Debentures, means, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except:
(a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;
(b) Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided , however , that, if such Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Section 10.3 or provision satisfactory to the Trustee shall have been made for giving such notice; and
(c) Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Company and the Trustee is presented that any such Debentures are held by bona fide holders in due course.
Person means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
Predecessor Security of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture.
Principal Office of the Trustee , or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.
Redemption Date has the meaning set forth in Section 10.1.
Redemption Price means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest (including any Additional Interest) on such Debentures to the Redemption Date.
Responsible Officer means, with respect to the Trustee, any officer within the Principal Office of the Trustee, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Trust Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officers knowledge of and familiarity with the particular subject.
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Securities Act means the Securities Act of 1933, as amended from time to time or any successor legislation.
Securityholder , holder of Debentures, or other similar terms, means any Person in whose name at the time a particular Debenture is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof.
Senior Indebtedness means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for all borrowed and purchased money and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of credit, any bankers acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the Company associated with derivative products such as interest and foreign exchange rate contracts, commodity contracts, and similar arrangements; (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise including, without limitation, similar obligations arising from off-balance sheet guarantees and direct credit substitutes; and (vii) all obligations of the type referred to in clauses (i) through (vi) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Indenture or thereafter incurred. Notwithstanding the foregoing, Senior Indebtedness shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in respect of such Debentures, (3) trade accounts payable of the Company arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Debentures), or (4) obligations with respect to which (a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu , junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve (if the Company is a bank holding company) or the OTS (if the Company is a savings and loan holding company). Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness.
Special Event means any of a Capital Treatment Event, an Investment Company Event or a Tax Event.
Special Redemption Date has the meaning set forth in Section 10.2.
Special Redemption Price means the price set forth in the following table for any Special Redemption Date that occurs on the date indicated below (or if such day is not a Business Day, then the next succeeding Business Day), expressed as the percentage of the principal amount of the Debentures being redeemed:
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Month in which Special Redemption Date Occurs |
Special Redemption Price | ||
December 2006 |
104.625 | % | |
March 2007 |
104.300 | % | |
June 2007 |
104.000 | % | |
September 2007 |
103.650 | % | |
December 2007 |
103.350 | % | |
March 2008 |
103.000 | % | |
June 2008 |
102.700 | % | |
September 2008 |
102.350 | % | |
December 2008 |
102.050 | % | |
March 2009 |
101.700 | % | |
June 2009 |
101.400 | % | |
September 2009 |
101.050 | % | |
December 2009 |
100.750 | % | |
March 2010 |
100.450 | % | |
June 2010 |
100.200 | % | |
September 2010 and thereafter |
100.000 | % |
plus, in each case, accrued and unpaid interest (including any Additional Interest) on such Debentures to the Special Redemption Date.
Subsidiary means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, voting stock means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.
Tax Event means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt
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such procedures or regulations) (an Administrative Action) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.
3-Month LIBOR has the meaning set forth in Section 2.10.
Telerate Page 3750 has the meaning set forth in Section 2.10.
Trust shall mean Ameris Statutory Trust I, a Delaware statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor.
Trust Securities means Common Securities and Capital Securities of the Trust.
Trustee means Wilmington Trust Company, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder.
ARTICLE II.
DEBENTURES
Section 2.1. Authentication and Dating . Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $37,114,000.00 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee, upon receipt of a written authentication order from the Company, shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, the President, one of its Managing Directors or one of its Vice Presidents without any further action by the Company hereunder. Notwithstanding anything to the contrary contained herein, the Trustee shall be fully protected in relying upon the aforementioned authentication order and written order in authenticating and delivering said Debentures. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon:
(a) a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be; and
(b) an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state:
(1) that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in each case in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, subject to or limited by applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium and other statutory or
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decisional laws relating to or affecting creditors rights or the reorganization of financial institutions (including, without limitation, preference and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in effect, affecting the rights of creditors generally; and
(2) that all laws and requirements in respect of the execution and delivery by the Company of the Debentures have been complied with and that authentication and delivery of the Debentures by the Trustee will not violate the terms of this Indenture.
The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised in writing by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing holders.
The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures.
Section 2.2. Form of Trustees Certificate of Authentication . The Trustees certificate of authentication on all Debentures shall be in substantially the following form:
This is one of the Debentures referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, as Trustee | ||||
By |
|
|||
Authorized Signer |
Section 2.3. Form and Denomination of Debentures . The Debentures shall be substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an aggregate principal amount of less than $100,000.00 shall be deemed to be void and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Debentures for any purpose, including, but not limited to the receipt of payments on such Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such Debentures. The Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.
Section 2.4. Execution of Debentures . The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, President, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and delivered by the Trustee or
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the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debentures had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debenture, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.
Every Debenture shall be dated the date of its authentication.
Section 2.5. Exchange and Registration of Transfer of Debentures . The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the Debenture Register ) for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debentures as in this Article II provided. The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time.
Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange therefor the Debenture or Debentures which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture.
All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.
The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption.
Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company, upon the advice of counsel expert in securities law, in accordance with applicable law:
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.
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THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANYS RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (ERISA), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE CODE) (EACH A PLAN), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY PLANS INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING PLAN ASSETS OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
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THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures . In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof.
The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debenture which has matured or is about to mature or has been called for redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof.
Every substituted Debenture issued pursuant to the provisions of this Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.
Section 2.7. Temporary Debentures . Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent
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definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder.
Section 2.8. Payment of Interest and Additional Interest . Interest at the Interest Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid.
Each Debenture shall bear interest for the period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2006 at a rate per annum of 7.02%, and shall bear interest for each successive Distribution Period beginning on or after the Interest Payment Date in December 2006 at a rate per annum equal to the 3-Month LIBOR, determined as described in Section 2.10, plus 1.63% (the Coupon Rate ), applied to the principal amount thereof, until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period compounded quarterly. Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on the Interest Payment Date in December 2006.
Any interest on any Debenture, including Additional Interest, that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called Defaulted Interest ) shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing at least 25 days prior to the date of the proposed payment of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at its address as it appears in the Debenture Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable.
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The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method; provided , however , the Trustee in its sole discretion deems such payment method to be practical.
Any interest (including Additional Interest) scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures.
The term regular record date as used in this Section shall mean the close of business on the 15th Business Day preceding the applicable Interest Payment Date.
Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture.
Section 2.9. Cancellation of Debentures Paid, etc . All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee. The Trustee shall destroy all canceled Debentures unless the Company otherwise directs the Trustee in writing. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation.
Section 2.10. Computation of Interest . The amount of interest payable for each Distribution Period will be calculated by applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
(a) 3-Month LIBOR means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Trustee in the following order of priority:
(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). Telerate Page 3750 means the display designated as Page 3750 on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;
(2) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks offered quotations (expressed as percentages per annum) to prime banks in
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the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as requested in clause (2) above, the Trustee will request four major New York City banks to provide such banks offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and
(4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.
If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.
(b) The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
(c) Determination Date means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.
(d) The Trustee shall notify the Company, the Institutional Trustee and any securities exchange or interdealer quotation system on which the Capital Securities are listed, of the Coupon Rate and the Determination Date for each Distribution Period, in each case as soon as practicable after the determination thereof but in no event later than the thirtieth (30th) day of the relevant Distribution Period. Failure to notify the Company, the Institutional Trustee or any securities exchange or interdealer quotation system, or any defect in said notice, shall not affect the obligation of the Company to make payment on the Debentures at the applicable Coupon Rate. Any error in the calculation of the Coupon Rate by the Trustee may be corrected at any time by notice delivered as above provided. Upon the request of a holder of a Debenture, the Trustee shall provide the Coupon Rate then in effect and, if determined, the Coupon Rate for the next Distribution Period.
(e) Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of interest on the Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee will (in the absence of willful default, bad faith and manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Capital Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Institutional Trustee in connection with the exercise or non-exercise by either of them or their respective powers, duties and discretion.
Section 2.11. Extension of Interest Payment Period . So long as no Acceleration Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an Extension
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Period ), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as Additional Interest ). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided , however , that no Extension Period may extend beyond the Maturity Date; provided further , however , that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Companys or such Affiliates capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Companys capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Companys capital stock or of any class or series of the Companys indebtedness for any class or series of the Companys capital stock, (c) the purchase of fractional interests in shares of the Companys capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders rights plan, or the issuance of rights, stock or other property under any stockholders rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest to the extent permitted by applicable law. The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 15 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period. The Trustee shall give notice of the Companys election to begin a new Extension Period to the Securityholders.
Section 2.12. CUSIP Numbers . The Company in issuing the Debentures may use CUSIP numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification
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numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.
Section 2.13. Global Debentures .
(a) Upon the election of the holder of outstanding Debentures, which election need not be in writing, the Debentures owned by such holder shall be issued in the form of one or more Global Debentures registered in the name of the Depositary or its nominee. Each Global Debenture issued under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Debenture or a nominee thereof, delivered to such Depositary or a nominee thereof or custodian therefor and shall contain such legends as may be required by the Depositary and each such Global Debenture shall constitute a single Debenture for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global Debenture may be exchanged in whole or in part for Debentures registered, and no transfer of a Global Debenture in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Debenture or a nominee thereof unless (i) such Depositary advises the Trustee and the Company in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Debenture, and no qualified successor is appointed by the Company within ninety (90) days of receipt by the Company of such notice, (ii) such Depositary ceases to be a clearing agency registered under the Exchange Act and no successor is appointed by the Company within ninety (90) days after obtaining knowledge of such event, (iii) the Company executes and delivers to the Trustee a Company order stating that the Company elects to terminate the book-entry system through the Depositary or (iv) an Event of Default shall have occurred and be continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the Trustee shall notify the Depositary and instruct the Depositary to notify all owners of beneficial interests in such Global Debenture of the occurrence of such event and of the availability of Debentures to such owners of beneficial interests requesting the same. Upon the issuance of such Debentures and the registration in the Debenture Register of such Debentures in the names of the holders of the beneficial interests therein, the Trustee shall recognize such holders of beneficial interests as holders.
(c) If any Global Debenture is to be exchanged for other Debentures or canceled in part, or if another Debenture is to be exchanged in whole or in part for a beneficial interest in any Global Debenture, then either (i) such Global Debenture shall be so surrendered for exchange or cancellation as provided in this Article II or (ii) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Debentures to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Debenture registrar, whereupon the Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Debenture by the Depositary, accompanied by registration instructions, the Company shall execute and the Trustee shall authenticate and deliver any Debentures issuable in exchange for such Global Debenture (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions.
(d) Every Debenture authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Debenture or any portion thereof shall be authenticated and delivered in the form of, and shall be, a Global Debenture, unless such Debenture is registered in the name of a Person other than the Depositary for such Global Debenture or a nominee thereof.
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(e) Debentures distributed to holders of Book-Entry Capital Securities (as defined in the Declaration) upon the dissolution of the Trust shall be distributed in the form of one or more Global Debentures registered in the name of a Depositary or its nominee, and deposited with the Debentures registrar, as custodian for such Depositary, or with such Depositary, for credit by the Depositary to the respective accounts of the beneficial owners of the Debentures represented thereby (or such other accounts as they may direct). Debentures distributed to holders of Capital Securities other than Book-Entry Capital Securities upon the dissolution of the Trust shall not be issued in the form of a Global Debenture or any other form intended to facilitate book-entry trading in beneficial interests in such Debentures.
(f) The Depositary or its nominee, as the registered owner of a Global Debenture, shall be the holder of such Global Debenture for all purposes under this Indenture and the Debentures, and owners of beneficial interests in a Global Debenture shall hold such interests pursuant to the Applicable Depositary Procedures. Accordingly, any such owners beneficial interest in a Global Debenture shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary Participants. The Debentures registrar and the Trustee shall be entitled to deal with the Depositary for all purposes under this Indenture relating to a Global Debenture (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole holder of the Debenture and shall have no obligations to the owners of beneficial interests therein. Neither the Trustee nor the Debentures registrar shall have any liability in respect of any transfers effected by the Depositary.
(g) The rights of owners of beneficial interests in a Global Debenture shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Depositary Participants.
(h) No holder of any beneficial interest in any Global Debenture held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Debenture, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Debenture for all purposes whatsoever. None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Debenture or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as holder of any Debenture.
ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY
Section 3.1. Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures .
(a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest and any Additional Interest and other payments on the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holders of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or (ii) by wire transfer to any account with a banking institution located in the United States designated in writing
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by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Institutional Trustee.
(b) The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W8 BEN (or any substitute or successor form) establishing its non-United States status for United States federal income tax purposes.
(c) As of the date of this Indenture, the Company has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period.
(d) As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Companys ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Companys ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures.
Section 3.2. Offices for Notices and Payments, etc . So long as any of the Debentures remain outstanding, the Company will maintain in Wilmington, Delaware, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.5, such office or agency for all of the above purposes shall be the office or agency of the Trustee. In case the Company shall fail to maintain any such office or agency in Wilmington, Delaware, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee.
In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Wilmington, Delaware, where the Debentures may be presented for registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided , however , that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Wilmington, Delaware, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.
Section 3.3. Appointments to Fill Vacancies in Trustees Office . The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder.
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Section 3.4. Provision as to Paying Agent .
(a) If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4,
(1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures) in trust for the benefit of the holders of the Debentures;
(2) that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall be due and payable; and
(3) that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent.
(b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest or other payments, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium, interest or other payments so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest or other payments, if any, on the Debentures when the same shall become due and payable.
Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium, interest or other payments so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act.
(c) Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained.
(d) Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4.
Section 3.5. Certificate to Trustee . The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof. A form of this Certificate is attached hereto as Exhibit B .
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Section 3.6. Additional Sums . If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes (including withholding taxes), duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts ( Additional Sums ) on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes (including withholding taxes), duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided , however , that the deferral of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable.
Section 3.7. Compliance with Consolidation Provisions . The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with.
Section 3.8. Limitation on Dividends . If Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Companys capital stock or its Affiliates capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Companys capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Companys capital stock or of any class or series of the Companys indebtedness for any class or series of the Companys capital stock, (3) the purchase of fractional interests in shares of the Companys capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders rights plan, or the issuance of rights, stock or other property under any stockholders rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).
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Section 3.9. Covenants as to the Trust . For so long as the Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Companys ownership of such Common Securities. The Company, as owner of the Common Securities, shall, except in connection with a distribution of Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, cause the Trust (a) to remain a statutory trust, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes, and (c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debentures.
Section 3.10. Additional Junior Indebtedness . The Company shall not, and it shall not cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than Additional Junior Indebtedness (i) that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures, and (ii) of which the Company has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve, if the Company is a bank holding company, or the OTS, if the Company is a savings and loan holding company.
ARTICLE IV.
SECURITYHOLDERS LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
Section 4.1. Securityholders Lists . The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee:
(a) on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; and
(b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;
except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar.
Section 4.2. Preservation and Disclosure of Lists .
(a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures (1) contained in the most recent list furnished to it as provided in Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more holders of Debentures (hereinafter referred to as applicants) apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least 6 months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debentures with respect to their
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rights under this Indenture or under such Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either:
(1) afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or
(2) inform such applicants as to the approximate number of holders of Debentures whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, if permitted or required by applicable law, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all Debentures, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, as permitted or required by applicable law, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.
(c) Each and every holder of Debentures, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debentures in accordance with the provisions of subsection (b) of this Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b).
ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
UPON AN EVENT OF DEFAULT
Section 5.1. Events of Default . Event of Default, wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) the Company defaults in the payment of any interest upon any Debenture, including any Additional Interest in respect thereof, following the nonpayment of any such interest for twenty or more consecutive Distribution Periods; or
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(b) the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or
(c) the Company defaults in the performance of, or breaches, any of its covenants or agreements in this Indenture or in the terms of the Debentures established as contemplated in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Debentures, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a Notice of Default hereunder; or
(d) a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or
(e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or
(f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.
If an Acceleration Event of Default occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default under Section 5.1(b) or (c) occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may proceed to remedy the default or breach thereunder by such appropriate judicial proceedings as the Trustee or such holders shall deem most effectual to remedy the defaulted covenant or enforce the provisions of this Indenture so breached, either by suit in equity or by action at law, for damages or otherwise.
The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured
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installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, if any, and (ii) all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Debentures shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Debentures shall continue as though no such proceeding had been taken.
Section 5.2. Payment of Debentures on Default; Suit Therefor . The Company covenants that upon the occurrence of an Event of Default pursuant to Section 5.1(a) or (b) then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures the whole amount that then shall have become due and payable on all Debentures for principal and premium, if any, or interest, or both, as the case may be, with Additional Interest accrued on the Debentures (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under Section 6.6. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Debentures and collect in the manner provided by law out of the property of the Company or any other obligor on such Debentures wherever situated the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debentures, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise,
(i) | to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debentures, |
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(ii) | in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all other amounts due to the Trustee under Section 6.6), and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debentures, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Debentures in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings, |
(iii) | to collect and receive any moneys or other property payable or deliverable on any such claims, and |
(iv) | to distribute the same after the deduction of its charges and expenses. |
Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.6.
Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Debentures.
In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings.
Section 5.3. Application of Moneys Collected by Trustee . Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6;
Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV;
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Third: To the payment of the amounts then due and unpaid upon Debentures for principal (and premium, if any), and interest on the Debentures, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debentures (including Additional Interest); and
Fourth: The balance, if any, to the Company.
Section 5.4. Proceedings by Securityholders . No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding.
Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of, premium, if any, and interest, on such Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing itself of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
Section 5.5. Proceedings by Trustee . In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.
Section 5.6. Remedies Cumulative and Continuing; Delay or Omission Not a Waiver . Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right, remedy or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right, remedy or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee (in accordance with its duties under Section 6.1) or by the Securityholders.
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Section 5.7. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders . The holders of a majority in aggregate principal amount of the Debentures affected (voting as one class) at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debentures; provided , however , that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability.
The holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided , however , that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided , further , that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing.
Section 5.8. Notice of Defaults . The Trustee shall, within 90 days after the actual knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term defaults for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and (f) of Section 5.1, not including periods of grace, if any, provided for therein); provided , however , that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders.
Section 5.9. Undertaking to Pay Costs . All parties to this Indenture agree, and each holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided , however , that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable.
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ARTICLE VI.
CONCERNING THE TRUSTEE
Section 6.1. Duties and Responsibilities of Trustee . With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred
(1) the duties and obligations of the Trustee with respect to Debentures shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to the Debentures as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee, and
(2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it.
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Section 6.2. Reliance on Documents, Opinions, etc . Except as otherwise provided in Section 6.1:
(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the outstanding Debentures affected thereby; provided , however , that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and
(h) with the exceptions of defaults under Sections 5.1(a) or (b), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures.
Section 6.3. No Responsibility for Recitals, etc . The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be
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taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.
Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures . The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar.
Section 6.5. Moneys to be Held in Trust . Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President, a Managing Director, a Vice President, the Treasurer or an Assistant Treasurer of the Company.
Section 6.6. Compensation and Expenses of Trustee . The Company covenants and agrees to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct. For purposes of clarification, this Section 6.6 does not contemplate the payment by the Company of acceptance or annual administration fees owing to the Trustee pursuant to the services to be provided by the Trustee under this Indenture or the fees and expenses of the Trustees counsel in connection with the closing of the transactions contemplated by this Indenture. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability. The obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures.
Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(d), (e) or (f), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture.
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Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall have no obligation whatsoever to advance funds to pay any principal of or interest on or other amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company.
Section 6.7. Officers Certificate as Evidence . Except as otherwise provided in Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers Certificate delivered to the Trustee, and such certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.
Section 6.8. Eligibility of Trustee . The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published.
The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee.
In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9.
If the Trustee has or shall acquire any conflicting interest within the meaning of § 310(b) of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture.
Section 6.9. Resignation or Removal of Trustee
(a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Companys expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.
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(b) In case at any time any of the following shall occur
(1) the Trustee shall fail to comply with the provisions of Section 6.8 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months, or
(2) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint successor Trustee.
(c) Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within 10 Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor.
(d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.10.
Section 6.10. Acceptance by Successor Trustee . Any successor Trustee appointed as provided in Section 6.9 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.6, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee thereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.
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If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the Trust hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.
No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8.
In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder.
Upon acceptance of appointment by a successor Trustee as provided in this Section 6.10, the Company shall mail notice of the succession of such Trustee hereunder to the holders of Debentures at their addresses as they shall appear on the Debenture Register. If the Company fails to mail such notice within 10 Business Days after the acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company.
Section 6.11. Succession by Merger, etc . Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided such corporation shall be otherwise eligible and qualified under this Article.
In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have; provided , however , that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
Section 6.12. Authenticating Agents . There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided , however , that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of
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this Section 6.12 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent with respect to the Debentures by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein.
The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee.
ARTICLE VII.
CONCERNING THE SECURITYHOLDERS
Section 7.1. Action by Securityholders . Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory.
If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers Certificate, fix in advance a record date for such Debentures for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders
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for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debentures shall be computed as of the record date; provided , however , that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 6 months after the record date.
Section 7.2. Proof of Execution by Securityholders . Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.
The record of any Securityholders meeting shall be proved in the manner provided in Section 8.6.
Section 7.3. Who Are Deemed Absolute Owners . Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.
Section 7.4. Debentures Owned by Company Deemed Not Outstanding . In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided , however , that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgees right to vote such Debentures and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
Section 7.5. Revocation of Consents; Future Holders Bound . At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or
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substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor.
ARTICLE VIII.
SECURITYHOLDERS MEETINGS
Section 8.1. Purposes of Meetings . A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;
(b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.2; or
(d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debentures under any other provision of this Indenture or under applicable law.
Section 8.2. Call of Meetings by Trustee . The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures Register and, if the Company is not a holder of Debentures, to the Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.
Section 8.3. Call of Meetings by Company or Securityholders . In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.1, by mailing notice thereof as provided in Section 8.2.
Section 8.4. Qualifications for Voting . To be entitled to vote at any meeting of Securityholders a Person shall (a) be a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.
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Section 8.5. Regulations . Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00 principal amount of Debentures held or represented by him; provided , however , that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.
Section 8.6. Voting . The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters therein stated.
Section 8.7. Quorum; Actions . The Persons entitled to vote a majority in principal amount of the Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided , however , that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such
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meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum.
Except as limited by the provisos in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the Debentures then outstanding; provided , however , that, except as limited by the provisos in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding.
Any resolution passed or decision taken at any meeting of holders of Debentures duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting.
ARTICLE IX.
SUPPLEMENTAL INDENTURES
Section 9.1. Supplemental Indentures without Consent of Securityholders . The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes:
(a) to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof;
(b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided , however , that in respect of any such additional covenant restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;
(c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures;
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(d) to add to, delete from, or revise the terms of Debentures, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debentures, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital Securities as required by Section 2.5 (for purposes of assuring that no registration of Debentures is required under the Securities Act); provided , however , that any such action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Capital Securities shall not be deemed to materially adversely affect the holders of the Debentures);
(e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee;
(f) to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or
(g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures.
The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustees own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2.
Section 9.2. Supplemental Indentures with Consent of Securityholders . With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided , however , that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further , however , that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further , however , that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture.
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Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustees own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.
Section 9.3. Effect of Supplemental Indentures . Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
Section 9.4. Notation on Debentures . Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding.
Section 9.5. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee . The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof.
ARTICLE X.
REDEMPTION OF SECURITIES
Section 10.1. Optional Redemption . The Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if
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the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in September 2011 (the Redemption Date ), at the Redemption Price.
Section 10.2. Special Event Redemption . If a Special Event shall occur and be continuing, the Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event (the Special Redemption Date ) at the Special Redemption Price.
Section 10.3. Notice of Redemption; Selection of Debentures . In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than 60 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture.
Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Redemption Price or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of the Debentures to be redeemed. In case the Debentures are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued.
Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.
Section 10.4. Payment of Debentures Called for Redemption . If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date or Special Redemption Date, as applicable, and at the place or places stated in such notice at the applicable Redemption Price or Special Redemption Price and on and after said date (unless the Company shall default in the payment of
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such Debentures at the Redemption Price or Special Redemption Price, as applicable) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price or Special Redemption Price.
Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal to the unredeemed portion of the Debenture so presented.
ARTICLE XI.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.1. Company May Consolidate, etc., on Certain Terms . Nothing contained in this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided , however , that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property.
Section 11.2. Successor Entity to be Substituted . In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debentures and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof.
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Section 11.3. Opinion of Counsel to be Given to Trustee . The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI.
ARTICLE XII.
SATISFACTION AND DISCHARGE OF INDENTURE
Section 12.1. Discharge of Indenture . When
(a) | the Company shall deliver to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) and not theretofore canceled, or |
(b) | all the Debentures not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within 1 year or are to be called for redemption within 1 year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds, which shall be immediately due and payable, sufficient to pay at maturity or upon redemption all of the Debentures (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debentures (1) theretofore repaid to the Company in accordance with the provisions of Section 12.4, or (2) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws, |
and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures.
Section 12.2. Deposited Moneys to be Held in Trust by Trustee . Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest.
Section 12.3. Paying Agent to Repay Moneys Held . Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys.
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Section 12.4. Return of Unclaimed Moneys . Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after the date upon which the principal of, and premium, if any, or interest on such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease.
ARTICLE XIII.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 13.1. Indenture and Debentures Solely Corporate Obligations . No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures.
ARTICLE XIV.
MISCELLANEOUS PROVISIONS
Section 14.1. Successors . All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not.
Section 14.2. Official Acts by Successor Entity . Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.
Section 14.3. Surrender of Company Powers . The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor.
Section 14.4. Addresses for Notices, etc . Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, 24 Second Avenue SE, Moultrie, Georgia 31776, Attention: Cindi Lewis. Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder or the
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Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, addressed to the Trustee, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration. Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register.
Section 14.5. Governing Law . This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.
Section 14.6. Evidence of Compliance with Conditions Precedent . Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with.
Section 14.7. Table of Contents, Headings, etc . The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.
Section 14.8. Execution in Counterparts . This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
Section 14.9. Separability . In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.
Section 14.10. Assignment . The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto.
Section 14.11. Acknowledgment of Rights . The Company agrees that, with respect to any Debentures held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the
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Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Capital Securities of such Trust have so directed such Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Institutional Trustees rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures.
ARTICLE XV.
SUBORDINATION OF DEBENTURES
Section 15.1. Agreement to Subordinate . The Company covenants and agrees, and each holder of Debentures by such Securityholders acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of, and premium, if any, and interest on all Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder.
Section 15.2. Default on Senior Indebtedness . In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded or canceled and such Senior Indebtedness has not been paid in full, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness.
Section 15.3. Liquidation, Dissolution, Bankruptcy . Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether
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voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness ( pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or moneys worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article XV, the words cash, property or securities shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture.
Section 15.4. Subrogation . Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior
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Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.
Section 15.5. Trustee to Effectuate Subordination . Each Securityholder by such Securityholders acceptance thereof authorizes and directs the Trustee on such Securityholders behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholders attorney-in-fact for any and all such purposes.
Section 15.6. Notice by the Company . The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided , however , that if the Trustee shall not have received the notice provided for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority
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to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within 2 Business Days prior to such date.
The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder), to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.
Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness . The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6.
Section 15.8. Subordination May Not Be Impaired . No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person.
Signatures appear on the following page
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly exectuted by their respective officers thereunto duly authorized, as of the day and year first above written.
AMERIS BANCORP | ||
By: |
/s/ Edwin W. Hortman, Jr. |
|
Name: | Edwin W. Hortman, Jr. | |
Title: | President & CEO | |
WILMINGTON TRUST COMPANY, as Trustee | ||
By: |
/s/ Michele C. Harra |
|
Name: | Michele C. Harra | |
Title: | Financial Services Officer |
51
EXHIBIT A
FORM OF FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURE
[FORM OF FACE OF SECURITY]
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANYS RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (ERISA), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE CODE) (EACH A PLAN), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY PLANS INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING PLAN ASSETS OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY
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SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
Floating Rate Junior Subordinated Deferrable Interest Debenture
of
Ameris Bancorp
September 20, 2006
Ameris Bancorp, a Georgia corporation (the Company which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to Wilmington Trust Company, not in its individual capacity but solely as Institutional Trustee for Ameris Statutory Trust I (the Holder) or registered assigns, the principal sum of thirty-seven million one hundred fourteen thousand dollars ($37,114,000.00) on December 15, 2036, and to pay interest on said principal sum from September 20, 2006, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year or if such day is not a Business Day, then the next succeeding Business Day (each such date, an Interest Payment Date) (it being understood that interest accrues for any such non-Business Day), commencing on the Interest Payment Date in December 2006, at an annual rate equal to 7.02% beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2006 and at an annual rate for each successive period beginning on (and including) the Interest Payment Date in December 2006, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a Distribution Period), equal to 3-Month LIBOR, determined as described below, plus 1.63% (the Coupon Rate), applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable
A-2
law) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be fifteen Business Days prior to the day on which the relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.
3-Month LIBOR as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (Telerate Page 3750 means the display designated as Page 3750 on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Trustee will request four major New York City banks to provide such banks offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. As used herein, Determination Date means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.
The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
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The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided , however , that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.
So long as no Acceleration Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an Extension Period), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as Additional Interest). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided , however , that no Extension Period may extend beyond the Maturity Date; provided further , however , that during any such Extension Period, the Company shall not and shall not permit any Affiliate to engage in any of the activities or transactions described on the reverse side hereof and in the Indenture. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 15 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.
The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.
The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place.
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IN WITNESS WHEREOF, the Company has duly executed this certificate.
AMERIS BANCORP | ||
By |
|
|
Name: | ||
Title: |
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, as Trustee | ||
By: |
|
|
Authorized Officer |
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[FORM OF REVERSE OF DEBENTURE]
This Debenture is one of the floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under and pursuant to the Indenture dated as of September 20, 2006 (the Indenture), duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture.
Upon the occurrence and continuation of a Special Event prior to the Interest Payment Date in September 2011, the Company shall have the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event, at the Special Redemption Price.
In addition, the Company shall have the right to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in September 2011, at the Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.
Notwithstanding the foregoing, any redemption of Debentures by the Company shall be subject to the receipt of any and all required regulatory approvals.
In case an Acceleration Event of Default shall have occurred and be continuing, upon demand of the Trustee, the principal of all of the Debentures shall become due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture.
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The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding on behalf of the holders of all of the Debentures to waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof or of the Indenture which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9 of the Indenture; provided , however , that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided , further , that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of the Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by the Indenture, said default or Event of Default shall for all purposes of the Debentures and the Indenture be deemed to have been cured and to be not continuing.
No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, including Additional Interest, on this Debenture at the time and place and at the rate and in the money herein prescribed.
The Company has agreed that if Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such Extension Period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Companys capital stock or its Affiliates capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Companys capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Companys capital stock or of any class or series of the Companys indebtedness for any class or series of the Companys capital stock, (3) the purchase of fractional interests in shares of the Companys capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders rights plan, or the issuance of rights, stock or other property under any stockholders rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the
A-7
dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).
The Debentures are issuable only in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. As provided in the Indenture and subject to the transfer restrictions and limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Debenture Register of the Company. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2 of the Indenture, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to, the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing. No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.
Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.
No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of the Indenture and the issue of the Debentures.
Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company.
THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.
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EXHIBIT B
FORM OF CERTIFICATE TO TRUSTEE
Pursuant to Section 3.5 of the Indenture between Ameris Bancorp, as the Company (the Company), and Wilmington Trust Company, as Trustee, dated as of September 20, 2006 (the Indenture), the undersigned hereby certifies as follows:
1. | In my capacity as an officer of the Company, I would normally have knowledge of any default by the Company during the last fiscal year in the performance of any covenants of the Company contained in the Indenture. |
2. | [To my knowledge, the Company is not in default in the performance of any covenants contained in the Indenture. |
or, alternatively:
I am aware of the default(s) in the performance of covenants in the Indentures, as specified below.]
Capitalized terms used herein, and not otherwise defined herein, have the respective meanings ascribed thereto in the Indenture.
IN WITNESS WHEREOF, the undersigned has executed this Certificate.
Date:
|
||
Name: | ||
Title: |
B-1
Exhibit 4.5
AMENDED AND RESTATED DECLARATION
OF TRUST
by and among
WILMINGTON TRUST COMPANY,
as Delaware Trustee,
WILMINGTON TRUST COMPANY,
as Institutional Trustee,
AMERIS BANCORP,
as Sponsor,
and
EDWIN W. HORTMAN, JR., DENNIS J. ZEMBER JR. and
CINDI LEWIS,
as Administrators,
Dated as of September 20, 2006
TABLE OF CONTENTS
Page |
||||
ARTICLE I INTERPRETATION AND DEFINITIONS |
1 | |||
Section 1.1. |
Definitions. | 1 | ||
ARTICLE II ORGANIZATION |
8 | |||
Section 2.1. |
Name | 8 | ||
Section 2.2. |
Office. | 8 | ||
Section 2.3. |
Purpose. | 8 | ||
Section 2.4. |
Authority | 8 | ||
Section 2.5. |
Title to Property of the Trust. | 9 | ||
Section 2.6. |
Powers and Duties of the Trustees and the Administrators. | 9 | ||
Section 2.7. |
Prohibition of Actions by the Trust and the Institutional Trustee | 12 | ||
Section 2.8. |
Powers and Duties of the Institutional Trustee. | 13 | ||
Section 2.9. |
Certain Duties and Responsibilities of the Trustees and Administrators | 14 | ||
Section 2.10. |
Certain Rights of Institutional Trustee | 15 | ||
Section 2.11. |
Delaware Trustee. | 17 | ||
Section 2.12. |
Execution of Documents | 17 | ||
Section 2.13. |
Not Responsible for Recitals or Issuance of Securities. | 17 | ||
Section 2.14. |
Duration of Trust. | 18 | ||
Section 2.15. |
Mergers. | 18 | ||
ARTICLE III SPONSOR |
19 | |||
Section 3.1. |
Sponsors Purchase of Common Securities. | 19 | ||
Section 3.2. |
Responsibilities of the Sponsor | 19 | ||
Section 3.3. |
Expenses. | 19 | ||
Section 3.4. |
Right to Proceed | 20 | ||
ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS |
20 | |||
Section 4.1. |
Number of Trustees. | 20 | ||
Section 4.2. |
Delaware Trustee; Eligibility | 20 | ||
Section 4.3. |
Institutional Trustee; Eligibility | 21 | ||
Section 4.4. |
Administrators. | 21 | ||
Section 4.5. |
Appointment, Removal and Resignation of Trustees and Administrators | 21 | ||
Section 4.6. |
Vacancies Among Trustees. | 23 | ||
Section 4.7. |
Effect of Vacancies | 23 | ||
Section 4.8. |
Meetings of the Trustees and the Administrators. | 23 | ||
Section 4.9. |
Delegation of Power. | 24 | ||
Section 4.10. |
Conversion, Consolidation or Succession to Business. | 24 | ||
ARTICLE V DISTRIBUTIONS |
24 | |||
Section 5.1. |
Distributions. | 24 | ||
ARTICLE VI ISSUANCE OF SECURITIES |
24 | |||
Section 6.1. |
General Provisions Regarding Securities | 24 | ||
Section 6.2. |
Paying Agent, Transfer Agent and Registrar | 25 | ||
Section 6.3. |
Form and Dating. | 25 | ||
Section 6.4. |
Book-Entry Capital Securities. | 26 | ||
Section 6.5. |
Mutilated, Destroyed, Lost or Stolen Certificates. | 28 |
i
Section 6.6. |
Temporary Securities | 28 | ||
Section 6.7. |
Cancellation. | 28 | ||
Section 6.8. |
CUSIP Numbers. | 28 | ||
Section 6.9. |
Rights of Holders; Waivers of Past Defaults. | 28 | ||
ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST |
30 | |||
Section 7.1. |
Dissolution and Termination of Trust | 30 | ||
ARTICLE VIII TRANSFER OF INTERESTS |
31 | |||
Section 8.1. |
General | 31 | ||
Section 8.2. |
Transfer Procedures and Restrictions. | 32 | ||
Section 8.3. |
Deemed Security Holders. | 34 | ||
ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS |
34 | |||
Section 9.1. |
Liability | 34 | ||
Section 9.2. |
Exculpation | 35 | ||
Section 9.3. |
Fiduciary Duty. | 35 | ||
Section 9.4. |
Indemnification | 35 | ||
Section 9.5. |
Outside Businesses. | 37 | ||
Section 9.6. |
Compensation; Fee. | 38 | ||
ARTICLE X ACCOUNTING |
38 | |||
Section 10.1. |
Fiscal Year. | 38 | ||
Section 10.2. |
Certain Accounting Matters | 38 | ||
Section 10.3. |
Banking | 39 | ||
Section 10.4. |
Withholding. | 39 | ||
ARTICLE XI AMENDMENTS AND MEETINGS |
39 | |||
Section 11.1. |
Amendments. | 39 | ||
Section 11.2. |
Meetings of the Holders of Securities; Action by Written Consent. | 41 | ||
ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE |
42 | |||
Section 12.1. |
Representations and Warranties of Institutional Trustee. | 42 | ||
Section 12.2. |
Representations of the Delaware Trustee. | 42 | ||
ARTICLE XIII MISCELLANEOUS |
43 | |||
Section 13.1. |
Notices. | 43 | ||
Section 13.2. |
Governing Law. | 44 | ||
Section 13.3. |
Intention of the Parties | 44 | ||
Section 13.4. |
Headings. | 44 | ||
Section 13.5. |
Successors and Assigns. | 44 | ||
Section 13.6. |
Partial Enforceability. | 45 | ||
Section 13.7. |
Counterparts | 45 |
Annex I | Terms of Securities | |
Exhibit A-1 | Form of Capital Security Certificate | |
Exhibit A-2 | Form of Common Security Certificate | |
Exhibit B | Specimen of Initial Debenture | |
Exhibit C | Placement Agreement |
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AMENDED AND RESTATED
DECLARATION OF TRUST
OF
AMERIS STATUTORY TRUST I
September 20, 2006
AMENDED AND RESTATED DECLARATION OF TRUST ( Declaration ) dated and effective as of September 20, 2006, by the Trustees (as defined herein), the Administrators (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust (as defined herein) to be issued pursuant to this Declaration;
WHEREAS, the Trustees, the Administrators and the Sponsor established Ameris Statutory Trust I (the Trust ), a statutory trust under the Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of September 11, 2006 (the Original Declaration ), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on September 11, 2006, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain debentures of the Debenture Issuer (as defined herein);
WHEREAS, as of the date hereof, no interests in the Trust have been issued; and
WHEREAS, the Trustees, the Administrators and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration;
NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a statutory trust under the Statutory Trust Act and that this Declaration constitutes the governing instrument of such statutory trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. The parties hereto hereby agree as follows:
ARTICLE I
INTERPRETATION AND DEFINITIONS
Section 1.1. Definitions .
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning throughout;
(c) all references to the Declaration or this Declaration are to this Declaration as modified, supplemented or amended from time to time;
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(d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; and
(e) a reference to the singular includes the plural and vice versa.
Acceleration Event of Default has the meaning set forth in the Indenture.
Additional Interest has the meaning set forth in the Indenture.
Administrative Action has the meaning set forth in paragraph 4(a) of Annex I.
Administrators means each of Edwin W. Hortman, Jr., Dennis J. Zember Jr. and Cindi Lewis, solely in such Persons capacity as Administrator of the Trust created and continued hereunder and not in such Persons individual capacity, or such Administrators successor in interest in such capacity, or any successor appointed as herein provided.
Affiliate has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.
Applicable Depositary Procedures means, with respect to any transfer or transaction involving a Book-Entry Capital Security, the rules and procedures of the Depositary for such Book-Entry Capital Security, in each case to the extent applicable to such transaction and as in effect from time to time.
Authorized Officer of a Person means any Person that is authorized to bind such Person.
Bankruptcy Event means, with respect to any Person:
(a) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or
(b) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of such Person of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due.
Book-Entry Capital Securities means a Capital Security, the ownership and transfer of which shall be made through book entries by a Depositary.
Business Day means any day other than Saturday, Sunday or any other day on which banking institutions in New York City or Wilmington, Delaware are permitted or required by any applicable law or executive order to close.
Capital Securities has the meaning set forth in paragraph 1(a) of Annex I.
Capital Security Certificate means a definitive Certificate in fully registered form representing a Capital Security substantially in the form of Exhibit A-1.
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Capital Treatment Event has the meaning set forth in paragraph 4(a) of Annex I.
Certificate means any certificate evidencing Securities.
Closing Date has the meaning set forth in the Placement Agreement.
Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation.
Common Securities has the meaning set forth in paragraph 1(b) of Annex I.
Common Security Certificate means a definitive Certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2.
Company Indemnified Person means (a) any Administrator; (b) any Affiliate of any Administrator; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Administrator; or (d) any officer, employee or agent of the Trust or its Affiliates.
Corporate Trust Office means the office of the Institutional Trustee at which the corporate trust business of the Institutional Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attn: Corporate Trust Administration.
Coupon Rate has the meaning set forth in paragraph 2(a) of Annex I.
Covered Person means: (a) any Administrator, officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) any of the Trusts Affiliates; and (b) any Holder of Securities.
Creditor has the meaning set forth in Section 3.3.
Debenture Issuer means Ameris Bancorp, a Georgia corporation, in its capacity as issuer of the Debentures under the Indenture.
Debenture Trustee means Wilmington Trust Company, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee.
Debentures means the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036 to be issued by the Debenture Issuer under the Indenture.
Defaulted Interest has the meaning set forth in the Indenture.
Definitive Capital Securities Certificates means Capital Securities issued in certificated, fully registered form that are not Global Capital Securities.
Delaware Trustee has the meaning set forth in Section 4.2.
Depositary means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Administrators or any successor thereto. DTC will be the initial Depositary.
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Depositary Participant means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of securities deposited with the Depositary.
Determination Date has the meaning set forth in paragraph 4(a) of Annex I.
Direct Action has the meaning set forth in Section 2.8(d).
Distribution means a distribution payable to Holders of Securities in accordance with Section 5.1.
Distribution Payment Date has the meaning set forth in paragraph 2(b) of Annex I.
Distribution Period means (i) with respect to the Distribution paid on the first Distribution Payment Date, the period beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in December 2006 and (ii) thereafter, with respect to a Distribution paid on each successive Distribution Payment Date, the period beginning on (and including) the preceding Distribution Payment Date and ending on (but excluding) such current Distribution Payment Date.
Distribution Rate means, for the Distribution Period beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in December 2006, the rate per annum of 7.02%, and for each Distribution Period beginning on or after the Distribution Payment Date in December 2006, the Coupon Rate for such Distribution Period.
DTC means The Depository Trust Company or any successor thereto.
Event of Default means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) the occurrence of an Indenture Event of Default; or
(b) default by the Trust in the payment of any Redemption Price or Special Redemption Price of any Security when it becomes due and payable; or
(c) default in the performance, or breach, in any material respect, of any covenant or warranty of the Institutional Trustee in this Declaration (other than those specified in clause (a) or (b) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail to the Institutional Trustee and to the Sponsor by the Holders of at least 25% in aggregate liquidation amount of the outstanding Capital Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a Notice of Default hereunder; or
(d) the occurrence of a Bankruptcy Event with respect to the Institutional Trustee if a successor Institutional Trustee has not been appointed within 90 days thereof.
Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation.
Extension Period has the meaning set forth in paragraph 2(b) of Annex I.
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Federal Reserve has the meaning set forth in paragraph 3 of Annex I.
Fiduciary Indemnified Person shall mean each of the Institutional Trustee (including in its individual capacity), the Delaware Trustee (including in its individual capacity), any Affiliate of the Institutional Trustee or Delaware Trustee and any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee or Delaware Trustee.
Fiscal Year has the meaning set forth in Section 10.1.
Global Capital Security means a Capital Securities Certificate evidencing ownership of Book-Entry Capital Securities.
Guarantee means the guarantee agreement to be dated as of the Closing Date, of the Sponsor in respect of the Capital Securities.
Holder means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Statutory Trust Act.
Indemnified Person means a Company Indemnified Person or a Fiduciary Indemnified Person.
Indenture means the Indenture dated as of the Closing Date, between the Debenture Issuer and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued, as such Indenture and any supplemental indenture may be amended, supplemented or otherwise modified from time to time.
Indenture Event of Default means an Event of Default as defined in the Indenture.
Institutional Trustee means the Trustee meeting the eligibility requirements set forth in Section 4.3.
Interest means any interest due on the Debentures including any Additional Interest and Defaulted Interest.
Investment Company means an investment company as defined in the Investment Company Act.
Investment Company Act means the Investment Company Act of 1940, as amended from time to time, or any successor legislation.
Investment Company Event has the meaning set forth in paragraph 4(a) of Annex I.
Liquidation has the meaning set forth in paragraph 3 of Annex I.
Liquidation Distribution has the meaning set forth in paragraph 3 of Annex I.
Majority in liquidation amount of the Securities means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.
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Maturity Date has the meaning set forth in paragraph 4(a) of Annex I.
Officers Certificates means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers Certificate delivered with respect to compliance with a condition or covenant providing for it in this Declaration shall include:
(a) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination or investigation as, in such officers opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.
OTS has the meaning set forth in paragraph 3 of Annex I.
Owner means each Person who is the beneficial owner of Book-Entry Capital Securities as reflected in the records of the Depositary or, if a Depositary Participant is not the beneficial owner, then the beneficial owner as reflected in the records of the Depositary Participant.
Paying Agent has the meaning specified in Section 6.2.
Person means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.
Placement Agreement means the Placement Agreement relating to the offering and sale of Capital Securities in the form of Exhibit C.
Property Account has the meaning set forth in Section 2.8(c).
Pro Rata has the meaning set forth in paragraph 8 of Annex I.
QIB means a qualified institutional buyer as defined in Rule 144A under the Securities Act.
Quorum means a majority of the Administrators or, if there are only two Administrators, both of them.
Redemption Date has the meaning set forth in paragraph 4(a) of Annex I.
Redemption/Distribution Notice has the meaning set forth in paragraph 4(e) of Annex I.
Redemption Price has the meaning set forth in paragraph 4(a) of Annex I.
Registrar has the meaning set forth in Section 6.2.
Relevant Trustee has the meaning set forth in Section 4.5(a).
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Responsible Officer means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Corporate Trust Office of the Institutional Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officers knowledge of and familiarity with the particular subject.
Restricted Securities
Rule 3a-5 means Rule 3a-5 under the Investment Company Act.
Rule 3a-7 means Rule 3a-7 under the Investment Company Act.
Securities means the Common Securities and the Capital Securities.
Securities Act means the Securities Act of 1933, as amended from time to time, or any successor legislation.
Special Event has the meaning set forth in paragraph 4(a) of Annex I.
Special Redemption Date has the meaning set forth in paragraph 4(a) of Annex I.
Special Redemption Price has the meaning set forth in paragraph 4(a) of Annex I.
Sponsor means Ameris Bancorp, a Georgia corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust.
Statutory Trust Act means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. §§ 3801, et seq. as may be amended from time to time.
Successor Entity has the meaning set forth in Section 2.15(b).
Successor Delaware Trustee has the meaning set forth in Section 4.5(e).
Successor Institutional Trustee has the meaning set forth in Section 4.5(b).
Successor Securities has the meaning set forth in Section 2.15(b).
Super Majority has the meaning set forth in paragraph 5(b) of Annex I.
Tax Event has the meaning set forth in paragraph 4(a) of Annex I.
10% in liquidation amount of the Securities means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.
3-Month LIBOR has the meaning set forth in paragraph 4(a) of Annex I.
Transfer Agent has the meaning set forth in Section 6.2.
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Treasury Regulations means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
Trust Property means (a) the Debentures, (b) any cash on deposit in, or owing to, the Property Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Institutional Trustee pursuant to the trusts of this Declaration.
Trustee or Trustees means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder.
U.S. Person means a United States Person as defined in Section 7701(a)(30) of the Code.
ARTICLE II
ORGANIZATION
Section 2.1. Name . The Trust is named Ameris Statutory Trust I, as such name may be modified from time to time by the Administrators following written notice to the Holders of the Securities. The Trusts activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrators.
Section 2.2. Office . The address of the principal office of the Trust is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600. On at least 10 Business Days written notice to the Holders of the Securities, the Administrators may designate another principal office, which shall be in a state of the United States or in the District of Columbia.
Section 2.3. Purpose . The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities representing undivided beneficial interests in the assets of the Trust, (b) to invest the gross proceeds from such sale to acquire the Debentures, (c) to facilitate direct investment in the assets of the Trust through issuance of the Common Securities and the Capital Securities and (d) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust.
Section 2.4. Authority . Except as specifically provided in this Declaration, the Institutional Trustee shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by a Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. The Administrators shall have only those ministerial duties set forth herein with respect to accomplishing the purposes of the Trust and are not intended to be trustees or fiduciaries with respect to the Trust or the Holders. The Institutional Trustee shall have the right, but shall not be obligated except as provided in Section 2.6, to perform those duties assigned to the Administrators.
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Section 2.5. Title to Property of the Trust . Except as provided in Section 2.8 with respect to the Debentures and the Property Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust.
Section 2.6. Powers and Duties of the Trustees and the Administrators .
(a) The Trustees and the Administrators shall conduct the affairs of the Trust in accordance with the terms of this Declaration. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Trustees and the Administrators shall have the authority to enter into all transactions and agreements determined by the Institutional Trustee to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees or the Administrators, as the case may be, under this Declaration, and to perform all acts in furtherance thereof, including without limitation, the following:
(i) Each Administrator shall have the power and authority to act on behalf of the Trust with respect to the following matters:
(A) the issuance and sale of the Securities;
(B) to cause the Trust to enter into, and to execute and deliver on behalf of the Trust, such agreements as may be necessary or desirable in connection with the purposes and function of the Trust, including agreements with the Paying Agent;
(C) ensuring compliance with the Securities Act, applicable state securities or blue sky laws;
(D) the sending of notices (other than notices of default), and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration;
(E) the consent to the appointment of a Paying Agent, Transfer Agent and Registrar in accordance with this Declaration, which consent shall not be unreasonably withheld or delayed;
(F) execution and delivery of the Securities in accordance with this Declaration;
(G) execution and delivery of closing certificates pursuant to the Placement Agreement and the application for a taxpayer identification number;
(H) unless otherwise determined by the Holders of a Majority in liquidation amount of the Securities or as otherwise required by the Statutory Trust Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Administrators) any documents that the Administrators have the power to execute pursuant to this Declaration;
(I) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder);
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(J) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Capital Securities and Holders of Common Securities as to such actions and applicable record dates; and
(K) to duly prepare and file all applicable tax returns and tax information reports that are required to be filed with respect to the Trust on behalf of the Trust.
(ii) As among the Trustees and the Administrators, the Institutional Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters:
(A) the establishment of the Property Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other payments made in respect of the Debentures in the Property Account;
(D) the distribution through the Paying Agent of amounts owed to the Holders in respect of the Securities;
(E) the exercise of all of the rights, powers and privileges of a holder of the Debentures;
(F) the sending of notices of default and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration;
(G) the distribution of the Trust Property in accordance with the terms of this Declaration;
(H) to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware;
(I) after any Event of Default ( provided that such Event of Default is not by or with respect to the Institutional Trustee) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and
(J) to take all action that may be necessary for the preservation and the continuation of the Trusts valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Delaware.
(iii) The Institutional Trustee shall have the power and authority to act on behalf of the Trust with respect to any of the duties, liabilities, powers or the authority of the Administrators set forth in Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do any such act unless specifically requested to do so in writing by the Sponsor, and shall then be fully protected in acting pursuant to such written request; and in the event of a conflict between the action of the Administrators and the action of the Institutional Trustee, the action of the Institutional Trustee shall prevail.
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(b) So long as this Declaration remains in effect, the Trust (or the Trustees or Administrators acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, neither the Trustees nor the Administrators may cause the Trust to (i) acquire any investments or engage in any activities not authorized by this Declaration, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected (x) to cause the Trust to fail or cease to qualify as a grantor trust for United States federal income tax purposes or (y) to require the trust to register as an Investment Company under the Investment Company Act, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a lien on any of the Trust Property. The Institutional Trustee shall, at the sole cost and expense of the Trust, defend all claims and demands of all Persons at any time claiming any lien on any of the Trust Property adverse to the interest of the Trust or the Holders in their capacity as Holders.
(c) In connection with the issuance and sale of the Capital Securities, the Sponsor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Sponsor in furtherance of the following prior to the date of this Declaration are hereby ratified and confirmed in all respects):
(i) the taking of any action necessary to obtain an exemption from the Securities Act;
(ii) the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and the determination of any and all such acts, other than actions which must be taken by or on behalf of the Trust, and the advice to the Administrators of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Capital Securities;
(iii) the negotiation of the terms of, and the execution and delivery of, the Placement Agreement providing for the sale of the Capital Securities; and
(iv) the taking of any other actions necessary or desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not (i) be deemed to be an Investment Company required to be registered under the Investment Company Act, and (ii) fail to be classified as a grantor trust for United States federal income tax purposes. The Administrators and the Holders of a Majority in liquidation amount of the Common Securities shall not take any action inconsistent with the treatment of the Debentures as indebtedness of the Debenture Issuer for United States federal income tax purposes. In this connection, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized to take any action, not inconsistent with applicable laws, the Certificate of Trust or this Declaration, as amended from time to time, that each of the Administrators and the Holders of a Majority in liquidation amount of the Common Securities determines in their discretion to be necessary or desirable for such purposes.
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(e) All expenses incurred by the Administrators or the Trustees pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the Trustees and the Administrators shall have no obligations with respect to such expenses (for purposes of clarification, this Section 2.6(e) does not contemplate the payment by the Sponsor of acceptance or annual administration fees owing to the Trustees under this Declaration or the fees and expenses of the Trustees counsel in connection with the closing of the transactions contemplated by this Declaration).
(f) The assets of the Trust shall consist of the Trust Property.
(g) Legal title to all Trust Property shall be vested at all times in the Institutional Trustee (in its capacity as such) and shall be held and administered by the Institutional Trustee and the Administrators for the benefit of the Trust in accordance with this Declaration.
(h) If the Institutional Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Declaration and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Institutional Trustee or to such Holder, then and in every such case the Sponsor, the Institutional Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Institutional Trustee and the Holders shall continue as though no such proceeding had been instituted.
Section 2.7. Prohibition of Actions by the Trust and the Institutional Trustee .
(a) The Trust shall not, and the Institutional Trustee shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Institutional Trustee shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of the Securities pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust Property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever other than as expressly provided herein;
(vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities;
(vii) carry on any trade or business as that phrase is used in the Code; or
(viii) other than as provided in this Declaration (including Annex I), (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received a written opinion of counsel to the effect that such modification will not cause the Trust to cease to be classified as a grantor trust for United States federal income tax purposes.
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Section 2.8. Powers and Duties of the Institutional Trustee .
(a) The legal title to the Debentures shall be owned by and held of record in the name of the Institutional Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Institutional Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Institutional Trustee in accordance with Section 4.5. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered.
(b) The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Administrators or to the Delaware Trustee.
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing trust account (the Property Account ) in the name of and under the exclusive control of the Institutional Trustee, and maintained in the Institutional Trustees trust department, on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Property Account and make payments, or cause the Paying Agent to make payments, to the Holders of the Capital Securities and Holders of the Common Securities from the Property Account in accordance with Section 5.1. Funds in the Property Account shall be held uninvested until disbursed in accordance with this Declaration;
(ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Capital Securities and the Common Securities to the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the Administrators in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain circumstances pursuant to the terms of the Securities.
(d) The Institutional Trustee may bring or defend, pay, collect, compromise, arbitrate, resort to legal action with respect to, or otherwise adjust claims or demands of or against, the Trust which arises out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or arises out of the Institutional Trustees duties and obligations under this Declaration; provided , however , that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of the Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder (a Direct Action ) on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of the Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of the Capital Securities in such Direct Action; provided , however , that no Holder of the Common Securities may exercise such right of subrogation so long as an Event of Default with respect to the Capital Securities has occurred and is continuing.
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(e) The Institutional Trustee shall continue to serve as a Trustee until either:
(i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of the Securities pursuant to the terms of the Securities and this Declaration; or
(ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 4.5.
(f) The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a Holder of the Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Institutional Trustee may, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to this Declaration (including Annex I) and the terms of the Securities.
The Institutional Trustee must exercise the powers set forth in this Section 2.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 2.3, and the Institutional Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 2.3.
Section 2.9. Certain Duties and Responsibilities of the Trustees and Administrators .
(a) The Institutional Trustee, before the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Institutional Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 6.8), the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.
(b) The duties and responsibilities of the Trustees and the Administrators shall be as provided by this Declaration. Notwithstanding the foregoing, no provision of this Declaration shall require any Trustee or Administrator to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers if it shall have reasonable grounds to believe that repayment of such funds or adequate protection against such risk of liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Declaration relating to the conduct or affecting the liability of or affording protection to the Trustees or Administrators shall be subject to the provisions of this Article. Nothing in this Declaration shall be construed to relieve an Administrator or a Trustee from liability for its own negligent act, its own negligent failure to act, or its own willful misconduct. To the extent that, at law or in equity, a Trustee or an Administrator has duties and liabilities relating to the Trust or to the Holders, such Trustee or such Administrator shall not be liable to the Trust or to any Holder for such Trustees or such Administrators good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of the Administrators or the Trustee otherwise existing at law or in equity, are agreed by the Sponsor and the Holders to replace such other duties and liabilities of the Administrators or the Trustees.
(c) All payments made by the Institutional Trustee or a Paying Agent in respect of the Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Institutional Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Security, agrees that it will look solely to the revenue and proceeds from the Trust
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Property to the extent legally available for distribution to it as herein provided and that the Trustees and the Administrators are not personally liable to it for any amount distributable in respect of any Security or for any other liability in respect of any Security. This Section 2.9(c) does not limit the liability of the Trustees expressly set forth elsewhere in this Declaration.
(d) The Institutional Trustee shall not be liable for its own acts or omissions hereunder except as a result of its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) the Institutional Trustee shall not be liable for any error of judgment made in good faith by an Authorized Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee was negligent in ascertaining the pertinent facts;
(ii) the Institutional Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities or the Common Securities, as applicable, relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration;
(iii) the Institutional Trustees sole duty with respect to the custody, safekeeping and physical preservation of the Debentures and the Property Account shall be to deal with such property in a similar manner as the Institutional Trustee deals with similar property for its fiduciary accounts generally, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration;
(iv) the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor; and money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to the Property Account maintained by the Institutional Trustee pursuant to Section 2.8(c)(i) and except to the extent otherwise required by law; and
(v) the Institutional Trustee shall not be responsible for monitoring the compliance by the Administrators or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Administrators or the Sponsor.
Section 2.10. Certain Rights of Institutional Trustee . Subject to the provisions of Section 2.9:
(a) the Institutional Trustee may conclusively rely and shall fully be protected in acting or refraining from acting in good faith upon any resolution, opinion of counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration, the Institutional Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Declaration, the Institutional Trustee finds the same ambiguous or inconsistent with any other provisions contained herein, or (iii) the Institutional Trustee is unsure of the application of any provision of this Declaration, then, except as to any matter as to which the Holders of Capital Securities are entitled to vote under the
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terms of this Declaration, the Institutional Trustee may deliver a notice to the Sponsor requesting the Sponsors written instructions as to the course of action to be taken and the Institutional Trustee shall take such action, or refrain from taking such action, as the Institutional Trustee shall be instructed in writing, in which event the Institutional Trustee shall have no liability except for its own negligence or willful misconduct;
(c) any direction or act of the Sponsor or the Administrators contemplated by this Declaration shall be sufficiently evidenced by an Officers Certificate;
(d) whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before undertaking, suffering or omitting any action hereunder, the Institutional Trustee (unless other evidence is herein specifically prescribed) may request and conclusively rely upon an Officers Certificate as to factual matters which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrators;
(e) the Institutional Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof;
(f) the Institutional Trustee may consult with counsel of its selection (which counsel may be counsel to the Sponsor or any of its Affiliates) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; the Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction;
(g) the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any of the Holders pursuant to this Declaration, unless such Holders shall have offered to the Institutional Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; provided , that nothing contained in this Section 2.10(g) shall be taken to relieve the Institutional Trustee, subject to Section 2.9(b), upon the occurrence of an Event of Default (that has not been cured or waived pursuant to Section 6.9), to exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs;
(h) the Institutional Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Institutional Trustee may make such further inquiry or investigation into such facts or matters as it may see fit;
(i) the Institutional Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys and the Institutional Trustee shall not be responsible for any misconduct or negligence on the part of or for the supervision of, any such agent or attorney appointed with due care by it hereunder;
(j) whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Institutional Trustee (i) may request instructions from the Holders of the Capital Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Capital Securities as would be entitled to direct the Institutional Trustee under the terms of the Capital
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Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected in acting in accordance with such instructions;
(k) except as otherwise expressly provided in this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration;
(l) when the Institutional Trustee incurs expenses or renders services in connection with a Bankruptcy Event, such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors rights generally;
(m) the Institutional Trustee shall not be charged with knowledge of an Event of Default unless a Responsible Officer of the Institutional Trustee obtains actual knowledge of such event or the Institutional Trustee receives written notice of such event from any Holder, the Sponsor or the Debenture Trustee;
(n) any action taken by the Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustees or its agents taking such action; and
(o) no provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Institutional Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Institutional Trustee shall be construed to be a duty.
Section 2.11. Delaware Trustee . Notwithstanding any other provision of this Declaration other than Section 4.1, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of any of the Trustees or the Administrators described in this Declaration (except as may be required under the Statutory Trust Act). Except as set forth in Section 4.1, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of § 3807 of the Statutory Trust Act.
Section 2.12. Execution of Documents . Unless otherwise determined in writing by the Institutional Trustee, and except as otherwise required by the Statutory Trust Act, the Institutional Trustee, or any one or more of the Administrators, as the case may be, is authorized to execute on behalf of the Trust any documents that the Trustees or the Administrators, as the case may be, have the power and authority to execute pursuant to Section 2.6.
Section 2.13. Not Responsible for Recitals or Issuance of Securities . The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration, the Debentures or the Securities.
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Section 2.14. Duration of Trust . The Trust, unless earlier dissolved pursuant to the provisions of Article VII hereof, shall be in existence for 35 years from the Closing Date.
Section 2.15. Mergers .
(a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 2.15(b) and (c) and except in connection with the liquidation of the Trust and the distribution of the Debentures to Holders of Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of Annex I.
(b) The Trust may, with the consent of the Institutional Trustee and without the consent of the Holders of the Capital Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state; provided that:
(i) if the Trust is not the surviving entity, such successor entity (the Successor Entity ) either:
(A) expressly assumes all of the obligations of the Trust under the Securities; or
(B) substitutes for the Securities other securities having substantially the same terms as the Securities (the Successor Securities ) so that the Successor Securities rank the same as the Securities rank with respect to Distributions and payments upon Liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor Entity that possesses substantially the same powers and duties as the Institutional Trustee as the Holder of the Debentures;
(iii) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;
(iv) the Institutional Trustee receives written confirmation from Moodys Investor Services, Inc. and any other nationally recognized statistical rating organization that rates securities issued by the initial purchaser of the Capital Securities that it will not reduce or withdraw the rating of any such securities because of such merger, conversion, consolidation, amalgamation or replacement;
(v) such Successor Entity has a purpose substantially identical to that of the Trust;
(vi) prior to such merger, consolidation, amalgamation or replacement, the Trust has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;
(B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and
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(C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a grantor trust for United States federal income tax purposes;
(vii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Guarantee;
(viii) the Sponsor owns 100% of the common securities of any Successor Entity; and
(ix) prior to such merger, consolidation, amalgamation or replacement, the Institutional Trustee shall have received an Officers Certificate of the Administrators and an opinion of counsel, each to the effect that all conditions precedent under this Section 2.15(b) to such transaction have been satisfied.
(c) Notwithstanding Section 2.15(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes.
ARTICLE III
SPONSOR
Section 3.1. Sponsors Purchase of Common Securities . On the Closing Date, the Sponsor will purchase all of the Common Securities issued by the Trust in an amount at least equal to 3% of the capital of the Trust, at the same time as the Capital Securities are sold.
Section 3.2. Responsibilities of the Sponsor . In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in, or direct the Administrators to engage in, the following activities:
(a) to determine the States in which to take appropriate action to qualify the Trust or to qualify or register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States, to protect the limited liability of the Holders of the Capital Securities or to enable the Trust to effect the purposes for which it was created; and
(b) to negotiate the terms of and/or execute on behalf of the Trust, the Placement Agreement and other related agreements providing for the sale of the Capital Securities.
Section 3.3. Expenses . In connection with the offering, sale and issuance of the Debentures to the Trust and in connection with the sale of the Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer, shall:
(a) pay all reasonable costs and expenses owing to the Debenture Trustee pursuant to Section 6.6 of the Indenture;
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(b) be responsible for and shall pay all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust, the offering, sale and issuance of the Securities (including fees to the placement agents in connection therewith), the costs and expenses (including reasonable counsel fees and expenses) of the Institutional Trustee and the Administrators, the costs and expenses relating to the operation of the Trust, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agents, Registrars, Transfer Agents, duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets and the enforcement by the Institutional Trustee of the rights of the Holders (for purposes of clarification, this Section 3.3(b) does not contemplate the payment by the Sponsor of acceptance or annual administration fees owing to the Trustees pursuant to the services to be provided by the Trustees under this Declaration or the fees and expenses of the Trustees counsel in connection with the closing of the transactions contemplated by this Declaration); and
(c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust.
The Sponsors obligations under this Section 3.3 shall be for the benefit of, and shall be enforceable by, any Person to whom such debts, obligations, costs, expenses and taxes are owed (a Creditor ) whether or not such Creditor has received notice hereof. Any such Creditor may enforce the Sponsors obligations under this Section 3.3 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor. The Sponsor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 3.3.
Section 3.4. Right to Proceed . The Sponsor acknowledges the rights of Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.
ARTICLE IV
INSTITUTIONAL TRUSTEE AND ADMINISTRATORS
Section 4.1. Number of Trustees . The number of Trustees shall initially be two, and;
(a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holder of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holder of the Common Securities; provided , however , that there shall be a Delaware Trustee if required by Section 4.2; and there shall always be one Trustee who shall be the Institutional Trustee, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements, in which case Section 2.11 shall have no application to such entity in its capacity as Institutional Trustee.
Section 4.2. Delaware Trustee; Eligibility .
(a) If required by the Statutory Trust Act, one Trustee (the Delaware Trustee) shall be:
(i) a natural person at least 21 years of age who is a resident of the State of Delaware; or
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(ii) if not a natural person, an entity which is organized under the laws of the United States or any state thereof or the District of Columbia, has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, including § 3807 of the Statutory Trust Act.
(b) The initial Delaware Trustee shall be Wilmington Trust Company.
Section 4.3. Institutional Trustee; Eligibility .
(a) There shall at all times be one Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) not offer or provide credit or credit enhancement to the Trust; and
(iii) be a banking corporation or trust company organized and doing business under the laws of the United States of America or any state thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00), and subject to supervision or examination by Federal, state, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.3(a)(iii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
(b) If at any time the Institutional Trustee shall cease to be eligible to so act under Section 4.3(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 4.5.
(c) If the Institutional Trustee has or shall acquire any conflicting interest within the meaning of Section 310(b) of the Trust Indenture Act of 1939, as amended, the Institutional Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Declaration.
(d) The initial Institutional Trustee shall be Wilmington Trust Company.
Section 4.4. Administrators . Each Administrator shall be a U.S. Person, 21 years of age or older and authorized to bind the Sponsor. The initial Administrators shall be Edwin W. Hortman, Jr., Dennis J. Zember Jr. and Cindi Lewis. There shall at all times be at least one Administrator. Except where a requirement for action by a specific number of Administrators is expressly set forth in this Declaration and except with respect to any action the taking of which is the subject of a meeting of the Administrators, any action required or permitted to be taken by the Administrators may be taken by, and any power of the Administrators may be exercised by, or with the consent of, any one such Administrator.
Section 4.5. Appointment, Removal and Resignation of Trustees and Administrators .
(a) No resignation or removal of any Trustee (the Relevant Trustee) and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of this Section 4.5.
(b) Subject to Section 4.5(a), a Relevant Trustee may resign at any time by giving written notice thereof to the Holders of the Securities and by appointing a successor Relevant Trustee. Upon the
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resignation of the Institutional Trustee, the Institutional Trustee shall appoint a successor by requesting from at least three Persons meeting the eligibility requirements their expenses and charges to serve as the successor Institutional Trustee on a form provided by the Administrators, and selecting the Person who agrees to the lowest expense and charges (the Successor Institutional Trustee). If the instrument of acceptance by the successor Relevant Trustee required by this Section 4.5 shall not have been delivered to the Relevant Trustee within 60 days after the giving of such notice of resignation or delivery of the instrument of removal, the Relevant Trustee may petition, at the expense of the Trust, any federal, state or District of Columbia court of competent jurisdiction for the appointment of a successor Relevant Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Relevant Trustee. The Institutional Trustee shall have no liability for the selection of such successor pursuant to this Section 4.5.
(c) Unless an Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by an act of the Holders of a Majority in liquidation amount of the Common Securities. If any Trustee shall be so removed, the Holders of the Common Securities, by act of the Holders of a Majority in liquidation amount of the Common Securities delivered to the Relevant Trustee, shall promptly appoint a successor Relevant Trustee, and such successor Trustee shall comply with the applicable requirements of this Section 4.5. If an Event of Default shall have occurred and be continuing, the Institutional Trustee or the Delaware Trustee, or both of them, may be removed by the act of the Holders of a Majority in liquidation amount of the Capital Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). If any Trustee shall be so removed, the Holders of Capital Securities, by act of the Holders of a Majority in liquidation amount of the Capital Securities then outstanding delivered to the Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of this Section 4.5. If no successor Relevant Trustee shall have been so appointed by the Holders of a Majority in liquidation amount of the Capital Securities and accepted appointment in the manner required by this Section 4.5 within 30 days after delivery of an instrument of removal, the Relevant Trustee or any Holder who has been a Holder of the Securities for at least six months may, on behalf of himself and all others similarly situated, petition any federal, state or District of Columbia court of competent jurisdiction for the appointment of a successor Relevant Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a successor Relevant Trustee or Trustees.
(d) The Institutional Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Holders and to the Sponsor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Institutional Trustee.
(e) Notwithstanding the foregoing or any other provision of this Declaration, in the event a Delaware Trustee who is a natural person dies or is adjudged by a court to have become incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by the Institutional Trustee following the procedures in this Section 4.5 (with the successor being a Person who satisfies the eligibility requirement for a Delaware Trustee set forth in this Declaration) (the Successor Delaware Trustee).
(f) In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Securities and the Trust and (b) shall add to or change any of the provisions of this Declaration as shall be necessary to provide for or facilitate the administration of the Trust by more
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than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Trust or any successor Relevant Trustee, such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Securities and the Trust subject to the payment of all unpaid fees, expenses and indemnities of such retiring Relevant Trustee.
(g) No Institutional Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee or Successor Delaware Trustee, as the case may be.
(h) The Holders of the Capital Securities will have no right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Holders of the Common Securities.
(i) Any successor Delaware Trustee shall file an amendment to the Certificate of Trust with the Secretary of State of the State of Delaware identifying the name and principal place of business of such Delaware Trustee in the State of Delaware.
Section 4.6. Vacancies Among Trustees . If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 4.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Trustees or, if there are more than two, a majority of the Trustees, shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 4.5.
Section 4.7. Effect of Vacancies . The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to dissolve, terminate or annul the Trust or terminate this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled by the appointment of a Trustee in accordance with Section 4.5, the Institutional Trustee shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration.
Section 4.8. Meetings of the Trustees and the Administrators . Meetings of the Administrators shall be held from time to time upon the call of an Administrator. Regular meetings of the Administrators may be held in person in the United States or by telephone, at a place (if applicable) and time fixed by resolution of the Administrators. Notice of any in-person meetings of the Trustees with the Administrators or meetings of the Administrators shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Trustees with the Administrators or meetings of the Administrators or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Trustee or an Administrator, as the case may be, at a meeting shall constitute a waiver of notice of such meeting except where the Trustee or an Administrator, as the case may be, attends a meeting for the express purpose of objecting to the transaction of any activity on the grounds that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Trustees or the Administrators, as the case may be, may be taken at a meeting by vote of a majority of the Trustees or the Administrators present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Trustees or the Administrators. Meetings of the Trustees and the Administrators together shall be held from time to time upon the call of any Trustee or an Administrator.
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Section 4.9. Delegation of Power .
(a) Any Administrator may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 that is a U.S. Person his or her power for the purpose of executing any documents contemplated in Section 2.6; and
(b) the Administrators shall have power to delegate from time to time to such of their number the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrators or otherwise as the Administrators may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein.
Section 4.10. Conversion, Consolidation or Succession to Business . Any Person into which the Institutional Trustee or the Delaware Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Institutional Trustee or the Delaware Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Institutional Trustee or the Delaware Trustee shall be the successor of the Institutional Trustee or the Delaware Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article and, provided, further, that such Person shall file an amendment to the Certificate of Trust with the Secretary of State of the State of Delaware as contemplated in Section 4.5(i).
ARTICLE V
DISTRIBUTIONS
Section 5.1. Distributions . Holders shall receive Distributions in accordance with the applicable terms of the relevant Holders Securities. Distributions shall be made on the Capital Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of Interest or any principal on the Debentures held by the Institutional Trustee, the Institutional Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a Distribution ) of such amounts to Holders.
ARTICLE VI
ISSUANCE OF SECURITIES
Section 6.1. General Provisions Regarding Securities .
(a) The Administrators shall, on behalf of the Trust, issue one series of capital securities substantially in the form of Exhibit A-1 representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I and one series of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I. The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities. The Capital Securities rank pari passu to, and payment thereon shall be made Pro Rata with, the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Capital Securities as set forth in Annex I.
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(b) The Certificates shall be signed on behalf of the Trust by one or more Administrators. Such signature shall be the facsimile or manual signature of any Administrator. In case any Administrator of the Trust who shall have signed any of the Securities shall cease to be such Administrator before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Administrator, and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be an Administrator of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such an Administrator. A Capital Security shall not be valid until authenticated by the facsimile or manual signature of an Authorized Officer of the Institutional Trustee. Such signature shall be conclusive evidence that the Capital Security has been authenticated under this Declaration. Upon written order of the Trust signed by one Administrator, the Institutional Trustee shall authenticate the Capital Securities for original issue. The Institutional Trustee may appoint an authenticating agent that is a U.S. Person acceptable to the Trust to authenticate the Capital Securities. A Common Security need not be so authenticated.
(c) The Capital Securities issued to QIBs shall be, except as provided in Section 6.4, Book-Entry Capital Securities issued in the form of one or more Global Capital Securities registered in the name of the Depositary or its nominee and deposited with the Depositary or a custodian for the Depositary for credit by the Depositary to the respective accounts of the Depositary Participants thereof (or such other accounts as they may direct). The Capital Securities issued to a Person other than a QIB shall be issued in the form of a Definitive Capital Securities Certificate.
(d) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust.
(e) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and, except as provided in Section 9.1(b) with respect to the Common Securities, non-assessable.
(f) Every Person, by virtue of having become a Holder in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration and the Guarantee.
Section 6.2. Paying Agent, Transfer Agent and Registrar . The Trust shall maintain in Wilmington, Delaware, an office or agency where the Capital Securities may be presented for payment ( Paying Agent ), and an office or agency where Securities may be presented for registration of transfer or exchange (the Transfer Agent ). The Trust shall keep or cause to be kept at such office or agency a register for the purpose of registering Securities, transfers and exchanges of Securities, such register to be held by a registrar (the Registrar ). The Administrators may appoint the Paying Agent, the Registrar and the Transfer Agent and may appoint one or more additional Paying Agents or one or more co-Registrars, or one or more co-Transfer Agents in such other locations as it shall determine. The term Paying Agent includes any additional paying agent, the term Registrar includes any additional registrar or co-Registrar and the term Transfer Agent includes any additional transfer agent. The Administrators may change any Paying Agent, Transfer Agent or Registrar at any time without prior notice to any Holder. The Administrators shall notify the Institutional Trustee of the name and address of any Paying Agent, Transfer Agent and Registrar not a party to this Declaration. The Administrators hereby initially appoint the Institutional Trustee to act as Paying Agent, Transfer Agent and Registrar for the Capital Securities and the Common Securities. The Institutional Trustee or any of its Affiliates in the United States may act as Paying Agent, Transfer Agent or Registrar.
Section 6.3. Form and Dating . The Capital Securities and the Institutional Trustees certificate of authentication thereon shall be substantially in the form of Exhibit A-1, and the Common
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Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. Certificates may be typed, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrators, as conclusively evidenced by their execution thereof. The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Sponsor). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Institutional Trustee in writing. Each Capital Security shall be dated on or before the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Institutional Trustee, the Delaware Trustee, the Administrators and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. Capital Securities will be issued only in blocks having a stated liquidation amount of not less than $100,000.00 and any multiple of $1,000.00 in excess thereof.
The Capital Securities are being offered and sold by the Trust pursuant to the Placement Agreement in definitive, registered form without coupons and with the Restricted Securities Legend.
Section 6.4. Book-Entry Capital Securities .
(a) A Global Capital Security may be exchanged, in whole or in part, for Definitive Capital Securities Certificates registered in the names of Owners only if such exchange complies with Article VIII and (i) the Depositary advises the Administrators and the Institutional Trustee in writing that the Depositary is no longer willing or able to properly discharge its responsibilities with respect to the Global Capital Security, and no qualified successor is appointed by the Administrators within ninety (90) days of receipt of such notice, (ii) the Depositary ceases to be a clearing agency registered under the Exchange Act and the Administrators fail to appoint a qualified successor within ninety (90) days of obtaining knowledge of such event, (iii) the Administrators at their option advise the Institutional Trustee in writing that the Trust elects to terminate the book-entry system through the Depositary, or (iv) an Indenture Event of Default has occurred and is continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the Administrators shall notify the Depositary and instruct the Depositary to notify all Owners of Book-Entry Capital Securities and the Institutional Trustee of the occurrence of such event and of the availability of Definitive Capital Securities Certificates to Owners of the Capital Securities requesting the same. Upon the issuance of Definitive Capital Securities Certificates, the Administrators and the Institutional Trustee shall recognize the Holders of the Definitive Capital Securities Certificates as Holders. Notwithstanding the foregoing, if an Owner of a beneficial interest in a Global Capital Security wishes at any time to transfer an interest in such Global Capital Security to a Person other than a QIB, such transfer shall be effected, subject to the Applicable Depositary Procedures, in accordance with the provisions of this Section 6.4 and Article VIII, and the transferee shall receive a Definitive Capital Securities Certificate in connection with such transfer. A holder of a Definitive Capital Securities Certificate that is a QIB may upon request, and in accordance with the provisions of this Section 6.4 and Article VIII, exchange such Definitive Capital Securities Certificate for a beneficial interest in a Global Capital Security.
(b) If any Global Capital Security is to be exchanged for Definitive Capital Securities Certificates or canceled in part, or if any Definitive Capital Securities Certificate is to be exchanged in whole or in part for any Global Capital Security, then either (i) such Global Capital Security shall be so surrendered for exchange or cancellation as provided in this Section 6.4 and Article VIII or (ii) the aggregate liquidation amount represented by such Global Capital Security shall be reduced, subject to Section 6.3, or increased by an amount equal to the liquidation amount represented by that portion of the
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Global Capital Security to be so exchanged or canceled, or equal to the liquidation amount represented by such Definitive Capital Securities Certificates to be so exchanged for any Global Capital Security, as the case may be, by means of an appropriate adjustment made on the records of the Registrar, whereupon the Institutional Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender to the Administrators or the Registrar of any Global Capital Security or Securities by the Depositary, accompanied by registration instructions, the Administrators, or any one of them, shall execute the Definitive Capital Securities Certificates in accordance with the instructions of the Depositary. None of the Registrar, Administrators, or the Institutional Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions.
(c) Every Definitive Capital Securities Certificate executed and delivered upon registration or transfer of, or in exchange for or in lieu of, a Global Capital Security or any portion thereof shall be executed and delivered in the form of, and shall be, a Global Capital Security, unless such Definitive Capital Securities Certificate is registered in the name of a Person other than the Depositary for such Global Capital Security or a nominee thereof.
(d) The Depositary or its nominee, as registered owner of a Global Capital Security, shall be the Holder of such Global Capital Security for all purposes under this Declaration and the Global Capital Security, and Owners with respect to a Global Capital Security shall hold such interests pursuant to the Applicable Depositary Procedures. The Registrar, the Administrators and the Institutional Trustee shall be entitled to deal with the Depositary for all purposes of this Declaration relating to the Global Capital Securities (including the payment of the liquidation amount of and Distributions on the Book-Entry Capital Securities represented thereby and the giving of instructions or directions by Owners of Book-Entry Capital Securities represented thereby and the giving of notices) as the sole Holder of the Book-Entry Capital Securities represented thereby and shall have no obligations to the Owners thereof. None of the Administrators, the Institutional Trustee nor the Registrar shall have any liability in respect of any transfers effected by the Depositary.
(e) The rights of the Owners of the Book-Entry Capital Securities shall be exercised only through the Depositary and shall be limited to those established by law, the Applicable Depositary Procedures and agreements between such Owners and the Depositary and/or the Depositary Participants; provided, however, solely for the purpose of determining whether the Holders of the requisite amount of Capital Securities have voted on any matter provided for in this Declaration, to the extent that Capital Securities are represented by a Global Capital Security, the Administrators and the Institutional Trustee may conclusively rely on, and shall be fully protected in relying on, any written instrument (including a proxy) delivered to the Institutional Trustee by the Depositary setting forth the Owners votes or assigning the right to vote on any matter to any other Persons either in whole or in part. To the extent that Capital Securities are represented by a Global Capital Security, the initial Depositary will make book-entry transfers among the Depositary Participants and receive and transmit payments on the Capital Securities that are represented by a Global Capital Security to such Depositary Participants, and none of the Sponsor, the Administrators or the Institutional Trustee shall have any responsibility or obligation with respect thereto.
(f) To the extent that a notice or other communication to the Holders is required under this Declaration, for so long as Capital Securities are represented by a Global Capital Security, the Administrator and the Institutional Trustee shall give all such notices and communications to the Depositary, and shall have no obligations to the Owners.
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Section 6.5. Mutilated, Destroyed, Lost or Stolen Certificates .
If:
(a) any mutilated Certificates should be surrendered to the Registrar, or if the Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Registrar, the Administrators and the Institutional Trustee such security or indemnity as may be required by them to keep each of them harmless;
then, in the absence of notice that such Certificate shall have been acquired by a protected purchaser, an Administrator on behalf of the Trust shall execute (and in the case of a Capital Security Certificate, the Institutional Trustee shall authenticate) and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 6.5, the Registrar or the Administrators may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time.
Section 6.6. Temporary Securities . Until definitive Securities are ready for delivery, the Administrators may prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Administrators consider appropriate for temporary Securities. Without unreasonable delay, the Administrators shall prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, definitive Securities in exchange for temporary Securities.
Section 6.7. Cancellation . The Administrators at any time may deliver Securities to the Institutional Trustee for cancellation. The Registrar shall forward to the Institutional Trustee any Securities surrendered to it for registration of transfer, redemption or payment. The Institutional Trustee shall promptly cancel all Securities surrendered for registration of transfer, payment, replacement or cancellation and shall dispose of such canceled Securities as the Administrators direct. The Administrators may not issue new Securities to replace Securities that have been paid or that have been delivered to the Institutional Trustee for cancellation.
Section 6.8. CUSIP Numbers . The Trust in issuing the Securities may use CUSIP numbers (if then generally in use), and, if so, the Institutional Trustee shall use CUSIP numbers in notice of redemption as a convenience to Holders; provided , however , that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption and that identification numbers printed on the Securities and any such redemption shall not be affected by any defect in or omission of such numbers. The Trust shall promptly notify the Institutional Trustee in writing of any change in the CUSIP numbers.
Section 6.9. Rights of Holders; Waivers of Past Defaults .
(a) The legal title to the Trust Property is vested exclusively in the Institutional Trustee (in its capacity as such) in accordance with Section 2.5, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Securities shall be personal property giving only the rights specifically set forth therein and in this Declaration. The Securities shall have no preemptive or similar rights.
(b) For so long as any Capital Securities remain outstanding, if upon an Acceleration Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the
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outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of a Majority in liquidation amount of the Capital Securities then outstanding shall have the right to make such declaration by a notice in writing to the Institutional Trustee, the Sponsor and the Debenture Trustee.
At any time after a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as provided in the Indenture, if the Institutional Trustee, subject to the provisions hereof, fails to annul any such declaration and waive such default, the Holders of a Majority in liquidation amount of the Capital Securities, by written notice to the Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and annul such declaration and its consequences if:
(i) the Debenture Issuer has paid or deposited with the Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of the Debentures,
(B) any accrued Additional Interest on all of the Debentures,
(C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Debentures, and
(D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Institutional Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Debentures, other than the non-payment of the principal of the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.7 of the Indenture.
The Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default under the Indenture or any Indenture Event of Default, except a default or Indenture Event of Default in the payment of principal or interest on the Debentures (unless such default or Indenture Event of Default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default under the Indenture or an Indenture Event of Default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. No such rescission shall affect any subsequent default or impair any right consequent thereon.
Upon receipt by the Institutional Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Capital Securities, a record date shall be established for determining Holders of outstanding Capital Securities entitled to join in such notice, which record date shall be at the close of business on the day the Institutional Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided , that unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after
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expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.8.
(c) Except as otherwise provided in paragraphs (a) and (b) of this Section 6.8, the Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.
ARTICLE VII
DISSOLUTION AND TERMINATION OF TRUST
Section 7.1. Dissolution and Termination of Trust .
(a) The Trust shall dissolve on the first to occur of:
(i) unless earlier dissolved, on December 15, 2041, the expiration of the term of the Trust;
(ii) upon a Bankruptcy Event with respect to the Sponsor, the Trust or the Debenture Issuer;
(iii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor (other than in connection with a merger, consolidation or similar transaction not prohibited by the Indenture, this Declaration or the Guarantee, as the case may be) or upon the revocation of the charter of the Sponsor and the expiration of 90 days after the date of revocation without a reinstatement thereof;
(iv) upon the distribution of the Debentures to the Holders of the Securities, upon exercise of the right of the Holder of all of the outstanding Common Securities to dissolve the Trust as provided in Annex I hereto;
(v) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Trust or the Debenture Issuer;
(vi) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; or
(vii) before the issuance of any Securities, with the consent of all of the Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event referred to in Section 7.1(a), and after satisfaction of liabilities to creditors of the Trust as required by applicable law, including of the Statutory Trust Act, and subject to the terms set forth in Annex I, the Institutional Trustee shall terminate the Trust by filing a certificate of cancellation with the Secretary of State of the State of Delaware.
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(c) The provisions of Section 2.9 and Article IX shall survive the termination of the Trust.
ARTICLE VIII
TRANSFER OF INTERESTS
Section 8.1. General .
(a) Subject to Section 8.1(c), where Capital Securities are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal number of Capital Securities represented by different certificates, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfer and exchanges, the Trust shall issue and the Institutional Trustee shall authenticate Capital Securities at the Registrars request.
(b) Upon issuance of the Common Securities, the Sponsor shall acquire and retain beneficial and record ownership of the Common Securities and for so long as the Securities remain outstanding, and to the fullest extent permitted by applicable law, the Sponsor shall maintain 100% ownership of the Common Securities; provided , however , that any permitted successor of the Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S. Person may succeed to the Sponsors ownership of the Common Securities.
(c) Capital Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. To the fullest extent permitted by applicable law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void and will be deemed to be of no legal effect whatsoever and any such transferee shall be deemed not to be the holder of such Capital Securities for any purpose, including but not limited to the receipt of Distributions on such Capital Securities, and such transferee shall be deemed to have no interest whatsoever in such Capital Securities.
(d) The Registrar shall provide for the registration of Securities and of transfers of Securities, which will be effected without charge but only upon payment (with such indemnity as the Registrar may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Securities, the Registrar shall cause one or more new Securities of the same tenor to be issued in the name of the designated transferee or transferees. Every Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or such Holders attorney duly authorized in writing. Each Security surrendered for registration of transfer shall be canceled by the Institutional Trustee pursuant to Section 6.7. A transferee of a Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Security. By acceptance of a Security, each transferee shall be deemed to have agreed to be bound by this Declaration.
(e) The Trust shall not be required (i) to issue, register the transfer of, or exchange any Securities during a period beginning at the opening of business fifteen days before the day of any selection of Securities for redemption and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Securities to be redeemed, or (ii) to register the transfer or exchange of any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
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Section 8.2. Transfer Procedures and Restrictions .
(a) The Capital Securities shall bear the Restricted Securities Legend, which shall not be removed unless there is delivered to the Trust such satisfactory evidence, which may include an opinion of counsel satisfactory to the Institutional Trustee, as may be reasonably required by the Trust, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of the Securities Act. Upon provision of such satisfactory evidence, the Institutional Trustee, at the written direction of the Trust, shall authenticate and deliver Capital Securities that do not bear the legend.
(b) Except as permitted by Section 8.2(a), each Capital Security shall bear a legend (the Restricted Securities Legend ) in substantially the following form and a Capital Security shall not be transferred except in compliance with such legend, unless otherwise determined by the Sponsor, upon the advice of counsel expert in securities law, in accordance with applicable law:
[ If the Capital Security is to be Global Capital Security- THIS CAPITAL SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (DTC) OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO AMERIS STATUTORY TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE
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TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSORS AND THE TRUSTS RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (ERISA), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE CODE) (EACH A PLAN), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY PLANS INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING PLAN ASSETS OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
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THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
(c) To permit registrations of transfers and exchanges, the Trust shall execute and the Institutional Trustee shall authenticate Capital Securities at the Registrars request.
(d) Registrations of transfers or exchanges will be effected without charge, but only upon payment (with such indemnity as the Registrar or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it.
(e) All Capital Securities issued upon any registration of transfer or exchange pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits under this Declaration as the Capital Securities surrendered upon such registration of transfer or exchange.
Section 8.3. Deemed Security Holders . The Trust, the Administrators, the Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust, the Administrators, the Trustees, the Paying Agent, the Transfer Agent or the Registrar shall have actual or other notice thereof.
ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS
Section 9.1. Liability .
(a) Except as expressly set forth in this Declaration, the Guarantee and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of the Securities any deficit upon dissolution of the Trust or otherwise.
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(b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trusts assets.
(c) Pursuant to the Statutory Trust Act, the Holders of the Capital Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware.
Section 9.2. Exculpation .
(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Persons negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Persons professional or expert competence and, if selected by such Indemnified Person, has been selected by such Indemnified Person with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid.
Section 9.3. Fiduciary Duty .
(a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of the Indemnified Person.
(b) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision:
(i) in its discretion or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or
(ii) in its good faith or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law.
Section 9.4. Indemnification .
(a) The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed
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action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust; provided , however , that no such indemnification shall be made in respect of any claim, issue or matter as to which such Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
(c) To the extent that an Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4, or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys fees and expenses) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification of an Administrator under paragraphs (a) and (b) of this Section 9.4 (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (i) by the Administrators by a majority vote of a Quorum consisting of such Administrators who were not parties to such action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested Administrators so directs, by independent legal counsel in a written opinion, or (iii) by the Common Security Holder of the Trust.
(e) To the fullest extent permitted by law, expenses (including reasonable attorneys fees and expenses) incurred by an Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 9.4. Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Administrators by a majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
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Administrators so directs, by independent legal counsel in a written opinion or (iii) by the Common Security Holder of the Trust, that, based upon the facts known to the Administrators, counsel or the Common Security Holder at the time such determination is made, such Indemnified Person acted in bad faith or in a manner that such Indemnified Person did not believe to be in the best interests of the Trust, or, with respect to any criminal proceeding, that such Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Administrators, independent legal counsel or the Common Security Holder reasonably determine that such Indemnified Person deliberately breached his duty to the Trust or its Common or Capital Security Holders.
(f) The Trustees, at the sole cost and expense of the Sponsor, retain the right to representation by counsel of their own choosing in any action, suit or any other proceeding for which they are indemnified under paragraphs (a) and (b) of this Section 9.4, without affecting their right to indemnification hereunder or waiving any rights afforded to it under this Declaration or applicable law.
(g) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 9.4 shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Capital Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 9.4 shall be deemed to be provided by a contract between the Sponsor and each Indemnified Person who serves in such capacity at any time while this Section 9.4 is in effect. Any repeal or modification of this Section 9.4 shall not affect any rights or obligations then existing.
(h) The Sponsor or the Trust may purchase and maintain insurance on behalf of any Person who is or was an Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 9.4.
(i) For purposes of this Section 9.4, references to the Trust shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any Person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 9.4 with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued.
(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4 shall, unless otherwise provided when authorized or ratified, (i) continue as to a Person who has ceased to be an Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person; and (ii) survive the termination or expiration of this Declaration or the earlier removal or resignation of an Indemnified Person.
Section 9.5. Outside Businesses . Any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. None of any Covered Person, the Sponsor, the Delaware Trustee or the Institutional Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a
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character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates.
Section 9.6. Compensation; Fee . The Sponsor agrees:
(a) to pay to the Trustees from time to time such compensation for all services rendered by them hereunder as the parties shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Declaration (including the reasonable compensation and the expenses and disbursements of their respective agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct.
For purposes of clarification, this Section 9.6 does not contemplate the payment by the Sponsor of acceptance or annual administration fees owing to the Trustees under this Declaration or the fees and expenses of the Trustees counsel in connection with the closing of the transactions contemplated by this Declaration.
The provisions of this Section 9.6 shall survive the dissolution of the Trust and the termination of this Declaration and the removal or resignation of any Trustee.
No Trustee may claim any lien or charge on any property of the Trust as a result of any amount due pursuant to this Section 9.6.
ARTICLE X
ACCOUNTING
Section 10.1. Fiscal Year . The fiscal year ( Fiscal Year ) of the Trust shall be the calendar year, or such other year as is required by the Code.
Section 10.2. Certain Accounting Matters .
(a) At all times during the existence of the Trust, the Administrators shall keep, or cause to be kept at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained, at the Sponsors expense, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon (either separately or as part of the Sponsors regularly prepared consolidated financial report) as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrators.
(b) The Administrators shall cause to be duly prepared and delivered to each of the Holders of Securities Form 1099 or such other annual United States federal income tax information statement
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required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrators shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust.
(c) The Administrators, at the Sponsors expense, shall cause to be duly prepared at the principal office of the Sponsor in the United States, as United States is defined in Section 7701(a)(9) of the Code (or at the principal office of the Trust if the Sponsor has no such principal office in the United States), and filed an annual United States federal income tax return on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrators on behalf of the Trust with any state or local taxing authority.
Section 10.3. Banking . The Trust shall maintain in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, one or more bank accounts in the name and for the sole benefit of the Trust; provided , however , that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts (including the Property Account) shall be designated by the Institutional Trustee.
Section 10.4. Withholding . The Institutional Trustee or any Paying Agent and the Administrators shall comply with all withholding requirements under United States federal, state and local law. The Institutional Trustee or any Paying Agent shall request, and each Holder shall provide to the Institutional Trustee or any Paying Agent, such forms or certificates as are necessary to establish an exemption from withholding with respect to the Holder, and any representations and forms as shall reasonably be requested by the Institutional Trustee or any Paying Agent to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrators shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Institutional Trustee or any Paying Agent is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Institutional Trustee or any Paying Agent may reduce subsequent Distributions by the amount of such withholding.
ARTICLE XI
AMENDMENTS AND MEETINGS
Section 11.1. Amendments .
(a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed (i) by the Institutional Trustee, or (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, by the Delaware Trustee.
(b) Notwithstanding any other provision of this Article XI, an amendment may be made, and any such purported amendment shall be valid and effective only if:
(i) the Institutional Trustee shall have first received
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(A) an Officers Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and
(ii) the result of such amendment would not be to
(A) cause the Trust to cease to be classified for purposes of United States federal income taxation as a grantor trust; or
(B) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act.
(c) Except as provided in Section 11.1(d), (e) or (h), no amendment shall be made, and any such purported amendment shall be void and ineffective, unless the Holders of a Majority in liquidation amount of the Capital Securities shall have consented to such amendment.
(d) In addition to and notwithstanding any other provision in this Declaration, without the consent of each affected Holder, this Declaration may not be amended to (i) change the amount or timing of any Distribution on the Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Securities as of a specified date or change any conversion or exchange provisions or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date.
(e) Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities.
(f) Article III shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities.
(g) The rights of the Holders of the Capital Securities under Article IV to appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Capital Securities.
(h) This Declaration may be amended by the Institutional Trustee and the Holders of a Majority in liquidation amount of the Common Securities without the consent of the Holders of the Capital Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration;
(iii) add to the covenants, restrictions or obligations of the Sponsor; or
(iv) modify, eliminate or add to any provision of this Declaration to such extent as may be necessary to ensure that the Trust will be classified for United States federal income tax purposes at all times as a grantor trust and will not be required to register as an Investment Company (including without limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any other applicable rule under the Investment Company Act or written change in interpretation or
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application thereof by any legislative body, court, government agency or regulatory authority) which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders of Securities;
provided , however , that no such modification, elimination or addition referred to in clauses (i), (ii), (iii) or (iv) shall adversely affect in any material respect the powers, preferences or special rights of Holders of Capital Securities.
Section 11.2. Meetings of the Holders of Securities; Action by Written Consent .
(a) Meetings of the Holders of any class of Securities may be called at any time by the Administrators (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration or the terms of the Securities. The Administrators shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Administrators one or more calls in a writing stating that the signing Holders of the Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of the Securities calling a meeting shall specify in writing the Certificates held by the Holders of the Securities exercising the right to call a meeting and only those Securities represented by such Certificates shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of the Securities:
(i) notice of any such meeting shall be given to all the Holders of the Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of the Securities is permitted or required under this Declaration, such vote, consent or approval may be given at a meeting of the Holders of the Securities. Any action that may be taken at a meeting of the Holders of the Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of the Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of the Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of the Securities entitled to vote who have not consented in writing. The Administrators may specify that any written ballot submitted to the Holders of the Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrators;
(ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of the Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; each meeting of the Holders of the Securities shall be conducted by the Administrators or by such other Person that the Administrators may designate; and
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(iii) unless the Statutory Trust Act, this Declaration, or the terms of the Securities otherwise provides, the Administrators, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of the Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote; provided , however , that each meeting shall be conducted in the United States (as that term is defined in Treasury Regulations section 301.7701-7).
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE
Section 12.1. Representations and Warranties of Institutional Trustee . The initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Institutional Trustees acceptance of its appointment as Institutional Trustee, that:
(a) the Institutional Trustee is a Delaware banking corporation with trust powers, duly organized and validly existing under the laws of the State of Delaware with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Institutional Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee. This Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the Institutional Trustee does not conflict with or constitute a breach of the charter or by-laws of the Institutional Trustee; and
(d) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Institutional Trustee of this Declaration.
Section 12.2. Representations of the Delaware Trustee . The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustees acceptance of its appointment as Delaware Trustee that:
(a) if it is not a natural person, the Delaware Trustee is duly organized, validly existing and in good standing under the laws of the State of Delaware;
(b) if it is not a natural person, the execution, delivery and performance by the Delaware Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Delaware Trustee. This Declaration has been duly executed and delivered by the Delaware Trustee, and under Delaware law (excluding any securities laws) constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency and other similar laws affecting creditors rights generally and to general principles of equity and the discretion of the court (regardless of whether considered in a proceeding in equity or at law);
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(c) if it is not a natural person, the execution, delivery and performance of this Declaration by the Delaware Trustee does not conflict with or constitute a breach of the charter or by-laws of the Delaware Trustee;
(d) it has trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;
(e) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority governing the trust powers of the Delaware Trustee is required for the execution, delivery or performance by the Delaware Trustee of this Declaration; and
(f) the Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, it is an entity which has its principal place of business in the State of Delaware and, in either case, a Person that satisfies for the Trust the requirements of Section 3807 of the Statutory Trust Act.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Notices . All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied (which telecopy shall be followed by notice delivered or mailed by first class mail) or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrators at the Trusts mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities):
Ameris Statutory Trust I
c/o Ameris Bancorp
24 Second Avenue SE
Moultrie, Georgia 31776
Attention: Cindi Lewis
Telecopy: 229-890-2235
(b) if given to the Delaware Trustee, at the Delaware Trustees mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(c) if given to the Institutional Trustee, at the Institutional Trustees mailing address set forth below (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
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(d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice of to the Trust):
Ameris Bancorp
24 Second Avenue SE
Moultrie, Georgia 31776
Attention: Cindi Lewis
Telecopy: 229-890-2235
(e) if given to any other Holder, at the address set forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.
Section 13.2. Governing Law . This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the law of the State of Delaware and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of Delaware or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Delaware; provided , however , that there shall not be applicable to the Trust, the Trustees or this Declaration any provision of the laws (statutory or common) of the State of Delaware pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (c) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (d) fees or other sums payable to trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures to income or principal, or (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets.
Section 13.3. Intention of the Parties . It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties.
Section 13.4. Headings . Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof.
Section 13.5. Successors and Assigns . Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed.
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Section 13.6. Partial Enforceability . If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.
Section 13.7. Counterparts . This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees and Administrators to any of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.
Signatures appear on the following page
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IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written.
WILMINGTON TRUST COMPANY, as Delaware Trustee |
||
By: |
/s/ Michele C. Harra |
|
Name: | Michele C. Harra | |
Title: | Financial Services Officer |
WILMINGTON TRUST COMPANY, as Institutional Trustee |
||
By: |
/s/ Michele C. Harra |
|
Name: | Michele C. Harra | |
Title: | Financial Services Officer |
AMERIS BANCORP, as Sponsor | ||
By: |
/s/ Edwin W. Hortman, Jr. |
|
Name: | Edwin W. Hortman, Jr. | |
Title: | President & CEO |
ADMINISTRATORS OF AMERIS STATUTORY TRUST I | ||
By: |
|
|
Administrator | ||
By: |
|
|
Administrator | ||
By: |
|
|
Administrator |
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ANNEX I
TERMS OF SECURITIES
Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust, dated as of September 20, 2006 (as amended from time to time, the Declaration), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration):
1. | Designation and Number . |
(a) 36,000 Floating Rate Capital Securities of Ameris Statutory Trust I (the Trust), with an aggregate stated liquidation amount with respect to the assets of the Trust of thirty-six million dollars ($36,000,000.00) and a stated liquidation amount with respect to the assets of the Trust of $1,000.00 per Capital Security, are hereby designated for the purposes of identification only as the Capital Securities . The Capital Security Certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.
(b) 1,114 Floating Rate Common Securities of the Trust (the Common Securities ) will be evidenced by Common Security Certificates substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.
2. | Distributions . |
(a) Distributions will be payable on each Security for the Distribution Period beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in December 2006 at a rate per annum of 7.02% and shall bear interest for each successive Distribution Period beginning on (and including) the Distribution Payment Date in December 2006, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date at a rate per annum equal to the 3-Month LIBOR, determined as described below, plus 1.63% (the Coupon Rate ), applied to the stated liquidation amount thereof, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears will bear interest thereon compounded quarterly at the applicable Distribution Rate (to the extent permitted by law). Distributions, as used herein, include cash distributions and any such compounded distributions unless otherwise noted. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360. All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
(b) Distributions on the Securities will be cumulative, will accrue from the date of original issuance, and will be payable, subject to extension of distribution payment periods as described herein, quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, or if such day is not a Business Day, then the next succeeding Business Day (each a Distribution Payment Date )
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(it being understood that interest accrues for any such non-Business Day), commencing on the Distribution Payment Date in December 2006 when, as and if available for payment. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Acceleration Event of Default has occurred and is continuing, by deferring the payment of interest on the Debentures for up to 20 consecutive quarterly periods (each an Extension Period ) at any time and from time to time, subject to the conditions described below, during which Extension Period no interest shall be due and payable. During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as Additional Interest ). No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided , however , that no Extension Period may extend beyond the Maturity Date and provided further , however , that during any such Extension Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Debenture Issuers or its Affiliates capital stock (other than payments of dividends or distributions to the Debenture Issuer) or make any guarantee payments with respect to the foregoing, or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Debenture Issuer or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Debenture Issuer in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Debenture Issuer (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Debenture Issuers capital stock (or any capital stock of a subsidiary of the Debenture Issuer) for any class or series of the Debenture Issuers capital stock or of any class or series of the Debenture Issuers indebtedness for any class or series of the Debenture Issuers capital stock, (c) the purchase of fractional interests in shares of the Debenture Issuers capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders rights plan, or the issuance of rights, stock or other property under any stockholders rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. During any Extension Period, Distributions on the Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has
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funds available for the payment of such distributions in the Property Account of the Trust. The Trusts funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.
(c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. The relevant record dates shall be fifteen days before the relevant Distribution Payment Date. Distributions payable on any Securities that are not punctually paid on any Distribution Payment Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, as the case may be, when due (taking into account any Extension Period), will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture.
(d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution . In the event of the voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a Liquidation ) other than in connection with a redemption of the Debentures, the Holders of the Securities will be entitled to receive out of the assets of the Trust available for distribution to Holders of the Securities, after satisfaction of liabilities to creditors of the Trust (to the extent not satisfied by the Debenture Issuer), distributions equal to the aggregate of the stated liquidation amount of $1,000.00 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the Liquidation Distribution ), unless in connection with such Liquidation, the Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Distribution Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, and having the same record date as, such Securities, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with the Statutory Trust Act, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities.
The Sponsor, as the Holder of all of the Common Securities, has the right at any time to dissolve the Trust (including, without limitation, upon the occurrence of a Special Event), subject to the receipt by the Debenture Issuer of prior approval from the Board of Governors of the Federal Reserve System, or its designated district bank, as applicable, and any successor federal agency that is primarily responsible for regulating the activities of the Sponsor (the Federal Reserve ), if the Sponsor is a bank holding company, or from the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of Sponsor, (the OTS ) if the Sponsor is a savings and loan holding company, in either case if then required under applicable capital guidelines or policies of the Federal Reserve or OTS, as applicable, and, after satisfaction of liabilities to creditors of the Trust, cause the Debentures to be distributed to the Holders of the Securities on a Pro Rata basis in accordance with the aggregate stated liquidation amount thereof.
If a Liquidation of the Trust occurs as described in clause (i), (ii), (iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated by the Institutional Trustee as expeditiously as it determines to be possible by distributing, after satisfaction of liabilities to creditors of the Trust, to the Holders of the Securities, the Debentures on a Pro Rata basis to the extent not satisfied by the Debenture Issuer, unless such distribution is determined by the Institutional Trustee not to be practical, in which event such Holders will be entitled to receive out of the assets of the Trust available for distribution to the Holders,
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after satisfaction of liabilities of creditors of the Trust to the extent not satisfied by the Debenture Issuer, an amount equal to the Liquidation Distribution. An early Liquidation of the Trust pursuant to clause (iv) of Section 7.1(a) of the Declaration shall occur if the Institutional Trustee determines that such Liquidation is possible by distributing, after satisfaction of liabilities to creditors of the Trust, to the Holders of the Securities on a Pro Rata basis, the Debentures, and such distribution occurs.
If, upon any such Liquidation the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on such Capital Securities shall be paid to the Holders of the Trust Securities on a Pro Rata basis, except that if an Event of Default has occurred and is continuing, the Capital Securities shall have a preference over the Common Securities with regard to such distributions.
After the date for any distribution of the Debentures upon dissolution of the Trust (i) the Securities of the Trust will be deemed to be no longer outstanding, (ii) upon surrender of a Holders Securities certificate, such Holder of the Securities will receive a certificate representing the Debentures to be delivered upon such distribution, (iii) any certificates representing the Securities still outstanding will be deemed to represent undivided beneficial interests in such of the Debentures as have an aggregate principal amount equal to the aggregate stated liquidation amount with an interest rate identical to the Distribution Rate of, and bearing accrued and unpaid interest equal to accrued and unpaid distributions on, the Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissuance (and until such certificates are so surrendered, no payments of interest or principal shall be made to Holders of Securities in respect of any payments due and payable under the Debentures; provided , however that such failure to pay shall not be deemed to be an Event of Default and shall not entitle the Holder to the benefits of the Guarantee), and (iv) all rights of Holders of Securities under the Declaration shall cease, except the right of such Holders to receive Debentures upon surrender of certificates representing such Securities.
4. Redemption and Distribution .
(a) The Debentures will mature on December 15, 2036. The Debentures may be redeemed by the Debenture Issuer, in whole or in part, at any Distribution Payment Date on or after the Distribution Payment Date in September 2011, at the Redemption Price. In addition, the Debentures may be redeemed by the Debenture Issuer at the Special Redemption Price, in whole but not in part, at any Distribution Payment Date, upon the occurrence and continuation of a Special Event within 120 days following the occurrence of such Special Event at the Special Redemption Price, upon not less than 30 nor more than 60 days notice to holders of such Debentures so long as such Special Event is continuing. In each case, the right of the Debenture Issuer to redeem the Debentures is subject to the Debenture Issuer having received prior approval from the Federal Reserve (if the Debenture Issuer is a bank holding company) or prior approval from the OTS (if the Debenture Issuer is a savings and loan holding company), in each case if then required under applicable capital guidelines or policies of the applicable federal agency.
3-Month LIBOR means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Debenture Trustee in the following order of priority:
(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). Telerate Page 3750 means the display designated as Page 3750 on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;
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(2) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as requested in clause (2) above, the Debenture Trustee will request four major New York City banks to provide such banks offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and
(4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.
If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
Capital Treatment Event means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Sponsor will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Capital Securities as Tier 1 Capital (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding company or otherwise is not subject to the Federal Reserves risk-based capital adequacy guidelines, such guidelines applied to the Sponsor as if the Sponsor were subject to such guidelines); provided , however , that the inability of the Sponsor to treat all or any portion of the liquidation amount of the Capital Securities as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Sponsor having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further , however , that the distribution of Debentures in connection with the Liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such Liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.
Determination Date means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.
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Investment Company Event means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion, will be considered an Investment Company that is required to be registered under the Investment Company Act which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.
Maturity Date means December 15, 2036.
Redemption Date shall mean the date fixed for the redemption of Capital Securities, which shall be any Distribution Payment Date on or after the Distribution Payment Date in September 2011.
Redemption Price means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid Interest on such Debentures to the Redemption Date.
Special Event means a Tax Event, an Investment Company Event or a Capital Treatment Event.
Special Redemption Date means a date on which a Special Event redemption occurs, which shall be a Distribution Payment Date.
Special Redemption Price means the price set forth in the following table for any Special Redemption Date that occurs on the date indicated below (or if such day is not a Business Day, then the next succeeding Business Day), expressed as the percentage of the principal amount of the Debentures being redeemed:
Month in which Special Redemption Date Occurs |
Special Redemption Price |
|
December 2006 | 104.625% | |
March 2007 | 104.300 % | |
June 2007 | 104.000 % | |
September 2007 | 103.650 % | |
December 2007 | 103.350 % | |
March 2008 | 103.000 % | |
June 2008 | 102.700 % | |
September 2008 | 102.350 % | |
December 2008 | 102.050 % | |
March 2009 | 101.700 % | |
June 2009 | 101.400 % |
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September 2009 | 101.050 % | |
December 2009 | 100.750 % | |
March 2010 | 100.450 % | |
June 2010 | 100.200 % | |
September 2010 and thereafter | 100.000 % |
plus, in each case, accrued and unpaid Interest on such Debentures to the Special Redemption Date.
Tax Event means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement including any notice or announcement of intent to adopt such procedures or regulations) (an Administrative Action ) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Debenture Issuer or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Debenture Issuer on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Debenture Issuer, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.
(b) Upon the repayment in full at maturity or redemption in whole or in part of the Debentures (other than following the distribution of the Debentures to the Holders of the Securities), the proceeds from such repayment or payment shall concurrently be applied to redeem Pro Rata at the applicable Redemption Price or Special Redemption Price, as applicable, Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed; provided , however , that holders of such Securities shall be given not less than 30 nor more than 60 days notice of such redemption (other than at the scheduled maturity of the Debentures).
(c) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Capital Securities will be redeemed Pro Rata and the Capital Securities to be redeemed will be redeemed Pro Rata from each Holder of Capital Securities.
(d) The Trust may not redeem fewer than all the outstanding Capital Securities unless all accrued and unpaid Distributions have been paid on all Capital Securities for all quarterly Distribution periods terminating on or before the date of redemption.
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(e) Redemption or Distribution Procedures .
(i) Notice of any redemption of, or notice of distribution of the Debentures in exchange for, the Securities (a Redemption/Distribution Notice ) will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of such Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of such Securities at the address of each such Holder appearing on the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder.
(ii) If the Securities are to be redeemed and the Trust gives a Redemption/ Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which notice will be irrevocable), then, provided that the Institutional Trustee has a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Institutional Trustee will pay the relevant Redemption Price or Special Redemption Price, as applicable, to the Holders of such Securities by check mailed to the address of each such Holder appearing on the books and records of the Trust on the Redemption Date. If a Redemption/Distribution Notice shall have been given and funds deposited as required then immediately prior to the close of business on the date of such deposit Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the applicable Redemption Price or Special Redemption Price specified in paragraph 4(a), but without interest on such Redemption Price or Special Redemption Price. If payment of the Redemption Price or Special Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Trust or by the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions on such Securities will continue to accrue at the Distribution Rate from the original Redemption Date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price or Special Redemption Price. In the event of any redemption of the Capital Securities issued by the Trust in part, the Trust shall not be required to (i) issue, register the transfer of or exchange any Security during a period beginning at the opening of business fifteen days before any selection for redemption of the Capital Securities and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Capital Securities to be so redeemed or (ii) register the transfer of or exchange any Capital Securities so selected for redemption, in whole or in part, except for the unredeemed portion of any Capital Securities being redeemed in part.
(iii) Redemption/Distribution Notices shall be sent by the Administrators on behalf of the Trust to (A) in respect of the Capital Securities, the Holders thereof and (B) in respect of the Common Securities, the Holder thereof.
(iv) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), and provided that the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement.
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5. | Voting Rights - Capital Securities . |
(a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights. The Administrators are required to call a meeting of the Holders of the Capital Securities if directed to do so by Holders of at least 10% in liquidation amount of the Capital Securities.
(b) Subject to the requirements of obtaining a tax opinion by the Institutional Trustee in certain circumstances set forth in the last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Capital Securities, voting separately as a class, have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies available under the Indenture as the holder of the Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent on behalf of all the Holders of the Capital Securities to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required; provided , however , that, where a consent or action under the Indenture would require the consent or act of the holders of greater than a simple majority in aggregate principal amount of Debentures (a Super Majority ) affected thereby, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Capital Securities outstanding which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. If the Institutional Trustee fails to enforce its rights under the Debentures after the Holders of a Majority in liquidation amount of such Capital Securities have so directed the Institutional Trustee, to the fullest extent permitted by law, a Holder of the Capital Securities may institute a legal proceeding directly against the Debenture Issuer to enforce the Institutional Trustees rights under the Debentures without first instituting any legal proceeding against the Institutional Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date the interest or principal is payable (or in the case of redemption, the Redemption Date or the Special Redemption Date, as applicable), then a Holder of record of the Capital Securities may directly institute a proceeding for enforcement of payment, on or after the respective due dates specified in the Debentures, to such Holder directly of the principal of or interest on the Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder. The Institutional Trustee shall notify all Holders of the Capital Securities of any default actually known to the Institutional Trustee with respect to the Debentures unless (x) such default has been cured prior to the giving of such notice or (y) the Institutional Trustee determines in good faith that the withholding of such notice is in the interest of the Holders of such Capital Securities, except where the default relates to the payment of principal of or interest on any of the Debentures. Such notice shall state that such Indenture Event of Default also constitutes an Event of Default hereunder. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Institutional Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Institutional Trustee shall request the direction of the Holders of the Securities with respect to such
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amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided , however , that where a consent under the Indenture would require the consent of a Super-Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities outstanding which the relevant Super-Majority represents of the aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not take any such action in accordance with the directions of the Holders of the Securities unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Event of Default hereunder. Any required approval or direction of Holders of the Capital Securities may be given at a separate meeting of Holders of the Capital Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Institutional Trustee will cause a notice of any meeting at which Holders of the Capital Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of the Capital Securities. Each such notice will include a statement setting forth the following information (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Capital Securities will be required for the Trust to redeem and cancel Capital Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.
Notwithstanding that Holders of the Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not entitle the Holder thereof to vote or consent and shall, for purposes of such vote or consent, be treated as if such Capital Securities were not outstanding.
In no event will Holders of the Capital Securities have the right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Sponsor as the Holder of all of the Common Securities of the Trust. Under certain circumstances as more fully described in the Declaration, Holders of Capital Securities have the right to vote to appoint, remove or replace the Institutional Trustee and the Delaware Trustee.
6. | Voting Rights - Common Securities . |
(a) Except as provided under paragraphs 6(b), 6(c) and 7 and as otherwise required by law and the Declaration, the Common Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance with Article IV of the Declaration, to vote to appoint, remove or replace any Administrators.
(c) Subject to Section 6.8 of the Declaration and only after each Event of Default (if any) with respect to the Capital Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waiving any past default and its consequences that is waivable under the Indenture, or (iii) exercising
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any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided , however , that, where a consent or action under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Notwithstanding this paragraph 6(c), the Institutional Trustee shall not revoke any action previously authorized or approved by a vote or consent of the Holders of the Capital Securities. Other than with respect to directing the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action described in (i), (ii) or (iii) above, unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights, to the fullest extent permitted by law, under the Declaration, any Holder of the Common Securities may institute a legal proceeding directly against any Person to enforce the Institutional Trustees rights under the Declaration, without first instituting a legal proceeding against the Institutional Trustee or any other Person.
Any approval or direction of Holders of the Common Securities may be given at a separate meeting of Holders of the Common Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Administrators will cause a notice of any meeting at which Holders of the Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of the Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.
7. | Amendments to Declaration and Indenture . |
(a) In addition to any requirements under Section 11.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Trustees, Sponsor or Administrators otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the Liquidation of the Trust, other than as described in Section 7.1 of the Declaration, then the Holders of outstanding Securities, voting together as a single class, will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities, affected thereby; provided , however , if any amendment or proposal referred to in clause (i) above would adversely affect only the Capital Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities.
(b) In the event the consent of the Institutional Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Institutional Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification, or termination as directed by a Majority in liquidation amount of the
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Securities voting together as a single class; provided , however , that where a consent under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding.
(c) Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers of the Institutional Trustee or (iii) cause the Trust to be deemed an Investment Company which is required to be registered under the Investment Company Act.
(d) Notwithstanding any provision of the Declaration, the right of any Holder of the Capital Securities to receive payment of distributions and other payments upon redemption or otherwise, on or after their respective due dates, or to institute a suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. For the protection and enforcement of the foregoing provision, each and every Holder of the Capital Securities shall be entitled to such relief as can be given either at law or equity.
8. Pro Rata . A reference in these terms of the Securities to any payment, distribution or treatment as being Pro Rata shall mean pro rata to each Holder of the Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities then outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities Pro Rata according to the aggregate liquidation amount of the Capital Securities held by the relevant Holder relative to the aggregate liquidation amount of all Capital Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Capital Securities, to each Holder of the Common Securities Pro Rata according to the aggregate liquidation amount of the Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding.
9. Ranking . The Capital Securities rank pari passu with and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to receive payment of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of the Holders of the Capital Securities with the result that no payment of any Distribution on, or Redemption Price (or Special Redemption Price) of, any Common Security, and no other payment on account of redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all outstanding Capital Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price (or Special Redemption Price) the full amount of such Redemption Price (or Special Redemption Price) on all outstanding Capital Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Institutional Trustee shall first be applied to the payment in full in cash of all Distributions on, or the Redemption Price (or Special Redemption Price) of, the Capital Securities then due and payable.
10. Acceptance of Guarantee and Indenture . Each Holder of the Capital Securities and the Common Securities, by the acceptance of such Securities, agrees to the provisions of the Guarantee, including the subordination provisions therein and to the provisions of the Indenture.
11. No Preemptive Rights . The Holders of the Securities shall have no preemptive or similar rights to subscribe for any additional securities.
12. Miscellaneous . These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business.
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EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS CAPITAL SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (DTC) OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO AMERIS STATUTORY TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSORS AND THE TRUSTS RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE
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OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (ERISA), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE CODE) (EACH A PLAN), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY PLANS INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING PLAN ASSETS OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
Certificate Number P-1 | 36,000 Capital Securities | |
[CUSIP NO. [ ] ] |
September 20, 2006
Certificate Evidencing Floating Rate Capital Securities
of
Ameris Statutory Trust I
(liquidation amount $1,000.00 per Capital Security)
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Ameris Statutory Trust I, a statutory trust created under the laws of the State of Delaware (the Trust), hereby certifies that Cede & Co. (the Holder) is the registered owner of capital securities of the Trust representing undivided beneficial interests in the assets of the Trust, (liquidation amount $1,000.00 per capital security) (the Capital Securities). Subject to the Declaration (as defined below), the Capital Securities are transferable on the books and records of the Trust in person or by a duly authorized attorney, upon surrender of this Certificate duly endorsed and in proper form for transfer. The Capital Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of September 20, 2006, among Edwin W. Hortman, Jr., Dennis J. Zember Jr. and Cindi Lewis, as Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Ameris Bancorp, as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, including the designation of the terms of the Capital Securities as set forth in Annex I to such amended and restated declaration as the same may be amended from time to time (the Declaration). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws.
Signatures appear on following page
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IN WITNESS WHEREOF, the Trust has duly executed this certificate.
AMERIS STATUTORY TRUST I | ||
By: |
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Name: | ||
Title: | Administrator |
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the within-mentioned Declaration.
WILMINGTON TRUST COMPANY, as the Institutional Trustee |
||
By: |
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Authorized Officer |
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[FORM OF REVERSE OF CAPITAL SECURITY]
Distributions payable on each Capital Security will be payable at an annual rate equal to 7.02% beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in December 2006 and at an annual rate for each successive period beginning on (and including) the Distribution Payment Date in December 2006, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a Distribution Period), equal to 3-Month LIBOR, determined as described below, plus 1.63% (the Coupon Rate), applied to the stated liquidation amount of $1,000.00 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term Distributions as used herein includes cash distributions and any such compounded distributions unless otherwise noted. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. As used herein, Determination Date means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360.
3-Month LIBOR as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Debenture Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (Telerate Page 3750 means the display designated as Page 3750 on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Debenture Trustee will request four major New York City banks to provide such banks offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or.0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
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Except as otherwise described below, Distributions on the Capital Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year or if any such day is not a Business Day, then the next succeeding Business Day (each such day, a Distribution Payment Date) (it being understood that interest accrues for any such non-Business Day), commencing on the Distribution Payment Date in December 2006. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Acceleration Event of Default has occurred and is continuing, by extending the interest payment period for up to 20 consecutive quarterly periods (each an Extension Period) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable. During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as Additional Interest). No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided , however , that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. During any Extension Period, Distributions on the Capital Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trusts funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the Declaration.
A-1-6
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to:
____________________________________________________________________________________ |
(Insert assignees social security or tax identification number)__________________________________ |
____________________________________________________________________________________ |
____________________________________________________________________________________ |
(Insert address and zip code of assignee) and irrevocably appoints |
____________________________________________________________________________________ |
agent to transfer this Capital Security Certificate on the books of the Trust. The agent may substitute another to act for him or her.
Date: |
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Signature: |
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(Sign exactly as your name appears on the other side of this Capital Security Certificate)
Signature Guarantee: 1
1 | Signature must be guaranteed by an eligible guarantor institution that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (STAMP) or such other signature guarantee program as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. |
A-1-7
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 8.1 OF THE DECLARATION.
Certificate Number C-1 | 1,114 Common Securities |
September 20, 2006
Certificate Evidencing Floating Rate Common Securities
of
Ameris Statutory Trust I
Ameris Statutory Trust I, a statutory trust created under the laws of the State of Delaware (the Trust), hereby certifies that Ameris Bancorp (the Holder) is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust (the Common Securities). The Common Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of September 20, 2006, among Edwin W. Hortman, Jr., Dennis J. Zember Jr. and Cindi Lewis, as Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Ameris Bancorp, as Sponsor, and the holders from time to time of undivided beneficial interest in the assets of the Trust including the designation of the terms of the Common Securities as set forth in Annex I to such amended and restated declaration, as the same may be amended from time to time (the Declaration). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.
As set forth in the Declaration, when an Event of Default has occurred and is continuing, the rights of Holders of Common Securities to payment in respect of Distributions and payments upon Liquidation, redemption or otherwise are subordinated to the rights of payment of Holders of the Capital Securities.
Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder.
By acceptance of this Certificate, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of undivided beneficial ownership in the Debentures.
This Common Security is governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws.
A-2-1
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
AMERIS STATUTORY TRUST I | ||
By: |
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Name: | ||
Title: | Administrator |
A-2-2
[FORM OF REVERSE OF COMMON SECURITY]
Distributions payable on each Common Security will be payable at an annual rate equal to 7.02% beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in December 2006 and at an annual rate for each successive period beginning on (and including) the Distribution Payment Date in December 2006, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a Distribution Period), equal to 3 - Month LIBOR, determined as described below, plus 1.63% (the Coupon Rate), applied to the stated liquidation amount of $1,000.00 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term Distributions as used herein includes cash distributions and any such compounded distributions unless otherwise noted. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. As used herein, Determination Date means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360.
3 - Month LIBOR as used herein, means the London interbank offered interest rate for three - month U.S. dollar deposits determined by the Debenture Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three - month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (Telerate Page 3750 means the display designated as Page 3750 on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three - month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3 - Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Debenture Trustee will request four major New York City banks to provide such banks offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3 - Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3 - Month LIBOR will be a 3 - Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three - month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3 - Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
All percentages resulting from any calculations on the Common Securities will be rounded, if necessary, to the nearest one hundred - thousandth of a percentage point, with five one - millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or.0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one - half cent being rounded upward)).
A-2-3
Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year or if any such day is not a Business Day, then the next succeeding Business Day (each such day, a Distribution Payment Date) (it being understood that interest accrues for any such non-Business Day), commencing on the Distribution Payment Date in December 2006. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Acceleration Event of Default has occurred and is continuing, by extending the interest payment period for up to 20 consecutive quarterly periods (each an Extension Period) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable. During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as Additional Interest). No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided , however , that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. During any Extension Period, Distributions on the Common Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trusts funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer.
The Common Securities shall be redeemable as provided in the Declaration.
A-2-4
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to:
____________________________________________________________________________________ |
(Insert assignees social security or tax identification number)__________________________________ |
____________________________________________________________________________________ |
____________________________________________________________________________________ |
(Insert address and zip code of assignee) and irrevocably appoints |
____________________________________________________________________________________ |
agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. | ||
Date: |
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Signature: |
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(Sign exactly as your name appears on the other side of this Common Security Certificate) | ||
Signature: |
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(Sign exactly as your name appears on the other side of this Common Security Certificate) |
Signature Guarantee 2
2 | Signature must be guaranteed by an eligible guarantor institution that is a bank, stockbroker, savings and loan association or credit union, meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (STAMP) or such other signature guarantee program as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. |
A-2-5
EXHIBIT B
SPECIMEN OF INITIAL DEBENTURE
(See Document No. 17)
B-1
EXHIBIT C
PLACEMENT AGREEMENT
(See Document No. 1)
C-1
Exhibit 4.6
GUARANTEE AGREEMENT
by and between
AMERIS BANCORP
and
WILMINGTON TRUST COMPANY
Dated as of September 20, 2006
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (this Guarantee), dated as of September 20, 2006, is executed and delivered by Ameris Bancorp, a Georgia corporation (the Guarantor), and Wilmington Trust Company, a Delaware banking corporation, as trustee (the Guarantee Trustee), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of Ameris Statutory Trust I, a Delaware statutory trust (the Issuer).
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the Declaration), dated as of the date hereof among Wilmington Trust Company, not in its individual capacity but solely as institutional trustee, the administrators of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof those undivided beneficial interests, having an aggregate liquidation amount of $36,000,000.00 (the Capital Securities); and
WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase by each Holder of the Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions and Interpretation . In this Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Guarantee has the same meaning throughout;
(c) all references to the Guarantee or this Guarantee are to this Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to Articles or Sections are to Articles or Sections of this Guarantee, unless otherwise specified;
(e) terms defined in the Declaration as at the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
Affiliate has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.
Beneficiaries means any Person to whom the Issuer is or hereafter becomes indebted or liable.
Capital Securities has the meaning set forth in the recitals to this Guarantee.
Common Securities means the common securities issued by the Issuer to the Guarantor pursuant to the Declaration.
Corporate Trust Office means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.
Covered Person means any Holder of Capital Securities.
Debentures means the debt securities of the Guarantor designated the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036 held by the Institutional Trustee (as defined in the Declaration) of the Issuer.
Declaration Event of Default means an Event of Default as defined in the Declaration.
Event of Default has the meaning set forth in Section 2.4(a).
Guarantee Payments means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) which are required to be paid on such Capital Securities to the extent the Issuer shall have funds available therefor, (ii) the Redemption Price to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, (iii) the Special Redemption Price to the extent the Issuer has funds available therefor, with respect to Capital Securities redeemed upon the occurrence of a Special Event, and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders of the Capital Securities in exchange therefor as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the Liquidation Distribution).
Guarantee Trustee means Wilmington Trust Company, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee.
Guarantor means Ameris Bancorp and each of its successors and assigns.
Holder means any holder, as registered on the books and records of the Issuer, of any Capital Securities; provided , however , that, in determining whether the Holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, Holder shall not include the Guarantor or any Affiliate of the Guarantor.
Indemnified Person means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee.
Indenture means the Indenture dated as of the date hereof between the Guarantor and Wilmington Trust Company, not in its individual capacity but solely as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the institutional trustee of the Issuer.
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Issuer has the meaning set forth in the opening paragraph to this Guarantee.
Liquidation Distribution has the meaning set forth in the definition of Guarantee Payments herein.
Majority in liquidation amount of the Capital Securities means Holder(s) of outstanding Capital Securities, voting together as a class, but separately from the holders of Common Securities, of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Capital Securities then outstanding.
Obligations means any costs, expenses or liabilities (but not including liabilities related to taxes) of the Issuer other than obligations of the Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities.
Officers Certificate means, with respect to any Person, a certificate signed by one Authorized Officer of such Person. Any Officers Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include:
(a) a statement that the officer signing the Officers Certificate has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or investigation undertaken by the officer in rendering the Officers Certificate;
(c) a statement that the officer has made such examination or investigation as, in such officers opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of the officer, such condition or covenant has been complied with.
Person means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.
Redemption Price has the meaning set forth in the Indenture.
Responsible Officer means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee including any Vice President, Assistant Vice President, Secretary, Assistant Secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officers knowledge of and familiarity with the particular subject.
Special Event has the meaning set forth in the Indenture.
Special Redemption Price has the meaning set forth in the Indenture.
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Successor Guarantee Trustee means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1.
Trust Securities means the Common Securities and the Capital Securities.
ARTICLE II
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
Section 2.1. Powers and Duties of the Guarantee Trustee .
(a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Capital Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of Default and after curing all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been waived pursuant to Section 2.4) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the
4
case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that such Responsible Officer of the Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the written direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or relating to the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; and
(iv) no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds is not reasonably assured to it under the terms of this Guarantee or security and indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it.
Section 2.2. Certain Rights of Guarantee Trustee .
(a) Subject to the provisions of Section 2.1:
(i) The Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officers Certificate.
(iii) Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers Certificate of the Guarantor which, upon receipt of such request, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any re-recording, refiling or re-registration thereof).
(v) The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any
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of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys fees and expenses and the expenses of the Guarantee Trustees agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, however, that nothing contained in this Section 2.2(a)(vi) shall relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee.
(vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit.
(viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustees or its agents taking such action.
(x) Whenever in the administration of this Guarantee the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions.
(xi) The Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee.
(b) No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty.
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Section 2.3. Not Responsible for Recitals or Issuance of Guarantee . The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee.
Section 2.4. Events of Default; Waiver .
(a) An Event of Default under this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder.
(b) The Holders of a Majority in liquidation amount of the Capital Securities may, voting or consenting as a class, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.
Section 2.5. Events of Default; Notice .
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities and the Guarantor, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided , however , that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice from the Guarantor or a Holder of the Capital Securities (except in the case of a payment default), or a Responsible Officer of the Guarantee Trustee charged with the administration of this Guarantee shall have obtained actual knowledge thereof.
ARTICLE III
GUARANTEE TRUSTEE
Section 3.1. Guarantee Trustee; Eligibility .
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor, and
(ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or Person authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 3.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
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(b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 3.2(c).
(c) If the Guarantee Trustee has or shall acquire any conflicting interest within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to this Guarantee.
Section 3.2. Appointment, Removal and Resignation of Guarantee Trustee .
(a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default.
(b) The Guarantee Trustee shall not be removed in accordance with Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 3.2 within 60 days after delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such termination, removal or resignation.
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ARTICLE IV
GUARANTEE
Section 4.1. Guarantee .
(a) The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except the defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert. The Guarantors obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.
(b) The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof.
Section 4.2. Waiver of Notice and Demand . The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.
Section 4.3. Obligations Not Affected . The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer;
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(e) any invalidity of, or defect or deficiency in, the Capital Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.
Section 4.4. Rights of Holders .
(a) The Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; provided , however , that (subject to Section 2.1) the Guarantee Trustee shall have the right to decline to follow any such direction if the Guarantee Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Guarantee Trustee in good faith by its board of directors or trustees, executive committees or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Guarantee Trustee in personal liability.
(b) Any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustees rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives any right or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor.
Section 4.5. Guarantee of Payment . This Guarantee creates a guarantee of payment and not of collection.
Section 4.6. Subrogation . The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided , however , that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.
Section 4.7. Independent Obligations . The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3 hereof.
Section 4.8. Enforcement by a Beneficiary . A Beneficiary may enforce the obligations of the Guarantor contained in Section 4.1(b) directly against the Guarantor and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity
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before proceeding against the Guarantor. The Guarantor shall be subrogated to all rights (if any) of any Beneficiary against the Issuer in respect of any amounts paid to the Beneficiaries by the Guarantor under this Guarantee; provided , however , that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if at the time of any such payment, and after giving effect to such payment, any amounts are due and unpaid under this Guarantee.
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 5.1. Limitation of Transactions . So long as any Capital Securities remain outstanding, if (a) there shall have occurred and be continuing an Event of Default or a Declaration Event of Default or (b) the Guarantor shall have selected an Extension Period as provided in the Declaration and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor shall not and shall not permit any Affiliate to (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantors or such Affiliates capital stock (other than payments of dividends or distributions to the Guarantor) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of the Event of Default, Declaration Event of Default or Extension Period, as applicable, (ii) as a result of any exchange or conversion of any class or series of the Guarantors capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of the Guarantors capital stock or of any class or series of the Guarantors indebtedness for any class or series of the Guarantors capital stock, (iii) the purchase of fractional interests in shares of the Guarantors capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) any declaration of a dividend in connection with any stockholders rights plan, or the issuance of rights, stock or other property under any stockholders rights plan, or the redemption or repurchase of rights pursuant thereto, (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (vi) payments under this Guarantee).
Section 5.2. Ranking . This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein.
The right of the Guarantor to participate in any distribution of assets of any of its subsidiaries upon any such subsidiarys liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that subsidiary. Accordingly, the Guarantors obligations under this Guarantee will be effectively
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subordinated to all existing and future liabilities of the Guarantors subsidiaries, and claimants should look only to the assets of the Guarantor for payments hereunder. This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may enter into in the future or otherwise.
ARTICLE VI
TERMINATION
Section 6.1. Termination . This Guarantee shall terminate as to the Capital Securities (i) upon full payment of the Redemption Price or Special Redemption Price of all Capital Securities then outstanding, (ii) upon the distribution of all of the Debentures to the Holders of all of the Capital Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon dissolution of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Guarantee.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Exculpation .
(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Persons negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Persons professional or expert competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid.
Section 7.2. Indemnification .
(a) The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or willful misconduct on the part of the Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including, but not limited to, the costs and expenses (including reasonable legal fees and expenses) of the Indemnified Person defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of the Indemnified Persons powers or duties hereunder. The obligation to indemnify as set forth in this Section 7.2 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.
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(b) Promptly after receipt by an Indemnified Person under this Section 7.2 of notice of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is to be made against the Guarantor under this Section 7.2, notify the Guarantor in writing of the commencement thereof; but the failure so to notify the Guarantor (i) will not relieve the Guarantor from liability under paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph (a) above. The Guarantor shall be entitled to appoint counsel of the Guarantors choice at the Guarantors expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided , however , that such counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Guarantors election to appoint counsel to represent the Guarantor in an action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified Person(s) which are different from or additional to those available to the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor. The Guarantor will not, without the prior written consent of the Indemnified Persons, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding.
Section 7.3. Compensation; Reimbursement of Expenses . The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree to from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct.
For purposes of clarification, this Section 7.3 does not contemplate the payment by the Guarantor of acceptance or annual administration fees owing to the Guarantee Trustee for services to be provided by the Guarantee Trustee under this Guarantee or the fees and expenses of the Guarantee Trustees counsel in connection with the closing of the transactions contemplated by this Guarantee. The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Successors and Assigns . All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantors assets to another entity, in each case, to the extent permitted under the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of at least a Majority in liquidation amount of the Capital Securities.
Section 8.2. Amendments . Except with respect to any changes that do not adversely affect the rights of Holders of the Capital Securities in any material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities. The provisions of the Declaration with respect to amendments thereof apply to the giving of such approval.
Section 8.3. Notices . All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Guarantee Trustee, at the Guarantee Trustees mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Capital Securities and the Guarantor):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(b) If given to the Guarantor, at the Guarantors mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities and to the Guarantee Trustee):
Ameris Bancorp
24 Second Avenue SE
Moultrie, Georgia 31776
Attention: Cindi Lewis
Telecopy: 229-890-2235
(c) If given to any Holder of the Capital Securities, at the address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.
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Section 8.4. Benefit . This Guarantee is solely for the benefit of the Beneficiaries and, subject to Section 2.1(a), is not separately transferable from the Capital Securities.
Section 8.5. Governing Law . THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
Section 8.6. Counterparts . This Guarantee may be executed in one or more counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument.
Section 8.7 Separability . In case one or more of the provisions contained in this Guarantee shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
Signatures appear on the following page
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THIS GUARANTEE is executed as of the day and year first above written.
AMERIS BANCORP, as Guarantor, | ||
By: |
/s/ Edwin W. Hortman, Jr. |
|
Name: | Edwin W. Hortman, Jr. | |
Title: | President & CEO | |
WILMINGTON TRUST COMPANY, | ||
as Guarantee Trustee | ||
By: |
/s/ Michele C. Harra |
|
Name: | Michele C. Harra | |
Title: | Financial Services Officer |
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Exhibit 4.7
FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATIONS UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANYS RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (ERISA), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE CODE) (EACH A PLAN), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY PLANS INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING PLAN ASSETS OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTTVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE
IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF, ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
Floating Rate Junior Subordinated Deferrable Interest Debenture
of
Ameris Bancorp
September 20, 2006
Ameris Bancorp, a Georgia corporation (the Company which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to Wilmington Trust Company, not in its individual capacity but solely as Institutional Trustee for Ameris Statutory Trust I (the Holder) or registered assigns, the principal sum of thirty-seven million one hundred fourteen thousand dollars ($37,114,000.00) on December 15, 2036, and to pay interest on said principal sum from September 20, 2006, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year or if such day is not a Business Day, then the next succeeding Business Day (each such date, an Interest Payment Date) (it being understood that interest accrues for any such non-Business Day), commencing on the Interest Payment Date in December 2006, at an annual rate equal to 7.02% beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2006 and at an annual rate for each successive period beginning on (and including) the Interest Payment Date in December 2006, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a Distribution Period), equal to 3-Month LIBOR, determined as described below, plus 1.63% (the Coupon Rate), applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest (including Additional interest) at the Interest Rate in effect for each applicable period, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be fifteen Business Days prior to the day on which the relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.
3-Month LIBOR as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (Telerate Page 3750 means the display designated as Page 3750 on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Trustee will request four major New York City banks to provide such banks offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. As used herein, Determination Date means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.
The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided , however , that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately
designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.
So long as no Acceleration Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an Extension Period), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as Additional Interest ). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided , however ; that no Extension Period may extend beyond the Maturity Date; provided further , however , that during any such Extension Period, the Company shall not and shall not permit any Affiliate to engage in any of the activities or transactions described on the reverse side hereof and in the Indenture. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 15 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.
The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.
The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has duly executed this certificate.
AMERIS BANCORP | ||
By |
/s/ Edwin Hortman, Jr. |
|
Name: | Edwin Hortman, Jr. | |
Title: | President & CEO |
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, as Trustee | ||
By: |
/s/ Michele C. Harra |
|
Authorized Officer |
REVERSE OF DEBENTURE
This Debenture is one of the floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under and pursuant to the Indenture dated as of September 20, 2006 (the Indenture), duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture.
Upon the occurrence and continuation of a Special Event prior to the Interest Payment Date in September 2011, the Company shall have the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event, at the Special Redemption Price.
In addition, the Company shall have the right to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in September 2011, at the Redemption Price
Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed
Notwithstanding the foregoing, any redemption of Debentures by the Company shall be subject to the receipt of any and all required regulatory approvals.
In case an Acceleration Event of Default shall have occurred and be continuing, upon demand of the Trustee, the principal of all of the Debentures shall become due and payable in the manner, with the effect and subject to the conditions provided in the Indenture
The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided , however , that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture.
The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding on behalf of the holders of all of the Debentures to waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof or of the Indenture which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9 of the Indenture; provided , however , that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided , further , that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of the Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by the Indenture, said default or Event of Default shall for all purposes of the Debentures and the Indenture be deemed to have been cured and to be not continuing.
No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, including Additional Interest, on this Debenture at the time and place and at the rate and in the money herein prescribed
The Company has agreed that if Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such Extension Period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Companys capital stock or its Affiliates capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with
or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (l) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Companys capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Companys capital stock or of any class or series of the Companys indebtedness for any class or series of the Companys capital stock, (3) the purchase of fractional interests in shares of the Companys capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders rights plan, or the issuance of rights, stock or other property under any stockholders rights plan, or the redemption or repurchase of rights pursuant thereto; (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).
The Debentures are issuable only in registered, certificated form without coupons and in minimum denominations of $100,000. 00 and any multiple of $1,000.00 in excess thereof. As provided in the Indenture and subject to the transfer restrictions and limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Debenture Register of the Company Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2 of the Indenture, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to, the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith
Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.
No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of; and as a consideration for, the execution of the Indenture and the issue of the Debentures.
Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company
THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF
Exhibit 5.1
FORM OF OPINION OF ROGERS & HARDIN LLP
, 2006
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: | Ameris Bancorp |
Registration Statement on Form S-4 |
Registration No. |
Ladies and Gentlemen:
We have acted as counsel to Ameris Bancorp, a Georgia corporation (the Company), in connection with the filing by the Company of a Registration Statement on Form S-4 (the Registration Statement), with the Securities and Exchange Commission (the Commission) registering under the Securities Act of 1933, as amended (the Act), 661,846 shares (the Shares) of the Companys common stock, $1.00 par value per share (the Common Stock), issuable in connection with the proposed merger (the Merger) of Islands Bancorp, a South Carolina corporation (Islands), with and into the Company pursuant to that certain Agreement and Plan of Merger dated as of August 15, 2006, by and among the Company, Islands, American Banking Company and Islands Community Bank, N.A. (the Merger Agreement).
The opinion hereinafter set forth is given pursuant to Item 21 of Form S-4 and Item 601 of Regulation S-K. Such opinion is given solely for the benefit of the Commission and may be relied upon only by the Commission in connection with the Registration Statement and may not be used, circulated, quoted or referred to by or filed with any other person or entity, including any other governmental unit or agency, without first obtaining the express written consent of this firm; provided , however , that the shareholders of Islands entitled to vote on the Merger and the Merger Agreement may rely on this opinion in deciding how to cast such vote.
In giving the opinion hereinafter set forth, we have examined and relied upon, among other things: (i) the Merger Agreement; (ii) the Companys Articles of Incorporation, as amended, incorporated by reference as an exhibit to the Registration Statement; (iii) the Companys Amended and Restated Bylaws, incorporated by reference as an exhibit to the Registration Statement; and (iv) originals or copies, certified or otherwise identified to our satisfaction, of such other agreements, documents, instruments and records as we have deemed necessary or appropriate under the circumstances for us to express the opinion hereinafter set forth. As to various factual matters that are material to our opinion, we have relied upon certificates of officers of the Company and certificates and orders of various public officials. In making the foregoing examinations, we assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies, the authority of the person or persons who
Securities and Exchange Commission
, 2006
Page 2
executed each of such documents on behalf of any person or entity other than the Company, the correctness and accuracy of all certificates of officers of the Company and the correctness and accuracy of all certificates and orders of various public officials. We have also made such investigations of law as we have deemed appropriate.
In rendering this opinion, we have also assumed that prior to the issuance of any of the Shares: (i) the Registration Statement, as it may be amended, shall have become effective under the Act; (ii) the shareholders of Islands shall have approved and adopted the Merger Agreement and the Merger; and (iii) the transactions contemplated by the Merger Agreement shall have been consummated in accordance with the Merger Agreement.
On the basis of the foregoing, we are of the opinion that the Shares, when issued and delivered in accordance with the terms and conditions of the Merger Agreement, will be validly issued, fully paid and non-assessable.
Our conclusions are limited to the matters expressly set forth as our opinion in the immediately preceding paragraph, and no opinion is implied or to be inferred beyond the matters expressly so stated. Such opinion is given as of the date hereof, and we expressly decline any undertaking to revise or update such opinion subsequent to the date hereof or to advise the Commission of any matter arising subsequent to the date hereof that would cause us to modify, in whole or in part, such opinion.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving the foregoing consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
Exhibit 8.1
October 27, 2006
Ameris Bancorp
24 2nd Avenue, S.E.
Moultrie, Georgia 31768
Re: | Federal Income Tax Consequences of the Proposed Merger |
of Islands Bancorp with and into Ameris Bancorp |
Ladies and Gentlemen:
We have acted as counsel for Ameris Bancorp (Ameris) in connection with the proposed merger (the Company Merger) of Islands Bancorp (Islands) with and into Ameris, pursuant to the Agreement and Plan of Merger (the Merger Agreement) dated as of August 15, 2006, by and among Ameris, American Banking Company, Islands and Islands Community Bank, N.A. In our capacity as counsel for Ameris and as provided in the Merger Agreement, we have been requested to render our opinion regarding certain of the federal income tax consequences of the Company Merger. Capitalized terms used but not specifically defined herein have the meanings ascribed to such terms in the Merger Agreement.
We are furnishing this opinion to you at your request in connection with the filing by Ameris of the Registration Statement on Form S-4 (the Registration Statement) filed on the date hereof with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities Act).
In rendering our opinion set forth below, we have examined and, with the consent of Ameris and Islands, relied upon the accuracy and completeness (which we have neither investigated nor verified) of the facts, information, covenants, representations and warranties contained in originals or copies, certified or otherwise identified to our satisfaction, of the Merger Agreement, including the Exhibits thereto, the Registration Statement and such other documents and corporate records as we have deemed necessary or appropriate as a basis for our opinion set forth below. In addition, we have relied upon certain statements, representations and covenants made by Ameris and Islands, including representations and covenants set forth in letters from Ameris and Islands dated the date hereof (the Tax Certificates), and we have assumed that the Tax Certificates will be complete and accurate, and will be re-executed by appropriate officers of Ameris and Islands, as of the Effective Time.
Ameris Bancorp
October 27, 2006
Page 2
In rendering our opinion set forth below, we have assumed that: (i) the Company Merger will be consummated in accordance with the terms of the Merger Agreement and as described in the Registration Statement and that none of the terms and conditions contained therein will be waived or modified in any respect prior to the Effective Time; and (ii) the Registration Statement, the Merger Agreement and the Tax Certificates reflect all the material facts relating to the Company Merger, Ameris and Islands. Our opinion is conditioned upon, among other things, the initial and continuing accuracy and completeness of the facts, information, covenants, representations and warranties made by Ameris and Islands (including, without limitation, those set forth in the Merger Agreement and the Tax Certificates). Any material change or inaccuracy in the facts referred to, set forth or assumed herein, in the Registration Statement, in the Merger Agreement or in the Tax Certificates (giving effect to all events occurring after the date hereof, whether prior or subsequent to the Effective Time) may affect the conclusions stated herein.
We have also assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such documents.
In rendering our opinion set forth below, we have considered applicable provisions of the Internal Revenue Code of 1986, as amended (the Code), Treasury regulations promulgated thereunder (the Regulations), pertinent judicial authorities, rulings of the Internal Revenue Service and such other authorities as we have considered relevant. It should be noted that such laws, the Code, the Regulations, judicial decisions and administrative interpretations are subject to change at any time and, in some circumstances, with retroactive effect. Additionally, there can be no assurance that contrary positions will not be taken by the Internal Revenue Service. A material change in any of the authorities upon which our opinion is based could affect our conclusions herein.
Based solely upon and subject to the foregoing and the other limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that the Company Merger will qualify as a reorganization for U.S. federal income tax purposes under Section 368(a) of the Code.
Except as expressly set forth above, we express no other opinion, including, without limitation, any opinion as to whether any events subsequent to the Effective Time will be viewed as part of the plan of reorganization for U.S. federal income tax purposes and the effect, if any, of such events on our conclusions herein.
Ameris Bancorp
October 27, 2006
Page 3
This opinion is for your benefit and is not to be used, circulated, quoted or otherwise referred to for any purpose, except we consent to the filing of this opinion as an Exhibit to the Registration Statement and to the use of our name in the Registration Statement under the caption Legal Matters. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder. The opinion expressed herein is as of the date hereof, and we disclaim any undertaking to advise you of changes of facts stated or assumed herein or any subsequent changes in applicable law.
Very truly yours, |
/s/ Rogers & Hardin |
ROGERS & HARDIN |
Exhibit 8.2
October 27, 2006
Islands Bancorp
2348 Boundary Street
Beaufort, South Carolina 29902
Re: Merger of Ameris Bancorp into Islands Bancorp
Ladies and Gentlemen:
You have requested our opinion as to the tax consequences under the Internal Revenue Code of 1986, as amended (the Code), of the proposed merger (the Merger) of Islands Bancorp (Islands), a corporation organized and existing under the laws of the State of South Carolina with its principal office located in Beaufort, South Carolina, with and into Ameris Bancorp (Ameris), a corporation organized and existing under the laws of the State of Georgia with its principal office located in Moultrie, Georgia, with Ameris as the surviving entity, in accordance with the terms set forth in that certain Agreement and Plan of Merger by and among Islands Bancorp, Islands Community Bank, N.A., Ameris Bancorp, and American Banking Company, dated as of August 15, 2006 (the Merger Agreement). Specifically, you have requested us to opine that the Merger will each constitute a tax-free reorganization within the meaning of Section 368 of the Code.
In rendering the opinions expressed below, we have examined the following documents (the Documents):
(a) | The Merger Agreement; |
(b) | The Officers Tax Certificates of each of Islands and Ameris that have been delivered to the undersigned and incorporated herein by reference; |
(c) | The Registration Statement of Ameris and Joint Proxy Statement/Prospectus of Ameris and Islands related to the Merger; and |
(d) | Such other documents and records as we have deemed necessary in order to enable us to render the opinions expressed below. |
In rendering the opinions expressed below, we have assumed, without any independent investigation or verification of any kind, that all of the information as to factual matters contained in the Documents is true, correct, and complete. Any inaccuracy with respect to factual matters contained in the Documents or incompleteness in our understanding of the facts could alter the conclusion reached in this opinion.
Islands Bancorp
October 27, 2006
Page 2
In addition, for purposes of rendering the opinions expressed below, we have assumed with your permission, that (i) all signatures on all Documents reviewed by us are genuine, (ii) all Documents submitted to us as originals are true and correct, (iii) all Documents submitted to us as copies are true and correct copies of the originals thereof, (iv) each natural person signing any Document reviewed by us had the legal capacity to do so, and (v) the Merger and the transactions contemplated in the Merger Agreement will be effected in accordance with the terms thereof.
Finally, with your permission we have assumed that the sum of (i) the amount of any cash and the value of any property other than Ameris stock paid to Islands shareholders, including cash paid to Islands shareholders who exercise their statutory right to dissent to the Merger, (ii) the amount of cash and the value of any property other than Ameris stock given as consideration by Ameris (or a person related to Ameris within the meaning of Treasury Regulation Section 1.368-1(e)(2)) in exchange for Islands stock prior to, but in contemplation of, the Merger or in redemption of Ameris stock after the Merger, and (iii) the amount of cash paid to Islands shareholders in lieu of the issuance of fractional shares of Ameris stock will not exceed sixty percent (60%) of the sum of the total value of the Islands stock outstanding immediately prior to the effective time of the Merger and the total value of any Islands stock purchased by Ameris (or a person related to Ameris within the meaning of Treasury Regulation Section 1.368-1(e)(2)) prior to, but in contemplation of, the Merger.
OPINION
Based upon the foregoing, it is our opinion that the Merger will constitute a reorganization within the meaning of Code Section 368(a)(1)(A) to which Islands and Ameris are parties. Accordingly, it is our opinion that:
a. | No gain or loss will be recognized for federal income tax purposes by an Islands shareholder upon the exchange of shares of Islands stock solely for shares of Ameris stock, other than gain, if any, recognized with respect to the cash received in lieu of the issuance of a fractional share of Ameris stock, which will be taxed in the manner described in paragraph d. below. |
b | Gain, but not loss, will be recognized for federal income tax purposes by an Islands shareholder upon the exchange of shares of Islands stock for shares of Ameris stock and cash. The amount of gain that will be recognized by an Islands shareholder will equal the lesser of the cash received by the shareholder (not including cash received in lieu of fractional shares, which will be taxed in the manner described in d. below) or the amount of gain realized by the shareholder. Code Section 356(a)(1). The amount of gain realized by the shareholder will equal the excess, if any, of the cash received (not including cash received in lieu of the issuance of a fractional share of Ameris stock) plus the fair market value of |
Islands Bancorp
October 27, 2006
Page 3
the Ameris stock received in the Merger over the shareholders basis in his or her Islands stock. Code Section 1001. Generally, any gain or loss recognized by any such Islands shareholder will be capital gain or loss, provided (i) the Islands stock cancelled in the Merger constitutes a capital asset in the hands of such shareholder at the time of the Merger, and (ii) the requirements of one of Section 302(b)(1), (2), or (3) of the Code are met. The determination of whether the requirements of one of Section 302(b)(1), (2), or (3) of the Code are met will be made based upon the assumption that each Islands shareholder received only Ameris stock in the Merger and that a portion of the Ameris stock was then redeemed for cash. Commissioner v. Clark, 489 U.S. 726 (1989). In addition, each Islands shareholder, in making the determination of whether the requirements of one of Section 302(b)(1), (2) or (3) of the Code are met, must include both (x) the Ameris stock and cash consideration received for his or her Islands stock and (y) the Ameris stock and cash consideration received for Islands stock owned by persons related to the Islands shareholder as defined in Section 318 of the Code. Code Section 356(a)(2). In that the facts that need to be known in order to determine whether one of the redemption tests is met are personal to each shareholder, each affected Islands shareholder will need to consult with such shareholders own tax advisor for the tax effect of such redemption (i.e., exchange treatment or dividend).
c. | An Islands shareholder receiving only cash in exchange for his or her Islands stock in the Merger, whether as a result of such shareholders election to receive solely cash as provided in the Merger Agreement, a decision by such shareholder to exercise his or her statutory right to dissent in connection with the Merger, or otherwise, generally will recognize gain or loss equal to the difference between the amount of cash so received and the basis in his or her Islands stock surrendered in the Merger. |
d. | Cash, if any, received in lieu of fractional shares will be treated for federal income tax purposes as if the fractional shares were distributed and then redeemed by Ameris. The cash payments will be treated as having been received as a distribution in exchange for the fractional shares redeemed. Code Section 302(a); Rev. Rul. 66-365, 1966-2 C.B. 116. |
d. | The basis of the Ameris stock, not including any basis allocable to any fractional share of Ameris stock that is treated as issued in the Merger and immediately redeemed, that is received by an Islands shareholder in the Merger will equal the shareholders basis in the Islands stock surrendered therefor. Code Section 358(a)(1). |
Islands Bancorp
October 27, 2006
Page 4
e. | The holding period of the Ameris stock received by an Islands shareholder will include the period during which such shareholder held the Islands stock surrendered therefor, provided the Islands stock was a capital asset in the hands of such shareholder at the time of the Merger. Code Section 1223(1). |
f. | No gain or loss will be recognized by Ameris or Islands as a consequence of the Merger, except for deferred gain or income, if any, required to be recognized in accordance with the consolidated return regulations of the Code. Code Section 361(a). |
* * * * *
Our opinions are based upon the facts as they exist today, the existing provisions of the Code, Treasury Regulations issued or proposed thereunder, published Revenue Rulings and releases of the Internal Revenue Service, and existing federal case law, any of which could be changed at any time. Any such change may be retroactive in application and could modify the legal conclusion upon which our opinions are based.
In addition, this opinion does not address any tax considerations under foreign, state, or local laws, or the tax considerations to certain Islands shareholders in light of their particular circumstances, including persons who are not United States persons, dealers in securities, tax-exempt entities, shareholders who do not hold Islands common stock as capital assets within the meaning of Section 1221 of the Internal Revenue Code, and shareholders who acquired their shares of Islands stock pursuant to the exercise of Islands options or otherwise as compensation.
This opinion letter is being furnished only to the party to which it is addressed and is solely for its benefit. No other person shall be entitled to rely on the opinions contained herein without our prior express written consent. Except for its inclusion in the Registration Statement on Form S-4 of Ameris, to which this opinion is attached as an exhibit with our consent, this opinion letter may not be used, circulated, quoted, published, or otherwise referred to for any purpose without our prior express written consent. By giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. Our opinions are limited to the matters stated herein, and no opinion is implied or may be inferred beyond the opinions expressly stated herein.
Very truly yours, |
/s/ Powell Goldstein LLP |
POWELL GOLDSTEIN LLP |
Exhibit 21.1
REGISTRANTS SUBSIDIARIES
Following is a list of the Registrants subsidiaries and the state of incorporation or other jurisdiction.
Name of Subsidiary |
State of Incorporation or Other Jurisdiction |
|
Ameris Statutory Trust I | State of Delaware | |
American Banking Company | State of Georgia | |
Cairo Banking Company | State of Georgia | |
Tri-County Bank | State of Florida | |
Bank of Thomas County | State of Georgia | |
Moultrie Holding Company, Inc. | State of Delaware | |
Moultrie Real Estate Holdings, Inc. | State of Delaware | |
Quitman Holding Company, Inc. | State of Delaware | |
Quitman Real Estate Holdings, Inc. | State of Delaware | |
Thomas Holding Company, Inc. | State of Delaware | |
Thomas Real Estate Holdings, Inc. | State of Delaware | |
Citizens Holding Company, Inc. | State of Delaware | |
Citizens Real Estate Holdings, Inc. | State of Delaware | |
Cairo Holding Company, Inc. | State of Delaware | |
Cairo Real Estate Holdings, Inc. | State of Delaware | |
Southland Real Estate Holdings, Inc. | State of Alabama | |
Cordele Holding Company, Inc. | State of Delaware | |
Cordele Real Estate Holdings, Inc. | State of Delaware | |
First National Holding Company, Inc. | State of Delaware | |
First National Real Estate Holdings, Inc. | State of Delaware | |
M&F Holding Company, Inc. | State of Delaware | |
M&F Real Estate Holdings, Inc. | State of Delaware | |
Tri-County Holding Company, Inc. | State of Delaware | |
Tri-County Real Estate Holdings, Inc. | State of Delaware | |
Citizens Bancshares, Inc. | State of Florida |
Exhibit 23.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form S-4 of Ameris Bancorp and its subsidiaries of our reports dated February 17, 2006 relating to our audits of the consolidated financial statements and internal control over financial reporting, which appears in the Annual Report on Form 10-K of Ameris Bancorp for the year ended December 31, 2005.
We also consent to the reference to our firm under the caption Experts in the Prospectus, which is part of this Registration Statement.
/s/ Mauldin & Jenkins, LLC
Albany, Georgia
October 27, 2006
EXHIBIT 23.4
Francis & Company, CPAs
1000 Johnson Ferry Road, NE
Atlanta, Georgia 30342
Islands Bancorp
P.O. Box 6240
Beaufort, South Carolina 29903
Re: | Consent of Independent Certified Public Accountants |
Ladies and Gentlemen:
We have issued our Report dated February 23, 2006, which is included in the Annual Report on Form 10-KSB of Islands Bancorp for the year ended December 31, 2005. We hereby consent to the incorporation by reference of said report in this Registration Statement on Form S-4 of Ameris Bancorp. We further consent to the use of aforementioned report in the Registration Statement on Form S-4 and the use of our name under the caption Experts.
FRANCIS & COMPANY, CPAs
October 27, 2006
EXHIBIT 23.5
October 27, 2006
Islands Bancorp
2348 Boundary Street
Beaufort, South Carolina 29902
Re: Proxy Statement/Prospectus and Registration Statement
on Form S-4 of Ameris Bancorp
Ladies and Gentlemen:
We hereby consent to the use of our opinion letter dated August 15, 2006 to the Board of Directors of Islands Bancorp as an Appendix to the Joint Proxy Statement/Prospectus which forms a part of the Registration Statement on Form S-4 and to the references to our firm and such opinion in such Proxy Statement/Prospectus. In giving this consent, we do not admit that we come within the category of persons whose consent is required under the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder, nor do we thereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term experts as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder.
H OWE B ARNES H OEFER & A RNETT , I NC . |
||
By | / S / M ATTHEW C. B OBA | |
Name: Matthew C. Boba
Title: Executive Vice President and
|
Exhibit 99.2
REVOCABLE PROXY
ISLANDS BANCORP
x | PLEASE MARK VOTES AS IN THIS EXAMPLE |
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, being a holder of shares of common stock of Islands Bancorp (the Company), acknowledges receipt of the notice of the special meeting of shareholders of the Company to be held on , , and the accompanying proxy statement, and appoints John R. Perrill and D. Martin Goodman, and either of them, the attorneys of the undersigned, with power of substitution, for and in the name of the undersigned, to vote as proxies for the undersigned the number of shares of Company common stock the undersigned would be entitled to vote if personally present at the special meeting of the Company, as stated, and at any adjournment and adjournments thereof, upon the following matters (Management recommends a For vote on item No. 1):
For | Withhold | Abstain | ||||
1. Approval of the Agreement and Plan of Merger, dated
|
¨ | ¨ | ¨ | |||
2. Other Matters to Come Before the Meeting. |
The shares covered by this proxy will be voted in accordance with the selection indicated. IF NO SELECTION IS MADE, THEY WILL BE VOTED IN FAVOR OF APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.
Please sign exactly as your name appears on the stock certificate. When signing as an attorney, executor, administrator, trustee or guardian, please give full title as such. If signer is a corporation, sign full corporate name by duly authorized officer . If shares are held in the name of two or more persons, all should sign.
Please be sure to sign and date this Proxy in the box below |
Date |
|
Shareholder sign above | Co-holder (if any) sign above |
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD
IN THE ENCLOSED ENVELOPE
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED