<PAGE> 1
As filed with the Securities and Exchange Commission on May 7, 1999
Registration No. 333-74997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(Name of small business issuer in its charter)
------------------------------
FLORIDA 6712 59-3535315
(State or other ---- ----------
jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or Classification Code Number) Identification Number)
organization)
------------------------------
3411 TAMIAMI TRAIL NORTH, SUITE 200
NAPLES, FLORIDA 34103
(941) 643-4646
(Address and telephone number
of principal executive offices)
---------------------------------
POLLY M. ROGERS
3411 TAMIAMI TRAIL NORTH, SUITE 200
NAPLES, FLORIDA 34103
(941) 643-4646
(Name, address and telephone
number of agent for service)
---------------------------------
Copies Requested to:
ROBERT C. SCHWARTZ, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP
SUITE 3100, PROMENADE II
1230 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
(404) 815-3758
---------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities
Act, check the following box. [X]
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(c) 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. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
<TABLE>
<CAPTION>
================================================================================================================
Proposed
Title of each class maximum Proposed maximum
of securities Amount to be offering price aggregate Amount of
to be registered registered per unit offering price registration fee
- -------------------------------------- ------------ -------------- ---------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock Purchase Warrants (1) 113,330 $ 0 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value (2) 113,330 $10.00 $1,133,300 $315.06
- ----------------------------------------------------------------------------------------------------------------
Total $1,133,300 $315.06
================================================================================================================
</TABLE>
1. Represents Common Stock Purchase Warrants reserved for issuance to the
organizers of the Company.
2. Represents the shares of Common Stock which are issuable upon the exercise
of the Common Stock Purchase Warrants.
================================================================================
<PAGE> 2
1,200,000 SHARES COMMON STOCK
113,330 COMMON STOCK PURCHASE WARRANTS
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
A BANK HOLDING COMPANY FOR
CITIZENS NATIONAL BANK OF SOUTHWEST FLORIDA
A PROPOSED NATIONAL BANK
We are Citizens Bancshares of Southwest Florida, Inc., and we are
offering 1,200,000 shares of our common stock at $10.00 per share to raise
capital to form and capitalize Citizens National Bank of Southwest Florida, a
proposed national bank.
We will deposit all subscription funds in an escrow account until we
receive subscriptions for 1,000,000 shares. If we do not receive subscriptions
for 1,000,000 shares by August ___, 1999, we will terminate the offering and
promptly return all subscription funds to subscribers, along with any interest
earned on the funds. We may, however, at our option and without giving notice to
subscribers, extend the offering for three consecutive 90-day periods until May
___, 2000. We may reject all or part of any subscription for any reason.
Investors must purchase a minimum of 500 shares and may purchase up to 20,000
shares.
We are conducting this offering through several of our directors and
officers. These individuals will devote appropriate time and energy to marketing
and selling the shares, but there is no guarantee that we will be able to sell
the 1,000,000 shares necessary to complete the offering.
At the $10.00 offering price, we will receive total proceeds of between
$10,000,000 and $12,000,000 in this offering. Because there is no underwriter
involved in this offering and the directors and officers who will be selling the
shares will not receive any commissions, we will receive the full proceeds of
this offering.
We will also be issuing to our organizers an aggregate of 113,330
warrants to purchase shares of our common stock.
There is currently no public market for our common stock.
INVESTING IN THESE SECURITIES INVOLVES RISK. WE URGE YOU TO READ
CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON PAGE 5, ALONG WITH THE REST OF
THIS PROSPECTUS, BEFORE MAKING YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
The date of this prospectus is ___________, 1999
<PAGE> 3
PROSPECTUS SUMMARY
This summary highlights some of the information contained in this
prospectus. It does not contain all of the information that you should consider
before investing in our common stock. To fully understand this offering, you
should read the entire prospectus carefully, including the risk factors and the
financial statements.
THE COMPANY
We plan to operate as a bank holding company and to be the sole
shareholder of Citizens National Bank of Southwest Florida, a proposed national
bank. We will use the proceeds of this offering primarily to purchase all of the
common stock to be issued by Citizens Bank. This will provide Citizens Bank
sufficient capital to pay its pre-opening and organizational expenses and to
begin operations. Citizens Bank will operate as a full service community bank
emphasizing prompt, personalized customer service to meet the financial needs of
individuals and small to medium-sized businesses in and around western Collier
County, Florida. We anticipate that we will receive all necessary regulatory
approvals and be able to begin operations of Citizens Bank in June of 1999. The
main office of Citizens Bancshares and Citizens Bank will be located in the Park
Shore area of Naples in Collier County, Florida. The address of our operations
office, which is located adjacent to the site of our future main office, is 3411
Tamiami Trail North, Suite 200, Naples, Florida 34103, and our telephone number
is (941) 643-4646.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered............. 1,200,000 shares of common stock and 113,330
warrants. To complete this offering, we must
sell a minimum of 1,000,000 shares. Each
investor must purchase a minimum of 500
shares and may purchase a maximum of 20,000
shares. We may, however, waive these minimum
and maximum subscription amounts in our sole
discretion. Each warrant entitles the holder
to purchase one share of common stock at an
exercise price of $10.00. See "Terms of the
Offering" at page 7.
Common Stock to be Outstanding
after this Offering............ Between 1,018,000 and 1,218,000 shares,
excluding the 113,330 shares of common stock
issuable upon exercise of the warrants
Price to Public................ $10.00 per share
</TABLE>
1
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<TABLE>
<S> <C>
Offering Conditions............ This offering is subject to the following
conditions:
- investors must subscribe for a total of
at least 1,000,000 shares
- the Federal Reserve Board must approve
our application to become a bank holding
company
- the FDIC must approve Citizens Bank's
application for deposit insurance
- we must not have canceled this offering,
which we reserve the right to do at any
time before we withdraw funds from the
subscription escrow account
Escrow Arrangements............ Until the offering conditions are satisfied,
we will deposit all subscription funds in a
subscription escrow account with First
National Bank of Naples. If the offering
conditions are not satisfied by August __,
1999, we will promptly return all
subscription funds, along with any interest
earned on the subscription funds, to the
subscribers.
If all of the offering conditions are
satisfied, the escrow agent will at that
time release the subscription funds to us
and the escrow account will be closed. Any
subscription funds we receive after the
offering conditions have been satisfied will
be immediately available to us. See "Terms
of The Offering -- Escrow of Subscription
Funds" at page 8.
Plan of Distribution........... Several of our directors and officers will
market the common stock. Although these
individuals will devote appropriate time and
energy to marketing and selling the shares,
there is no guarantee that the required
minimum of 1,000,000 shares will be sold.
These individuals will not receive any
commissions on the sales. If the offering
conditions are not satisfied by August __,
1999, we may engage an underwriter to sell
the shares. The underwriter would receive a
commission on sales which would not exceed
10%. See "Terms of The Offering-- Plan of
Distribution" at page 10.
Use of Proceeds................ We will use the proceeds of this offering to
pay expenses associated with the
organization of Citizens Bancshares and
Citizens Bank, to pay expenses associated
with this offering, and to purchase all of
the issued and outstanding capital stock of
Citizens Bank. Citizens Bank will, in turn,
use the proceeds from the sale of its stock
to begin its operations. See "Use of
Proceeds" at page 11.
</TABLE>
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RISK FACTORS
An investment in our common stock involves a significant degree of
risk. You should not invest in our common stock unless you can afford to lose
your entire investment. You should consider carefully these risk factors
together with all of the other information included in this prospectus before
you decide to purchase shares of our common stock.
IF WE FAIL TO RECEIVE NECESSARY REGULATORY APPROVALS, YOU COULD LOSE A
PORTION OF YOUR INVESTMENT. If and when the stock subscription funds are
released from the subscription escrow account, we will use a portion of the
funds to pay start-up expenses. If we then fail to receive final regulatory
approval, we would seek to dissolve and liquidate Citizens Bancshares. Upon
liquidation, we would return to subscribers all subscription funds, with any
interest earned on the funds, less all expenses we had incurred. See "Terms of
the Offering -- Failure of Bank to Open for Business" at page 9.
WE HAVE NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR
FUTURE SUCCESS. Citizens Bank, which initially will be the sole subsidiary of
Citizens Bancshares, is in organization, and neither Citizens Bank nor Citizens
Bancshares has any operating history on which to base any estimate of future
performance. Although we anticipate that Citizens Bank will open for business in
June of 1999, we can offer no assurance as to when, if at all, Citizens Bank
will open. In addition to the possibility that we will fail to receive final
regulatory approval to begin banking operations, our business is subject to the
risks inherent in the establishment of any new business enterprise. Because of
our lack of operating history, you do not have access to the type and amount of
information that would be available to a purchaser of the securities of a
financial institution with an operating history.
WE WILL INCUR SUBSTANTIAL START-UP EXPENSES AND WE DO NOT EXPECT TO BE
PROFITABLE FOR SEVERAL YEARS. Initially, we will merely act as the sole
shareholder of Citizens Bank. Thus, our profitability will be dependent upon the
successful operation of Citizens Bank. Although we anticipate that Citizens Bank
will open for business in June of 1999, we can offer no assurance as to when, if
at all, Citizens Bank will open. Any delay in opening for business will increase
our pre-opening expenses and postpone our realization of potential revenues.
Such a delay would cause our accumulated deficit to increase as a result of
continuing operating expenses, including lease payments, salaries and other
administrative expenses. Once it begins operations, Citizens Bank will incur
losses unless and until its deposit base develops to a level where it is able to
generate significant loan-related and other income to offset operating expenses.
Typically, new banks are not profitable in the first year of operation and
sometimes are not profitable for several years. We will incur substantial
expenses operating Citizens Bank, and we can offer no assurance that Citizens
Bank will be profitable or that future earnings, if any, will meet the levels of
earnings prevailing in the banking industry.
WE WILL BE COMPETING IN COLLIER COUNTY, FLORIDA WITH MANY OTHER,
LARGER, FINANCIAL INSTITUTIONS. Citizens Bank will be a full service community
bank in Collier County, Florida. Competition among financial institutions in
Collier County is intense, and we will compete with other state and national
banks, savings and loan associations, consumer finance companies, credit unions,
money market mutual funds, and other financial institutions which have far
greater financial resources than are available to us. Our relatively small size
may impact our ability to compete effectively with these larger institutions in
offering financial services. In addition, the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 has further increased competition by
eliminating interstate branching barriers for certain financial institutions,
making it easier for out-of-state financial institutions to more easily access
the market to be served by Citizens Bank. If we are unable to successfully
compete for deposit, loan and other banking customers effectively, this
inability would have an adverse effect on our potential for growth and
profitability. See "Business of Citizens Bank -- Market Area and Competition" at
page 15.
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<PAGE> 6
IF OUR PROPOSED CHIEF EXECUTIVE OFFICER, MICHAEL MCMULLAN, WERE TO
BECOME UNAVAILABLE, IT COULD DELAY OR PREVENT THE OPENING OF CITIZENS BANK.
Regulatory approval to establish and operate a national bank partially depends
upon the approval by the Office of the Comptroller of the Currency (OCC) of the
bank's proposed chief executive officer. Generally, the chief executive officer
of a start-up financial institution is considered vital to the potential success
of the new institution. In our charter application to the OCC, we proposed
Michael McMullan as Citizens Bank's chief executive officer. If Mr. McMullan
were to become unavailable for any reason, final regulatory approval to begin
banking operations would be delayed until the OCC approved a suitable
replacement. It is possible that we would not be able to find a suitable
replacement for Mr. McMullan. See "Management" at page 25.
INTEREST RATE VOLATILITY COULD SIGNIFICANTLY HARM OUR BUSINESS. Our
results of operations, like those of most other banks and bank holding
companies, will be significantly affected by changes in market interest rates.
Our profitability will depend substantially on our net interest income, which is
the difference between the interest income earned on interest-bearing assets,
such as loans, and the interest paid on interest-bearing liabilities, such as
deposits and borrowings. To the extent that the maturities of these assets and
liabilities differ, rapidly rising or falling interest rates could have a
material effect on our earnings. See "Business of Citizens Bank --
Asset/Liability Management" at page 18.
OUR RELATIVELY LOW LENDING LIMIT MAY LIMIT OUR GROWTH. At least during
our first years of operation, our legally mandated lending limit will be lower
than that of many of our competitors because during this period we will have
less capital than many of our competitors. Initially, we will have a legal
lending limit for unsecured loans of up to $1,455,000 to any one borrower. This
relatively low lending limit may discourage potential borrowers who have greater
borrowing needs, which may restrict our ability to grow. We may try to serve the
needs of these borrowers by selling loan participations to other institutions,
but this strategy may not succeed.
CITIZENS BANK'S LOAN PORTFOLIO WILL INCLUDE COMMERCIAL LOANS, WHICH WE
BELIEVE TO BE SOMEWHAT RISKIER THAN RESIDENTIAL AND CONSUMER LOANS. We
anticipate that approximately 15% of Citizens Bank's loan portfolio will consist
of commercial loans to small- and medium-sized businesses and to professionals.
The value of the collateral held by Citizens Bank as a measure of safety against
loss is more volatile in this loan category than in the categories of real
estate and consumer loans.
BOTH CITIZENS BANCSHARES AND CITIZENS BANK WILL OPERATE IN A HIGHLY
REGULATED ENVIRONMENT AND WILL BE SUBJECT TO SUPERVISION AND EXAMINATION BY
SEVERAL REGULATORY AGENCIES. As a bank holding company, Citizens Bancshares will
be subject to regulation and supervision by the Federal Reserve Board. As a
national bank, Citizens Bank will be subject to regulation and supervision
primarily by the OCC and, to a lesser extent, by the FDIC. Both Citizens
Bancshares and Citizens Bank will be subject to changes in federal and state
law, regulations, governmental policies, income tax laws and accounting
principles. In particular, legislation and regulations deregulating the banking
industry and allowing interstate expansion of financial services firms could
adversely affect our business along with that of the entire banking industry.
See "Supervision and Regulation" at page 21.
OUR SUCCESS WILL DEPEND SIGNIFICANTLY UPON GENERAL ECONOMIC CONDITIONS
IN COLLIER COUNTY. A prolonged economic dislocation or recession affecting
Collier County could cause Citizens Bank's non-performing assets to increase,
causing operating losses, impaired liquidity and the erosion of capital. Such an
economic dislocation or recession could result from a variety of causes,
including natural disasters such as hurricanes, floods or tornadoes, or a
prolonged downturn in various industries upon which the economy of Collier
County depends.
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<PAGE> 7
THE OPERATION OF CITIZENS BANK MAY IN THE FUTURE REQUIRE MORE CAPITAL
THAN WE WILL RAISE IN THIS OFFERING. Although we anticipate that the $10,000,000
minimum amount of capital to be raised by this offering will be sufficient to
support Citizens Bank's capital needs for the next five years, we may in the
future need to obtain additional capital to comply with regulatory capital
requirements. We can give no assurance that we will be able to access the
capital markets in the future in order to obtain additional capital. See
"Supervision and Regulation" at page 21.
IF A MARKET FOR OUR COMMON STOCK DOES NOT DEVELOP, YOU MAY NOT BE ABLE
TO SELL YOUR SHARES. Since the size of the offering is relatively small, it is
unlikely that an active and liquid trading market will develop and be
maintained. You should only invest in the common stock if you have a long-term
investment intent. If an active market does not develop, you may not be able to
sell your shares promptly or perhaps at all. At this time, we do not intend to
list the common stock on any national securities exchange or on the Nasdaq Stock
Market.
WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK FOR AT LEAST
SEVERAL YEARS. We intend to retain our future earnings, if any, to enhance
Citizens Bank's capital structure or to defray its operating costs. Dividend
distributions of national banks are restricted by statute and regulation. Our
future dividend policy will depend on the earnings, capital requirements,
financial conditions and other factors considered relevant by our board of
directors. See "Dividend Policy" at page 13.
THE OFFERING PRICE WAS ARBITRARILY SET BY THE ORGANIZERS AND MAY NOT
ACCURATELY REFLECT THE VALUE OF AN INVESTMENT IN OUR COMMON STOCK. There is no
established market for the common stock or the warrants, nor was there an
established market prior to this offering. The offering price was arbitrarily
determined by the organizers, and does not bear any relationship to Citizens
Bancshares' assets, book value, net worth, or any other recognized criteria of
value. In determining the offering price of the common stock, the organizers
considered the OCC bank capital requirements and general market conditions for
the sale of securities.
MANAGEMENT WILL BE ABLE TO VOTE A SIGNIFICANT PORTION OF THE
OUTSTANDING SHARES OF COMMON STOCK FOLLOWING THE OFFERING, AND THERE MAY BE
INSTANCES IN WHICH THE INTERESTS OF MANAGEMENT ARE DIFFERENT FROM THE INTERESTS
OF OTHER SHAREHOLDERS. Upon completion of the minimum offering, the directors
and executive officers will own a total of 180,000 shares, which will equal
17.7% of the 1,018,000 shares then issued and outstanding. The maximum number of
shares that may be purchased by a single investor is 20,000 shares, or 2.0% of
the number of shares to be outstanding upon completion of the minimum offering,
although we reserve the right to waive this maximum. If management were to act
together, they could have significant influence over the outcome of any
stockholder vote. For example, this voting power could enable management to
deter or prevent takeover attempts that you would like to see happen. See
"Management" at page 25.
CITIZENS BANCSHARES WILL ISSUE THE ORGANIZERS OF CITIZENS BANCSHARES
AND CITIZENS BANK WARRANTS TO PURCHASE SHARES OF CITIZENS BANCSHARES COMMON
STOCK, WHICH IF EXERCISED, WOULD REDUCE YOUR PERCENTAGE OWNERSHIP AND WOULD
INCREASE THE ORGANIZERS' CONTROL OF THE COMPANY AND THE BANK. In consideration
of their efforts in organizing Citizens Bancshares and Citizens Bank and the
attendant personal financial risks assumed by them, Citizens Bancshares will
issue to the organizers warrants to purchase an aggregate of 113,330 shares of
Citizens Bancshares common stock. The warrants will be exercisable at a price of
$10.00 per share and will expire at the end ten years. See "Terms of the
Offering -- Grant of Warrants to Organizers" at page 9.
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<PAGE> 8
OUR ARTICLES OF INCORPORATION CONTAIN PROVISIONS WHICH COULD SERVE TO
DETER OR PREVENT TAKE-OVER ATTEMPTS BY A POTENTIAL PURCHASER OF SHARES OF OUR
COMMON STOCK WHO WOULD BE WILLING TO PAY A PREMIUM OVER THE MARKET PRICE. The
Articles of Incorporation of Citizens Bancshares contain provisions which give
the board of directors the ability to deter or prevent a merger with, or a sale
of control to, a third party, even if the owners of a majority of the common
stock were to favor of such a transaction. Our Articles of Incorporation
authorize the board of directors to issue a series of preferred stock without
shareholder action. Such an issuance of preferred stock could discourage a third
party from attempting to acquire, or make it more difficult for a third party to
acquire, a controlling interest in Citizens Bancshares, and could adversely
affect the voting power or other rights of holders of the common stock. In
addition, the Articles of Incorporation establish a board of directors
classified such that only one-third of the members of our board of directors is
elected each year and each director serves for a term of three years. These
provisions make it difficult for a third party to achieve a change in control of
Citizens Bancshares through the acquisition of a large block of common stock
without approval of the board of directors. As a result of these anti-takeover
provisions, you may be deprived of opportunities to sell some or all of your
shares at prices exceeding market prices. See "Description of Capital Stock --
Anti-Takeover Provisions" at page 32.
IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS, OR THOSE OF OUR DATA
PROCESSING VENDOR OR LOAN CUSTOMERS, WILL FAIL TO OPERATE PROPERLY BEGINNING
JANUARY 1, 2000. As the year 2000 approaches, an important business issue has
emerged regarding existing application software programs and operating systems.
Many existing application software products were designed to accommodate a
two-digit year. For example, "98" is stored on the system to represent 1998. As
a result, any computer programs or equipment that are date dependent may, for
example, recognize a date stored as "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing a
significant disruption of operations. We will utilize a third party vendor to
provide primary banking applications for Citizens Bank, including its core
processing systems. If we, our data processing vendor, or our loan customers do
not successfully and timely achieve Year 2000 compliance, our business, future
prospects, financial condition or results of operations could be materially
adversely affected. See "Business of Citizens Bank--Year 2000" at page 19.
This prospectus contains forward-looking statements. These statements
can be identified by the use of forward-looking words such as "may," "will,"
"expect," "anticipate," "estimate," "continue," or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other "forward-looking"
information. When reading these forward-looking statements, you should keep in
mind the risk factors and other cautionary statements in this prospectus. The
risk factors noted in this section and other factors noted throughout this
prospectus, including certain risks and uncertainties, could cause our actual
results to differ materially from those described in any forward-looking
statement.
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<PAGE> 9
THE COMPANY
Citizens Bancshares was incorporated under the laws of the State of
Florida on September 15, 1998, to operate as a bank holding company under the
federal Bank Holding Company Act of 1956. Citizens Bancshares will use the
proceeds of this offering to purchase all of the authorized capital stock of
Citizens Bank, which will conduct a general banking business in Collier County,
Florida. All of the organizers reside in Collier County and all of the
organizers will serve on the initial board of directors of both Citizens
Bancshares and Citizens Bank. See "Management."
In order to become a bank holding company, Citizens Bancshares will
file an application with the Federal Reserve Board. Upon obtaining regulatory
approval, Citizens Bancshares will be a registered bank holding company subject
to regulation by the Federal Reserve Board. See "Supervision and Regulation." It
is anticipated that Citizens Bank will open for business in June of 1999, or as
soon thereafter as practicable.
Citizens Bancshares has purchased a former NationsBank branch office
located at 3401 Tamiami Trail North, Naples, Florida 34103. This facility will
serve as the main office of Citizens Bank and of Citizens Bancshares. Citizens
Bancshares has also leased office space adjacent to the main office to serve as
an operations office for both Citizens Bancshares and Citizens Bank. See
"Business of Citizens Bancshares -- Premises." Citizens Bancshares' telephone
number is (941) 643-4646.
TERMS OF THE OFFERING
GENERAL
Citizens Bancshares is offering 1,200,000 shares of its common stock
for cash at a price of $10.00 per share. Investors must purchase a minimum of
500 shares and may purchase a maximum of 20,000 shares, or 1.67% of the total
number of shares being offered. The minimum and maximum subscription amounts may
be waived by Citizens Bancshares in its sole discretion. The purchase price
shall be paid in full upon execution and delivery of a subscription agreement.
All subscriptions tendered by investors are subject to acceptance by the board
of directors of Citizens Bancshares, and Citizens Bancshares reserves the
absolute and unqualified right to reject or reduce any subscription for any
reason prior to acceptance. Subscriptions which are rejected by Citizens
Bancshares will be returned to the subscriber without interest. Any investor
whose subscription is reduced by Citizens Bancshares may withdraw his or her
subscription within ten days after being notified of such reduction by Citizens
Bancshares. Citizens Bancshares reserves the right to cancel this offering for
any reason whatsoever at any time prior to the time it withdraws funds from the
subscription escrow account.
Citizens Bancshares will also be issuing 113,330 stock purchase
warrants to its organizers. The warrants will be exercisable for a period of ten
years, beginning on the date Citizens Bank opens for business, at an exercise
price of $10.00 per share.
Prior to this offering there has been no established public market for
the shares of the common stock or the warrants and we can offer no assurance
that an established market for the common stock will develop. The offering price
of the common stock has been arbitrarily determined and is not a reflection of
Citizens Bancshares' book value, net worth or any other recognized criteria of
value. In determining the offering price, the organizers considered the capital
requirements imposed by the OCC and the general market conditions for the sale
of the securities. There can be no assurance that, if a market should develop
for the common stock, the post-offering market price will equal or exceed the
offering price.
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<PAGE> 10
CONDITIONS OF THE OFFERING
This offering will expire at 5:00 p.m. Eastern Time 90 days from the
date of this prospectus, on August __, 1999, unless the offering is extended by
Citizens Bancshares. The expiration date may be extended by Citizens Bancshares
without notice to subscribers for up to three consecutive 90-day periods, or not
later than May __, 2000. The offering is expressly conditioned upon fulfillment
of the following conditions on or prior to the expiration date, as extended. The
offering conditions, which may not be waived, are as follows:
(a) at least $10,000,000 must be deposited with the escrow agent
in the subscription escrow account;
(b) the Federal Reserve Board must approve Citizens Bancshares'
application to become a bank holding company;
(c) the FDIC must approve Citizens Bank's application for deposit
insurance; and
(d) Citizens Bancshares must not have canceled this offering prior
to the time funds are withdrawn from the subscription escrow
account.
ESCROW OF SUBSCRIPTION FUNDS
Until the offering conditions above have been satisfied, Citizens
Bancshares will place all subscription funds and documents tendered by investors
in an escrow account with First National Bank of Naples. The escrow agreement, a
copy of which is included in this prospectus at Appendix A, provides that the
escrow agent will release all subscription funds, along with any interest earned
on the funds, to Citizens Bancshares at such time Citizens Bancshares certifies
to the escrow agent that all of the offering conditions have been met. The
subscription funds will not be insured by the FDIC or any other governmental
agency.
Pending disposition of the subscription escrow account, the escrow
agent is authorized, upon instructions to be given by Polly M. Rogers, the
President of Citizens Bank, to invest subscription funds in investments of the
United States Government and United States Government-backed securities.
Citizens Bancshares will invest the subscription funds and any additional funds
obtained after breaking escrow and prior to the time that Citizens Bancshares
purchases the common stock of Citizens Bank in a similar manner.
If the offering conditions are not satisfied by the expiration date,
the escrow agent will promptly return to the subscribers their proportionate
share of the funds from the escrow account. Citizens Bancshares will also return
to the subscribers their proportionate share of any interest earned on the
funds. If the offering conditions are not satisfied, the expenses incurred by
Citizens Bancshares will be borne by the organizers and not by the subscribers.
No assurance can be given that subscription funds can or will be
invested at the highest rate of return available or that any profits will be
realized from the investment of subscription funds.
If all of the offering conditions are satisfied, and Citizens
Bancshares withdraws the subscription funds from the subscription escrow
account, any and all profits and earnings on the escrow account will belong to
Citizens Bancshares.
First National Bank of Naples, by accepting appointment as escrow agent
under the escrow agreement, in no way endorses the purchase of securities of
Citizens Bancshares by any person.
8
<PAGE> 11
FAILURE OF BANK TO OPEN FOR BUSINESS
The OCC requires that a new national bank receive final approval of its
charter and open for business within eighteen months after receiving preliminary
approval from the OCC. The organizers received preliminary approval to charter
Citizens Bank on February 12, 1999. The organizers anticipate that Citizens Bank
will open for business in June of 1999, or as soon thereafter as is practicable.
Because final approval of Citizens Bank's charter is conditioned on Citizens
Bancshares raising $9,700,000 of funds to capitalize Citizens Bank, Citizens
Bancshares expects to issue the shares of common stock before Citizens Bank has
obtained all final regulatory approvals. If Citizens Bancshares issues the
shares of common stock and the OCC does not grant Citizens Bank final regulatory
approval to open for business within eighteen months of Citizens Bank's receipt
of preliminary approval from the OCC, Citizens Bancshares will solicit
shareholder approval to dissolve and liquidate the company. If this were to
occur, Citizens Bancshares would return to subscribers all subscription funds
together with any interest earned thereon, less all expenses incurred by
Citizens Bancshares, including the expenses of this offering and the
organizational and pre-opening expenses of Citizens Bancshares and Citizens
Bank. Therefore, if Citizens Bancshares and Citizens Bank do not receive final
regulatory approvals, subscribers whose funds were originally placed in escrow
and subscribers whose funds were immediately available to Citizens Bancshares
face the risk of loss of a portion of their subscription funds. It is possible
that this return may be further reduced by amounts paid to satisfy claims of
creditors, as discussed in the following paragraph.
Once Citizens Bancshares issues the shares of common stock, the
offering proceeds will be considered part of general corporate funds and thus
may be subject to the claims of creditors of Citizens Bancshares, including
claims against Citizens Bancshares that may arise out of actions of Citizens
Bancshares' officers, directors or employees. It is possible, therefore, that
one or more creditors may seek to attach the proceeds of the offering prior to
Citizens Bank's opening for business. If such an attachment occurred and it
became necessary to pay the offering proceeds to the shareholders because of
failure to obtain all necessary regulatory approvals, the payment process might
be delayed, and if it became necessary to pay creditors from the subscription
funds, the payment to shareholders might be further reduced.
PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS OF CITIZENS BANCSHARES
Upon completion of the minimum offering, the directors and executive
officers will own 181,500 shares of Citizens Bancshares' common stock, or 17.8%
of the 1,018,000 shares to be then issued and outstanding. The directors and
executive officers have represented to Citizens Bancshares that these purchases
will be made for investment purposes only and not with a view to resell the
shares. See "Management."
GRANT OF WARRANTS TO ORGANIZERS
In consideration of their efforts in organizing Citizens Bancshares and
Citizens Bank and the attendant personal financial risks assumed by them, the
organizers will be issued warrants as of the date Citizens Bank opens for
business to purchase an aggregate of 113,330 shares of Citizens Bancshares
common stock.
The warrants will be granted to the organizers in recognition of the
financial risk they have undertaken in connection with the organizational
expenses of this project and of the time expended and devoted to this
organizational effort, including attendance at weekly meetings over a period of
several months. Each of the organizers has personally guaranteed the line of
credit obtained from NationsBank, N.A. The warrants will provide the organizers
with the opportunity to profit from any future increase in the market value of
the common stock. Twenty percent of the warrants issued to each organizer will
9
<PAGE> 12
become exercisable on the date that Citizens Bank opens for business and twenty
percent will become exercisable on each of the four succeeding anniversaries of
the date Citizens Bank opens for business. The warrants will have an exercise
price of $10.00 per share and all of the warrants will expire ten years from the
date Citizens Bank opens for business. The following table sets forth the number
of shares underlying the warrants to be issued to each of the organizers:
<TABLE>
<CAPTION>
Shares
Underlying
Organizer Warrants
--------- ----------
<S> <C>
Joe B. Cox.......... 13,333
Earl L. Frye........ 13,333
Stanley W. Hole..... 6,666
John B. James....... 13,333
LaVonne Johnson..... 13,333
Luc C. Mazzini...... 13,333
Polly M. Rogers..... 13,333
Bernard L. Turner... 13,333
Lorenzo Walker...... 13,333
</TABLE>
PLAN OF DISTRIBUTION
Citizens Bancshares may cancel this offering for any reason at any time
prior to the release of subscription funds from the subscription escrow account,
and accepted subscriptions are subject to cancellation in the event that
Citizens Bancshares elects to cancel the offering in its entirety. If the
offering conditions have not been satisfied by the expiration date, this
offering will be terminated and subscription funds promptly returned to the
subscribers, together with their allocated share of profits, if any, earned on
the investment of the subscription funds as described above. See "Terms of the
Offering -- Escrow of Subscription Funds."
Shares of the common stock of Citizens Bancshares will be marketed
exclusively through a number of the directors and officers of Citizens
Bancshares, none of whom will receive any commissions or other form of
remuneration based on the sale of the shares. However, if the offering
conditions have not been satisfied by August ___, 1999, Citizens Bancshares may
engage an underwriter to sell the shares and the underwriter would receive a
commission based upon the sales. It is anticipated that commissions paid to the
underwriter would not exceed 10% of the $10.00 per share sales price and that
other expenses of the underwriting would not exceed an aggregate of $50,000.
Subscriptions to purchase shares of common stock can be made by
completing the subscription agreement attached to this prospectus and delivering
the same to Citizens Bancshares at 3411 Tamiami Trail North, Suite 200, Naples,
Florida 34103 or mailing the same in the enclosed self-addressed, stamped
envelope. Full payment of the purchase price must accompany the subscription.
Unless otherwise agreed by Citizens Bancshares, all subscription amounts must be
paid in United States currency by check, bank draft or money order payable to
"First National Bank of Naples, Escrow Agent for Citizens Bancshares of
Southwest Florida, Inc." Failure to pay the full subscription price will entitle
Citizens Bancshares to disregard the subscription.
No subscription agreement is binding until accepted by Citizens
Bancshares. Citizens Bancshares may refuse to accept any subscription for
shares, in whole or in part, for any reason whatsoever. As soon as
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<PAGE> 13
practicable, but no more than ten business days after receipt of a subscription,
Citizens Bancshares will accept or reject the subscription. Subscriptions not
rejected by Citizens Bancshares within this ten day period shall be deemed
accepted. If Citizens Bancshares refuses to accept all or part of a
subscription, a refund, without interest, of the payment for shares in excess of
the number of shares allocated to the subscriber will be issued by mail to the
subscriber within ten days of the date of the rejection.
After a subscription is accepted and proper payment received, Citizens
Bancshares will not cancel the subscription unless all accepted subscriptions
are canceled. Once a subscription is accepted by Citizens Bancshares, it cannot
be withdrawn by the subscriber. A subscription will be accepted in writing by
Citizens Bancshares in the Form of Acceptance included in this prospectus at
page B-4.
Certificates representing shares of common stock of Citizens
Bancshares, duly authorized and fully paid, will be issued as soon as
practicable after subscription funds are released to Citizens Bancshares from
the subscription escrow account.
USE OF PROCEEDS
The gross proceeds from the sale of shares of common stock offered by
Citizens Bancshares are estimated to be $10,000,000 assuming the sale of a
minimum of 1,000,000 shares, and $12,000,000 assuming the sale of a maximum of
1,200,000 shares. The estimated expenses of this offering are as follows:
<TABLE>
<S> <C>
Registration fees, including state securities
registrations fees and expenses.......................................... $ 5,000
Legal fees and expenses...................................................... 18,000
Accounting fees and expenses................................................. 15,000
Printing and engraving expenses.............................................. 6,000
Advertising.................................................................. 3,500
Mailing and distribution..................................................... 5,000
Miscellaneous................................................................ 4,000
-----------
Total expenses ......................................................... $ 56,500
===========
Net proceeds (minimum offering)........................................ $ 9,943,500
Net proceeds (maximum offering)........................................ $11,943,500
</TABLE>
The net proceeds of this offering, as well as any interest earned on
the subscription funds, will be used by Citizens Bancshares, after breaking
escrow, primarily for the purchase all of the issued and outstanding capital
stock of Citizens Bank. Citizens Bank will, in turn, use the funds as capital to
begin its business operations and to pay expenses incurred in the organization
of Citizens Bancshares and Citizens Bank.
As indicated in the charter application of Citizens Bank filed by the
organizers with the OCC, Citizens Bancshares intends to capitalize Citizens Bank
at $9,700,000. Accordingly, any net proceeds of this offering in excess of
$9,700,000 will be retained by Citizens Bancshares for growth of Citizens Bank
in compliance with OCC regulations regarding the ratio that Citizens Bank's
total assets may bear to its total capital. Citizens Bancshares anticipates that
the proceeds received upon exercise of the warrants, if any, will be used for
working capital purposes. Although management of Citizens Bancshares anticipates
that the proceeds of this offering will be sufficient to support Citizens Bank's
immediate capital needs, if Citizens Bank experiences greater growth than
anticipated it may require the infusion of capital in addition to the proceeds
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<PAGE> 14
of this offering. In that event, management of Citizens Bancshares would seek to
support such growth through debt financing; however, such financing might not be
available on terms acceptable to management.
The following is a schedule of the estimated use by Citizens Bank of
the proceeds from the sale of its common stock to Citizens Bancshares, including
Citizens Bank's estimated operating expenses for its first twelve months of
operation.
<TABLE>
<S> <C>
Organizational and pre-opening expenses
of Citizens Bank including salaries,
lease of operations office and legal
and accounting fees (1)............................ $ 265,000 *
Purchase of land and building for
main office(2)..................................... 1,325,000 *
Furniture, fixtures and equipment (3)................. 558,000 *
Lease expense associated with
operations office.................................. 53,000 +
Salaries and benefits (4)............................. 1,080,000 +
Occupancy expenses (5)
(utilities, property insurance, etc.).............. 55,000 +
General and administrative expenses,
composed primarily of data processing,
marketing and advertising, telephone
and casualty and deposit insurance (5)............. 233,000 +
Investment and loan portfolio (6)..................... 6,131,000
--------------
Total capital......................................... $ 9,700,000
==============
</TABLE>
- -----------------
* Represents expenses which will be incurred prior to the opening of Citizens
Bank.
+ Represents operating expenses which will be incurred during Citizens Bank's
first twelve months of operations.
(1) These expenses will be incurred prior to
the opening of Citizens Bank and are being funded by a credit line in the
amount of $300,000 with NationsBank, N.A. and capital contributions from
the organizers in the aggregate amount of $180,000. A portion of these
costs may be allocated to and expensed by Citizens Bancshares, in which
event the funds available for inclusion in Citizens Bank's investment and
loan portfolio would be increased by an equal amount.
(2) Citizens Bancshares has entered into a loan agreement with NationsBank,
N.A. to fund the purchase of Citizens Bank's main office facility.
(3) Furniture and equipment cost is based on the organizers' estimates and upon
information from suppliers of bank equipment of the costs required to
furnish and equip Citizens Bank for the expected level of operations.
(4) Salaries and benefits are based on management's estimates of the number and
types of employees which will be required during the first twelve months of
operations of Citizens Bank. It is presently anticipated that Citizens Bank
will initially employ 21 individuals, including nine officers.
(5) These expenses are based on the experiences of similar size banks in the
region and on management's previous banking experience.
(6) Although the exact composition of Citizens Bank's investment and loan
portfolio has not been determined, it is currently anticipated that any
remaining proceeds will be used to fund investments in loans, U.S.
government and agency securities, and Federal Funds sold.
The expenses described above are estimates only and assume Citizens
Bank will open for business in June of 1999. Actual expenses may exceed these
amounts. A portion of these expenses will be offset by revenues generated by
Citizens Bank during its first year of operation.
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<PAGE> 15
DIVIDEND POLICY
As Citizens Bancshares and Citizens Bank are both start-up operations,
the board of directors of Citizens Bancshares intends to reinvest earnings for
such period of time as is necessary to ensure the success of the operations of
Citizens Bancshares and Citizens Bank. There are no current plans to initiate
payment of cash dividends, and future dividend policy will depend on Citizens
Bank's earnings, capital requirements, financial condition and other factors
considered relevant by the board of directors of Citizens Bancshares.
Citizens Bank will be restricted in its ability to pay dividends by the
national banking laws and OCC regulations. 12 U.S.C. ss. 56 provides that a
national bank may not pay dividends from its capital. In addition, no dividends
may be made in an amount greater than a national bank's undivided profits,
subject to other applicable provisions of law. Payments of dividends out of
undivided profits is further limited by 12 U.S.C. ss. 60(a), which prohibits a
bank from declaring a dividend on its shares of common stock until its surplus
equals its stated capital, unless there has been transferred to surplus not less
than 1/10 of the bank's net income of the preceding two consecutive half-year
periods (in the case of an annual dividend). 12 U.S.C. ss. 60(b) provides that
the approval of the OCC is required if the total of all dividends declared by
Citizens Bank in any calendar year exceeds the total of its net income for that
year combined with its retained net income for the preceding two years, less any
required transfers to surplus or a fund for the retirement of any preferred
stock.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Citizens Bancshares is still in the development stage, and will remain
in that stage until the offering of the common stock is complete. Citizens
Bancshares has funded its start-up and organization costs to date through a
$300,000 credit line with NationsBank, N.A. and capital contributions from the
organizers in the amount of $180,000. Total organizational costs, paid and
accrued, as of February 22, 1999 amounted to approximately $145,000. These costs
include consultant fees, legal fees and regulatory application fees. In
addition, the Company has entered into a $1,500,000 loan agreement with
NationsBank to fund the purchase of Citizens Bank's main office facility.
Subscription funds received during this offering will be placed in a
subscription escrow account and invested in investments of the United States
Government and United States Government-backed securities.
In the opinion of Citizens Bancshares, the proceeds of $10,000,000 from
the minimum offering will be adequate to support the growth of both Citizens
Bancshares and Citizens Bank for the first five years of operation. It is not
anticipated that Citizens Bancshares will find it necessary to raise additional
funds to meet expenditures required to operate the business of Citizens
Bancshares and Citizens Bank over the next twelve months. All anticipated
material expenditures for such period have been provided for out of the proceeds
of this offering. See "Use of Proceeds."
The plan of operations for Citizens Bancshares and Citizens Bank is
described in detail elsewhere in this prospectus. See "Business of Citizens
Bancshares" and "Business of Citizens Bank."
BUSINESS OF CITIZENS BANCSHARES
Citizens Bancshares was incorporated under the laws of the State of
Florida on September 15, 1998, for the purpose of organizing and purchasing all
of the outstanding capital stock of Citizens Bank. The organizers received
preliminary approval to charter Citizens Bank on February 12, 1999. Citizens
13
<PAGE> 16
Bancshares has been organized as a mechanism to enhance Citizens Bank's ability
to serve its future customers' requirements for financial services. Citizens
Bancshares will file an application with the Federal Reserve Board to operate as
a bank holding company, which will provide flexibility for expansion of Citizens
Bancshares' banking business through acquisition of other financial institutions
and provision of additional banking-related services which the traditional
commercial bank may not provide under present laws. For example, banking
regulations require that Citizens Bank maintain a minimum ratio of capital to
assets. In the event that Citizens Bank's growth is such that this minimum ratio
is not maintained, Citizens Bancshares may borrow funds, subject to the capital
adequacy guidelines of the Federal Reserve Board, and contribute them to the
capital of Citizens Bank and otherwise raise capital in a manner which would be
unavailable to Citizens Bank under existing banking regulations.
Citizens Bancshares has no present plans to acquire any operating
subsidiaries other than Citizens Bank; however, it is expected that Citizens
Bancshares may make additional acquisitions in the event that Citizens Bank
becomes profitable and such acquisitions are deemed to be in the best interests
of Citizens Bancshares and its shareholders. Such acquisitions, if any, will be
subject to certain regulatory approvals and requirements. See "Supervision and
Regulation."
BUSINESS OF CITIZENS BANK
GENERAL
The organizers received preliminary approval from the OCC to charter
Citizens Bank on February 12, 1999. The organizers expect to receive FDIC
approval of Citizens Bank's application for deposit insurance in April of 1999.
Citizens Bank anticipates that it will begin operations in June of
1999, or as soon thereafter as is practicable. Citizens Bank plans to be a full
service commercial bank, except that it will not have trust powers. Citizens
Bank will offer a full range of interest bearing and non-interest bearing
accounts, including commercial and retail checking accounts, money market
accounts, individual retirement accounts, regular interest bearing statement
savings accounts, certificates of deposit, commercial loans, real estate loans,
home equity loans and consumer/installment loans. In addition, Citizens Bank
will provide such consumer services as U.S. Savings Bonds, travelers checks,
cashiers checks, safe deposit boxes, bank by mail services, direct deposit and
automatic teller services.
The philosophy of management of Citizens Bank will be to emphasize
prompt and responsive personal service to members of the business and
professional community of western Collier County, Florida, in order to attract
customers and acquire market share now controlled by other financial
institutions in Citizens Bank's market area. Citizens Bank's prime location and
range of banking services, as well as its emphasis on personal attention and
service, prompt decision making and consistency in banking personnel, will be
major tools in Citizens Bank's efforts to capture market share. In addition,
Citizens Bank's executive officers have substantial banking experience, which
will be an asset in providing both products and services designed to meet the
needs of Citizens Bank's customer base. All of the organizers are active members
of the business community in and around the Collier County area, and continued
active community involvement will provide an opportunity to promote Citizens
Bank and its products and services. The organizers intend to utilize target
marketing and superior selling efforts in order to build a distinct
institutional image for Citizens Bank and to establish a customer base.
14
<PAGE> 17
MARKET AREA AND COMPETITION
Citizens Bank will be located in the Park Shore section of Naples,
Florida, which is approximately three miles north of downtown Naples. The
organizers have identified Citizens Bank's primary service area, the area from
which it is expected that 75% of bank's customer base will be drawn, as western
Collier County, Florida. This area is defined by the Gulf of Mexico to the west,
the Collier County line to the north, State Road 951 to the east, and the
Intercoastal Waterway to the south.
Collier County represents one of the fastest growing metropolitan areas
in the United States. According to information compiled by the Collier County
Community Development & Environmental Services Division, the county population
more than quadrupled from 1975 to 1995. The county's estimated 1997 population
of 202,900 was expected to increase another 30% by the year 2000.
Collier County's economic base is built on services, retail trade,
tourism, finance, insurance, real estate, construction and agriculture. While
historically employment in the county has been seasonal, as a result of winter
tourism, recent population growth has added greater diversity to the county's
economy.
Competition in Citizens Bank's primary service area is intense. At June
30, 1997, Collier County reported total bank and thrift institution deposits of
$3.5 billion and the market was served by 21 financial institutions with a total
of 90 branches in Collier County. The 21 financial institutions represent
seventeen commercial banks and four savings banks. Thirteen regional holding
companies are represented in the county. Of these, NationsBank is the largest,
with a deposit market share of 29.5%, and First Union National Bank of Florida
is second in size, with a market share of 16.5%. The independent community banks
are represented by Community Bank of Naples, Village Bank of Naples, Pelican
National Bank, Gulf Coast National Bank and First National Bank of Naples. In
addition, numerous brokerage firms compete in the market for deposits and
services.
Financial institutions compete with one another primarily for deposits.
A bank's deposit base directly affects the bank's loan activities and general
growth. Primary methods of competition include interest rates on deposits and
loans, service charges on deposit accounts and the offering of unique financial
services products. Citizens Bank will be competing with financial institutions
which have much greater financial resources than Citizens Bank, and which may be
able to offer more and unique services and possibly better terms to their
customers. However, the organizers believe that Citizens Bank will be able to
attract sufficient deposits to enable it to compete effectively with other area
financial institutions. The organizers believe that Citizens Bank will have the
advantage of being locally owned and managed, enabling it to benefit from the
high visibility and excellent business contacts of its organizers.
Citizens Bank will be in competition with existing area financial
institutions other than commercial banks and savings and loan associations,
including insurance companies, consumer finance companies, brokerage houses,
credit unions and other business entities which have recently been invading the
traditional banking markets. Due to the continuing growth of Collier County, it
is anticipated that additional competition will continue from new entrants to
the market.
DEPOSITS
Citizens Bank will offer a full range of interest bearing and
non-interest bearing accounts, including commercial and retail checking
accounts, money market accounts, individual retirement accounts, regular
interest bearing statement savings accounts and certificates of deposit with
fixed and variable rates and a range of maturity date options. The sources of
deposits will be residents, businesses and employees of
15
<PAGE> 18
businesses within Citizens Bank's market area, obtained through the personal
solicitation of Citizens Bank's officers and directors, direct mail solicitation
and advertisements published in the local media. Citizens Bank will pay
competitive interest rates on time and savings deposits up to the maximum
permitted by law or regulation. In addition, Citizens Bank will implement a
service charge fee schedule competitive with other financial institutions in
Citizens Bank's market area, covering such matters as maintenance fees on
checking accounts, per item processing fees on checking accounts, returned check
charges and the like.
LOAN PORTFOLIO
Citizens Bank will engage in a full complement of lending activities,
including commercial, consumer/installment and real estate loans. Although
management believes that real estate loans will be Citizens Bank's primary
product, constituting approximately 80% of Citizens Bank's loan portfolio,
commercial and consumer/installment loans are expected to comprise significant
portions of Citizens Bank's loan portfolio as well (15% and 5%, respectively).
While adjustable rates for Citizens Bank's real estate loans will be emphasized,
fixed rates will also be offered. Initially, Citizens Bank will have a legal
lending limit for unsecured loans of up to $1,455,000 to any one person.
Management intends to originate loans and to participate with other banks with
respect to loans which exceed Citizens Bank's lending limits. Management does
not believe that loan participations will necessarily pose any greater risk of
loss than loans which Citizens Bank originates. See "Supervision and
Regulation."
Based on the risks associated with Citizens Bank's loan portfolio,
management intends to provide an allowance for loan losses which will be based
on an analysis of the loan portfolio and will reflect an amount which, in
management's judgment, is adequate to absorb losses which have been incurred as
of each balance sheet date. The analysis of the loan portfolio will include, but
will not be limited to, the following:
- growth and composition of the loan portfolio
- current economic conditions
- past loss experience of similar size institutions
- evaluation of potential losses in the current loan portfolio
Lending will be directed principally towards individuals and businesses
whose demands for funds fall within Citizens Bank's legal lending limits and
which are potential deposit customers of Citizens Bank. Citizens Bank does not
anticipate any foreign loans in Citizens Bank's loan portfolio. The following is
a description of each of the major categories of loans anticipated in Citizens
Bank's loan portfolio and the anticipated risks associated with each type of
loan:
Commercial and Industrial Loans
Commercial lending will be directed principally towards businesses
whose demands for funds fall within Citizens Bank's legal lending limits and
which are potential deposit customers of Citizens Bank. This category of loans
includes loans made to individual, partnership, or corporate borrowers, for a
variety of business purposes. Particular emphasis will be placed on loans to
small and medium-sized businesses and to professionals. Risks of these types of
loans depend on the general business conditions of the local economy and the
local business borrower's ability to sell its products and services in order to
generate sufficient business profits to repay Citizens Bank under the agreed
upon terms and conditions. The value of the collateral held by Citizens Bank as
a measure of safety against loss is most volatile in this loan category.
16
<PAGE> 19
Consumer Loans
Citizens Bank's consumer loans will consist primarily of installment
loans to individuals for personal, family and household purposes, including
automobile loans. Citizens Bank will also offer 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. Loss or decline of income by the borrower due to layoff, divorce
or unexpected medical expenses represent unplanned occurrences that may
represent risk of default to Citizens Bank. In the event of default, a shortfall
in the value of the collateral may pose a loss to Citizens Bank in this loan
category.
Real Estate Loans
Citizens Bank's real estate loans will consist of residential first and
second mortgage loans, residential construction loans and commercial real estate
loans to a limited degree. These loans will be made consistent with Citizens
Bank's appraisal policy and real estate lending policy which will detail maximum
loan-to-value ratios and maturities. Citizens Bank expects that these
loan-to-value ratios will be sufficient to compensate for fluctuations in the
real estate market to minimize the risk of loss to Citizens Bank.
Residential Mortgage. These loans will be granted to qualified
individuals for the purchase of existing single family residences in Citizens
Bank's market area. Both fixed and variable rate loans will be offered with
competitive terms and fees consistent with national mortgage investor
guidelines. These loans will be made consistent with Citizens Bank's appraisal
policy and real estate lending policy which will detail maximum loan-to-value
ratios and maturities. Management of Citizens Bank expects that these
loan-to-value ratios, which generally will not exceed 80%, will be sufficient to
compensate for fluctuations in the real estate market to minimize the risk of
loss. Mortgage loans that do not conform to Citizens Bank's asset/liability mix
policies will be sold by Citizens Bank in the secondary markets. The risk of
this type of activity depends on the salability of the loan to national
investors and interest rate changes. Delivering these loans to the end investor
on a mandatory basis and meeting the investor's quality control procedures
limits Citizens Bank's risk of making fixed rate mortgage loans. The risk
assumed by Citizens Bank will be conditioned upon Citizens Bank's internal
controls, loan underwriting and market conditions in the national mortgage
market. Citizens Bank will retain 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. Although Citizens Bank has not formally adopted
any underwriting or loan policies, the loan underwriting standards and policies
will generally be the same for both loans sold in the secondary market and those
retained in Citizens Bank's portfolio.
Residential Construction. These loans will be made for the
construction of single family residences in Citizens Bank's market area. The
loans will be granted to qualified individuals with down payments of at least
20% of the appraised value or contract price, whichever is less. The interest
rates are expected to fluctuate at 1% to 2% above Citizens Bank's prime interest
rate during the six month construction period. Citizens Bank will also charge a
fee of 1% to 2% in addition to the normal closing costs. These loans generally
command higher rates and fees commensurate with the risk warranted in the
construction lending field. The risk in construction lending is dependent upon
the performance of the builder in building the project to the plans and
specifications of the borrower and Citizens Bank's ability to administer and
control all phases of the construction disbursements. Upon completion of the
construction period, management anticipates that the mortgage would be converted
to a permanent loan and normally sold to an investor in the secondary mortgage
market.
17
<PAGE> 20
Commercial Real Estate. To a limited extent, Citizens Bank
anticipates that it will also offer commercial real estate loans to developers
of both commercial and residential properties. In making these loans, Citizens
Bank intends to manage its credit risk by actively monitoring such measures as
advance rate, cash flow, collateral value and other appropriate credit factors.
Management will attempt to reduce credit risk in the commercial real estate
portfolio be emphasizing loans on owner-occupied office and retail buildings
where the loan-to-value ratio, established by independent appraisals, does not
exceed 80%. In addition, Citizens Bank may require personal guarantees of the
principal owners.
While risk of loss in Citizens Bank's loan portfolio is primarily tied
to the credit quality of the various borrowers, risk of loss may also increase
due to factors beyond Citizens Bank's control, such as local, regional and/or
national economic downturns. General conditions in the real estate market may
also impact the relative risk in Citizens Bank's real estate portfolio. Of
Citizens Bank's target areas of lending activities, commercial loans are
generally considered to have greater risk than real estate loans or consumer
installment loans.
The above description of Citizens Bank's loan portfolio represents
management's best estimate as to the types of loans which will comprise its
portfolio and the risks associated with such loans. The board of directors of
Citizens Bank has not adopted any specific loan policies and procedures as of
the date of this prospectus.
INVESTMENTS
In its first year of operation, management of Citizens Bank anticipates
that investment securities will comprise approximately 12% of Citizens Bank's
assets, loans will comprise approximately 45% of Citizens Bank's assets, and
other investments will comprise approximately 31% of Citizens Bank's assets.
Citizens Bank intends to invest primarily in direct obligations of the United
States, obligations guaranteed as to principal and interest by the United
States, obligations of agencies of the United States and certificates of deposit
issued by commercial banks. In addition, Citizens Bank will enter into Federal
Funds transactions with its principal correspondent banks, and anticipates that
it will primarily act as a net seller of such funds. The sale of Federal Funds
amounts to a short-term loan from Citizens Bank to another bank.
ASSET/LIABILITY MANAGEMENT
It will be the objective of Citizens Bank to manage its assets and
liabilities to provide a satisfactory, consistent level of profitability.
Citizens Bank's executive officers and the Asset/Liability Committee of the
board of Directors of the bank will be responsible for monitoring
interest-bearing assets and interest-bearing liabilities to ensure stability of
earnings. It is the overall philosophy of management to support asset growth
primarily through growth of core deposits, which include deposits of all
categories made by individuals, partnerships and corporations. Management will
seek to invest the largest portion of Citizens Bank's assets in real estate,
commercial and consumer loans.
Citizens Bank's asset/liability mix likely will be monitored on a daily
basis with a monthly report reflecting interest-sensitive assets and
interest-sensitive liabilities being 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 First National Bank's earnings.
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<PAGE> 21
CORRESPONDENT BANKING
Correspondent banking involves the providing of services by one bank to
another bank which cannot provide that service for itself from an economic or
practical standpoint. Citizens Bank will be required to purchase correspondent
services offered by larger banks, including check collections, purchase of
Federal Funds, security safekeeping, investment services, coin and currency
supplies, over line and liquidity loan participations and sales of loans to or
participations with correspondent banks.
Citizens Bank anticipates that it will sell loan participations to
correspondent banks with respect to loans which exceed Citizens Bank's lending
limit. As compensation for services provided by a correspondent, Citizens Bank
may maintain certain balances with such correspondents in non-interest bearing
accounts.
DATA PROCESSING
Citizens Bank expects to enter into a data processing servicing
agreement with The BISYS Group, Inc., which will provide for Citizens Bank to
receive a full range of data processing services, including an automated general
ledger, deposit accounting, commercial, real estate and installment lending data
processing , central information file and ATM processing services. Citizens Bank
anticipates entering into an agreement with ADP to provide payroll services, and
anticipates entering into an agreement with another third party vendor to
provide investment portfolio accounting.
YEAR 2000
As the year 2000 approaches, an important business issue has emerged
regarding existing application software programs and operating systems. Many
existing application software products were designed to accommodate a two-digit
year. For example, the number "98" is stored on the system to represent the year
1998. As a result, these systems may mistakenly recognize dates beyond 1999. For
example, the number "00" could be interpreted as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations, which could
in turn result in a potentially significant disruption of normal business
activities.
Communications and information systems, including systems which monitor
deposit and lending accounts, are critical to Citizens Bancshares' and Citizens
Bank's business. Citizens Bank will install software and hardware developed by
independent third parties to provide primary banking applications, including
core processing systems. Citizens Bank intends to choose a source for these
systems that has modified or upgraded its computer applications to become Year
2000 compliant. Management intends to obtain a representation from this vendor
that its core processing systems will be fully Year 2000 compliant prior to the
opening of Citizens Bank for business. In addition, Citizens Bancshares and
Citizens Bank intend to implement a Year 2000 compliance program whereby
Citizens Bank will review the Year 2000 issues that may be faced by its other
third-party vendors and loan and deposit customers. As Citizens Bank expects
that all of the hardware and software it purchases will be Year 2000 compliant,
Citizens Bank estimates that it will incur additional expenses of less than
$5,000 in connection with Year 2000 issues. In the event that Citizens
Bancshares, Citizens Bank or its significant vendors or loan customers do not
successfully and timely achieve Year 2000 compliance, Citizens Bank's business,
future prospects, financial condition or results of operations could be
materially adversely affected.
Another area of concern to Citizens Bancshares, Citizens Bank, and
their primary regulator, the OCC, is the effect of Year 2000 issues on Citizens
Bank's loan customers. Failure to address Year 2000 related
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<PAGE> 22
issues could have a significant impact on the ability of certain customers of
Citizens Bank to continue operations. Citizens Bank's loan portfolio could be
negatively impacted if customers are unable to honor loan agreements and
defaults occur as a result of failure to address Year 2000 issues. These
customer relationships will be monitored to ensure that the necessary
modifications to systems will be made on a timely basis. In addition, Citizens
Bank will review Year 2000 related issues as part of its normal underwriting
criteria and loan approval process. Citizens Bank also will include Year 2000
compliance requirements and covenants requiring compliance within its standard
loan agreements. Although Citizens Bancshares and Citizens Bank will take
extensive steps to address Year 2000 customer related issues, there can be no
assurance that all customers will be Year 2000 compliant. Failure of certain
customers to adequately address these issues could result in loan defaults which
would reduce Citizens Bancshares' earnings.
Although Citizens Bancshares and Citizens Bank will take extensive
steps to address Year 2000 related issues, there can be no assurance that all
necessary modifications will be identified and corrected or that unforeseen
difficulties or costs will not arise. In addition, there can be no assurance
that the failure of Citizens Bank's internal systems or the systems provided by
its data processing vendor or other companies on which Citizens Bank's systems
rely will not have a negative impact Citizens Bank's systems or operations.
EMPLOYEES
In its first year of operation, Citizens Bancshares and Citizens Bank
expect to employ 21 individuals on a full-time basis, including nine officers.
Citizens Bank will hire additional persons as needed, including additional
tellers and financial service representatives.
PREMISES
Citizens Bancshares has purchased the facility which will be used as
Citizens Bank's main office site. The facility, a former NationsBank office, is
a single story, 4,500 square foot building located on an approximately 1.05-acre
parcel of land at 3401 Tamiami Trail North. Citizens Bancshares has entered into
a $1,500,000 loan agreement with NationsBank, N.A. to fund the purchase of the
land and building. The facility will have a vault, four offices, four teller
stations, five drive-through lanes, a boardroom conference facility and a loan
operations area.
Citizens Bancshares has also entered into a contract to lease
approximately 3,000 square feet of office space to serve as the operations
offices of Citizens Bancshares and Citizens Bank. The leased premises are
located at 3411 Tamiami Trail North, which is adjacent to the property on which
Citizens Bank's main office facility will be located. Monthly payments of
$4,438.50 are due under the lease agreement.
The organizers plan to open a branch facility in the third quarter of
Citizen's Bank's third year of operations to access projected growth in the
northern portion of Collier County.
MONETARY POLICIES
The results of operations of Citizens Bank will be affected by credit
policies of monetary authorities, particularly the Federal Reserve Board. The
instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the discount
rate on member bank borrowings, changes in reserve requirements against member
bank deposits and limitations on interest rates which member banks may pay on
time and savings deposits. In view of changing conditions in the national
economy and in the money markets, as well as the effect of action by monetary
and fiscal
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<PAGE> 23
authorities, including the Federal Reserve Board, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of Citizens Bank.
SUPERVISION AND REGULATION
GENERAL
Citizens Bancshares and Citizens Bank will operate in a highly regulated
environment, and the business activities of Citizens Bancshares and Citizens
Bank will be supervised by a number of federal regulatory agencies, including
the Federal Reserve Board, the OCC, the Florida Banking Department and the FDIC.
Citizens Bancshares will be regulated by the Federal Reserve Board under
the federal Bank Holding Company Act of 1956, which requires every bank holding
company to obtain the prior approval of the Federal Reserve Board before
acquiring more than 5% of the voting shares of any bank or all or substantially
all of the assets of a bank, and before merging or consolidating with another
bank holding company. The Federal Reserve Board, through its regulations and
published policy statements, has maintained that a bank holding company must
serve as a source of financial strength to its subsidiary banks. In adhering to
the Federal Reserve Board policy, Citizens Bancshares may be required to provide
financial support to its subsidiary bank at a time when, absent such Federal
Reserve Board policy, Citizens Bancshares may not deem it advisable to provide
such assistance.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, the restrictions on interstate acquisitions of banks by bank holding
companies were repealed as of September 29, 1995, such that Citizens Bancshares
and any other bank holding company located in Florida is able to acquire a bank
located in any other state, and a bank holding company located outside Florida
can acquire any Florida-based bank, in either case subject to certain deposit
percentage and other restrictions. Beginning on June 1, 1997, the legislation
provides that unless an individual state has elected to prohibit out-of-state
banks from operating interstate branches within its territory, adequately
capitalized and managed bank holding companies will be able to consolidate their
multi-state bank operations into a single bank subsidiary and to branch
interstate through acquisitions. De novo branching by an out-of-state bank would
be permitted only if it is expressly permitted by the laws of the host state.
Florida does not permit de novo banking by an out-of-state bank. Therefore, the
only method by which an out-of-state bank or bank holding company may enter
Florida is through an acquisition. The authority of a bank to establish and
operate branches within a state will continue to be subject to applicable state
branching laws.
A bank holding company is generally prohibited from acquiring control of
any company which is not a bank and from engaging in any business other than the
business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to be
so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies. Effective April 21, 1997, the Federal
Reserve Board revised and expanded the list of permissible non-banking
activities, which includes the following activities: extending credit and
servicing loans; acting as investment or financial advisor to subsidiaries and
certain outside companies; leasing personal and real property or acting as a
broker with respect thereto; providing management and employee benefits
consulting advice and career counseling services to nonaffiliated banks and
nonbank depository institutions; operating certain nonbank depository
institutions; performing certain trust company functions; providing certain
agency transactional services, including securities brokerage services, riskless
principal transactions, private placement services, and acting as a futures
commission merchant; providing data processing and data transmission services;
acting as an insurance agent or underwriter with respect to limited types of
insurance; performing real estate appraisals; arranging commercial real estate
equity
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<PAGE> 24
financing; providing check-guaranty, collection agency and credit bureau
services; engaging in asset management, servicing and collection activities;
providing real estate settlement services; acquiring certain debt which is in
default; underwriting and dealing in obligations of the United States, the
states and their political subdivisions; engaging as a principal in foreign
exchange trading and dealing in precious metals; providing other support
services such as courier services and the printing and selling of checks; and
investing in programs designed to promote community welfare.
In determining whether an activity is so closely related to banking as
to be permissible for bank holding companies, the Federal Reserve Board is
required to consider whether the performance of such activities by a bank
holding company or its subsidiaries can reasonably be expected to produce such
benefits to the public as greater convenience, increased competition and gains
in efficiency that outweigh such possible adverse effects as undue concentration
of resources, decreased or unfair competition, conflicts of interest and unsound
banking practices. Generally, bank holding companies are required to obtain
prior approval of the Federal Reserve Board to engage in any new activity not
previously approved by the Federal Reserve Board.
Citizens Bancshares is also regulated, to a limited extent, by the
Florida Banking Department under the Florida Financial Institutions Code, which
requires every bank holding company to obtain the prior approval of the Florida
Commissioner of Banking before acquiring more than 5% of the voting shares of
any Florida bank or all or substantially all of the assets of a Florida bank, or
before merging or consolidating with any Florida bank holding company. A bank
holding company is generally prohibited from acquiring ownership or control of
5% or more of the voting shares of any Florida bank or Florida bank holding
company unless the Florida bank or all subsidiaries of the Florida bank holding
company to be acquired have been in existence and continuously operating, on the
date of such acquisition, for a period of three years or more. However, approval
of the Florida Banking Department is not required if the bank to be acquired or
all bank subsidiaries of the Florida bank holding company to be acquired are
national banks.
Citizens Bank, as a subsidiary of Citizens Bancshares, is subject to
restrictions under federal law in dealing with Citizens Bancshares and other
affiliates, if any. These restrictions apply to extensions of credit to an
affiliate, investments in the securities of an affiliate and the purchase of
assets from an affiliate.
Loans and extensions of credit by national banks are subject to legal
lending limitations. Under federal law, a national bank's total outstanding
loans and extensions of credit to one borrower may not exceed 15% of its capital
and surplus, plus an additional 10% of its capital and surplus, if such
additional amount is fully secured by readily marketable collateral. Loans and
extensions of credit may exceed the general lending limit if they qualify under
one of several exceptions. Such exceptions include certain loans or extensions
of credit arising from the discount of commercial or business paper, the
purchase of bankers' acceptances, loans secured by documents of title, loans
secured by U.S. obligations and loans to or guaranteed by the federal
government.
CAPITAL ADEQUACY REQUIREMENTS
Both Citizens Bancshares and Citizens Bank are subject to regulatory
capital requirements imposed by the Federal Reserve Board and the OCC. The
Federal Reserve Board and the OCC have issued risk-based capital guidelines for
bank holding companies and banks which make regulatory capital requirements more
sensitive to differences in risk profiles of various banking organizations. The
capital adequacy guidelines issued by the Federal Reserve Board are applied to
bank holding companies on a consolidated basis with Citizens Banks owned by the
holding company. The OCC's risk capital guidelines
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<PAGE> 25
apply directly to national banks regardless of whether they are a subsidiary of
a bank holding company. Both agencies' requirements, which are substantially
similar, provide that banking organizations must have capital equivalent to 8%
of risk weighted assets. The risk weights assigned to assets are based primarily
on credit risks. Both the Federal Reserve Board and the OCC have also
implemented new minimum capital leverage ratios to be used in tandem with the
risk-based guidelines in assessing the overall capital adequacy of banks and
bank holding companies. Under these rules, banking institutions are required to
maintain a ratio of 4% "Tier 1" capital to total assets (net of goodwill). Tier
1 capital includes common shareholders equity, noncumulative perpetual preferred
stock and minority interests in the equity accounts of consolidated
subsidiaries, less certain intangible assets.
Both the risk-based capital guidelines and the leverage ratio are
minimum requirements, applicable only to top-rated banking institutions.
Institutions operating at or near these levels are expected to have
well-diversified risk, high asset quality, high liquidity, good earnings and in
general, have to be considered strong banking organizations, rated composite 1
under the CAMELS rating system for banks. Institutions with lower ratings and
institutions with high levels of risk or experiencing or anticipating
significant growth would be expected to maintain ratios 100 to 200 basis points
above the stated minimums.
The OCC has amended the risk-based capital guidelines applicable to
national banks in an effort to clarify certain questions of interpretation and
implementation, specifically with regard to treatment of originated and
purchased mortgage servicing rights and other intangible assets. The OCC's
guidelines provide that intangible assets are generally deducted from Tier 1
capital in calculating a bank's risk-based capital ratio. However, certain
intangible assets which meet specified criteria ("qualifying intangibles") such
as mortgage servicing rights are retained as a part of Tier 1 capital. The OCC
currently maintains that only mortgage servicing rights and purchased credit
card relationships meet the criteria to be considered qualifying intangibles.
The OCC's guidelines formerly provided that the amount of such qualifying
intangibles that may be included in Tier 1 capital was strictly limited to a
maximum of 25% of total Tier 1 capital. The OCC has amended its guidelines to
increase the limitation on such qualifying intangibles from 25% to 50% of Tier 1
capital and further to permit the inclusion of purchased credit card
relationships as a qualifying intangible asset.
In addition, the OCC has adopted rules which clarify treatment of asset
sales with recourse not reported on a bank's balance sheet. Among assets
affected are mortgages sold with recourse under Fannie Mae, Freddie Mac and
Farmer Mac programs. The rules clarify that even though those transactions are
treated as asset sales for bank Call Report purposes, those assets will still be
subject to a capital charge under the risk-based capital guidelines.
The OCC, the Federal Reserve Board and the FDIC have adopted regulations
revising their risk-based capital guidelines to ensure that the guidelines take
adequate account of interest rate risk. Interest rate risk is the adverse effect
that changes in market interest rates may have on a bank's financial condition
and is inherent to the business of banking. Under these regulations, when
evaluating a bank's capital adequacy, the agencies' capital standards now
explicitly include a bank's exposure to declines in the economic value of its
capital due to changes in interest rates. The exposure of a bank's economic
value generally represents the change in the present value of its assets, less
the change in the value of its liabilities, plus the change in the value of its
interest rate off-balance sheet contracts. Concurrently, the agencies issued a
joint policy statement, effective June 26, 1996, to provide guidance on sound
practices for managing interest rate risk. In the policy statement, the agencies
emphasize the necessity of adequate oversight by a bank's board of directors and
senior management and of a comprehensive risk management process. The policy
statement also describes the critical factors affecting the agencies'
evaluations of a bank's interest rate risk when making a determination of
capital adequacy. The agencies' risk assessment
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<PAGE> 26
approach used to evaluate a bank's capital adequacy for interest rate risk
relies on a combination of quantitative and qualitative factors. Banks that are
found to have high levels of exposure and/or weak management practices will be
directed by the agencies to take corrective action. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA), enacted on December 19, 1991, provides for the development of a
regulatory monitoring system requiring prompt corrective action on the part of
banking regulators with regard to certain classes of undercapitalized
institutions. While the FDICIA does not change any of the minimum capital
requirements, it directs each of the federal banking agencies to issue
regulations putting the monitoring plan into effect. The FDICIA creates five
"capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in the FDICIA and which will be used to
determine the severity of corrective action the appropriate regulator may take
in the event an institution reaches a given level of undercapitalization. For
example, an institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will take
to become adequately capitalized. Upon approving the plan, the regulator will
monitor the institution's compliance. Before a capital restoration plan will be
approved, any entity controlling a bank (i.e., holding companies) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of five percent of the institution's total assets or the
amount which is necessary to bring the institution into compliance with all
capital standards. In addition, "undercapitalized" institutions will be
restricted from paying management fees, dividends and other capital
distributions, will be subject to certain asset growth restrictions and will be
required to obtain prior approval from the appropriate regulator to open new
branches or expand into new lines of business. Based on a capitalization of
$9,700,000, management of Citizens Bank believes that Citizens Bank will be a
"well capitalized" institution.
As an institution's capital levels decline, the extent of action to be
taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
The Act also provides that banks have to meet new safety and soundness
standards. In order to comply with the Act, the Federal Reserve Board, the OCC
and the FDIC have adopted regulations defining operational and managerial
standards relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth, and compensation, fees and
benefits.
Both the capital standards and the safety and soundness standards which
the Act seeks to implement are designed to bolster and protect the deposit
insurance fund.
In response to the directive issued under the Act, the regulators have
established regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the Act. The
following table reflects the capital thresholds:
24
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<TABLE>
<CAPTION>
TOTAL RISK - TIER 1 RISK - TIER 1
BASED CAPITAL BASED CAPITAL LEVERAGE
RATIO RATIO RATIO
------------- ------------- ---------
<S> <C> <C> <C>
Well capitalized(1)............................. >10.0% > 6.0% > 5.0%
- - -
Adequately Capitalized(1)....................... > 8.0% > 4.0% > 4.0%(2)
- - -
Undercapitalized(3)............................. < 8.0% < 4.0% < 4.0%(4)
Significantly Undercapitalized(3)............... < 6.0% < 3.0% < 3.0%
Critically Undercapitalized..................... - - < 2.0%(5)
</TABLE>
- ---------------------------
(1) An institution must meet all three minimums.
(2) 3.0% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
(4) Less than 3.0% for composite 1-rated institutions, subject to
appropriate federal banking agency guidelines.
(5) Ratio of tangible equity to total assets.
The scope of regulation and permissible activities of Citizens
Bancshares and Citizens Bank is subject to change by future federal and state
legislation. In addition, regulators sometimes require higher capital levels on
a case-by-case basis based on such factors as the risk characteristics or
management of a particular institution. Citizens Bancshares and Citizens Bank
are not aware of any attributes of their operating plan that would cause
regulators to impose higher requirements.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF CITIZENS BANCSHARES AND CITIZENS BANK
Citizens Bancshares' directors and executive officers and Citizens
Bank's proposed directors and executive officers are as follows:
<TABLE>
<CAPTION>
Position with
Name Company and Bank
---- ----------------
<S> <C>
Michael L. McMullan Chief Executive Officer
and Director
Polly M. Rogers President and Director
Joe B. Cox Chairman
Earl L. Frye Director
Stanley W. Hole Director
John B. James Director
LaVonne Johnson Director
Luc C. Mazzini Director
Craig D. Sherman Senior Lending Officer
Bernard L. Turner Director
Lorenzo Walker Director
Thomas M. Whelan Chief Financial Officer
</TABLE>
Each of the directors listed above other than Mr. McMullan has been a
director of Citizens Bancshares since September 15, 1998 and is an organizer of
Citizens Bancshares and Citizens Bank. Mr. McMullan has served as the Chief
Executive Officer of and a director of Citizens Bancshares since February 28,
1999. All of the directors reside in Collier County, Florida.
Citizens Bancshares has a classified board of directors whereby
one-third of the members will be elected each year at Citizens Bancshares'
Annual Meeting of Shareholders. Upon election, each director of Citizens
Bancshares serves for a term of three years. See "Description of Capital Stock
- -- Board of
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<PAGE> 28
Directors." Citizens Bancshares' officers are appointed by the board of
directors and hold office at the will of the board.
Each of Citizens Bank's proposed directors will serve until Citizens
Bank's first shareholders' meeting, which meeting will be held shortly after
Citizens Bank receives its charter. As Citizens Bancshares will be the sole
shareholder of Citizens Bank, it is expected that each interim director will be
elected to serve as a director of Citizens Bank. After the first shareholders'
meeting, directors of Citizens Bank will serve for a term of one year and will
be elected each year at Citizens Bank's Annual Meeting of Shareholders. Citizens
Bank's officers will be appointed by its board of directors and will hold office
at the will of the board.
MICHAEL L. MCMULLAN, 44, began his career in banking in 1976,
completing the Management Trainee Program at First Tennessee National Bank,
Memphis. He became President of the Mississippi Bank, Canton Division, in 1981.
Subsequently, he managed the retail banking division of Mississippi Bank from
1982 to 1983. He became President of First Mississippi National Bank, Jackson
Division, in 1983. In 1984, he accepted the position of Executive Vice President
and Manager of the Lending Division at Republic Bank of South Austin in Austin,
Texas. In 1990, Mr. McMullan became the commercial banking executive for C & S
Bank of Florida's Jacksonville bank. He was transferred to Naples in 1991, where
he was named Chief Operating Officer of C & S Bank of Florida's Collier County
bank. Subsequent to the merger with NCNB, he was named Senior Banking Executive
and Commercial Banking Manager of NationsBank, Collier County. In 1993, he
accepted the position of Commercial Banking Executive for NationsBank's Broward
County Division and since then has managed the Broward County and Palm Beach
divisions and was Florida Market Manager for NationsBank's Financial Strategies
Group. His most recent position with NationsBank was that of Manager of the
Economic Development Office for the state of Florida. He has served on the board
of directors of the United Way of Jackson, Mississippi and Broward County,
Florida; the Boys and Girls Club of Broward County; the advisory board of the
Economic Development Councils in Collier County and Broward County; and the
Board and Executive Committees of Boy Scouts of America, Central Texas and
Central Mississippi regions. Mr. McMullan received a BBS from the Chair of
Banking at the University of Mississippi in 1976, and in 1979 received an MBA in
Finance and Monetary Policy from Columbia University, New York. He is married
with four children.
POLLY M. ROGERS, 60, is the proposed President of the Citizen Bank and
as such will have as one of her primary responsibilities Private Banking. Her
banking career began in 1970 at The Vanderbilt Bank in Naples. The Vanderbilt
Bank was purchased in 1979 by Exchange Bancorporation, Tampa, Florida, which was
in turn purchased in 1981 by NCNB, now NationsBank, for which Mrs. Rogers served
as Vice President until 1986. In 1986, she was employed by Citizens National
Bank of Naples, a $310 million community bank in Naples, Florida. Mrs. Rogers
served as an Executive Vice President of the bank until April, 1994 when
Citizens Bank merged with Amsouth Bancorporation. While at Citizens Bank, she
managed three banking locations with combined private banking deposits in excess
of $110 million. In July, 1994, Mrs. Rogers became an organizer of Gulf Coast
National Bank. Mrs. Rogers served as President and as a director of Gulf Coast
until July 1996. Mrs. Rogers is very involved in the community and has served on
numerous charitable boards and locally sponsored organizations. She is a member
of Royal Poinciana Golf Club and an active member of The First Baptist Church of
Naples.
JOE B. COX, 59, is a practicing attorney in Naples. Mr. Cox received a
J.D. degree from the University of Tulsa Law School in July 1966. In July 1978,
he opened the Naples branch office of Cummings & Lockwood. As Senior Partner,
Mr. Cox oversees a staff of 23 attorneys and paralegals and a support staff of
28 employees. Mr. Cox is a member of the Oklahoma and Florida Bar Associations,
American Bar Association, and the American College of Trust & Estate Counsel,
and is a well-regarded
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<PAGE> 29
lecturer and author. Mr. Cox's civil activities include serving as Vice Chairman
of the Board of Naples Community Hospital, Chairman of the Board of Naples Day
Surgery, Director of the Naples Area Chamber of Commerce, President of the
Greater Naples Civic Association, Chairman of the Florida Chamber Foundation
Board of Trustees and Vice Chairman of the Federal Judicial Selection Committee,
to which he was appointed by Senator Connie Mack.
EARL L. FRYE, 70, is a banker, realtor and developer who moved to
Naples in 1962 from Cincinnati, Ohio. He joined Wesley G. Downing Real Estate
and one year later became a full partner, changing the name of the company to
Downing-Frye & Associates, Inc. From 1989 to 1992, Mr. Frye was also a broker
and partner of USF&G Realty near Baltimore, Maryland. Mr. Frye was responsible
for developing the first gated community in Naples, Wilderness Country Club. He
also developed one of the first high-rise condominiums in Naples, the 21-story
Meridian, in Park Shore. Mr. Frye is a past President of the Naples Area Board
of Realtors and Director of the Florida Association of Realtors, as well as past
President of the Collier County Society of Real Estate Appraisers. His banking
career began in 1968 when he served as a director of First National Bank and
Trust Company of Collier County, which later merged with Southwest Florida Banks
of Ft. Myers. Southwest Florida Bank later merged with Sovran of Norfolk,
Virginia, which became C&S Sovran. C&S Sovran then merged with NCNB of
Charlotte, North Carolina. Mr. Frye served on all of the above parent boards and
state boards, and was also elected Chairman of First National Bank of Collier
County. He also served on various committees. After the merger of C&S Sovran and
NCNB, which became NationsBank, Mr. Frye served on the Florida/Georgia board of
directors and chaired the trust committee. He has served as Trustee for Naples
Community Hospital, co-chaired a fundraiser to build a satellite known as North
Collier Hospital, Community Foundation of Collier County, and Collier County
Conservancy. Furthermore, he has chaired the commercial United Way Fund Drive
and was instrumental in the formation of Youth Haven.
STANLEY W. HOLE, 67, is Chairman Emeritus of Hole, Montes & Associates,
a Naples-based civil engineering firm of which Mr. Hole was President when he
retired in 1997 after serving for 32 years. The firm's primary emphasis is on
water and wastewater projects and land development projects. Hole, Montes &
Associates was instrumental in the development of Collier County's Water and
Wastewater Master Plans, East and South Naples Sewer Evaluation Survey, and
South Collier County Regional Wastewater Transmission and Effluent Reuse
Systems. Mr. Hole has also served as the Chairman of the South Florida Water
Management District, as Chairman of the Florida Keys Aqueduct Authority and as
chairman of the Regional Planning Council. Throughout his career as a civil
engineer, Mr. Hole has been an active teacher and lecturer, an author of
numerous professional articles and books and has accepted gubernatorial
appointments to various legislative committees concerned with water use and
management issues. His involvement in the community includes membership on
several boards of directors, such as the American Heart Association, Chamber of
Commerce, Economic Development Council, Collier County Education Foundation and
the City of Naples Planning Advisory Board. He is on the board of Naples
Community Hospital; he serves on the Executive Committee, the Bio Ethics
committee and chairs the Building Committee. Mr. Hole received his undergraduate
degree from the University of Miami.
JOHN B. JAMES, 57, retired from NationsBank on December 31, 1997 after
30 years in banking. After receiving a degree from Florida State University, Mr.
James joined Citizens and Southern National Bank, Atlanta, as a management
trainee. He was elected a Vice President of Retail Banking in 1972. In 1978, Mr.
James was promoted to Senior Vice President and Senior Credit Officer for
Georgia affiliate banks. In 1982, he was promoted to Executive Vice President
with responsibility for Corporate and Correspondent Banking in the southeastern
United States. Mr. James transferred to Tampa in 1989 and served as President of
the C&S Hillsborough County Bank. Mr. James has been involved in many civic
activities, including Collier County Educational Foundation Board, The Economic
Development Council of Collier County,
27
<PAGE> 30
Pelican Bay Business Association Board, has served as a member of the Chamber of
Southwest Florida Board, the Lee County Public School Foundation Board, and the
Tampa Committee of 100, and has participated in the Leadership Lee and
Leadership Southwest Florida Programs.
LAVONNE JOHNSON, 66, is a retired Planner and Project Director for
Allegheny County, Pennsylvania. She and her husband maintain residences in both
Pittsburgh, Pennsylvania and Marco Island, Florida. Mrs. Johnson began investing
in real estate in Collier County in 1974 and in 1980 constructed a home on Marco
Island. Currently, Mrs. Johnson is a member of the Art League of Marco and the
Association of University Women, and serves as a Certified Tutor through the
literacy program of the Collier County Library system. Mrs. Johnson has served
in various elected capacities in Minnesota, including member of the Board of
Education, County Chairwoman of a political party and delegate to a National
Political Convention. In Pennsylvania, Mrs. Johnson served on several civic
Boards, including those of the Shakespeare Festival, the Opera Theater in
Pittsburgh, the Civic Light Opera Guild and Project Rediscovery, a program which
focuses on capable minority children at risk to drop out of school. Mrs. Johnson
received a B.A. degree in Political Science and Sociology from the University of
Pennsylvania and also received a Master of Public Administration degree from the
University of Pennsylvania.
LUC C. MAZZINI, DDS, 43, is a licensed dentist in both Florida and
Texas and has been practicing General Dentistry for eighteen years. His area of
specialty is cosmetic and implant dentistry. Dr. Mazzini has maintained an
active dental practice in Collier County since 1990. Dr. Mazzini has at various
times served as a member of the Noon Rotary Club of Marco Island, a member of
the Marco Island Chamber of Commerce and a member of the board of directors of
the San Marco Condominium Association. Dr. Mazzini has also enjoyed memberships
in several professional organizations, including the Texas Dental Association,
Greater Houston Dental Society, American Dental Association, Florida Dental
Association and Collier County Dental Association. Dr. Mazzini received a B.S.
degree from the University of Texas and a D.D.S. from Baylor College of
Dentistry.
CRAIG D. SHERMAN, 41, began his banking career in 1979 as director of
Commercial and Installment Lending for Sun Bank, Ft. Lauderdale Beach. He joined
Gulf Coast Bank of Pinellas in 1981 as Vice President and Senior Loan Officer.
Following the acquisition of Gulf Coast Bank by C&S Bank, Mr. Sherman became
employed with First National Bank & Trust Co. of Naples as Vice President and
Commercial Loan Officer. This bank was also later acquired by C&S Bank. Mr.
Sherman joined First Union National Bank, Naples in 1986 as Vice President and
Commercial Lending Officer. In 1989, he became Vice President and Commercial
Lending Officer for Nations Bank, Naples, Florida. In 1992, Mr. Sherman joined
the National Bank of Lee County as Senior Vice President and Senior Loan
Officer. Following the acquisition of the bank by SouthTrust in January of 1994,
Mr. Sherman served as Senior Vice President and subsequently as Vice President
and Commercial Team Lender for SouthTrust in Naples, Florida, until he joined
Citizens Bancshares in May of 1999. Mr. Sherman is a 1979 graduate of Florida
State University with a Bachelor of Science Degree in Finance. He is married to
Jill.
BERNARD L. TURNER, 72, a businessman and developer, has been a resident
of Naples for over 28 years and currently serves as Chairman of the Board of the
Florida Coastal School of Law, Jacksonville, Florida, which he co-founded in
1994. From 1970 to 1994, Mr. Turner served as President and Chancellor at Walden
University, Minneapolis, Minnesota, a fully accredited doctorate level
institution. Locally, Mr. Turner has been involved in a health club partnership,
a land trust, and has developed an office complex valued in excess of
$3,000,000. Mr. Turner was also an organizing director of the former Citizens
National Bank. He has served as Trustee of the Collier County Economic
Development Committee, was the founding Chairman of Creative Living, a
non-profit corporation to provide housing for the needy elderly, and was
appointed by former Florida Governor Bob Graham as a member of the Board of the
State Board of
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<PAGE> 31
Independent Colleges and Universities. Mr. Turner has previously taught high
school, lectured at various universities, and served as an economist for the
National Industrial Conference Board.
LORENZO WALKER, 78, has been a lifelong member of the Naples community.
After serving in the military, Mr. Walker returned to Naples in 1946 and
assisted in developing the zoning plan for the City of Naples. Along with his
father and brother, Mr. Walker formed Walker Construction Company and began
developing waterfront properties in Naples and Bonita Springs. Mr. Walker later
formed James L. Walker Real Estate Inc., a local real estate brokerage firm. He
has served the community in many different capacities, including Founding
Director of Naples Community Hospital, member of Lee University, member of
Advisory Council of the Lorenzo Walker Institute of Technology, the largest
school in Collier County and is Director Emeritus of International College of
Naples. Mr. Walker has also been active in local and state politics. He has
served on the Board of County Commissioners, as a representative to the Florida
House of Representatives, as Speaker Pro Tem, and as Dean of the Florida House,
the position he held when he retired in 1974. Mr. Walker has significant bank
board experience, having been a founding director and director of FNB Naples
from 1955-1976, a founding director and the Chairman of Citizens National Bank,
Naples, in 1968, a founding director of Vanderbilt Bank and director of the
second Citizens National Bank in 1987.
THOMAS M. WHELAN, 49, began his community banking career in 1972 in
Angola, New York with Evans National Bank. He served as Auditor, V.P. & Auditor,
and Sr. V.P. & Cashier during his 14 years with Evans National Bank. In 1988, he
assumed the Senior Vice President position responsible for financial and
operational functions for The Village Bank, Chapel Hill, North Carolina. He
joined Triangle Bank in Raleigh, North Carolina in 1993 and became Vice
President, Director for Banking Services, where he managed Deposit Support, Loan
Support, Check Image, Electronic Banking and Bookkeeping. During a sixteen-month
period, there were seven merger/acquisitions, growth from $300 million to $800
million in assets and branch growth from fourteen to 38 offices. In 1996, his
family relocated to Southwest Florida where he joined Hendry County Bank as Vice
President and Cashier. In May 1997, he was named President and CEO. Following
the acquisition of Hendry County Bank by Florida Community Bank in February of
1998, he served as Executive Vice President in charge of Finance, Operations and
Branch Administration, until joining Citizens Bancshares in April of 1999. Mr.
Whelan received his Bachelor of Arts degree in business and management from Ohio
Northern University in 1971. He is a 1982 honors graduate of the BAI School in
Banking at the University of Wisconsin. He is married and has two daughters.
There are no family relationships between any director or executive
officer and any other director or executive officer of Citizens Bancshares.
EXECUTIVE COMPENSATION
Citizens Bancshares and Citizens Bank have entered into an employment
agreement, dated as of April 28, 1999, with each of Michael McMullan and Polly
Rogers, pursuant to which the two serve as Chief Executive Officer and
President, respectively, of Citizens Bank and Citizens Bancshares. The
employment contract with Mr. McMullan provides for a term of three years and an
initial salary at an annual rate of $140,000. The employment contract with Ms.
Rogers provides for a term of one year and an initial salary at an annual rate
of $100,000. Each of the respective salaries may be increased from time to time
in the sole discretion of the board of directors of Citizens Bancshares and each
of the executive officers will also be eligible to receive a bonus which will
not exceed 40% of his or her annual base salary.
The employment agreement provides that Mr. McMullan and Ms. Rogers will
receive options to purchase shares of common stock of Citizens Bancshares at a
price of $10.00 per share pursuant to an incentive stock option plan to be
adopted by Citizens Bancshares. Mr. McMullan will receive 30,000 options, and
Ms. Rogers will receive 20,000 options. Twenty percent of these options will
become exercisable on December
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<PAGE> 32
31, 1999 and twenty percent will become exercisable on December 31 of each of
the four succeeding years. All options will be exercisable for a period of ten
years.
The employment agreements also provide that Mr. McMullan and Ms. Rogers
will each receive health, disability, and term life insurance, and be eligible
to participate in Citizens Bank's employee benefit plan, if one is adopted by
the board of directors of Citizens Bank. Each of the executive officers will
also be entitled to four weeks vacation each year during which time his or her
salary will be paid in full.
In the event of a "change of control" of Citizens Bancshares, as
defined in the employment contract, each of the executive officers will be
entitled to give written notice to Citizens Bancshares of termination of his or
her employment agreement and to receive a cash payment equal to 250% of his or
her annual salary, and an additional cash payment equal to the excess, if any,
of the aggregate market value of the number of shares of common stock of
Citizens Bancshares subject to options held by the executive officer over the
aggregate exercise price of all such options.
The employment agreements provide that Citizens Bank may terminate the
employment of the executive officers with or without cause, but that in the
latter case the executive officers will each receive a severance payment equal
to that he or she would be entitled to in the event of a change in control, as
described above. In addition, each employment agreement contains a non-compete
provision which provides that in the event the employment contract is terminated
by Citizens Bancshares or Citizens Bank without cause, or by the respective
executive officer, the executive officer may not, without the prior written
consent of Citizens Bank, either directly or indirectly serve as an employee of
any financial institution within Collier or Lee County for a period of twelve
months after such termination.
STOCK OPTION PLAN
Citizens Bancshares' board of directors will adopt an Incentive Stock
Option Plan (the "Plan") to provide for the issuance of stock options to
employees who are contributing significantly to the management or operation of
the business of Citizens Bancshares or its subsidiaries as determined by the
committee administering the Plan. The Plan will be contingent upon approval by
the shareholders of Citizens Bancshares. The Plan will provide for the grant of
options at the discretion of a committee designated by the board of directors to
administer the Plan. The committee must at all times consist of at least two
non-employee directors. The option exercise price must be at least 100% (110% in
the case of a holder of 10% or more of the common stock) of the fair market
value of the stock on the date the option is granted and the options are
exercisable by the holder thereof in full at any time prior to their expiration
in accordance with the terms of the Plan. Stock options granted pursuant to the
Plan will expire on or before (i) the date which is the tenth anniversary of the
date the option is granted, or (ii) the date which is the fifth anniversary of
the date the option is granted in the event that the option is granted to a key
employee who owns more than 10% of the total combined voting power of all
classes of stock of Citizens Bancshares or any subsidiary of Citizens
Bancshares.
Management has not yet determined the exact number of shares which will
be reserved for issuance pursuant to the Plan. Currently, an aggregate of 85,000
options are to be granted in connection with the employment agreements between
Citizens Bancshares and four of its executive officers.
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<PAGE> 33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership of the common stock of
Citizens Bancshares by its directors and executive officers both before and
after completion of the minimum offering of 1,000,000 shares.
<TABLE>
<CAPTION>
After Completion of
Before Offering Minimum Offering
--------------- -------------------
Number of Percent of Number of Percent of
Name of Beneficial Owner Shares Total Shares Total
- ------------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Joe B. Cox.......................... 2,000 11.1% 20,000 2.0%
Earl L. Frye........................ 2,000 11.1% 20,000 2.0%
Stanley W. Hole..................... 2,000 11.1% 10,000 1.0%
John B. James....................... 2,000 11.1% 20,000 2.0%
LaVonne Johnson..................... 2,000 11.1% 20,000 2.0%
Luc C. Mazzini...................... 2,000 11.1% 20,000 2.0%
Michael L. McMullan................. 0 0.0 % 10,000 1.0%
Polly M. Rogers..................... 2,000 11.1% 20,000 2.0%
Craig D. Sherman.................... 0 0.0% 500 *
Bernard L. Turner................... 2,000 11.1% 20,000 2.0%
Lorenzo Walker...................... 2,000 11.1% 20,000 2.0%
Thomas M. Whelan.................... 0 0.0% 1,000 *
------ ----- ------- ----
Total........................ 18,000 100.0% 181,500 17.8%
</TABLE>
- ----------------
* Less than 1%
CERTAIN TRANSACTIONS
Once Citizens Bank opens for business, it may from time to time extend
loans to certain of Citizens Bancshares' directors, their associates, and
members of the immediate families of the directors and executive officers of
Citizens Bancshares. These loans will be made in the ordinary course of business
on substantially the same terms, including interest rates, collateral
requirements, and repayment terms, as those prevailing at the time for
comparable transactions with persons not affiliated with Citizens Bancshares or
Citizens Bank, and will not involve more than the normal risk of collectibility
or present other unfavorable features.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Citizens Bancshares consists of
20,000,000 shares of common stock, $.01 par value per share, and 1,000,000
shares of preferred stock, $.01 par value per share. There are presently 18,000
shares of common stock issued and outstanding, all of which are held by the
organizers. No shares of the preferred stock are issued and outstanding.
COMMON STOCK
The holders of common stock are entitled to elect the members of the
board of directors of Citizens Bancshares and are entitled to vote as a class on
all matters required or permitted to be submitted to the shareholders of
Citizens Bancshares.
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<PAGE> 34
No holder of any class of stock of Citizens Bancshares has preemptive
rights with respect to the issuance of shares of any class of stock, and the
common stock does not carry cumulative voting rights with respect to the
election of directors.
The holders of common stock are entitled to dividends and other
distributions if, as, and when declared by the board of directors out of assets
legally available therefor. Upon the liquidation, dissolution, or winding up of
Citizens Bancshares, the holder of each share of common stock will be entitled
to share equally in the distribution of Citizens Bancshares' assets. The holders
of common stock are not entitled to the benefit of any sinking fund provision.
The shares of common stock of Citizens Bancshares are not subject to any
redemption provisions, nor are they convertible into any other security or
property of Citizens Bancshares. All outstanding shares of each class of common
stock are, and the shares to be outstanding upon completion of this offering
will be, fully paid and nonassessable.
WARRANTS
Citizens Bancshares is authorized to issue up to 113,330 warrants in
this offering. Each warrant entitles the holder to purchase one share of common
stock at an exercise price of $10.00 per share for a period of ten years
beginning on the date Citizens Bank opens for business. The warrants will become
exercisable in equal amounts beginning on the date Citizens Bank opens for
business and on each of the four succeeding anniversaries of that date.
The warrants have antidilution provisions that take effect in the event
of stock dividends, splits, mergers, and for other similar events.
Citizens Bancshares has reserved sufficient shares of common stock for
issuance upon exercise of the warrants. The reserved shares are included in the
registration statement of which this prospectus is a part. Further, Citizens
Bancshares has filed an undertaking with the SEC that it will maintain an
effective registration statement by filing any necessary post-effective
amendments or supplements to the registration statement throughout the term of
the warrants with respect to the warrants and the shares of common stock
issuable upon exercise of the warrants.
No holder of any warrant will be entitled to vote, receive dividends or
be deemed the holder of common stock for any purpose until the warrant has been
exercised and the common stock purchasable upon the exercise of the warrant has
been delivered.
PREFERRED STOCK
The board of directors may, without approval of Citizens Bancshares'
shareholders, from time to time authorize the issuance of preferred stock in one
or more series for such consideration and, within certain limits, with such
relative rights, preferences and limitations as the board of directors may
determine. The relative rights, preferences and limitations that the board of
directors has the authority to determine as to any such series of preferred
stock include, among other things, dividend rights, voting rights, conversion
rights, redemption rights and liquidation preferences. Because the board of
directors has the power to establish the relative rights, preferences and
limitations of each series of preferred stock, it may afford to the holders of
any such series preferences and rights senior to the rights of the holders of
shares of common stock. Although the board of directors has no intention at the
present time of doing so, it could cause the issuance of preferred stock that
could discourage an acquisition attempt or other transactions that some, or a
majority of, the shareholders might believe to be in their best interests or in
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<PAGE> 35
which the shareholders might receive a premium for their shares of common stock
over the market price of such shares.
BOARD OF DIRECTORS
The board of directors of Citizens Bancshares consists of ten
directors. The directors are divided into three classes, designated Class I,
Class II and Class III. The term of the initial Class I directors expires at
Citizens Bancshares' first Annual Meeting of Shareholders; the term of the
initial Class II directors expires at Citizens Bancshares' second Annual Meeting
of Shareholders; and the term of the initial Class III directors expires at
Citizens Bancshares' third Annual Meeting of Shareholders. At each Annual
Meeting of Shareholders, successors to the class of directors whose term expires
at the Annual Meeting will be elected for a three-year term. If the number of
directors is changed, an increase or decrease will be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class will hold office for a term that will
coincide with the remaining term of that class, but in no event will a decrease
in the number of directors shorten the term of any incumbent director. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors will have the same remaining term as that of his predecessor.
Except in the case of removal from office, any vacancy on the board of directors
will be filled by a majority vote of the remaining directors then in office.
Any director may be removed, with or without cause, at any regular or
special meeting of shareholders called for that purpose, and his position filled
by another person nominated and elected for that purpose by the holders of 75%
of the outstanding shares of Citizens Bancshares' common stock.
The effect of the classified board of directors is to make it more
difficult for a person, entity or group to effect a change in control of
Citizens Bancshares through the acquisition of a large block of Citizens
Bancshares' voting stock.
ANTI-TAKEOVER PROVISIONS
Citizens Bancshares' Articles of Incorporation contain provisions
requiring supermajority shareholder approval to effect certain extraordinary
corporate transactions which are not approved by the board of directors. The
Articles of Incorporation require the affirmative vote or consent of the holders
of at least two-thirds of the shares of each class of common stock of Citizens
Bancshares entitled to vote in elections of directors to approve any merger,
consolidation, disposition of all or a substantial part of the assets of
Citizens Bancshares or a subsidiary of Citizens Bancshares, exchange of
securities requiring shareholder approval or liquidation of Citizens Bancshares
("Covered Transaction"), if any person who together with his affiliates and
associates owns beneficially 5% or more of any voting stock of Citizens
Bancshares ("Interested Person") is a party to the transaction; provided that
75% of the entire board of Directors of Citizens Bancshares has not approved the
transaction. In addition, the Articles of Incorporation require the separate
approval by the holders of a majority of the shares of each class of stock of
Citizens Bancshares entitled to vote in elections of directors which are not
beneficially owned, directly or indirectly, by an Interested Person, of any
merger, consolidation, disposition of all or a substantial part of the assets of
Citizens Bancshares or a subsidiary of Citizens Bancshares, or exchange
33
<PAGE> 36
of securities requiring shareholder approval ("Business Combination"), if an
Interested Person is a party to such transaction; provided, that such approval
is not required if :
- the consideration to be received by the holders of the stock of
Citizens Bancshares meets certain minimal levels determined by a
formula under the Articles of Incorporation (generally the highest
price paid by the Interested Person for any shares which he has
acquired),
- there has been no reduction in the average dividend rate from that
which was obtained prior to the time the Interested Person became
such, and
- the consideration to be received by shareholders who are not
Interested Persons shall be paid in cash or in the same form as
the Interested Person previously paid for shares of such class of
stock. These Articles, as well as the Article establishing a
classified board of directors, may be amended, altered, or
repealed only by the affirmative vote or consent of the holders of
at least 75% of the shares of each class of stock of Citizens
Bancshares entitled to vote in elections of directors.
The effect of these provisions is to make it more difficult for a
person, entity or group to effect a change in control of Citizens Bancshares
through the acquisition of a large block of Citizens Bancshares' voting stock.
STATUTORY ANTI-TAKEOVER PROVISIONS
The State of Florida has statutory provisions relating to business
combinations between a Florida corporation and an "interested shareholder" that
outline the statutory requirements to effect such transactions. In its Articles
of Incorporation, Citizens Bancshares has elected not to be governed by these
provisions and, therefore, these statutory anti-takeover provisions do not apply
to Citizens Bancshares.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION
OF OFFICERS AND DIRECTORS
As allowed under Florida law, Citizens Bancshares' Articles of
Incorporation provide that a director shall not be personally liable to Citizens
Bancshares or its shareholders for monetary damages for breach of duty of care
or any other duty owed to Citizens Bancshares as a director, except that such
provision shall not eliminate or limit the liability of a director (a) for any
appropriation, in violation of his duties, of any business opportunity of
Citizens Bancshares, (b) for acts or omissions which involve intentional
misconduct or a knowing violation of law, (c) for unlawful corporate
distributions, or (d) for any transaction from which the director received an
improper personal benefit.
Article VI of Citizens Bancshares' Bylaws provides that Citizens
Bancshares shall indemnify a director who has been successful in the defense of
any proceeding to which he was a party or in defense of any claim, issue or
matter therein because he is or was a director of Citizens Bancshares, against
reasonable expenses incurred by him in connection with such defense.
Citizens Bancshares' Bylaws also provide that Citizens Bancshares is
required to indemnify any director, officer, employee or agent made a party to a
proceeding because he is or was a director, employee or agent against liability
incurred in the proceeding if he acted in a manner he believed in good faith or
to be in or not opposed to the best interests of Citizens Bancshares and, in the
case of any criminal proceeding, he had no reasonable cause to believe his
conduct was unlawful. Determination concerning whether or not the applicable
standard of conduct has been met can be made by:
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<PAGE> 37
- a disinterested majority of the board of directors,
- a majority of a committee of disinterested directors,
- independent legal counsel, or
- an affirmative vote of a majority of shares held by disinterested
shareholders.
No indemnification may be made to or on behalf of a director, officer, employee
or agent:
- in connection with a proceeding by or in the right of Citizens
Bancshares in which such person was adjudged liable to Citizens
Bancshares, or
- in connection with any other proceeding in which such person was
adjudged liable on the basis that personal benefit was improperly
received by him.
Citizens Bancshares may, if authorized by its shareholders by a
majority of votes which would be entitled to be cast in a vote to amend Citizens
Bancshares' Articles of Incorporation, indemnify or obligate itself to indemnify
a director, officer, employee or agent made a party to a proceeding, including a
proceeding brought by or in the right of Citizens Bancshares.
To the extent that indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Citizens Bancshares by the provisions described above, or otherwise,
Citizens Bancshares 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.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Citizens
Bancshares or Citizens Bank is a party or of which any of their properties are
subject; nor are there material proceedings known to Citizens Bancshares or
Citizens Bank to be contemplated by any governmental authority; nor are there
material proceedings known to Citizens Bancshares or Citizens Bank, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of Citizens Bancshares or Citizens Bank, or any associate of any
of the foregoing is a party or has an interest adverse Citizens Bancshares or
Citizens Bank.
LEGAL MATTERS
Certain legal matters in connection with the shares of common stock
offered hereby have been passed upon for Citizens Bancshares by Smith, Gambrell
& Russell, LLP, Atlanta, Georgia, counsel to Citizens Bancshares.
EXPERTS
The financial statements of Citizens Bancshares of Southwest Florida,
Inc. as of February 22, 1999 included in this prospectus have been audited by
Hill, Barth & King, Inc., independent auditors, as stated in their report, which
is included herein, and has been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
Citizens Bancshares has filed with the Securities and Exchange
Commission, Washington, D.C. 20549, a Registration Statement under the
Securities Act of 1933 with respect to the shares of
35
<PAGE> 38
common stock offered hereby. This prospectus does not contain all of the
information included in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to Citizens Bancshares
and the common stock, please refer to the Registration Statement and the
exhibits and schedules thereto. You may request a copy of the Registration
Statement by contacting Citizens Bancshares either at its address at 3411
Tamiami Trail North, Suite 200, Naples, Florida 34103, or at its telephone
number at (941) 643-4646.
Citizens Bancshares intends to furnish its shareholders annual reports
containing audited financial statements.
36
<PAGE> 39
FINANCIAL STATEMENTS
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(A Development Stage Company)
February 22, 1999
C O N T E N T S
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report ......................... F-2
Balance Sheet ........................................ F-3
Statement of Operations .............................. F-4
Statement of Shareholders' Equity .................... F-5
Statement of Cash Flows .............................. F-6
Notes to Financial Statements ........................ F-7-9
</TABLE>
F-1
<PAGE> 40
Board of Directors
Citizens Bancshares of Southwest Florida, Inc.
Naples, Florida
Independent Auditors' Report
We have audited the accompanying balance sheet of Citizens Bancshares of
Southwest Florida, Inc. (the Company) as of February 22, 1999 and the related
statements of operations, shareholders' equity and cash flows for the period
from June 15, 1998 (date of inception) to February 22, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Citizens Bancshares
of Southwest Florida, Inc. as of February 22, 1999 and the results of its
operations and its cash flows for the period from June 15, 1998 (date of
inception) to February 22, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the
company will continue as a going concern. As discussed in Note G to the
financial statements, the company's ability to continue as a going concern is
dependent on approval from the Office of the Comptroller of the Currency for a
National Banking Charter and a successful public offering of the Company's
common stock. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ HILL, BARTH & KING, INC.
Certified Public Accountants
Naples, Florida
February 22, 1999
F-2
<PAGE> 41
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(A Development Stage Company)
BALANCE SHEET
February 22, 1999
<TABLE>
<CAPTION>
<S> <C>
A S S E T S
CURRENT ASSETS
Cash $ 206,330
Prepaid expenses 17,622
Deferred offering costs 16,905
-----------
TOTAL CURRENT ASSETS 240,857
-----------
NET PROPERTY AND EQUIPMENT - NOTE B 1,429,237
OTHER ASSET
Deposits 5,320
-----------
$ 1,675,414
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable $ 8,577
Loans payable - NOTE C 1,600,000
Accrued interest payable 34,309
-----------
TOTAL LIABILITIES 1,642,886
Shareholders' Equity - NOTE F
Preferred stock, par value $.01 per share,
1,000,000 shares authorized; 0 shares
issued and outstanding 0
Common stock, par value $.01 per share,
20,000,000 shares authorized; 18,000 shares issued
and outstanding 180
Additional paid-in capital 179,820
Deficit accumulated during the development stage (147,472)
-----------
TOTAL SHAREHOLDERS' EQUITY 32,528
-----------
$ 1,675,414
===========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE> 42
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Period from June 15, 1998 (date of inception) to February 22, 1999
<TABLE>
<S> <C>
INCOME
Interest income $ 2,220
EXPENSES
Consulting fees 24,500
Interest expense 4,475
License and permits 18,881
Rent 22,633
Professional fees 57,998
Legal fees 5,865
Insurance expense 4,597
Other expenses 10,743
---------
TOTAL EXPENSES 149,692
---------
NET LOSS $(147,472)
=========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 43
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
Period from June 15, 1998 (date of inception) to February 22, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-in Development
Stock Capital Stage Total
------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Balance
June 15, 1998 $ 0 $ 0 $ 0 $ 0
(date of inception)
Proceeds from
issuance of
common stock 180 179,820 0 180,000
Net loss 0 0 (147,472) (147,472)
---- -------- --------- ---------
Balance (deficit)
February 22, 1999 $180 $179,820 $(147,472) $ 32,528
==== ======== ========= =========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE> 44
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Period from June 15, 1998 (date of inception) to February 22, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (147,472)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 80
Increase in prepaid expenses (17,622)
Increase in other assets (22,225)
Increase in accounts payable 8,577
Increase in accrued interest payable 34,309
-----------
NET CASH USED IN OPERATING ACTIVITIES (144,353)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,429,317)
-----------
NET CASH USED IN INVESTING ACTIVITIES (1,429,317)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on short-term notes 1,600,000
Proceeds from sale of stock 180,000
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,780,000
-----------
NET INCREASE IN CASH 206,330
CASH
Beginning of period 0
-----------
End of period $ 206,330
===========
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE> 45
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 22, 1999
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
Citizens Bancshares of Southwest Florida, Inc. (the Company) was
incorporated under the laws of the State of Florida. The Company's activities to
date have been limited to the organization of Citizens National Bank of
Southwest Florida (the Bank), as well as preparation for a $12,000,000 common
stock offering (the Offering). A substantial portion of the proceeds of the
Offering will be used by the Company to provide the initial capitalization of
the Bank. The start-up of the Bank is contingent upon receiving the approval of
various banking regulatory authorities and also a successful completion of the
Offering.
Nature of Business:
The Bank intends to offer a full range of commercial and consumer
banking services primarily within the Naples, Florida area.
Use of Estimates:
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Deferred Offering Costs:
Deferred offering costs consist primarily of legal and accounting fees
related to the initial public stock offering and will be offset against the
offering proceeds when received.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment at February 22, 1999 consists of the following:
<TABLE>
<S> <C>
Building $1,361,137
Leasehold improvements 350
Furniture and fixtures 60,639
Equipment 7,191
----------
1,429,317
Less accumulated depreciation 80
----------
TOTAL $1,429,237
==========
</TABLE>
Depreciation is computed on the straight-line method over the estimated
useful lives of the depreciable assets. Depreciation expense was $80 for the
period ended February 22, 1999. For the period ended February 22, 1999, the
Company capitalized interest of approximately $30,190 related to the purchase
and renovation of the facility to ready the premise for operations.
F-7
<PAGE> 46
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 22, 1999
NOTE C - LOANS PAYABLE
The Company has obtained a $300,000 line of credit payable to a bank, guaranteed
by the organizers of the Company to pay organizational and pre-opening expenses
of the Bank and the Company. As of February 22, 1999, the Company had borrowed
$100,000 under this agreement. The line of credit bears interest at the LIBOR
rate plus 2.25% (7.493% as of 2/17/99) and varies as LIBOR varies and matures in
October 1999. The foregoing line of credit and any unpaid accrued interest will
be repaid from the offering proceeds.
The Company has also obtained a $1,500,000 loan payable to a bank,
secured by a building that was purchased with the proceeds. The loan bears
interest at a fixed rate of 7.125% per annum. The foregoing loan and unpaid
accrued interest are due in April 1999.
NOTE D - INCOME TAXES
Deferred taxes are recognized for temporary differences between the
basis of assets and liabilities for financial statement and income tax purposes.
The tax effect of the differences that gave rise to a deferred tax asset of
$51,615 and corresponding valuation allowance of ($51,615) at February 22, 1999
relate primarily to the capitalization of preoperating start-up costs which are
amortized over a five year term from the date operations commence for tax
purposes.
NOTE E - COMMITMENTS AND CONTINGENCIES
The Company has entered into an operating lease for 2,959 square feet of
space for its executive offices. The base annual lease payment is $53,262 plus
applicable sales tax; increased annually by 4% on the anniversary date of the
lease during the initial term on any option period agreed to under the lease.
The lease has an initial term of three years and may be renewed for two
additional terms of three years. The company has also entered into a thirty-six
month lease on the bank's phone system. Lease payments under this lease
arrangement are $615 per month.
Future minimum rental commitments as of February 22, 1999 are as
follows:
<TABLE>
<S> <C>
Year ending -
December 31, 1999 $ 51,250
December 31, 2000 63,573
December 31, 2001 55,819
December 31, 2002 1,302
--------
TOTAL $171,944
========
</TABLE>
F-8
<PAGE> 47
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 22, 1999
NOTE F - STOCK OPTIONS AND WARRANTS
The Board of Directors of the Company intend to adopt an Incentive
Stock Option Plan to provide for the issuance of stock options to employees who
are contributing significantly to the management or operation of the company.
Options will be granted at 100% of the market value of the stock on the date the
option is granted. No shares have been reserved for issuance under this plan
thus far.
The Board of Directors of the Company have entered into a Stock
Purchase Warrant Agreement in consideration for the organizer's efforts in
organizing the Company and the Bank and the attendant personal financial risks
assumed by each organizer. The Company intends to issue warrants to purchase two
shares of Common Stock for each three shares of Common Stock purchased by each
organizer prior to completion of the Offering. Warrants will vest in equal
increments over a five year period commencing on the date the Bank opens for
business. Warrants will be exercisable at $10.00 per share and will expire 10
years from date of issue. The company has reserved 113,330 shares of its Common
Stock for issuance thereunder.
NOTE G - GOING CONCERN
As shown in the accompanying financial statements, the Company incurred
a net loss of $147,472 during the development stage, from June 15, 1998 (date of
inception) to February 22, 1999. The ability of the Company to continue as a
going concern is dependent on approval from the Office of the Comptroller of the
Currency for a National Banking Charter and a successful public offering of the
Company's common stock. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
F-9
<PAGE> 48
APPENDIX A
[ESCROW AGREEMENT]
Citizens Bancshares of Southwest Florida, Inc.
3411 Tamiami Trail North, Suite 200
Naples, Florida 34103
February 5, 1999
First National Bank of Naples
2150 Goodlette Road
Naples, Florida 34102
Attention: Garrett S. Richter
President and CEO
Gentlemen:
Citizens Bancshares of Southwest Florida, Inc., a Florida corporation
(the "Company"), proposes to offer for sale up to 1,200,000 shares of its $.01
par value common stock (the "Common Stock"), which shares shall be registered
under the Securities Act of 1933, as amended, by the filing of a Registration
Statement on Form SB-2 with the Securities and Exchange Commission. Shares will
be offered at a price of $10.00 each. The minimum subscription per subscriber is
500 shares.
(1) The Company hereby appoints and designates you as Escrow Agent for the
purposes set forth herein. By your signature hereto, you acknowledge
and accept said appointment and designation and agree to be bound by
the terms of this agreement (the "Escrow Agreement"). The Company
understands that you, by accepting said appointment and designation, in
no way endorse the merits of the offering of the shares described
herein. The Company agrees to notify any person acting on its behalf
that your position as Escrow Agent does not constitute such an
endorsement, and to prohibit said persons from the use of your name as
an endorser of such offering. The Company further agrees to allow you
to review any sales literature in which your name appears and which is
used in connection with such offering.
(2) The Company shall deliver all payments received in purchase of the
shares (the "Subscription Funds") to you in the form in which they are
received by noon of the next business day after their receipt by the
Company, and the Company shall deliver to you within five calendar days
copies of written acceptances of the Company for shares in the Company
for which the Subscription Funds represent payment. Upon receipt of
such written acceptance by the Company, you shall deposit such funds
into the escrow account. The Company shall also deliver to you copies
of completed Subscription Agreements for each subscriber, along with
such subscriber's name, address, number of shares subscribed and social
security or taxpayer identification number.
A-1
<PAGE> 49
(3) Subscription Funds shall be held and disbursed by you in accordance
with the terms of this Agreement.
(4) In the event any Subscription Funds are dishonored for payment for any
reason, you agree to orally notify the Company immediately thereof and
to confirm same in writing and to return the dishonored Subscription
Funds to the Company in the form in which they were delivered to you.
(5) (a) As used herein, the term "Total Receipts" shall mean the sum
of all Subscription Funds delivered to you pursuant to
Paragraph 2 hereof, less all Subscription Funds returned
pursuant to Paragraph 4 hereof.
(b) As used herein, the term "Expiration Date" shall mean the date
which marks the 90th day after the date of the Prospectus;
provided, however, in the event that you are given oral
notification, followed in writing, by the Company that it has
elected to extend the offering for an additional period of 90
days after the initial period, then the Expiration Date shall
mean the date which marks the 180th day after the date of the
Prospectus; provided further, in the event that you are given
oral notification, followed in writing, by the Company that it
has elected to extend the offering for an additional period of
90 days after the first extension, then the Expiration Date
shall mean the date which marks the 270th day after the date
of the Prospectus; provided further, in the event that you are
given oral notification, followed in writing, by the Company
that it has elected to extend the offering for an additional
period of 90 days after the second extension, then the
Expiration Date shall mean the date which marks the 360th day
after the date of the Prospectus.
(6) (a) If Total Receipts equal $10,000,000 on or before the
Expiration Date, you shall, on the Closing Date, no later than
10:00 A.M., Eastern Daylight Time, upon receipt of 24-hour
written instructions from the Company, remit all amounts
representing Subscription Funds, plus any profits or earnings
thereon after deducting your fees, if any, held by you
pursuant hereto in accordance with such instructions.
(b) If (i) Total Receipts are less than $10,000,000 as of 5:00
P.M., Eastern Daylight Time on the Expiration Date, or (ii)
the offering is canceled by the Company at any time prior to
the Expiration Date, then you shall promptly remit to each
subscriber at the address set forth in his Subscription
Agreement an amount equal to the amount of his Subscription
Funds thereunder, adjusted for his allocated share of any net
profits earned on the investment of the Subscription Funds as
set forth in Paragraph 7, below. The Company hereby agrees to
provide to you in writing the specific allocations of net
profits attributable to each subscriber hereunder and the
names and addresses of each subscriber.
(7) Pending disposition of the Subscription Funds under this Agreement, you
are authorized, upon oral instructions, followed in writing, given by
Polly M. Rogers, to invest Subscription Funds in Federal Funds, in
short-term direct obligations of the United States government, in
short-term FDIC or FSLIC insured certificates of deposit, but in any
case with maturities of 90 days or less. For purposes of Paragraph 6
above, the specific allocations of net profits attributable to each
subscriber shall be determined by the Company as follows: each
subscriber's allocated share of earnings on the Subscription Funds,
after deducting your fees, if any, shall be that fraction (i) the
numerator of which is the dollar amount of such subscriber's accepted
subscription multiplied by the number of days between the date of
acceptance of the purchaser's subscription and the date of the
offering's
** Interest will be paid at the rate of daily Federal Funds less 75 basis points
A-2
<PAGE> 50
termination, inclusive (the subscriber's "Time Subscription Factor"),
and (ii) the denominator of which is the aggregate Time Subscription
Factors of all purchasers depositing Subscription Funds in the escrow
account.
(8) Your obligations as Escrow Agent hereunder shall terminate upon your
transferring all funds you hold hereunder pursuant to the terms of
Paragraphs (4) through (6) herein, as applicable.
(9) As used herein, "Closing Date" shall mean the third business day
following the date of receipt by you of Total Receipts aggregating
$10,000,000 and executed Subscription Agreements and copies of written
acceptances of the Company in connection therewith.
(10) You shall be protected in acting upon any written notice, request,
waiver, consent, certificate, receipt, authorization, or other paper or
document which you believe to be genuine and what it purports to be.
(11) You shall not be liable for anything which you may do or refrain from
doing in connection with this Escrow Agreement, except your own gross
negligence or willful misconduct.
(12) You may confer with legal counsel in the event of any dispute or
question as to the construction of any of the provisions hereof, or
your duties hereunder, and you shall incur no liability and you shall
be fully protected in acting in accordance with the opinions and
instructions of such counsel. Any and all expenses and legal fees in
this regard are payable from the Subscription Funds unless paid by the
Company.
(13) In the event of any disagreement between the Company and any other
person resulting in adverse claims and demands being made in connection
with any Subscription Funds involved herein or affected hereby, you
shall be entitled to refuse to comply with any such claims or demands
as long as such disagreement may continue, and in so refusing, shall
make no delivery or other disposition of any Subscription Funds then
held by you under this Agreement, and in so doing you shall be entitled
to continue to refrain from acting until (a) the right of adverse
claimants shall have been finally settled by binding arbitration or
finally adjudicated in a court assuming and having jurisdiction of the
Subscription Funds involved herein or affected hereby or (b) all
differences shall have been adjusted by agreement and you shall have
been notified in writing of such agreement signed by the parties
thereto. In the event of such disagreement, you may, but need not,
tender into the registry or custody of any court of competent
jurisdiction all money or property in your hands under the terms of
this Agreement, together with such legal proceedings as you deem
appropriate and thereupon to be discharged from all further duties
under this Escrow Agreement. The filing of any such legal proceeding
shall not deprive you of your compensation earned prior to such filing.
You shall have no obligation to take any legal action in connection
with this Agreement or towards its enforcement, or to appear in,
prosecute or defend any action or legal proceeding which would or might
involve you in any cost, expense, loss or liability unless
indemnification shall be furnished.
(14) You may resign for any reason, upon thirty days written notice to the
Company. Upon the expiration of such thirty day notice period, you may
deliver all Subscription Funds and copies of Subscription Agreements in
your possession under this Escrow Agreement to any successor Escrow
Agent appointed by the Company, or if no successor Escrow Agent has
been appointed, to any court of competent jurisdiction. Upon either
such delivery, you shall be released from any and all liability under
this Escrow Agreement. A termination under this paragraph shall in no
way change the terms of paragraphs 12 and 13 affecting reimbursement of
expenses, indemnity and fees. You shall have
A-3
<PAGE> 51
the right to deduct from the Subscription Funds transferred to any
successor Escrow Agent any outstanding and unpaid expenses or fees.
(15) You agree to charge your customary and normal fee for your services
hereunder. A copy of the current schedule is attached hereto. The fee
schedule may be modified from time to time. The acceptance fee and
expenses shall be paid in advance or at closing by the Company. Any
subsequent fees and expenses will be paid by the Company upon receipt
of invoice.
(16) All notices and communications hereunder shall be in writing and shall
be deemed to be duly given if sent by registered or certified mail,
return receipt requested, to the respective addresses set forth herein.
You shall not be charged with knowledge of any fact, including but not
limited to performance or non-performance of any condition, unless you
have actually received written notice thereof from the Company or its
authorized representative clearly referring to this Escrow Agreement.
(17) The rights created by this Escrow Agreement shall inure to the benefit
of, and the obligations created hereby shall be binding upon the
successors and assigns of you and the parties hereto. Notwithstanding
the foregoing, the Company may not assign its rights hereunder without
your prior written consent.
(18) This Escrow Agreement shall be construed and enforced according to the
laws of the State of Florida.
(19) This Escrow Agreement shall terminate and you shall be discharged of
all responsibility hereunder at such time as you shall have completed
your duties hereunder.
(20) This Escrow Agreement may be executed in several counterparts, which
taken together shall constitute a single document.
(21) This Escrow Agreement constitutes the entire understanding and
agreement of the parties hereto with respect to the transactions
described herein and supersedes all prior agreements or understandings,
written or oral, between the parties with respect thereto. Further,
this Escrow Agreement may only be amended by a written amendment signed
by the parties hereto.
(22) If any provision of this Escrow Agreement is declared by a court of
competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and
effect without being impaired or invalidated in any way.
(23) The Company shall provide you with its Employer Identification Number
as assigned by the Internal Revenue Service. Additionally, the Company
shall complete and return to you any and all tax forms or reports
required to be maintained or obtained by you. In the event that
Subscription Funds are returned to subscribers pursuant to paragraph 6
hereof, you shall, based upon the information available to you, file
with the Internal Revenue Service and send to each subscriber a Form
1099-INT with respect to contributions of interest to subscribers. All
interest or other income earned under this Escrow Agreement which is
payable to the Company pursuant to paragraph 6 hereof shall be
allocated and paid as directed by the Company and reported to the
Internal Revenue Service as having been so allocated and paid.
A-4
<PAGE> 52
(24) Your signature hereto is your consent that a signed copy hereof may be
filed with the various regulatory authorities of the State of Florida
and with any Federal Government agencies or regulatory authorities.
Please indicate your acceptance of this Agreement by executing a copy
of this letter and returning it to the undersigned.
Respectfully,
CITIZENS BANCSHARES OF
SOUTHWEST FLORIDA, INC.
By: /s/ Polly M. Rogers
-----------------------------------
Polly M. Rogers, President
Attest:
- -------------------------
(CORPORATE SEAL)
ACCEPTED AND AGREED:
First National Bank of Naples
By: /s/ Garrett Richter
-----------------------------------
Name: Garrett S. Richter
Title: President & CEO
A-5
<PAGE> 53
APPENDIX B
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
SUBSCRIPTION AGREEMENT
To: Citizens Bancshares of Southwest Florida, Inc.
3411 Tamiami Trail North, Suite 200
Naples, Florida 34103
Gentlemen:
You have informed me that Citizens Bancshares of Southwest Florida,
Inc. (the "Company"), is offering up to 1,200,000 shares of its $.01 par value
Common Stock (the "Common Stock") at a price of $10.00 per share as described in
and offered pursuant to the Prospectus furnished to the undersigned herewith
(the "Prospectus"). In addition, you have informed me that the minimum
subscription is 500 shares.
i. SUBSCRIPTION. Subject to the terms and conditions
hereof, the undersigned hereby tenders this subscription, together with payment
in United States currency by check, bank draft or money order payable to "First
National Bank of Naples, Escrow Agent for Citizens Bancshares of Southwest
Florida, Inc." or any other consideration satisfactory to the Company (the
"Funds"), representing the payment of $10.00 per share for the number of shares
of the Common Stock indicated below.
ii. ACCEPTANCE OF SUBSCRIPTION. It is understood and
agreed that the Company shall have the right to accept or reject this
subscription in whole or in part, for any reason whatsoever. The Company shall
reject this subscription, if at all, in writing within ten business days after
receipt of this subscription. The Company may reduce the number of shares for
which the undersigned has subscribed, indicating acceptance of less than all of
the shares subscribed on its written form of acceptance.
iii. ACKNOWLEDGMENTS. The undersigned hereby acknowledges
that he or she has received a copy of the Prospectus and agrees to be bound by
the terms of this Agreement and the Escrow Agreement.
iv. REVOCATION. The undersigned agrees that once this
Subscription Agreement is accepted by the Company, it may not be withdrawn by
him or her. Therefore, until the earlier of the expiration of five business days
after receipt by the Company of this Subscription Agreement or acceptance of
this Subscription Agreement by the Company, the undersigned may withdraw this
subscription and receive a full refund of the subscription price. The
undersigned agrees that, except as provided in this Section 4, he or she shall
not cancel, terminate or revoke this Subscription Agreement or any agreement of
the undersigned made hereunder and that this Subscription Agreement shall
survive the death or disability of the undersigned.
By executing this Subscription Agreement, the subscriber is not waiving any
rights he or she may have under federal securities laws, including the
Securities Act of 1933 and the Securities Exchange Act of 1934.
B-1
<PAGE> 54
Please fill in the information requested below, make your check payable
to "First National Bank of Naples, Escrow Agent for Citizens Bancshares of
Southwest Florida, Inc." and mail the Subscription Agreement, the Stock
Certificate Registration Instructions and your check to the attention of Polly
M. Rogers, President, Citizens Bancshares of Southwest Florida, Inc., 3411
Tamiami Trail North, Suite 200, Naples, Florida 34103.
- ------------------------ --------------------------------------
No. of Shares Subscribed (Signature of Subscriber)
$
----------------------- --------------------------------------
Funds Tendered ($10.00 Name (Please Print or Type)
per share subscribed)
Date:
----------------------------------
Phone Number:
(Home)
---------------------------------
(Office)
-------------------------------
Residence Address:
---------------------------------------
---------------------------------------
---------------------------------------
City, State and Zip Code
---------------------------------------
Social Security Number or other
Taxpayer Identification Number
B-2
<PAGE> 55
STOCK CERTIFICATE REGISTRATION INSTRUCTIONS
Name _________________________________________
Additional Name if Tenant in Common or Joint Tenant ____________________________
Mailing Address: _________________________________________
_________________________________________
_________________________________________
Social Security Number or other Taxpayer Identification Number ________________
Number of Shares to be registered in above name(s): _____________
Legal form of ownership:
<TABLE>
<S> <C>
___ Individual ___ Joint Tenants with Rights of Survivorship
___ Tenants in Common ___ Uniform Gift to Minors
___ Other _____________________
</TABLE>
INFORMATION AS TO BANKING INTERESTS
1. As a prospective shareholder I would be interested in the following
services checked below:
<TABLE>
<CAPTION>
PERSONAL BUSINESS
<S> <C> <C> <C>
(a) Checking Account ___ ___
(b) Savings Account ___ ___
(c) Certificates of Deposit ___ ___
(d) Individual Retirement Accounts ___ ___
(e) Checking Account Overdraft Protection ___ ___
(f) Consumer Loans (Auto, etc.) ___ ___
(g) Commercial Loans ___ ___
(h) Equity Line of Credit ___ ___
(i) Mortgage Loans ___ ___
(j) Revolving Personal Credit Line ___ ___
(k) Safe Deposit Box ___ ___
(l) Automatic Teller Machines (ATM's) ___ ___
</TABLE>
2. I would like our new bank to provide the following additional services:
(a)
(b)
B-3
<PAGE> 56
FORM OF ACCEPTANCE
Citizens Bancshares of Southwest Florida, Inc.
3411 Tamiami Trail North, Suite 200
Naples, Florida 34103
[Date]
To: [Subscriber]
Dear Subscriber:
Citizens Bancshares of Southwest Florida, Inc. (the "Company")
acknowledges receipt of your subscription for _____ shares of its $.01 par value
common stock and your check for $__________.
The Company hereby accepts your subscription for the purchase of _____
shares of its common stock, at $10.00 per share, for an aggregate of
$__________, effective as of the date of this letter.
Your stock certificate(s) representing shares of common stock duly
authorized and fully paid will be issued to you as soon as practicable after all
subscription funds are released to the Company from the subscription escrow
account, all as described in the Subscription Agreement executed by you and in
the prospectus furnished to you. In the event that (i) the offering is canceled,
or (ii) the minimum number of subscriptions (1,000,000 shares) is not obtained,
or (iii) the Company shall not have received approval from the Federal Reserve
Board to become a bank holding company, or (iv) Citizens National Bank of
Southwest Florida shall not have received approval for deposit insurance from
the Federal Deposit Insurance Corporation, your subscription funds will be
returned to you, adjusted for net profits from the investment of such funds, if
any, as described in the prospectus.
If this acceptance is for a lesser number of shares than that number
subscribed by you as indicated in your Subscription Agreement, your payment for
shares of common stock in excess of the number of shares accepted hereby will be
refunded to you by mail, without interest, within ten days of the date hereof.
Respectfully,
CITIZENS BANCSHARES OF
SOUTHWEST FLORIDA, INC.
By:
-----------------------------------
Polly M. Rogers, President
B-4
<PAGE> 57
================================================================================
THE ONLY INFORMATION AUTHORIZED BY CITIZENS BANCSHARES REGARDING THIS OFFERING
IS CONTAINED IN THIS PROSPECTUS. ANY OTHER STATEMENTS OR REPRESENTATIONS MADE TO
YOU BY A DEALER, SALESMAN, ORGANIZER OF CITIZENS BANCSHARES, OR ANY OTHER
INDIVIDUAL MUST NOT BE RELIED UPON AS BEING AUTHORIZED BY CITIZENS BANCSHARES.
THE INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF _____________, 1999.
THIS PROSPECTUS IS NOT AN OFFER TO SELL, NOR IS IT
SEEKING AN OFFER TO BUY SECURITIES OF CITIZENS
BANCSHARES IN ANY JURISDICTION WHERE THE OFFER
OR SALES ARE NOT PERMITTED.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................................................................................1
Risk Factors......................................................................................................3
The Company.......................................................................................................7
Terms of the Offering.............................................................................................7
Use of Proceeds..................................................................................................11
Dividend Policy..................................................................................................13
Management's Discussion and Analysis
of Financial Condition and
Results of Operations.........................................................................................13
Business of Citizens Bancshares..................................................................................14
Business of Citizens Bank........................................................................................14
Supervision and Regulation.......................................................................................21
Management.......................................................................................................25
Security Ownership of Certain Beneficial
Owners and Management.........................................................................................30
Certain Transactions.............................................................................................31
Description of Capital Stock.....................................................................................31
Limitations on Liability and Indemnification
of Officers and Directors.....................................................................................33
Legal Proceedings................................................................................................34
Legal Matters....................................................................................................34
Experts..........................................................................................................34
Additional Information...........................................................................................35
Index to Financial Statements...................................................................................F-1
Appendix A - Escrow Agreement
Appendix B - Subscription Materials
</TABLE>
---------------------------
UNTIL AUGUST __ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT
EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS,
1,200,000 SHARES OF COMMON STOCK
113,330 COMMON STOCK PURCHASE WARRANTS
CITIZENS
BANCSHARES OF
SOUTHWEST
FLORIDA, INC.
A Bank Holding Company for
CITIZENS NATIONAL BANK OF
SOUTHWEST FLORIDA
A Proposed National Bank
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
_______________, 1999
================================================================================
<PAGE> 58
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850(1) of the Florida Business Corporation Act ("FBCA")
permits a Florida corporation to indemnify any person who may be a party to any
third party proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, against liability
incurred in connection with such proceeding (including any appeal thereof) 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 corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 607.0850(2) of the FBCA permits a Florida corporation to
indemnify any person who may be a party to a derivative action if such person
acted in any of the capacities set forth in the preceding paragraph, against
expenses and amounts paid in settlement not exceeding, in the judgement of the
board of directors, the estimated expenses of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding (including appeals), provided that the person
acted under the standards set forth in he preceding paragraph. However, no
indemnification shall be made for any claim, issue or matter for which such
person is found to be liable unless, and only to the extent that, the court.
determines that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which the court deems proper.
Section 607.0850(4) of the FCBA provides that any indemnification made
under the above provisions, unless pursuant to a court determination, may be
made only after a determination that the person to be indemnified has met the
standard of conduct described above. This determination is to be made by a
majority vote of a quorum consisting of the disinterested directors of the board
of directors, by duly selected independent legal counsel, or by a majority vote
of the disinterested shareholders. The board of directors also may designate a
special committee of disinterested directors to make this determination.
Section 607.0850(3), however, provides that a Florida corporation must
indemnify any director, or officer, employee or agent of a corporation who has
been successful in the defense of any proceeding referred to in Section
607.0850(1) or (2), or in the defense of any claim, issue or matter therein,
against expenses actually and reasonably incurred by him in connection
therewith.
Expenses incurred by a director or officer in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it is ultimately determined that
such director or officer is not entitled to indemnification under Section
607.0850. Expenses incurred by other employees or agents in such a proceeding
may be paid in advance of final disposition thereof upon such terms or
conditions that the board of directors deems appropriate.
The FBCA further provides that the indemnification and advancement of
payment provisions contained therein are not exclusive and it specifically
empowers a corporation to make any other further indemnification or advancement
of expenses under any bylaw, Agreement, vote of shareholders or disinterested
actions taken in other capacities while holding an office. However, a
corporation cannot indemnify or advance expenses if a judgment or other final
adjudication establishes that the actions of the director or officer were
material to the adjudicated cause of action and the director or officer (a)
violated criminal law, unless the director or officer had reasonable cause to
believe his conduct was unlawful, (b) derived an improper personal benefit from
a transaction, (c) was or is a director in a circumstance where the liability
under Section 607.0834 (relating to unlawful distributions) applies, or (d)
engages in willful misconduct or conscious disregard for the best interests of
the corporation in a proceeding by or in right of the corporation to procure a
judgment in its favor or in a proceeding by or in right of a shareholder.
II-1
<PAGE> 59
Article XI of the Company's Articles of Incorporation provides that the
Company shall indemnify any director or officer or any former director or
officer against any liability arising from any action or suit to the full extent
permitted by Florida law as referenced above.
Article VI of the Company's By-Laws provides that the Company shall
indemnify a director, officer, employee or agent who has been successful on the
merits or otherwise in the defense of any action, suit or proceeding to which he
was a party or in defense of any claim, issue or matter therein because he is or
was a director, officer, employee or agent of the Company, against reasonable
expenses incurred by him in connection with such defense.
The Company's By-Laws also provide that the Company is required to
indemnify any director, officer, employee or agent made a party to a proceeding
because he is or was a director, employee or agent against liability incurred in
the proceeding if he acted in a manner he believed in good faith or to be in or
not opposed to the best interests of the Company and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Determination concerning whether or not the applicable standard of
conduct has been met can be made by (a) a disinterested majority of the board of
directors, (b) a majority of a committee of disinterested directors, (c)
independent legal counsel, or (d) an affirmative vote of a majority of shares
held by disinterested shareholders. No indemnification may be made to or on
behalf of a director, officer, employee or agent (i) in connection with a
proceeding by or in the right of the Company in which such person was adjudged
liable to the Company unless the court in which the action, suit or proceeding
was brought, upon application, determines indemnification is fair and
reasonable.
The Company may, if authorized by its shareholders by a majority of
votes which would be entitled to be cast in a vote to amend the Company's
Articles of Incorporation, indemnify or obligate itself to indemnify a director,
officer, employee or agent made a party to a proceeding, including a proceeding
brought by or in the right of the Company.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered, other than the underwriting discounts and commissions. All of the
amounts shown are estimated except for the registration fees of the Securities
and Exchange Commission.
<TABLE>
<S> <C>
Registration fees, including state securities
registrations fees and expenses.................................... $ 5,000
Legal fees and expenses................................................ 18,000
Accounting fees and expenses........................................... 15,000
Printing and engraving expenses........................................ 6,000
Advertising............................................................ 3,500
Mailing and distribution............................................... 5,000
Miscellaneous.......................................................... 4,000
--------
Total expenses ................................................... $ 56,500
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On February 22, 1999, the Company issued 2,000 shares, at a price of
$10.00 per share, to each of the following nine individuals, each of whom is,
and was at the time of the sale, a director of the Company: Joe B. Cox, Earl L.
Frye, Stanley W. Hole, John B. James, LaVonne Johnson, Luc C. Mazzini, Polly M.
Rogers, Bernard L. Turner and Lorenzo Walker. These shares were issued without
registration under the Securities Act of 1933, as amended (the "Securities Act")
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
II-2
<PAGE> 60
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
3.1* Amended and Restated Articles of Incorporation of
Citizens Bancshares.
3.2* Bylaws of Citizens Bancshares.
4.1 Specimen Common Stock Certificate.
4.2* Escrow Agreement dated February 5, 1999 between
Citizens Bancshares of Southwest Florida, Inc. and
First National Bank of Naples.
4.3 Form of Stock Purchase Warrant
5.1 Opinion of Smith, Gambrell & Russell, LLP.
10.1 Employment Agreement dated as of March 18, 1999 by
and between Citizens Bancshares of Southwest
Florida, Inc. and Michael L. McMullan.
10.2* Form of contract for sale and purchase of land
dated August 12, 1998.
10.3 Employment Agreement dated as of April 28, 1999 by
and between Citizens Bancshares of Southwest
Florida, Inc. and Polly M. Rogers
23.1 Consent of Hill, Barth & King, Inc.
23.2 Consent of Smith, Gambrell & Russell, LLP
(contained in their opinion filed as Exhibit 5.1
hereto)
24.1* Power of Attorney (included in signature page to
Registration Statement).
27.1* Financial Data Schedule (for SEC use only).
</TABLE>
- -----------------------
* Previously filed
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it
offers or sells securities, a post-effective
amendment to this Registration Statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or
events which, individually or together,
represent a fundamental change in the
information in the registration statement.
Notwithstanding the foregoing, any increase
or decrease in volume of securities offered
(if the total dollar volume of securities
offered would not exceed that which was
registered) and any deviation from the low
or high end of the estimated maximum
offering range may be reflected in the form
of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the
aggregate, changes in the
II-3
<PAGE> 61
volume and price represent no more than a
20% change in the maximum aggregate offering
price set forth in the "Calculation of
Registration Fee" table in the effective
registration statement.
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new
registration of the securities offered, and the
offering of the securities at the time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold
at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE> 62
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Amendment No. 1
to be signed on its behalf by the undersigned, in the City of Naples, State of
Florida on May 7, 1999.
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
Date: May 7, 1999 By: /s/ Michael C. McMullen
------------------------------------------
Michael L. McMullan
Chief Executive Officer
(Principal Executive Officer)
Date: May 7, 1999 By: /s/ Thomas M. Whelan
------------------------------------------
Thomas M. Whelan
Chief Financial Officer
(Principal Financial and Accounting Officer)
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael L. McMullan Chief Executive Officer, May 7, 1999
- --------------------------------------- Director
Michael L. McMullan
* President, Director May 7, 1999
- --------------------------------------
Polly M. Rogers
* Director May 7, 1999
- --------------------------------------
Joe B. Cox
* Director May 7, 1999
- --------------------------------------
Earl L. Frye
* Director May 7, 1999
- --------------------------------------
Stanley W. Hole
* Director May 7, 1999
- --------------------------------------
John B. James
* Director May 7, 1999
- --------------------------------------
LaVonne Johnson
* Director May 7, 1999
- --------------------------------------
Luc C. Mazzini
* Director May 7, 1999
- --------------------------------------
Bernard L. Turner
* Director May 6, 1999
- --------------------------------------
Lorenzo Walker
* By /s/ Michael L. McMullan
----------------------------------
Michael L. McMullan
Attorney-in-Fact
</TABLE>
<PAGE> 63
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
3.1* Amended and Restated Articles of Incorporation of Citizens
Bancshares.
3.2* Bylaws of Citizens Bancshares.
4.1 Specimen Common Stock Certificate.
4.2* Escrow Agreement dated February 5, 1999 between Citizens
Bancshares of Southwest Florida, Inc. and First National Bank
of Naples.
4.3 Form of Stock Purchase Warrant
5.1 Opinion of Smith, Gambrell & Russell, LLP.
10.1 Employment Agreement dated as of April 28, 1999 by and between
Citizens Bancshares of Southwest Florida, Inc. and Michael L.
McMullan.
10.2* Form of contract for sale and purchase of land dated August
12, 1998.
10.3 Employment Agreement dated as of April 28, 1999 by and between
Citizens Bancshares of Southwest Florida, Inc. and Polly M.
Rogers
23.1 Consent of Hill, Barth & King, Inc.
23.2 Consent of Smith, Gambrell & Russell, LLP (contained in their
opinion filed as Exhibit 5.1 hereto)
24.1* Power of Attorney (included in signature page to Registration
Statement).
27.1* Financial Data Schedule (for SEC use only).
</TABLE>
- -------------------
* Previously filed
<PAGE> 1
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS OF THE
STATE OF FLORIDA
NUMBER -0- 0 SHARES
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
COMMON STOCK
This certifies that SPECIMEN is the owner of SPECIMEN Shares of the Capital
-------- --------
Stock of CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC. A FLORIDA CORPORATION,
fully paid and non-assessable [SEAL] transferable only on the Books of
the Corporation by the holder hereof in person or by duly authorized Attorney,
on surrender of this Certificate properly endorsed.
In Witness Whereof the duly authorized officers of this Corporation have
hereunto subscribed their names and caused the corporate Seal to be hereto
affixed at Naples, FL this day of A.D. 1999
---------- ------- --------
- ----------------------------- ------------------------------
PRESIDENT SECRETARY
<PAGE> 2
Shares $0.01 Each.
Par Value
CERTIFICATE
FOR
0
SHARES
OF THE
CAPITAL STOCK
CITIZENS BANCSHARES OF
SOUTHWEST FLORIDA, INC.
ISSUED TO
-------------------
DATED
1999
-------------------
For Value Received, hereby sell, assign and transfer
-------
unto Shares of the Capital Stock represented by the within
-------------
Certificate, and do hereby irrevocably constitute and appoint
-----------------
to transfer the said Stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated
---------------------
In presence of
- ----------------------------- ------------------------------
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 4.3
DATED: ___________, 1999
No. _____
____________ Shares
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK, $.01 PAR VALUE
This is to certify that, for value received, _________________
("Holder" or "Warrant Holder"), or its or his successors, is entitled, upon the
due exercise hereof at any time, subject to Section 3 hereof, during the period
commencing on the date on which Citizens National Bank of Southwest Florida
(the "Bank") opens for business (the "Commencement Date") and terminating at
5:00 p.m., Naples, Florida local time, on the tenth anniversary of the
Commencement Date, unless earlier terminated as provided in Section 2 hereunder
(the "Termination Date"), to purchase _____ shares (subject to adjustment as
provided herein) of the $.01 par value Common Stock of Citizens Bancshares of
Southwest Florida, Inc. (the "Company") at a price per share as specified in
Section 2 of this Warrant and to exercise the other rights, powers and
privileges hereinafter provided, all on the terms and subject to the conditions
specified herein.
Section 1. Certain Definitions. Unless the context otherwise
requires, the following terms as used in this Warrant shall have the following
meanings:
(a) "Average Market Value" shall mean the average of the
Closing Prices for the Common Stock for the five trading
days immediately preceding the date of determination.
(b) "Bank" shall mean Citizens National Bank of Southwest
Florida, a national banking association (in organization)
and a wholly-owned subsidiary of the Company.
(c) "Closing Price" shall mean:
(i) if the primary market for the Common Stock is a national
securities exchange, the NASDAQ Stock Market, or other
market or quotation system in which last sale
transactions are reported on a contemporaneous basis, the
last reported sales price, regular way, of such security
on such exchange or in such quotation system for such
trading day, or, if there shall not have been a sale on
such exchange or reported through such system on such
trading day, the closing or last bid quotations therefor
on such exchange or quotation system on such trading day;
(ii) if the primary market for the Common Stock is not a
national securities exchange or quotation system in which
last sale transactions are contemporaneously reported,
the last bid quotation in the over-the-counter market on
such trading day as reported by the National Association
of Securities Dealers through NASDAQ, its automated
system for reporting quotations, or its successor or such
other generally accepted source of publicly reported bid
quotations as the Company may reasonably designate; or
<PAGE> 2
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 2
(iii) if the Closing Price cannot be ascertained by any of the
methods set forth in the immediately preceding paragraphs
(i) and (ii), such Closing Price shall be deemed to be
the amount equal to a quotient determined by dividing the
Fair Market Value by the number of shares (including any
fractional shares) of Common Stock then outstanding.
(d) "Commencement Date" shall mean the date that the Bank opens for
business.
(e) "Common Stock" shall mean the Company's $.01 par value common
stock, any security into which such common stock shall have
been changed or any security resulting from reclassification
of such common stock.
(f) "Company" shall mean Citizens Bancshares of Southwest Florida,
Inc., a Florida corporation, and its successors and assigns.
(g) "Exercise Date" shall mean the date on which the Company shall
have received from the Holder all deliveries required by
Section 3 of this Warrant.
(h) "Exercise Price" shall mean the price per share of Common Stock
specified in Section 2 hereof, as the same shall be adjusted
from time to time pursuant to the provisions of this Warrant.
(i) "Fair Market Value" shall mean the price, as determined by a
written appraisal prepared by an appraiser acceptable to the
Company, that would be paid by the most likely hypothetical
buyer in a single transaction, for 100% of the equity capital
of the Company on a going-concern basis. The Company shall pay
for the cost of any such appraisal.
(i) "Initial Public Offering" shall mean the initial public
offering of Common Stock by the Company, pursuant to an
effective registration statement on Form SB-2 filed with the
United States Securities and Exchange Commission under the
Securities Act of 1933, as amended, which initial public
offering is anticipated to occur and close no later than June
1, 2000.
Section 2. Exercise Price; Termination. Subject to the adjustments
provided for in this Warrant, the exercise price per share (the "Exercise
Price") shall be equal to $10.00. In the event that the Company does not close
the Initial Public Offering on or before 5:00 p.m., Atlanta, Georgia local
time, on June 1, 2000, then this Warrant and the rights hereunder shall
immediately terminate, shall become null and void and shall be of no further
force or effect.
Section 3. Exercise of Warrant. The Holder of this Warrant may, at
any time on or after the Commencement Date but prior to the Termination Date,
exercise this Warrant in whole at any time or in part from time to time for the
number of shares which such Holder is then entitled to purchase hereunder.
<PAGE> 3
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 3
The Holder may exercise its rights under this Warrant only as follows:
(i) no part of the Warrant may be exercised prior to the
Commencement Date;
(ii) beginning on the Commencement Date, this Warrant may be
exercised with respect to a maximum of 20% of the shares of
Common Stock subject to this Warrant;
(iii) beginning on the first anniversary of the Commencement Date,
this Warrant may be exercised with respect to an additional 20%
of the shares of Common Stock subject to this Warrant;
(iv) beginning on the second anniversary of the Commencement Date,
this Warrant may be exercised with respect to an additional 20%
of the shares of Common Stock subject to this Warrant;
(v) beginning on the third anniversary of the Commencement Date,
this Warrant may be exercised with respect to an additional 20%
of the shares of Common Stock subject to this Warrant; and
(vi) beginning on the fourth anniversary of the Commencement Date,
this Warrant may be exercised with respect to an additional 20%
of the shares of Common Stock subject to this Warrant.
The Holder may exercise this Warrant, in whole or in part, by
delivering to the Company at its offices maintained pursuant to Section 4 for
such purpose (i) a written notice of such Holder's election to exercise this
Warrant, which notice shall specify the number of shares to be purchased, (ii)
this Warrant, and (iii) a sum equal to the Exercise Price therefor in cash
(U.S. dollars) or by certified or cashier's check.
Such notice may be in the form of an election to subscribe attached
hereto. Upon delivery thereof, the Company shall, as promptly as practicable
and in any event within ten business days thereafter, cause to be executed and
delivered to such Holder a certificate or certificates representing the
aggregate number of shares of Common Stock issuable upon such exercise.
The certificate or certificates for shares of Common Stock so
delivered shall be in such denominations as may be specified in said notice and
shall be registered in the name of such Holder or such other name or names as
shall be designated in said notice. Such certificate or certificates shall be
deemed to have been issued and the person designated to be named in such
certificate shall be deemed to have become a holder of record of such shares,
and to have become entitled, to the extent permitted by law, to the right to
vote such shares or to consent or receive notice as a stockholder, as of the
Exercise Date. If this Warrant shall have been exercised only in part, the
Company shall, at the time of delivery of said certificate or certificates,
deliver to such Holder a new warrant dated the date it is issued, evidencing
the rights of such Holder to purchase the remaining shares of Common Stock
issuable pursuant to this Warrant, which new
<PAGE> 4
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 4
warrant shall in all other respects be identical with this Warrant, or, at the
request of such Holder, appropriate notation may be made on this Warrant and
the Warrant returned to such Holder.
The Company shall pay all expenses, transfer taxes and other charges
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 3, except that, in the event such stock
certificates are to be registered in a name or names other than the name of the
Holder, funds sufficient to pay all stock transfer and any other applicable
taxes payable upon the issuance of such certificates shall be paid by the
Holder not later than the Exercise Date.
Section 4. Warrant Registration. At all times while any portion of
this Warrant remains outstanding and exercisable the Company shall keep and
maintain at its principal offices a register in which the ownership and any
exchange of this Warrant shall be recorded. The Company shall not at any time,
except upon the dissolution, liquidation or winding up of the Company, close
such register so as to result in the prevention or delay of the proper exercise
of this Warrant.
Section 5. Transferability. This Warrant and all rights hereunder
shall not be transferable by the Holder except by operation of law. The Company
may deem and treat the registered Holder as the absolute owner of this Warrant
for all purposes and shall not be affected by any notice to the contrary.
Section 6. Exchange. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the offices of the Company, for a new warrant
or warrants, in such denominations as Holder shall designate at the time of
surrender for exchange, of like tenor and date, representing in the aggregate
the right to subscribe for and purchase the number of shares which may be
subscribed for and purchased hereunder, each of such new warrants to represent
the right to subscribe for and purchase not less than 1,000 shares of Common
Stock (except to the extent necessary to reflect the balance of the number of
shares purchasable hereunder).
Section 7. Representations and Covenants of Issuer.
(a) The Company hereby represents to the Holder as follows:
(i) The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State
of Florida.
(ii) The Company has the corporate power and authority to
execute and deliver this Warrant and to perform the terms
hereof, including the issuance of shares of Common Stock
issuable upon exercise hereof. The Company has taken all
action necessary to authorize the execution, delivery and
performance of this Warrant and the issuance of the
shares of Common Stock issuable upon exercise hereof.
This Warrant has been duly authorized and executed by the
Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the
Company in accordance with its
<PAGE> 5
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 5
terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or
limiting creditors' rights generally.
(b) The Company covenants and agrees that all shares of Common
Stock which may be issued upon the exercise of this Warrant
will, upon issuance, be fully paid and nonassessable and free
from all taxes, liens and charges (other than taxes in
respect of any transfer occurring contemporaneously with such
issuance).
Section 8. Adjustments to Exercise Price and Number of Shares
Purchasable. The Exercise Price and number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time
to time as follows:
(a) In the event the Company shall at any time exchange, as a
whole, by subdivision or combination in any manner or by the
making of a stock dividend, the number of shares of Common
Stock then outstanding into a different number of shares,
with or without par value, then thereafter the number of
shares of Common Stock which the Holder shall be entitled to
purchase pursuant to this Warrant (calculated immediately
prior to such change), shall be increased or decreased, as
the case may be, in direct proportion to the increase or
decrease in the number of shares of outstanding Common Stock
of the Company by reason of such change, and the Exercise
Price after such change shall, in the event of an increase in
the number of shares of Common Stock outstanding, be
proportionately reduced, and, in the event of a decrease in
the number of shares of Common Stock outstanding, be
proportionately increased.
(b) In the event of any reclassification or change of outstanding
shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par
value, or as a result of a subdivision, combination or stock
dividend as provided for in Section 8(a)), or in the event of
any consolidation of the Company with, or merger of the
Company into, another corporation, or in the event of any
sale of all or substantially all of the property, assets,
business and goodwill of the Company, the Company, or such
successor or purchasing corporation, as the case may be,
shall provide that the Holder of this Warrant shall
thereafter be entitled to purchase, by exercise of this
Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such
reclassification, change, consolidation, merger or sale by a
holder of the number of shares of Common Stock which this
Warrant entitles the Holder to purchase immediately prior to
such reclassification, change, consolidation, merger or sale.
Any such successor corporation thereafter shall be
substituted for the Company for purposes of this Warrant.
<PAGE> 6
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 6
Section 9. Holder's Rights. Except as otherwise expressly set forth
herein, this Warrant shall not entitle the Holder to any rights of a
stockholder of the Company, except that if the Company, during the period in
which this Warrant is exercisable, declares a dividend upon the Common Stock
payable otherwise than in cash out of earnings or earned surplus (computed in
accordance with generally accepted accounting principles) or otherwise than in
Common Stock or securities convertible into Common Stock, then the Holder, upon
exercise of this Warrant, shall receive the number of shares of Common Stock
purchasable upon such exercise and, in addition and without further payment,
the cash, stock or other securities or property which the Holder would have
received by way of dividends or other distribution if, continuously since the
date hereof, such Holder (a) had been the record holder of the number of shares
of Common Stock then being purchased, and (b) had retained all such cash, stock
and other securities (other than Common Stock or securities convertible into
Common Stock) and/or other property payable in respect of such Common Stock or
in respect of any stock or securities paid as dividends and originating
directly or indirectly from such Common Stock.
Section 10. Notices. If there shall be any adjustment as provided in
Section 8 hereof, or if securities or property other than shares of Common
Stock of the Company shall become purchasable in lieu of shares of Common Stock
upon exercise of this Warrant, the Company shall forthwith cause written notice
thereof to be sent by registered mail, postage prepaid, to the registered
Holder of this Warrant at the address of such Holder shown on the books of the
Company, which notice shall be accompanied by an explanation setting forth in
reasonable detail the basis for the Holder's becoming entitled to purchase such
shares and the number of shares which may be purchased and the exercise price
thereof, or the facts requiring any such adjustment and the exercise price and
number of shares purchasable subsequent to such adjustment, or the kind and
amount of any such securities or property so purchasable upon the exercise of
this Warrant, as the case may be. At the request of the Holder and upon
surrender of this Warrant, the Company shall reissue this Warrant in a form
conforming to such adjustments.
Section 11. Cash in Lieu of Fractional Shares. The Company shall not
be required to issue fractional shares upon the exercise of this Warrant. If,
by reason of any change made pursuant to Sections 8 or 9 hereof, the Holder of
this Warrant would be entitled, upon the exercise of any rights evidenced
hereby, to receive a fractional share, the Company shall, upon such exercise,
pay to the Holder an amount in cash equal to the Average Market Value of such
fractional interest, determined as of the Exercise Date.
Section 12. Forfeiture. If at any time while this Warrant is
outstanding, the Board of Governors of the Federal Reserve System makes a
formal capital call upon the Company or the Comptroller of the Currency makes a
formal capital call upon the Bank, the Holder will exercise this Warrant in
whole or in part as may be needed for additional required capital, or the
Warrant shall be forfeited. The number of shares of Common Stock as to which
the Warrant shall be exercised by each Holder to meet the capital call will be
calculated pro rata on the basis of the number of shares of Common Stock
subject to a Warrant held by each Holder. The exercise price for shares of
Common Stock purchased upon such exercise will be equal to the greater of the
Exercise Price determined pursuant to Section 2 hereof and the then-current
book value per
<PAGE> 7
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 7
share of Common Stock of the Company. Any portion of this Warrant not required
to be exercised under the terms of any such capital call may be exercised under
the original terms of this Warrant.
Section 13. Lost, Stolen, Mutilated, or Destroyed Warrants. If this
Warrant shall become lost, stolen, mutilated, or destroyed, the Company shall,
on such terms as to indemnity or otherwise as it may in its reasonable
discretion impose upon the registered Holder hereof (as shown on the register
of Warrants maintained by the Company), issue a new warrant of like
denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or
destroyed.
Section 14. Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder hereof to purchase shares of Common
Stock, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of such Holder for the purchase price of the
shares or as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
Section 15. Applicable Law. The validity, interpretation, and
performance of this Warrant shall be governed by the laws of the State of
Florida.
Section 16. Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and permitted assigns of the Company and the Holder hereof.
Section 17. Headings. Headings of the paragraphs in this Warrant are
for convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
<PAGE> 8
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 8
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
this ___ day of ________, 1999, by its duly authorized officers.
CITIZENS BANCSHARES OF SOUTHWEST FLORIDA, INC.
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
ATTEST:
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE> 9
EXHIBIT A
[Subscription Form to Be Executed Upon Exercise of Warrant]
The undersigned registered holder or permitted assignee of such
registered holder of the within Warrant hereby (1) subscribes for ______ Shares
which the undersigned is entitled to purchase under the terms of the within
Warrant, (2) makes the full cash payment therefor called for by the within
Warrant, and (3) directs that the shares issuable upon exercise of said Warrant
be issued as follows:
--------------------------------------------
(Name)
--------------------------------------------
(Address)
Signature
---------------------------------
Dated
-----------------------
NOTICE: The signature on this subscription form must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement, or any change whatsoever, and must be guaranteed by
a bank, other than a savings bank or trust company, or by a firm having
membership on a registered national securities exchange.
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Smith, Gambrell & Russell, LLP]
May 7, 1999
Board of Directors
Citizens Bancshares of Southwest Florida, Inc.
3411 Tamiami Trail North, Suite 200
Naples, Florida 34103
Re: Citizens Bancshares of Southwest Florida, Inc.
Registration Statement on Form SB-2
113,330 Common Stock Purchase Warrants and
113,330 Common Shares Issuable Upon Exercise
Ladies and Gentlemen:
We have acted as counsel for Citizens Bancshares of Southwest Florida,
Inc. (the "Company") in connection with the proposed public offering of shares
of the Company's $.01 par value Common Stock and Common Stock Purchase Warrants
covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, as amended,
certified by the Secretary of State of the State of Florida;
(2) The Bylaws of the Company, certified as complete and correct
by the Secretary of the Company;
(3) The minute book of the Company, certified as correct and
complete by the Secretary of the Company;
(4) Certificate of Active Status with respect to the Company,
issued by the Secretary of State of the State of Florida; and
(5) The Registration Statement, including all exhibits thereto.
<PAGE> 2
Board of Directors
Citizens Bancshares of Southwest Florida, Inc.
May 7, 1999
Page 2
Based upon such examination and upon examination of such other
instruments and records as we have deemed necessary, we are of the opinion
that:
(A) The Company has been duly incorporated and is validly
existing under the laws of the State of Florida.
(B) The 113,330 Common Stock Purchase Warrants covered by the
Registration Statement have been legally authorized and, when
issued in accordance with the terms described in said
Registration Statement, will be validly issued, fully paid
and non-assessable.
(C) The 113,330 shares of Common Stock issuable upon the exercise
of the Common Stock Purchase Warrants covered by the
Registration Statement have been legally authorized and, when
issued in accordance with the terms described in said Common
Stock Purchase Warrants, will be validly issued, fully paid
and non-assessable.
We consent to the filing of this opinion as an exhibit to the
aforementioned Registration Statement on Form SB-2 and to the reference to this
firm under the caption "Legal Matters" in the Prospectus. In giving this
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, or the
rules and regulations of the Securities and Exchange Commission thereunder.
Sincerely,
SMITH, GAMBRELL & RUSSELL, LLP
/s/ Robert C. Schwartz
Robert C. Schwartz
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
FOR
CHIEF EXECUTIVE OFFICER
THIS AGREEMENT, dated as of the 28th day of March, 1999, by
and among Citizens Bancshares of Southwest Florida, Inc., a Florida corporation
(the "Employer"), Citizens National Bank of Southwest Florida (Proposed), a
proposed national bank to be organized under the laws of the United States (the
"Bank") (the Employer and the Bank are collectively referred to herein as the
"Employer"), and Michael L. McMullan, ("Executive").
W I T N E S S E T H:
WHEREAS, the directors of the Employer, as organizers of the
Bank, are seeking approval from the Comptroller of the Currency ("OCC") and the
Federal Deposit Insurance Corporation ("FDIC") to charter a national bank in
Collier County, Florida; and
WHEREAS, as of the date of this Agreement the Employer has
obtained preliminary approval from the OCC and is currently seeking approval
from the FDIC;
WHEREAS, Executive is willing to assist the directors of the
Employer in the organization of the Bank and to become the Chief Executive
Officer of the Bank and the Employer in accordance with the terms and conditions
hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual
premises and covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer employs Executive and Executive
accepts employment upon the terms and conditions set forth in this Agreement.
2. TERM. Unless earlier terminated under the provisions
of this Agreement the term of employment of Executive under this Agreement shall
be the three-year period
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commencing on April 28, 1999 ("Commencement Date"), and ending on
February 28, 2002.
3. COMPENSATION. For all services to be rendered by
Executive during the term of this Agreement, Employer agrees to pay Executive in
accordance with the terms outlined in Exhibit "A" net of applicable
withholdings.
4. TITLE AND DUTIES. Executive shall serve as Chief
Executive Officer of the Bank commencing on the Commencement Date. Executive's
duties are described on attached Exhibit "B".
5. EXTENT OF SERVICES. Commencing on the Commencement
Date, Executive shall devote his full business time, attention and energies to
the business of Employer and shall not during the term of this Agreement be
engaged in any other career which requires the attention or participation of
Executive during normal business hours of Employer, recognition being given to
the fact that Executive is expected on occasion to participate in client
development after normal business hours. However, Executive may invest his
assets in such form or manner as Executive so desires, so long as such
investments do not require his services during normal business hours in the
operation of the affairs of the companies in which such investments are made.
Executive shall notify Employer of any significant participation by him in any
trade association or similar organization.
6. EXPENSES. Executive may incur reasonable expenses for
promoting the business of the Bank, including expenses for entertainment,
travel, and similar items. Executive will be reimbursed for all such expenses
upon Executive's periodic presentation of an itemized account of such
expenditures. Executive's reimbursable expenses are further detailed on Exhibit
"A".
7. VACATIONS. Executive shall be entitled each year to a
vacation in accordance with the personnel policy established by the Bank's Board
of Directors, during which
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<PAGE> 3
time Executive's compensation shall be paid in full. Executive's vacation
allowance is further detailed on Exhibit "A".
8. EXECUTIVE BENEFITS. Without limiting or reducing any
of the Executive's rights and benefits available to Executive as an employee
under state and/or federal law, so long as Executive is employed, Executive will
be entitled to participate in the employee benefit programs offered to
Employer's employees and covering the Executive's employment and duties
including, without limitation, those rights and benefits described in Exhibit
"A" of this Agreement.
9. CONFIDENTIALITY. In Executive's position as an
employee of Employer, Executive has had and will have access to confidential
information, trade secrets and other proprietary information of vital importance
to Employer and has and will also develop relationships with customers,
employees and others who deal with Employer which are of value to Employer.
Employer requires as a condition to Executive's employment with Employer that
Executive agrees to certain restrictions as set forth below on Executive's use
of the proprietary information and valuable relationships developed during
Executive's employment with Employer. In consideration of the terms and
conditions contained herein, the parties hereby agree as follows:
9.1 Employer and Executive mutually agree and
acknowledge that Employer may entrust Executive with highly sensitive
confidential, restricted and proprietary information concerning various Business
Opportunities (as hereinafter defined), customer lists, and personnel matters.
Executive acknowledges that during Executive's employment by the Employer, he
shall bear a responsibility to Employer to protect such information from use or
disclosure that is not necessary for the performance of Executive's duties
hereunder, as an essential incident of Executive's employment with Employer.
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<PAGE> 4
9.2 For the purposes of this Section, the
following definitions shall apply.
9.2.1 "TRADE SECRET" shall mean the identity of
customers of Employer, the whole or any portion or phase of any scientific or
technical information, design, process, procedure, formula or improvement that
is valuable and secret (in the sense that it is not generally known to
competitors of Employer) and which is defined as a "trade secret" under Florida
law.
9.2.2 "CONFIDENTIAL INFORMATION" shall mean any
data or information, other than Trade Secrets, which is material to Employer and
not generally known by the public. Confidential Information shall include, but
not be limited to, Business Opportunities of Employer (as hereunder defined),
the details of this Agreement, Employer's business plans and financial
statements and projections, and the costs of the services Employer may offer or
provide to the customers they serve, to the extent such information is material
to Employer and not generally known by the public.
9.2.3 "BUSINESS OPPORTUNITIES" shall mean any
specialized information or plans of Employer concerning the provision of
financial services to the public, together with all related information
concerning the specifics of any contemplated financial services regardless of
whether Employer has contacted or communicated with such target person or
business.
9.2.4 Notwithstanding the definitions of Trade
Secrets, Confidential Information, and Business Opportunities set forth above,
Trade Secrets, Confidential Information, Business Opportunities and the
information generally subject to this Paragraph 9 and its subparts shall not
include any information:
4
<PAGE> 5
(i) that is or becomes generally known
to the public;
(ii) that is already known by Executive
or is developed by Executive after termination of employment through entirely
independent efforts;
(iii) that Executive obtains from an
independent source having a bona fide right to use and disclose such
information;
(iv) that is required to be disclosed by
law, except to the extent eligible for special treatment under an appropriate
protective order; or
(v) that Employer's Board of Directors
approves for release.
9.3 Executive shall not, without the prior
approval of Employer's Board, during his employment with Employer and for a
period of one (1) year from the last day of his providing full services under
his employment with the Employer use or disclose, to any unauthorized person who
is not an employee of Employer, any Trade Secrets and/or Confidential
Information of Employer, its subsidiaries or affiliates, or of any other person
or entity making Trade Secrets and/or Confidential Information available for
Employer's use unless said Trade Secrets and/or Confidential Information ceases
to be a Trade Secret and/or unless the Employer ceases to do business in Collier
County, Florida, in which case these restrictions on disclosure and use shall
not apply.
10. OBSERVANCE OF SECURITY MEASURES. During Executive's
employment with Employer, Executive is required to observe all security measures
adopted to protect Trade Secrets, Confidential Information, and Business
Opportunity of Employer.
5
<PAGE> 6
11. CHANGE IN CONTROL OF THE EMPLOYER.
11.1 In the event of a "change in control" of the
Employer, as defined hereinafter, Executive shall be entitled at any time up to
thirty (30) days prior to the date of closing of the transaction (the "Election
Date") which will affect such change in control (the "Change-in-Control Date")
and at his election, to give written notice to Employer of termination of this
Agreement, and Executive shall be paid, in addition to all accrued but unpaid
Base Salary (which is to be paid as earned) and Performance Bonuses (which are
to be paid as provided in this Agreement), a lump sum cash payment in the amount
stated in Paragraph J of Exhibit "A" (the "Change-in-Control Payment"). The
Change-in-Control payment provided for in this Section 11.1 shall be
unconditional and without setoff of any kind and paid in cash, not later than
ten (10) days after the date of notice of termination by Executive under this
Section 11.1 or on the Change-in-Control Date, whichever is later provided;
however, that such Change-in-Control Payment shall in no event be paid later
than ninety (90) days from the date of the notice of termination by Executive.
Additionally, the Change-in-Control Payment shall be made to Executive as a
condition precedent to the closing of the transaction which will effect the
change in control, and prior to the Change-in-Control Date Employer shall notify
representatives of the acquiring or successor entity, as the case may be, of
Executive's rights and Employer's obligations under this Agreement, including
without limitation this paragraph, and without effecting Employer's obligations
to pay Executive hereunder, any such acquiring or successor entity shall become
obligated to forthwith pay to Executive for such part of the Change-in-Control
Payment as has not been paid by the Employer as of the Change-in-Control Date.
11.2 In addition to the foregoing and
notwithstanding any provision to the contrary or otherwise in this Agreement, in
the event of a change in control of Employer (as defined hereinafter), all
options and other stock rights of the Executive, whether under this Agreement or
otherwise (including, but not limited to the accrual of stock options not yet
issued
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<PAGE> 7
to Executive, but to which Executive is entitled), shall be automatically and
without further documentation immediately vest in executive, and Executive shall
have the immediate and unfettered right to take any and all actions as Executive
shall deem appropriate with regard to said options and/or rights, including
without limitation the immediate right to receive unissued, but accrued stock
options, exercise stock options and/or transfer or sell stock. Employer shall
take all actions necessary to immediately issue any stock options which have
accrued but have not yet been issued.
11.3 If Executive elects to terminate this
Agreement pursuant to this Section 11, then Executive shall further be entitled,
in lieu of the receipt of shares of Common Stock of the Employer issuable upon
exercise of Executive's stock options, whether such options arose under this
Agreement or otherwise, to receive from Employer an amount in cash or Common
Stock of the Employer (or any combination thereof) as Executive shall in his
sole discretion designate (hereinafter "like-kind election") equal to the excess
of the fair market value (hereinafter defined) as of the Change-in-Control Date
of each share of Common Stock over the exercise price(s) of each share
represented by Executive's options, times the number of shares of Common Stock
represented by such options. The "fair market value" of each share of the Common
Stock shall be equal to the higher of (i) the value as determined by the Board
of Directors of the Employer if there is no organized trading market for the
shares at the time such determination is made, or (ii) the closing price per
share as of the date of the like-kind election (or the average of the bid and
asked prices if no closing price is available) on any nationally recognized
securities exchange or association on which the Employer's shares may be quoted
or listed, or (iii) the highest per share price actually paid for Common Stock
in connection with any change in control of the Employer, or (iv) the book value
of the shares of the Common Stock as determined by Sheshunoff or Keefe, Bruyette
and Woods, or similarly qualified entity or (v) the price being paid for each
share of Common Stock as part of the Change-in-Control. The payment provided for
in this Section 11.2 shall be paid in full not later than ten (10) days after
the date of the Change-in-Control Notice
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<PAGE> 8
by Executive under this Section 11 or on the Change-of-Control Date,
whichever is later.
11.4 For purposes of this Section 11, "change in
control" of the Employer shall mean the first to occur of any one or more of the
following:
(i) any transaction, whether by merger,
consolidation, asset sale,
recapitalization, reorganization,
combination, stock purchase, tender
offer, reverse stock split, or
otherwise, which results in the
acquisition of, or beneficial
ownership (as such term is defined
under rules and regulations
promulgated under the Securities
Exchange Act of 1934, as amended)
by, any person or entity or any
group of persons or entities acting
in concert, of 50% or more of the
outstanding shares of Common Stock
of the Employer, or
(ii) the sale of all or substantially
all of the assets of the Employer;
or
(iii) the liquidation of the Employer or
a material amount of Employer's
assets; or
(iv) the takeover or control of all or
substantially all of the operations
of Employer through any of the
means specified in 11.4 (i) above;
or
(v) the approval by the Board of
Directors and the holders of a
majority of the Common Shares then
outstanding of any of the events or
transactions listed in 11.4 (i) -
(iv) above.
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<PAGE> 9
12. RETURN OF MATERIALS Upon the termination of his
employment with Employer, Executive shall deliver to Employer all memoranda,
notes, records, manuals or other documents, including all copies of such
materials, pertaining to the performance of Executive's services hereunder or
containing Trade Secrets or Confidential Information, whether made or compiled
by Executive or furnished to him from any source by virtue of his employment
with Employer.
13. SEVERABILITY. Executive acknowledges and agrees that
the covenants contained in Sections 9 through 12 of this Agreement shall be
construed as covenants independent of one another and distinct from the
remaining terms and conditions of this Agreement, and severable from every other
contract and course of business between Employer and Executive, and that the
existence of any claim, suit or action by Executive against Employer, whether
predicated upon this or any other agreement, shall not constitute a defense to
Employer's enforcement of any covenant contained in Sections 9 through 12 of
this Agreement. Likewise, the existence of any claim, suit and/or action by
Employer against Executive, whether predicated on this or any other agreement,
shall not act as, constitute or permit a setoff or defense to Employer's
obligations under this Agreement.
14. SPECIFIC PERFORMANCE. Executive acknowledges and
agrees that except as otherwise stated, the covenants contained in Sections 9
and 12 of this Agreement shall survive any termination of employment, as
applicable, with or without Cause, at the instigation or upon the initiative of
either party. Executive further acknowledges and agrees that the ascertainment
of damages in the event of Executive's breach of any covenant contained in
Sections 9 and 12 of this Agreement would be difficult, if at all possible.
Executive therefore acknowledges and agrees that Employer shall be entitled in
addition to and not in limitation of any other rights, remedies, or damages
available to Employer in arbitration, at law or in equity, upon submitting
whatever affidavit the law may require, and posting any necessary bond, to have
a court of
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<PAGE> 10
competent jurisdiction enjoin Executive from committing any such breach of the
covenants stated in paragraphs 9 and 12.
15. TERMINATION.
15.1 FOR CAUSE. This Agreement may be terminated
for any of the following reasons by the Board of Directors of the Employer
"for cause," but only after giving Executive written notice of the Board's
intent to terminate Executive setting forth all matters constituting "cause"
and further giving thirty (30) days or, if cure is not able to be completed
in thirty (30) days, (or, if cure is not able to be completed in thirty (30)
days after the exercise of due diligence, such longer period as is reasonably
necessary), to cure the matters giving rise to the "for cause" termination:
(i) gross negligence or willful
misconduct of Executive materially
damaging to the business of the
Employer during the term of this
Agreement, or at any time while he
was employed by the Employer prior
to the term of this Agreement, if
not disclosed to the Employer prior
to the commencement of the term of
this Agreement; or
(ii) conviction of Executive during the
term of this Agreement of a crime
involving breach of trust or moral
turpitude.
In the event that the Employer discharges Executive
alleging "cause" under this Section 15.1 and it is subsequently determined
judicially that the termination was "without cause," then such discharge shall
be deemed a discharge without cause subject to the provisions of Section 15.2
hereof. In the event that Executive fails to cure those matters giving rise to
the "for cause" termination, then upon Employer's discharge of Executive for
"cause" under this Section 15.1, such notice of discharge shall be accompanied
by a written and specific description of the circumstances constituting such
"cause" (hereinafter "Notice of Discharge.")
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<PAGE> 11
Upon termination for cause, Executive shall be paid not later
than the thirtieth day following the date of the written notice of discharge for
cause, without setoff or deduction all accrued but unpaid Base Salary and
Performance Bonuses, and Executive shall further have those rights stated in
Section 15.3 below.
15.2 WITHOUT CAUSE.
(i) The Employer may, upon thirty (30)
days' written notice ("Notice of
Termination") to Executive,
terminate this Agreement without
cause at any time during the term
of this Agreement upon the
condition that Executive shall be
paid without setoff or deduction
(i) all Base Salary and Performance
Bonuses accrued, but not yet paid,
plus, (ii), as liquidated damages
in lieu of any claim by Executive
for damages arising out of early
termination an amount equal to the
Change-in-Control Payments as
provided in Paragraph J of Exhibit
"A" hereof, and Executive shall
have the right to a like-kind
election as described in 11.3
above; provided, however, that for
purposes of determining the fair
market value of Common Stock, such
fair market value shall be
determined as of the date of Notice
of Termination without cause of
this Agreement given by the
Employer to Executive.
Additionally, in the event of a
without cause termination,
Executive shall have all of the
rights and benefits provided for in
Section 15.3 below.
The payment provided for in
this Section 15.2 shall be made to
Executive not later than the
thirtieth day following the date
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of the Notice of Termination of
employment of Executive. In the
event of termination by Employer
without cause, Employer shall have
no right to enforce the terms and
conditions of the non-competition
and non-solicitation covenants in
Section 17 hereof and such
provisions shall not be binding
upon Executive.
(ii) Executive may upon thirty (30)
days' written notice ("Notice of
Termination") to Employer terminate
this Agreement without cause at any
time during the term of this
Agreement. In the event of
termination of this Agreement by
Executive, then Executive shall
have all of the same rights that
Executive would have had if
Employer had terminated without
cause except that the Employer
shall have no obligation to pay to
Executive an amount equal to the
Change-in-Control Payment. However,
Employer shall be obligated to pay,
within thirty (30) days of
Additionally, Executive's notice of
termination without cause all Base
Salary and Performance Bonuses
accrued, but not yet paid to
Executive, and the Employer shall
be entitled to enforcement of the
non-competition and
non-solicitation covenants
contained in Section 17 hereof.
Additionally, Executive shall have
and retain those rights specified
in Section 15.3 below.
15.3 In the event this Agreement is
terminated with or without cause,
and, if without cause whether by
Executive or by the
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Employer, all of the Executive's
stock options including any options
which have accrued but not yet been
issued to Executive ("Accrued
Options"), and any unexercised
portion thereof, granted pursuant
to this Agreement or otherwise
whether or not vested on the date
of termination, may be exercised by
Executive within thirty (30) days
from the date of termination, at
which time all such options that
have not been so exercised shall
expire; provided, however, that in
the case of Accrued Options,
Executive shall have 30 days from
the date of issuance of the options
to exercise the same.
16. DEATH OR DISABILITY. In the event of Executive's
disability or death, Executive shall have all of the same rights as if he had
been terminated "without cause" and Employer shall pay to Executive (in the case
of disability) or (in the case of death), Executive's designated beneficiary,
or, if Executive has failed to designate a beneficiary, to his estate those
amounts specified under Section 15.2 (i) and (ii) above for a "without cause"
termination and Executive shall also have all of the benefits provided under
15.3 except that in the case of disability or death, all unvested options shall
immediately vest, and the time for exercising the options shall be within 365
days from the date of disability (as defined below) or death. In the event of a
change in control of the Employer after Executive's death or disability as
defined herein, Executive or Executive's designated beneficiary or his estate,
as the case may be, shall be entitled to the rights, payments, and benefits of
Sections 11.1, 11.2 and 11.3 hereof. The Employer may maintain insurance on its
behalf to satisfy in whole or in part the obligations of Employer under this
Section 16.
16.1 DISABILITY - means:
(i) Solely due to injury or Sickness and for a
consecutive period of ninety (90) days:
(a) your ability to work is restricted,
resulting in the Loss of Earnings; or
(b) you are unable to perform the substantial
and material duties of your regular occupation in which you were engaged just
prior to the Disability; or
(c) your state licensing board has restricted
your ability to perform your occupation as a health care practitioner as a
result of testing positive on a human immunodeficiency virus test; and
(d) your Loss of Earnings is 20% or more of
your Prior Earnings.
(ii) You are receiving care from a Doctor which is
appropriate for the condition causing your Disability. We will waive this
requirement when continued care would be of no benefit to you.
If a Disability is caused by more than one
injury or Sickness, we will pay benefits as if the Disability were caused by
only one injury or Sickness.
16.2 DOCTOR - means a medical practitioner who is legally
licensed to practice under state law, and not yourself, the Owner, or the Loss
Payee.
16.3 EARNINGS - means income you earn for labor or
services performed. This includes salary, wages, fees, draws, commissions, and
other compensation (excluding Stock Options) you receive. If you are
self-employed, this is not income after deducting your normal and customary
business expenses. These expenses must be reasonable and must not exceed
expenses before Disability began. They must be deductible for Federal Income
Tax purposes.
16.4 Identifiable contributions for you to any tax
qualified retirement, annuity, salary reduction, or deferred compensation plan,
whether employer sponsored or individually owned, or to any non-qualified
deferred compensation plan are considered Earnings if they are:
(i) Made either by you or on your behalf; and
(ii) Not waived by contract during your Disability.
16.5 During any period Earnings:
(i) Will include all income for services performed
during that period, whether or not received; but
(ii) Will not include income for services performed
prior to that period, regardless of when received.
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17. NON-COMPETITION AND NON-SOLICITATION.
17.1 Executive acknowledges that he has performed
services or will perform services hereunder which directly affect Employer's
business. Accordingly, the parties deem it necessary to enter into the
protective agreement set forth below, the terms and conditions of which have
been negotiated by and between the parties hereto.
17.2 In the event of termination of employment
under this Agreement pursuant to Section 15 prior to the expiration of the term
of this Agreement, Executive agrees with Employer that through the actual date
of termination of the Agreement, and for a period of twelve (12) months after
such termination date, Executive shall not, without the prior written consent of
Employer, within Collier and Lee County, Florida either directly or indirectly,
serve as an officer, independent contractor, employee, Director of any bank,
bank holding company or other financial institution.
17.3 The covenants of Executive set forth in this
Section 17 are separate and independent covenants for which valuable
consideration has been paid, the receipt, adequacy and sufficiency of which are
acknowledged by Executive, and have also been made by Executive to induce
Employer to enter into this Agreement. Further, each of the aforesaid covenants
may be availed of or relied upon by Employer in any court of competent
jurisdiction, and shall form the basis of injunctive relief and damages
including expenses of litigation (including but not limited to reasonable
attorney's fees) suffered by Employer arising out of any breach of the aforesaid
covenants by Executive. The covenants of Executive set forth in this Section 17
are cumulative to each other and to all other covenants of Executive in favor of
Employer contained in this Agreement and shall survive the termination of this
Agreement for the purposes intended.
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Should any covenant, term, or condition contained in this Section 17 become or
be declared invalid or unenforceable by a court of competent jurisdiction, then
the parties may request that such court judicially modify such unenforceable
provision consistent with the intent of this Section 17 so that it shall be
enforceable as modified, and in any event the invalidity of any provision of
this Section 17 shall not affect the validity of any other provision in this
Section 17 or elsewhere in this Agreement.
17.4 Notwithstanding anything to the contrary in
this Section 17, this Agreement or otherwise, in the event that Employer ceases
to operate as a Bank in Collier County, then the provisions of Section 17.1 -
17.3 shall no longer apply to Executive.
18. NOTICES. Any notice required or desired to be given
under this Agreement shall be deemed given if in writing sent by certified mail
to his residence in the case of Executive, or to its principal office in the
case of Employer.
19. WAIVER OF BREACH. The waiver by Employer or
Executive, as the case may be, of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach by the
breaching party. No waiver shall be valid unless in writing and signed by an
authorized officer of Employer or Executive, as the case may be.
20. ASSIGNMENT. Executive acknowledges that the services
to be rendered by him are unique and personal. Accordingly, Executive may not
assign any of his rights or delegate any of his duties or obligations under this
Agreement. The rights and obligations of Executive under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
Employer.
21. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida.
22. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto regarding employment of Executive, and
supersedes and replaces any prior
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agreement relating thereto. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
EMPLOYER
Dated: 4/28/99 /s/ Joe B. Cox
------------- ----------------------------------------
EXECUTIVE
Dated: 4/28/99 /s/ Michael L. McMullan
-------------- ----------------------------------------
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EXHIBIT "A"
EXECUTIVE COMPENSATION
FOR
CHIEF EXECUTIVE OFFICER
A. SALARY. For all services rendered by Executive, Executive shall receive
a minimum annual base salary of $140,000.00 ("Base Salary"), payable in equal
semi-monthly installments during the term of this Agreement. Base Salary
payments shall be subject to withholding and other applicable taxes. Annual
salary reviews shall take place on each anniversary of this Agreement during the
term hereof.
B. BONUS. Beginning December 31, 1999, and at the end of each calendar
year of the Employer, in addition to Executive's Base Salary, Executive shall be
paid performance bonuses ("Performance Bonuses") based upon good faith written
annual goals for Executive established with Executive's input by the Board of
Directors and given to the Executive at least 30 days before January 1st of the
year for which the goals apply (hereinafter "Performance Goals") except that for
the year 1999, such goals shall be established and given to Executive by no
later than March 31, 1999. The payment of Performance Bonuses pursuant to this
Section (B) shall be contingent upon the following:
(a) As of the calendar year end in question, the overall condition
of the Bank must be "satisfactory" in the opinion of the OCC as set forth in the
most current OCC Report of Supervisory Activity provided to the Board of
Directors of the Bank and the Uniform Financial Institution Rating of the Bank
shall not be less than a "3"; and
(b) As of the calendar year end in question, the Bank shall be
"adequately capitalized" as defined under regulations promulgated by the OCC
pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991;
and
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(c) The Bank shall be profitable, and
(d) No bonus shall exceed 40% of the Executive's Base Salary.
When the contingencies stated in sub-paragraphs B (a), (b) and
(c) above have been met, but in no instance beyond 45 days from each calendar
year-end, the Employer shall set the Performance Bonus amounts based upon the
following criteria:
1. Goals being set by the Board of Directors and goals met;
2. Deposit goals set by the Board of Directors and goals met;
3. Loan goals set by the Board of Directors and goals met;
4 Expense control goals set by the Board of Directors and
goals met. The Performance Goals shall be part of the annual business plans
prior to the expiration of each calendar year for the next ensuing calendar
year, except that the business plan and Performance Goals for 1999 shall be
completed prior to March 31, 1999. In each business plan, each of the above
criteria will be assigned specific percentage bonus (in relation to the
Executive's Base Salary) and each percentage (or, such portion of each
percentage if a specific criteria has not been fully met) shall be paid to
Executive annually, but in no event beyond fifty (50) days from each calendar
year end.
C. STOCK OPTION PLAN: Upon the Commencement Date, Employer shall grant and
transfer to Executive options to purchase 30,000 shares of Common Stock of
Employer at an exercise price of ten dollars ($10.00) per share. Unless sooner
vested as a result of other terms of this or any other Agreement, twenty percent
(20%) of these options shall vest on December 31, 1999 and twenty percent (20%)
shall vest on December 31st of each of the successive four years. All
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options shall be exercisable for a period of 10 years from the date of grant.
The provisions of this paragraph shall not in any way limit the availability of
additional options to Executive.
D. AUTO ALLOWANCE: Executive will be given $650.00 per month for the cost
of his automobile operations and normal maintenance.
E. CLUB MEMBERSHIP: Golf membership at a country club to be determined.
F. EXPENSE ACCOUNT: Legitimate and customary business related expenses.
G. VACATION: FOUR: Four weeks paid vacation.
H. HEALTH INSURANCE:* Family coverage comparable to or better than
Executive's health insurance coverage while Executive employed at Nationsbank,
N.A.
I. CONTINUING EDUCATION: Required continuing education shall be paid for
by Employer. Payment for optional education for Executive shall be determined
annually.
J. CHANGE IN CONTROL PAYMENTS: Two and one-half (2 1/2) times the
then-applicable annual Base Salary.
K. LIFE INSURANCE:* Death benefit equal to two (2) times Executive's
annual Base Salary.
L. DISABILITY INSURANCE: * Coverage comparable to or better than
Executive's coverage while Executive employed at Nationsbank, N.A.
M.
* All insurance policies shall be issued by companies which are not insurance
trusts (or their equivalent) and which are A rated or the equivalent of an A
rating or better.
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
FOR
PRESIDENT
THIS AGREEMENT, dated as of the 28th day of March, 1999, by
and among Citizens Bancshares of Southwest Florida, Inc., a Florida corporation
(the "Employer"), Citizens National Bank of Southwest Florida (Proposed), a
proposed national bank to be organized under the laws of the United States (the
"Bank") (the Employer and the Bank are collectively referred to herein as the
"Employer"), and Polly M. Rogers, ("Executive").
W I T N E S S E T H:
WHEREAS, the directors of the Employer, as organizers of the
Bank, are seeking approval from the Comptroller of the Currency ("OCC") and the
Federal Deposit Insurance Corporation ("FDIC") to charter a national bank in
Collier County, Florida; and
WHEREAS, as of the date of this Agreement the Employer has
obtained preliminary approval from the OCC and is currently seeking approval
from the FDIC;
WHEREAS, Executive is willing to assist the directors of the
Employer in the organization of the Bank and to become the Chief Executive
Officer of the Bank and the Employer in accordance with the terms and conditions
hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual
premises and covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer employs Executive and Executive
accepts employment upon the terms and conditions set forth in this Agreement.
2. TERM. Unless earlier terminated under the provisions
of this Agreement the term of employment of Executive under this Agreement shall
be the one-year period
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commencing on April 28, 1999 ("Commencement Date"), and ending on
April 28, 2000.
3. COMPENSATION. For all services to be rendered by
Executive during the term of this Agreement, Employer agrees to pay Executive in
accordance with the terms outlined in Exhibit "A" net of applicable
withholdings.
4. TITLE AND DUTIES. Executive shall serve as President
of the Bank commencing on the Commencement Date. Executive's duties are
described on attached Exhibit "B".
5. EXTENT OF SERVICES. Commencing on the Commencement
Date, Executive shall devote his full business time, attention and energies to
the business of Employer and shall not during the term of this Agreement be
engaged in any other career which requires the attention or participation of
Executive during normal business hours of Employer, recognition being given to
the fact that Executive is expected on occasion to participate in client
development after normal business hours. However, Executive may invest his
assets in such form or manner as Executive so desires, so long as such
investments do not require his services during normal business hours in the
operation of the affairs of the companies in which such investments are made.
Executive shall notify Employer of any significant participation by him in any
trade association or similar organization.
6. EXPENSES. Executive may incur reasonable expenses for
promoting the business of the Bank, including expenses for entertainment,
travel, and similar items. Executive will be reimbursed for all such expenses
upon Executive's periodic presentation of an itemized account of such
expenditures. Executive's reimbursable expenses are further detailed on Exhibit
"A".
7. VACATIONS. Executive shall be entitled each year to a
vacation in accordance with the personnel policy established by the Bank's Board
of Directors, during which
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time Executive's compensation shall be paid in full. Executive's vacation
allowance is further detailed on Exhibit "A".
8. EXECUTIVE BENEFITS. Without limiting or reducing any
of the Executive's rights and benefits available to Executive as an employee
under state and/or federal law, so long as Executive is employed, Executive will
be entitled to participate in the employee benefit programs offered to
Employer's employees and covering the Executive's employment and duties
including, without limitation, those rights and benefits described in Exhibit
"A" of this Agreement.
9. CONFIDENTIALITY. In Executive's position as an
employee of Employer, Executive has had and will have access to confidential
information, trade secrets and other proprietary information of vital importance
to Employer and has and will also develop relationships with customers,
employees and others who deal with Employer which are of value to Employer.
Employer requires as a condition to Executive's employment with Employer that
Executive agrees to certain restrictions as set forth below on Executive's use
of the proprietary information and valuable relationships developed during
Executive's employment with Employer. In consideration of the terms and
conditions contained herein, the parties hereby agree as follows:
9.1 Employer and Executive mutually agree and
acknowledge that Employer may entrust Executive with highly sensitive
confidential, restricted and proprietary information concerning various Business
Opportunities (as hereinafter defined), customer lists, and personnel matters.
Executive acknowledges that during Executive's employment by the Employer, he
shall bear a responsibility to Employer to protect such information from use or
disclosure that is not necessary for the performance of Executive's duties
hereunder, as an essential incident of Executive's employment with Employer.
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9.2 For the purposes of this Section, the
following definitions shall apply.
9.2.1 "TRADE SECRET" shall mean the identity of
customers of Employer, the whole or any portion or phase of any scientific or
technical information, design, process, procedure, formula or improvement that
is valuable and secret (in the sense that it is not generally known to
competitors of Employer) and which is defined as a "trade secret" under Florida
law.
9.2.2 "CONFIDENTIAL INFORMATION" shall mean any
data or information, other than Trade Secrets, which is material to Employer and
not generally known by the public. Confidential Information shall include, but
not be limited to, Business Opportunities of Employer (as hereunder defined),
the details of this Agreement, Employer's business plans and financial
statements and projections, and the costs of the services Employer may offer or
provide to the customers they serve, to the extent such information is material
to Employer and not generally known by the public.
9.2.3 "BUSINESS OPPORTUNITIES" shall mean any
specialized information or plans of Employer concerning the provision of
financial services to the public, together with all related information
concerning the specifics of any contemplated financial services regardless of
whether Employer has contacted or communicated with such target person or
business.
9.2.4 Notwithstanding the definitions of Trade
Secrets, Confidential Information, and Business Opportunities set forth above,
Trade Secrets, Confidential Information, Business Opportunities and the
information generally subject to this Paragraph 9 and its subparts shall not
include any information:
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(i) that is or becomes generally known
to the public;
(ii) that is already known by Executive
or is developed by Executive after termination of employment through entirely
independent efforts;
(iii) that Executive obtains from an
independent source having a bona fide right to use and disclose such
information;
(iv) that is required to be disclosed by
law, except to the extent eligible for special treatment under an appropriate
protective order; or
(v) that Employer's Board of Directors
approves for release.
9.3 Executive shall not, without the prior
approval of Employer's Board, during his employment with Employer and for a
period of one (1) year from the last day of his providing full services under
his employment with the Employer use or disclose, to any unauthorized person who
is not an employee of Employer, any Trade Secrets and/or Confidential
Information of Employer, its subsidiaries or affiliates, or of any other person
or entity making Trade Secrets and/or Confidential Information available for
Employer's use unless said Trade Secrets and/or Confidential Information ceases
to be a Trade Secret and/or unless the Employer ceases to do business in Collier
County, Florida, in which case these restrictions on disclosure and use shall
not apply.
10. OBSERVANCE OF SECURITY MEASURES. During Executive's
employment with Employer, Executive is required to observe all security measures
adopted to protect Trade Secrets, Confidential Information, and Business
Opportunity of Employer.
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11. CHANGE IN CONTROL OF THE EMPLOYER.
11.1 In the event of a "change in control" of the
Employer, as defined hereinafter, Executive shall be entitled at any time up to
thirty (30) days prior to the date of closing of the transaction (the "Election
Date") which will affect such change in control (the "Change-in-Control Date")
and at his election, to give written notice to Employer of termination of this
Agreement, and Executive shall be paid, in addition to all accrued but unpaid
Base Salary (which is to be paid as earned) and Performance Bonuses (which are
to be paid as provided in this Agreement), a lump sum cash payment in the amount
stated in Paragraph J of Exhibit "A" (the "Change-in-Control Payment"). The
Change-in-Control payment provided for in this Section 11.1 shall be
unconditional and without setoff of any kind and paid in cash, not later than
ten (10) days after the date of notice of termination by Executive under this
Section 11.1 or on the Change-in-Control Date, whichever is later provided;
however, that such Change-in-Control Payment shall in no event be paid later
than ninety (90) days from the date of the notice of termination by Executive.
Additionally, the Change-in-Control Payment shall be made to Executive as a
condition precedent to the closing of the transaction which will effect the
change in control, and prior to the Change-in-Control Date Employer shall notify
representatives of the acquiring or successor entity, as the case may be, of
Executive's rights and Employer's obligations under this Agreement, including
without limitation this paragraph, and without effecting Employer's obligations
to pay Executive hereunder, any such acquiring or successor entity shall become
obligated to forthwith pay to Executive for such part of the Change-in-Control
Payment as has not been paid by the Employer as of the Change-in-Control Date.
11.2 In addition to the foregoing and
notwithstanding any provision to the contrary or otherwise in this Agreement, in
the event of a change in control of Employer (as defined hereinafter), all
options and other stock rights of the Executive, whether under this Agreement or
otherwise (including, but not limited to the accrual of stock options not yet
issued
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to Executive, but to which Executive is entitled), shall be automatically and
without further documentation immediately vest in executive, and Executive shall
have the immediate and unfettered right to take any and all actions as Executive
shall deem appropriate with regard to said options and/or rights, including
without limitation the immediate right to receive unissued, but accrued stock
options, exercise stock options and/or transfer or sell stock. Employer shall
take all actions necessary to immediately issue any stock options which have
accrued, but have not yet been issued.
11.3 If Executive elects to terminate this
Agreement pursuant to this Section 11, then Executive shall further be entitled,
in lieu of the receipt of shares of Common Stock of the Employer issuable upon
exercise of Executive's stock options, whether such options arose under this
Agreement or otherwise, to receive from Employer an amount in cash or Common
Stock of the Employer (or any combination thereof) as Executive shall in his
sole discretion designate (hereinafter "like-kind election") equal to the excess
of the fair market value (hereinafter defined) as of the Change-in-Control Date
of each share of Common Stock over the exercise price(s) of each share
represented by Executive's options, times the number of shares of Common Stock
represented by such options. The "fair market value" of each share of the Common
Stock shall be equal to the higher of (i) the value as determined by the Board
of Directors of the Employer if there is no organized trading market for the
shares at the time such determination is made, or (ii) the closing price per
share as of the date of the like-kind election (or the average of the bid and
asked prices if no closing price is available) on any nationally recognized
securities exchange or association on which the Employer's shares may be quoted
or listed, or (iii) the highest per share price actually paid for Common Stock
in connection with any change in control of the Employer, or (iv) the book value
of the shares of the Common Stock as determined by Sheshunoff or Keefe, Bruyette
and Woods, or similarly qualified entity or (v) the price being paid for each
share of Common Stock as part of the Change-in-Control. The payment provided for
in this Section 11.2 shall be paid in full not later than ten (10) days after
the date of the Change-in-Control Notice
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by Executive under this Section 11 or on the Change-of-Control Date,
whichever is later.
11.4 For purposes of this Section 11, "change in
control" of the Employer shall mean the first to occur of any one or more of the
following:
(i) any transaction, whether by merger,
consolidation, asset sale,
recapitalization, reorganization,
combination, stock purchase, tender
offer, reverse stock split, or
otherwise, which results in the
acquisition of, or beneficial
ownership (as such term is defined
under rules and regulations
promulgated under the Securities
Exchange Act of 1934, as amended)
by, any person or entity or any
group of persons or entities acting
in concert, of 50% or more of the
outstanding shares of Common Stock
of the Employer, or
(ii) the sale of all or substantially
all of the assets of the Employer;
or
(iii) the liquidation of the Employer or
a material amount of Employer's
assets; or
(iv) the takeover or control of all or
substantially all of the operations
of Employer through any of the
means specified in 11.4 (i) above;
or
(v) the approval by the Board of
Directors and the holders of a
majority of the Common Shares then
outstanding of any of the events or
transactions listed in 11.4 (i) -
(iv) above.
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12. RETURN OF MATERIALS Upon the termination of his
employment with Employer, Executive shall deliver to Employer all memoranda,
notes, records, manuals or other documents, including all copies of such
materials, pertaining to the performance of Executive's services hereunder or
containing Trade Secrets or Confidential Information, whether made or compiled
by Executive or furnished to him from any source by virtue of his employment
with Employer.
13. SEVERABILITY. Executive acknowledges and agrees that
the covenants contained in Sections 9 through 12 of this Agreement shall be
construed as covenants independent of one another and distinct from the
remaining terms and conditions of this Agreement, and severable from every other
contract and course of business between Employer and Executive, and that the
existence of any claim, suit or action by Executive against Employer, whether
predicated upon this or any other agreement, shall not constitute a defense to
Employer's enforcement of any covenant contained in Sections 9 through 12 of
this Agreement. Likewise, the existence of any claim, suit and/or action by
Employer against Executive, whether predicated on this or any other agreement,
shall not act as, constitute or permit a setoff or defense to Employer's
obligations under this Agreement.
14. SPECIFIC PERFORMANCE. Executive acknowledges and
agrees that except as otherwise stated, the covenants contained in Sections 9
and 12 of this Agreement shall survive any termination of employment, as
applicable, with or without Cause, at the instigation or upon the initiative of
either party. Executive further acknowledges and agrees that the ascertainment
of damages in the event of Executive's breach of any covenant contained in
Sections 9 and 12 of this Agreement would be difficult, if at all possible.
Executive therefore acknowledges and agrees that Employer shall be entitled in
addition to and not in limitation of any other rights, remedies, or damages
available to Employer in arbitration, at law or in equity, upon submitting
whatever affidavit the law may require, and posting any necessary bond, to have
a court of
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competent jurisdiction enjoin Executive from committing any such breach of the
covenants stated in paragraphs 9 and 12.
15. TERMINATION.
15.1 FOR CAUSE. This Agreement may be terminated
for any of the following reasons by the Board of Directors of the Employer
"for cause," but only after giving Executive written notice of the Board's
intent to terminate Executive setting forth all matters constituting "cause"
and further giving thirty (30) days or, if cure is not able to be completed
in thirty (30) days, (or, if cure is not able to be completed in thirty (30)
days after the exercise of due diligence, such longer period as is reasonably
necessary), to cure the matters giving rise to the "for cause" termination:
(i) gross negligence or willful
misconduct of Executive materially
damaging to the business of the
Employer during the term of this
Agreement, or at any time while he
was employed by the Employer prior
to the term of this Agreement, if
not disclosed to the Employer prior
to the commencement of the term of
this Agreement; or
(ii) conviction of Executive during the
term of this Agreement of a crime
involving breach of trust or moral
turpitude.
In the event that the Employer discharges Executive
alleging "cause" under this Section 15.1 and it is subsequently determined
judicially that the termination was "without cause," then such discharge shall
be deemed a discharge without cause subject to the provisions of Section 15.2
hereof. In the event that Executive fails to cure those matters giving rise to
the "for cause" termination, then upon Employer's discharge of Executive for
"cause" under this Section 15.1, such notice of discharge shall be accompanied
by a written and specific description of the circumstances constituting such
"cause" (hereinafter "Notice of Discharge.")
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Upon termination for cause, Executive shall be paid not later
than the thirtieth day following the date of the written notice of discharge for
cause, without setoff or deduction all accrued but unpaid Base Salary and
Performance Bonuses, and Executive shall further have those rights stated in
Section 15.3 below.
15.2 WITHOUT CAUSE.
(i) The Employer may, upon thirty (30)
days' written notice ("Notice of
Termination") to Executive,
terminate this Agreement without
cause at any time during the term
of this Agreement upon the
condition that Executive shall be
paid without setoff or deduction
(i) all Base Salary and Performance
Bonuses accrued, but not yet paid,
plus, (ii), as liquidated damages
in lieu of any claim by Executive
for damages arising out of early
termination an amount equal to the
Change-in-Control Payments as
provided in Paragraph J of Exhibit
"A" hereof, and Executive shall
have the right to a like-kind
election as described in 11.3
above; provided, however, that for
purposes of determining the fair
market value of Common Stock, such
fair market value shall be
determined as of the date of Notice
of Termination without cause of
this Agreement given by the
Employer to Executive.
Additionally, in the event of a
without cause termination,
Executive shall have all of the
rights and benefits provided for in
Section 15.3 below.
The payment provided for in
this Section 15.2 shall be made to
Executive not later than the
thirtieth day following the date
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of the Notice of Termination of
employment of Executive. In the
event of termination by Employer
without cause, Employer shall have
no right to enforce the terms and
conditions of the non-competition
and non-solicitation covenants in
Section 17 hereof and such
provisions shall not be binding
upon Executive.
(ii) Executive may upon thirty (30)
days' written notice ("Notice of
Termination") to Employer terminate
this Agreement without cause at any
time during the term of this
Agreement. In the event of
termination of this Agreement by
Executive, then Executive shall
have all of the same rights that
Executive would have had if
Employer had terminated without
cause except that the Employer
shall have no obligation to pay to
Executive an amount equal to the
Change-in-Control Payment. However,
Employer shall be obligated to pay,
within thirty (30) days of
Additionally, Executive's notice of
termination without cause all Base
Salary and Performance Bonuses
accrued, but not yet paid to
Executive, and the Employer shall
be entitled to enforcement of the
non-competition and
non-solicitation covenants
contained in Section 17 hereof.
Additionally, Executive shall have
and retain those rights specified
in Section 15.3 below.
15.3 In the event this Agreement is
terminated with or without cause,
and, if without cause whether by
Executive or by the
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Employer, all of the Executive's
stock options including any options
which have accrued but not yet been
issued to Executive ("Accrued
Options"), and any unexercised
portion thereof, granted pursuant
to this Agreement or otherwise
whether or not vested on the date
of termination, may be exercised by
Executive within thirty (30) days
from the date of termination, at
which time all such options that
have not been so exercised shall
expire; provided, however, that in
the case of Accrued Options,
Executive shall have 30 days from
the date of issuance of the options
to exercise the same.
16. DEATH OR DISABILITY. In the event of Executive's
disability or death, Executive shall have all of the same rights as if he had
been terminated "without cause" and Employer shall pay to Executive (in the case
of disability) or (in the case of death), Executive's designated beneficiary,
or, if Executive has failed to designate a beneficiary, to his estate those
amounts specified under Section 15.2 (i) and (ii) above for a "without cause"
termination and Executive shall also have all of the benefits provided under
15.3 except that in the case of disability or death, all unvested options shall
immediately vest, and the time for exercising the options shall be within 365
days from the date of disability (as defined below) or death. In the event of a
change in control of the Employer after Executive's death or disability as
defined herein, Executive or Executive's designated beneficiary or his estate,
as the case may be, shall be entitled to the rights, payments, and benefits of
Sections 11.1, 11.2 and 11.3 hereof. The Employer may maintain insurance on its
behalf to satisfy in whole or in part the obligations of Employer under this
Section 16.
16.1 DISABILITY - means:
(i) Solely due to injury or Sickness and for a
consecutive period of ninety (90) days:
(a) your ability to work is restricted,
resulting in the Loss of Earnings; or
(b) you are unable to perform the substantial
and material duties of your regular occupation in which you were engaged just
prior to the Disability; or
(c) your state licensing board has restricted
your ability to perform your occupation as a health care practitioner as a
result of testing positive on a human immunodeficiency virus test; and
(d) your Loss of Earnings is 20% or more of
your Prior Earnings.
(ii) You are receiving care from a Doctor which is
appropriate for the condition causing your Disability. We will waive this
requirement when continued care would be of no benefit to you.
If a Disability is caused by more than one
injury or Sickness, we will pay benefits as if the Disability were caused by
only one injury or Sickness.
16.2 DOCTOR - means a medical practitioner who is legally
licensed to practice under state law, and not yourself, the Owner, or the Loss
Payee.
16.3 EARNINGS - means income you earn for labor or
services performed. This includes salary, wages, fees, draws, commissions, and
other compensation (excluding Stock Options) you receive. If you are
self-employed, this is not income after deducting your normal and customary
business expenses. These expenses must be reasonable and must not exceed
expenses before Disability began. They must be deductible for Federal Income
Tax purposes.
16.4 Identifiable contributions for you to any tax
qualified retirement, annuity, salary reduction, or deferred compensation plan,
whether employer sponsored or individually owned, or to any non-qualified
deferred compensation plan are considered Earnings if they are:
(i) Made either by you or on your behalf; and
(ii) Not waived by contract during your Disability.
16.5 During any period Earnings:
(i) Will include all income for services performed
during that period, whether or not received; but
(ii) Will not include income for services performed
prior to that period, regardless of when received.
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17. NON-COMPETITION AND NON-SOLICITATION.
17.1 Executive acknowledges that he has performed
services or will perform services hereunder which directly affect Employer's
business. Accordingly, the parties deem it necessary to enter into the
protective agreement set forth below, the terms and conditions of which have
been negotiated by and between the parties hereto.
17.2 In the event of termination of employment
under this Agreement pursuant to Section 15 prior to the expiration of the term
of this Agreement, Executive agrees with Employer that through the actual date
of termination of the Agreement, and for a period of twelve (12) months after
such termination date, Executive shall not, without the prior written consent of
Employer, within Collier and Lee County, Florida either directly or indirectly,
serve as an officer, independent contractor, employee, Director of any bank,
bank holding company or other financial institution.
17.3 The covenants of Executive set forth in this
Section 17 are separate and independent covenants for which valuable
consideration has been paid, the receipt, adequacy and sufficiency of which are
acknowledged by Executive, and have also been made by Executive to induce
Employer to enter into this Agreement. Further, each of the aforesaid covenants
may be availed of or relied upon by Employer in any court of competent
jurisdiction, and shall form the basis of injunctive relief and damages
including expenses of litigation (including but not limited to reasonable
attorney's fees) suffered by Employer arising out of any breach of the aforesaid
covenants by Executive. The covenants of Executive set forth in this Section 17
are cumulative to each other and to all other covenants of Executive in favor of
Employer contained in this Agreement and shall survive the termination of this
Agreement for the purposes intended.
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Should any covenant, term, or condition contained in this Section 17 become or
be declared invalid or unenforceable by a court of competent jurisdiction, then
the parties may request that such court judicially modify such unenforceable
provision consistent with the intent of this Section 17 so that it shall be
enforceable as modified, and in any event the invalidity of any provision of
this Section 17 shall not affect the validity of any other provision in this
Section 17 or elsewhere in this Agreement.
17.4 Notwithstanding anything to the contrary in
this Section 17, this Agreement or otherwise, in the event that Employer ceases
to operate as a Bank in Collier County, then the provisions of Section 17.1 -
17.3 shall no longer apply to Executive.
18. NOTICES. Any notice required or desired to be given
under this Agreement shall be deemed given if in writing sent by certified mail
to his residence in the case of Executive, or to its principal office in the
case of Employer.
19. WAIVER OF BREACH. The waiver by Employer or
Executive, as the case may be, of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach by the
breaching party. No waiver shall be valid unless in writing and signed by an
authorized officer of Employer or Executive, as the case may be.
20. ASSIGNMENT. Executive acknowledges that the services
to be rendered by him are unique and personal. Accordingly, Executive may not
assign any of his rights or delegate any of his duties or obligations under this
Agreement. The rights and obligations of Executive under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
Employer.
21. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida.
22. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto regarding employment of Executive, and
supersedes and replaces any prior
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agreement relating thereto. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
EMPLOYER
Dated: 4/28/99 /s/ Joe B. Cox
------------- ----------------------------------------
EXECUTIVE
Dated: 4/28/99 /s/ Polly M. Rogers
-------------- ----------------------------------------
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EXHIBIT "A"
EXECUTIVE COMPENSATION
FOR
PRESIDENT
A. SALARY. For all services rendered by Executive, Executive shall receive
a minimum annual base salary of $100,000.00 ("Base Salary"), payable in equal
semi-monthly installments during the term of this Agreement. Base Salary
payments shall be subject to withholding and other applicable taxes. Annual
salary reviews shall take place on each anniversary of this Agreement during the
term hereof.
B. BONUS. Beginning December 31, 1999, and at the end of each calendar
year of the Employer, in addition to Executive's Base Salary, Executive shall be
paid performance bonuses ("Performance Bonuses") based upon good faith written
annual goals for Executive established with Executive's input by the Board of
Directors and given to the Executive at least 30 days before January 1st of the
year for which the goals apply (hereinafter "Performance Goals") except that for
the year 1999, such goals shall be established and given to Executive by no
later than March 31, 1999. The payment of Performance Bonuses pursuant to this
Section (B) shall be contingent upon the following:
(a) As of the calendar year end in question, the overall condition
of the Bank must be "satisfactory" in the opinion of the OCC as set forth in the
most current OCC Report of Supervisory Activity provided to the Board of
Directors of the Bank and the Uniform Financial Institution Rating of the Bank
shall not be less than a "3"; and
(b) As of the calendar year end in question, the Bank shall be
"adequately capitalized" as defined under regulations promulgated by the OCC
pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991;
and
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(c) The Bank shall be profitable, and
(d) No bonus shall exceed 40% of the Executive's Base Salary.
When the contingencies stated in sub-paragraphs B (a), (b) and
(c) above have been met, but in no instance beyond 45 days from each calendar
year-end, the Employer shall set the Performance Bonus amounts based upon the
following criteria:
1. Goals being set by the Board of Directors and goals met;
2. Deposit goals set by the Board of Directors and goals met;
3. Loan goals set by the Board of Directors and goals met;
4 Expense goals being set and goals met. The Performance
Goals shall be part of the annual business plans prior to the expiration of
each calendar year for the next ensuing calendar year, except that the business
plan and Performance Goals for 1999 shall be completed prior to March 31,
1999. In each business plan, each of the above criteria will be assigned
specific percentage bonus (in relation to the Executive's Base Salary) and
each percentage (or, such portion of each percentage if a specific criteria
has not been fully met) shall be paid to Executive annually, but in no event
beyond fifty (50) days from each calendar year end.
C. STOCK OPTION PLAN: Upon the Commencement Date, Employer shall grant and
transfer to Executive options to purchase 20,000 shares of Common Stock of
Employer at an exercise price of ten dollars ($10.00) per share. Unless sooner
vested as a result of other terms of this or any other Agreement, twenty percent
(20%) of these options shall vest on December 31, 1999 and twenty percent (20%)
shall vest on December 31st of each of the successive four years. All
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options shall be exercisable for a period of 10 years from the date of grant.
The provisions of this paragraph shall not in any way limit the availability of
additional options to Executive.
D. AUTO ALLOWANCE: Executive will be given $650.00 per month for the cost
of his automobile operations and normal maintenance.
E. CLUB MEMBERSHIP: Social membership at Royal Poinciana ($3,500
allocated annually).
F. EXPENSE ACCOUNT: Legitimate and customary business related expenses.
G. VACATION: FOUR: Four weeks paid vacation.
H. HEALTH INSURANCE:* Family coverage comparable to or better than
Executive's current health insurance.
I. CONTINUING EDUCATION: To be determined annually.
J. CHANGE IN CONTROL PAYMENTS: Two and one-half (2 1/2) times the
then-applicable annual Base Salary.
K. LIFE INSURANCE:* Death benefit equal to two (2) times Executive's
annual Base Salary.
L. DISABILITY INSURANCE: * Based on market conditions and will be part of
an overall insurance package inter-related with the health insurance and life
insurance discussed above.
M.
* All insurance policies shall be issued by companies which are not insurance
trusts (or their equivalent) and which are A rated or the equivalent of an A
rating or better.
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EXHIBIT 23.1
CONSENT OF HILL, BARTH & KING, INC., INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on the Pre-Effective Amendment No. 1 to Form SB-2 and
related Prospectus of Citizens Bancshares of Southwest Florida, Inc. for the
registration of 1,200,000 shares of its common stock and to the incorporation
therein of our report dated February 22, 1999 relating to the financial
statements of Citizens Bancshares of Southwest Florida, Inc. as of February 22,
1999 and for the period from June 15, 1998 (date of inception) to February 22,
1999.
/s/ HILL, BARTH & KING, INC.
Certified Public Accountants
Naples, Florida
May 7, 1999
