<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): December 30, 1997
(December 16, 1997)
Century South Banks, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 2-75364 58-1455591
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
60 Main Street West, Dahlonega, Georgia 30533
----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
770/535-8000
----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On March 31, 1997, Century South Banks, Inc. ("Registrant") and Bank
Corporation of Georgia ("BCG") executed a definitive agreement regarding the
proposed merger of BCG into Registrant (the "Agreement"). The Agreement provides
for Registrant to acquire BCG by merger with the consideration to be the
issuance of common stock of Registrant having a market value of approximately
$71,770,179 as of the consummation of the transaction. The Agreement was
amended on July 11, 1997 and on October 15, 1997.
On December 16, 1997, the transaction contemplated by the Agreement was
consummated and the common stock of Registrant having an approximate market
value of $71,770,179 was issued in exchange for all the outstanding common stock
of BCG. The consideration paid in the transaction was determined through arms
length negotiations between the parties. There are no material relationships
between the Registrant and BCG or any affiliate or related party.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements follow this page.
(b) Pro Forma Financial Information follows the Financial Statements.
(c) Exhibits
2.1 Agreement And Plan of Merger
2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Independent Auditors' Report F-1
Consolidated Balance Sheets - December 31, 1996 and 1995 F-2
Consolidated Statements of Earnings - Years ended December 31, 1996, 1995, and 1994 F-3
Consolidated Statements of Shareholders' Equity - Years ended December 31, 1996, 1995, and 1994 F-4
Consolidated Statements of Cash Flows - Years ended December 31, 1996, 1995, and 1994 F-5
Notes to Consolidated Financial Statements - December 31, 1996, 1995, and 1994 F-7
Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 F-29
Consolidated Balance Sheets - June 30, 1997 and 1996 F-30
Consolidated Statements of Earnings -Six Months ended June 30, 1997 and 1996 F-31
Consolidated Statements of Earnings - Three Months ended June 30, 1997 and 1996 F-32
Consolidated Statements of Cash Flows - Six Months ended June 30, 1997 and 1996 F-33
Notes to Consolidated Financial Statements - Six Months ended June 30, 1997 and 1996 F-34
</TABLE>
<PAGE>
BCG FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Bank Corporation of Georgia
Macon, Georgia
We have audited the accompanying consolidated balance sheets of Bank
Corporation of Georgia and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bank
Corporation of Georgia and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
PORTER KEADLE MOORE, LLP
/s/ Porter Keadle Moore, LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
March 5, 1997, except for note 14, as to which the date is July 11, 1997.
F-1
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
------
<TABLE>
<CAPTION>
1995
(Restated
1996 Note 2)
---- -------
<S> <C> <C>
Cash and due from banks $ 34,027,974 $ 11,429,382
Federal funds sold 5,210,000 13,860,000
Cash and cash equivalents 39,237,974 25,289,382
Investment securities available for sale 42,828,598 39,293,305
Investment securities 1,088,719 1,135,448
Loans, net 186,583,708 177,889,613
Premises and equipment, net 9,801,980 7,923,567
Accrued interest receivable 2,333,047 2,072,351
Other assets 8,380,296 6,068,104
------------ ------------
$290,254,322 259,671,770
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Deposits:
Demand $ 44,709,405 37,715,723
NOW and money-market accounts 79,417,686 58,326,538
Savings 9,405,878 8,757,760
Time 125,165,463 119,423,585
------------ ------------
Total deposits 258,698,432 224,223,606
Accrued expenses and other liabilities 3,333,327 2,933,120
Notes payable 1,500,000 2,770,809
Federal Home Loan Bank advances - 6,100,000
------------ ------------
Total liabilities 263,531,759 236,027,535
Minority interest - 1,409,943
============ ============
Shareholders' equity:
Common stock, $1 par value; 3,000,000 shares authorized; 2,284,864 and
2,128,774 shares issued, respectively 2,284,864 2,128,774
Additional paid-in capital 6,170,157 4,507,789
Retained earnings 18,286,889 15,200,657
Net unrealizable gain (loss) on investment securities available for sale, net of tax
288,689 779,421
Unearned employee stock ownership plan shares (196,496) (270,809)
Common stock in treasury, at cost, 16,767 shares (111,540) (111,540)
------------ ------------
Total shareholders' equity 26,722,563 22,234,292
------------ ------------
$290,254,322 259,671,770
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
1996 (Restated (Restated
---- Note 2) Note 2)
--------- ---------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $20,526,340 18,820,191 15,456,899
Interest on Federal Home Loan Bank deposits 28,058 225,362 544,223
Interest on federal funds sold 740,545 315,337 26,973
Interest on investment securities:
U.S. Treasury and Government agencies 2,987,276 3,077,478 1,699,052
State and municipal 11,374 28,755 53,068
Other 141,269 120,542 89,230
----------- ----------- -----------
Total interest income 24,434,862 22,587,665 17,869,445
Interest expense 9,877,915 9,335,770 7,246,885
----------- ----------- -----------
Net interest income 14,556,947 13,251,895 10,622,560
Provision for loan losses 409,000 465,005 447,003
----------- ----------- -----------
Net interest income after provision for loan losses 14,147,947 12,786,890 10,175,557
----------- ----------- -----------
Other income:
Service charges and fee income 1,609,247 1,400,474 1,430,142
Securities gains (losses), net (1,497) (10,767) (315,576)
Gains on sales of loans 162,032 123,799 81,702
Miscellaneous 1,299,136 854,497 870,812
Gains on sales of banking units -- -- 814,035
----------- ----------- -----------
Total other income 3,068,918 2,368,003 2,881,115
----------- ----------- -----------
Other expenses:
Salaries and employee benefits 6,675,921 6,216,441 5,492,799
Occupancy 1,190,952 961,097 925,135
Equipment 691,909 669,008 576,293
Other operating 4,139,871 3,132,479 3,252,917
----------- ----------- -----------
Total other expenses 12,698,653 10,979,025 10,247,144
----------- ----------- -----------
Earnings before income taxes and minority
interest in earnings of subsidiary 4,518,212 4,175,868 2,809,528
Income taxes (benefit) 1,158,609 930,750 (151,321)
----------- ----------- -----------
Earnings before minority interest in earnings of subsidiary 3,359,603 3,245,118 2,960,849
Minority interest in earnings of subsidiary 46,913 381,460 651,569
----------- ----------- -----------
Net earnings $ 3,312,690 2,863,658 2,309,280
=========== =========== ===========
Net earnings per share:
Primary $1.41 $1.35 $1.11
Fully diluted $1.41 $1.34 $1.10
Weighted average number of shares outstanding:
Primary 2,344,764 2,114,930 2,077,211
Fully diluted 2,341,815 2,129,550 2,103,317
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NET UNREALIZED GAIN
ADDITIONAL (LOSS) ON SECURITIES
PAID- RETAINED AVAILABLE FOR SALE, UNEARNED
COMMON STOCK IN CAPITAL EARNINGS NET OF TAX ESOP SHARES
------------ ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993, as previously
reported $1,081,500 1,269,608 12,372,757 - (520,904)
Adjustment in connection with pooling of
Interest (note 2) 188,703 2,986,767 (1,234,540) - -
---------- --------- ---------- ----------- -----------
Balance, December 31, 1993, as restated 1,270,203 4,256,375 11,138,217 - (520,904)
Cumulative effect of accounting change for
investment securities net of tax - - - 35,209 -
Issuance of common stock 1,333 12,164 - - -
Release of unearned ESOP shares - - - - 220,005
Cash dividends paid - - (107,324) - -
Purchase of treasury stock - - - - -
Net earnings - - 2,309,280 - -
Change in unrealized loss on securities
available for sale, net of tax - - - (273,478)
Minority interest in unrealized loss on
available for sale securities at AmeriCorp - - - 17,223 -
---------- --------- ---------- ----------- -----------
Balance, December 31, 1994 1,271,536 4,268,539 13,340,173 (221,046) (300,899)
Stock split effected in the form of a 75%
stock dividend 812,013 - (812,013) - -
Issuance of common stock (note 2) 45,225 239,250 - - -
Release of unearned ESOP shares - - - - 30,090
Cash dividends paid - - (191,161) - -
Net earnings - - 2,863,658 - -
Change in unrealized gain (loss) on securities
available for sale, net of tax - - - 1,126,180 -
Minority interest in unrealized gain on
available for sale securities at AmeriCorp - - - (125,713) -
---------- --------- ---------- ----------- -----------
Balance, December 31, 1995 2,128,774 4,507,789 15,200,657 779,421 (270,809)
Issuance of common stock 6,875 26,323 - - -
Release of unearned ESOP shares - - - - 74,313
Cash dividends paid - - (226,458) - -
Net earnings - - 3,312,690 - -
Issuance of common stock in conjunction
with the acquisition of AmeriCorp 149,215 1,636,045 - - -
Change in unrealized gain on securities
available for sale, net of tax (490,732)
---------- --------- ---------- ----------- --------
Balance, December 31, 1996 $2,284,864 6,170,157 18,286,889 288,689 (196,496)
========== ========= ========== =========== ========
<CAPTION>
TREASURY STOCK TOTAL
-------------- -----
<S> <C> <C>
Balance, December 31, 1993, as previously
reported (17,940) 14,185,021
Adjustment in connection with pooling of
Interest (note 2) - 1,940,930
-------- ----------
Balance, December 31, 1993, as restated (17,940) 16,125,951
Cumulative effect of accounting change for
investment securities net of tax - 35,209
Issuance of common stock - 13,497
Release of unearned ESOP shares - 220,005
Cash dividends paid - (107,324)
Purchase of treasury stock (93,600) (93,600)
Net earnings - 2,309,280)
Change in unrealized loss on securities
available for sale, net of tax - (273,478)
Minority interest in unrealized loss on
available for sale securities at AmeriCorp - 17,223
--------
Balance, December 31, 1994 (111,540) 18,246,763
Stock split effected in the form of a 75%
stock dividend - -
Issuance of common stock (note 2) - 284,475
Release of unearned ESOP shares - 30,090
Cash dividends paid - (191,161)
Net earnings - 2,863,658
Change in unrealized gain (loss) on securities
available for sale, net of tax - 1,126,180
Minority interest in unrealized gain on
available for sale securities at AmeriCorp - (125,713)
-------- ----------
Balance, December 31, 1995 (111,540) 22,234,292
Issuance of common stock - 33,198
Release of unearned ESOP shares - 74,313
Cash dividends paid - (226,458)
Net earnings - 3,312,690
Issuance of common stock in conjunction
with the acquisition of AmeriCorp - 1,785,260
Change in unrealized gain on securities
available for sale, net of tax (490,732)
-------- ----------
Balance, December 31, 1996 (111,540) 26,722,563
======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
(Restated (Restated
1996 Note 2) Note 2)
---- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities (net of effects of bank sales
and acquisitions):
Net earnings $ 3,312,690 2,863,658 2,309,280
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation 708,943 689,894 612,299
Amortization and accretion, net (99,149) (485,050 97,139
Minority interest in earnings of subsidiary 46,913 381,460 651,569
Provision for loan losses 409,000 465,005 447,003
Provision for losses on other real estate owned 13,344 82,214 60,782
Provision for deferred taxes 104,810 (36,895) (967,788)
Loss (gain) on sale of securities, net 1,497 10,767 315,576
Loss (gain) on sale of other real estate, net (5,631) (104,282) (4,643)
Gains on sales of banking units - - (814,035)
Loss (gain) on sale of premises and equipment - (79,781) 4,099
Change in assets and liabilities:
Interest receivable and other assets (1,897,744) (636,917) (971,780)
Interest payable (169,828) 341,357 461,411
Accrued expenses and other liabilities 634,479 (15,374) 82,740
----------- ----------- -----------
Net Cash provided by operating activities 3,059,324 3,476,056 2,283,652
----------- ----------- -----------
Cash flows from investing activities (net of effects of bank sales
and acquisitions):
Proceeds from sales of investment securities available for sale 9,526,180 2,419,286 19,163,119
Proceeds from calls and maturities of investment securities 51,500 774,000 393,229
Proceeds from calls and maturities of investment securities
available for sale 7,194,080 20,938,152 25,624,058
Purchase of investment securities available for sale (21,021,208) (19,976,840) (52,166,887)
Proceeds from sale of other real estate owned 265,196 379,339 454,998
Improvements to other real estate owned - (61,945) (28,187)
Purchase of premises and equipment (2,034,627) (1,118,436) (1,708,982)
Cash received in acquisition of banking units 12,687,620 - -
Cash paid upon the sales of banking units - - (12,517,604
Net increase in loans (5,952,803) (21,355,439) (13,817,922)
----------- ----------- -----------
Net cash provided (used) by investing activities 715,938 (18,001,383) (34,604,178)
----------- ----------- -----------
</TABLE>
F-5
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
(Restated (Restated
1996 Note 2) Note 2)
---- ---------- ----------
<S> <C> <C> <C>
Cash flows from financing activities (net of effects of
bank sales and acquisitions):
Net increase in deposits 17,783,870 12,531,499 37,809,430
Repayment of notes payable (1,000,000) - (500,000)
Repayment of ESOP debt (196,496) - -
Proceeds from FHLB advances - 6,100,000 -
Repayments of FHLB advances (6,100,000) (5,000,000) -
Dividends paid (226,458) (191,161) (107,324)
Distributions to dissenting shareholders (120,784) - -
Proceeds from issuance of common stock 33,198 284,475 13,497
Purchase of treasury stock - - (96,300)
----------- ---------- ----------
Net cash provided by financing activities 10,173,330 13,724,813 37,122,003
----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 13,948,592 (801,014) 4,801,477
Cash and cash equivalents at beginning of year 25,289,382 26,090,396 21,288,919
----------- ---------- ----------
Cash and cash equivalents at end of year $ 39,237,974 25,289,382 26,090,396
=========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 9,867,345 8,994,413 6,785,474
Income taxes $ 1,279,700 1,149,000 990,000
Supplemental schedule of noncash investing
and financing activities:
Change in unrealized gain (loss) on investment
securities available for sale, net of tax, including
$108,489 in 1996 previously attributed to the minority interest $ (599,221) 1,000,467 (221,046)
Transfers of loans to other real estate owned $ 132,000 411,247 637,612
Transfer of premises and equipment
to other real estate owned $ 187,294 - -
Financed sales of other real estate owned $ 4,472 436,493 635,609
Increase (decrease) in unearned ESOP Shares $ (74,313) (30,090) (220,005)
Deposit liabilities disposed in sale of banking units $ - - 21,909,276
Assets disposed in sale of banking units, other than cash $ - - 8,577,637
Assets acquired in bank (4,325,812) - -
Liabilities assumed in bank acquisitions $ 17,013,432 - -
Issuance of common stock in conjunction with the
purchase of the remaining minority interest of
AmeriCorp, Inc. resulting in goodwill of $504,325 $ 1,785,260 - -
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company and its subsidiaries,
and the methods of applying these principles, conform with generally
accepted accounting principles and with general practice within the banking
industry. The more significant accounting policies are described in this
summary.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and income and expenses for
the year. Actual results could differ significantly from those estimates.
Material estimates common to the banking industry that are particularly
susceptible to significant change in an operating cycle of one year
include, but are not limited to, the determination of the allowance for
loan losses, the valuation of any real estate acquired in connection with
foreclosures or in satisfaction of loans, and valuation allowances
associated with the realization of deferred tax assets which are based on
future taxable income.
CONSOLIDATION
The consolidated financial statements include the accounts of Bank
Corporation of Georgia (the "Company") and its wholly-owned bank
subsidiaries, First South Bank, N.A. ("FSB"), First South Bank of Coweta
County, N.A. ("Coweta"), First South Bank of Middle Georgia, N.A. ("Middle
Georgia") and First South Bank of Ben Hill County, N.A. ("Ben Hill").
During 1996, Coweta and Middle Georgia were merged with FSB. During 1994,
the Company sold Ben Hill and the Ashburn, Georgia branch of FSB.
The financial statements also include the accounts of AmeriCorp, Inc.
("AmeriCorp") and its wholly-owned bank subsidiary AmeriBank, N.A.
("AmeriBank"). During 1996, AmeriCorp was dissolved upon the Company's
purchase of the remaining minority interest, and AmeriBank became a wholly-
owned subsidiary of the Company.
In consolidation, all significant intercompany accounts and transactions
have been eliminated.
CASH AND CASH EQUIVALENTS
Cash equivalents include amounts due from banks, interest-bearing deposits
with other banks due within three months, federal funds sold and overnight
investments with the Federal Home Loan Bank.
Included in cash and due from banks are interest bearing deposits with the
Federal Home Loan Bank amounting to $18,642,250 and $44,751 at December 31,
1996 and 1995, respectively.
INVESTMENT SECURITIES AND INVESTMENT SECURITIES AVAILABLE FOR SALE
The Company classifies its securities in one of three categories: trading,
available for sale, or held to maturity. Trading securities are bought and
held principally for the purpose of selling them in the near term. Held to
maturity securities ("Investment Securities") are those securities for
which the Company has the ability and intent to hold until maturity. All
other securities not included in trading or held to maturity are classified
as available for sale ("Securities AFS").
Securities AFS are recorded at fair value. Investment securities are
recorded at cost, adjusted for the amortization of premiums or accretion of
discounts. Unrealized holding gains and losses, net of the related tax
effect, on Securities AFS are excluded from earnings and are reported as a
separate component of shareholders' equity until realized. Transfers of
securities between categories are recorded at fair value
F-7
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
INVESTMENT SECURITIES AND INVESTMENT SECURITIES AVAILABLE FOR SALE,
CONTINUED
at the date of transfer. Unrealized holding gains or losses associated with
transfers from Investment Securities to Securities AFS are recorded as a
separate component of shareholders' equity. The unrealized holding gains
or losses included in the separate component of shareholders' equity for
securities transferred from Securities AFS to Investment Securities are
maintained and amortized into earnings over the remaining life of the
security as an adjustment to yield in a manner consistent with the
amortization or accretion of premium or discount on the associated
security. A decline in the market value of any Investment Securities or
Securities AFS below cost that is deemed other than temporary is charged to
earnings and establishes a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield. Realized gains and losses
for securities classified as Securities AFS and Investment Securities are
included in earnings and are derived using the specific identification
method for determining the cost of securities sold.
LOANS
Loans are stated at the principal amount outstanding, net of unearned
interest and the allowance for loan losses. Interest income on loans is
recognized on the effective yield method. Nonrefundable loan fees and
certain direct loan origination costs are accounted for in accordance with
Statement of Financial Accounting Standard (SFAS) No. 91, "Accounting for
Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans
and Initial Direct Costs of Leases." SFAS No. 91 requires recognition of
loan origination fees, net of direct costs, over the life of the related
loan as an adjustment to yield.
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosure" in
regards to accounting for impaired loans. A loan is impaired when, based on
current information and events, it is probable that all amounts due
according to the contractual terms of the loan agreement will not be
collected. Impaired loans are measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate, or at the loan's observable market price, or at the fair value of the
collateral of the loan if the loan is collateral dependent. The adoption of
these standards had no material effect on earnings.
The Banks are parties to agreements with the Federal Home Loan Bank of
Atlanta, ("FHLB"). The agreements allow for advances by the FHLB at varying
rates, secured by the Bank's stock in the FHLB, and certain 1-4 family,
first mortgage loans, up to 75% of the outstanding balances of these
residential loans. No advances were outstanding at December 31, 1996. At
December 31, 1995, the Banks had total advances of $6,100,000.
UNEARNED DISCOUNT
The unearned discount on loans purchased is recognized over the remaining
lives of the loans using the effective yield method.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance represents an amount which, in
management's judgement, will be adequate to absorb losses on
F-8
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
existing loans that may become uncollectible. Management's judgement in
determining the adequacy of the allowance is based on evaluations of the
collectibility of loans. These evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, current
economic conditions that may affect the borrower's ability to pay, overall
portfolio quality, and review of specific problem loans.
Management's judgement in determining the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations take
into consideration such factors as changes in the nature and volume of the
loan portfolio, current economic conditions that may affect the borrower's
ability to pay, overall portfolio quality, and review of specific problem
loans.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Company's allowance
for loan losses. Such agencies may require the Company to recognize
additions to the allowance based on judgments different than those of
management.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation.
Major additions and improvements are charged to the property accounts while
replacements, maintenance and repairs, which do not improve or extend the
life of respective assets, are expensed currently. When property is
retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss,
if any, is recognized. Depreciation expense is computed principally on the
straight-line method over the following estimated useful lives:
Buildings and improvements 15 - 40 years
Furniture, fixtures and equipment 5 - 10 years
Computer equipment 3 - 5 years
INTANGIBLE ASSETS
The unamortized cost in excess of fair value of net assets acquired in bank
acquisitions ("goodwill") amounted to approximately $1,323,000 and $394,000
at December 31, 1996 and 1995, respectively. Goodwill is being amortized
on a straight-line basis with periods ranging from 15 to 25 years.
401(K) PLAN
The Company has a retirement plan qualified pursuant to Internal Revenue
Code Section 401(k) ("401(k) Plan"). The 401(k) Plan covers substantially
all employees subject to certain minimum age and service requirements.
Contributions to the plan by employees is voluntary; however, the Company
will match a minimum of 25% of the employee's contributions. Contributions
to the plan charged to expense for the years ended December 31, 1996, 1995
and 1994 amounted to approximately $81,000, $153,000 and $151,000,
respectively.
F-9
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a leveraged employee stock ownership plan ("ESOP")
that covers substantially all employees subject to certain minimum age and
service requirements. The Company makes contributions to the ESOP which
the plan trustee is required to use to make loan principal and interest
payments. All dividends received by the ESOP are used to pay debt service.
The ESOP shares initially were pledged as collateral for its debt. As the
debt is repaid, shares are released from collateral and allocated to active
employees, based on the proportion of debt service paid in the year. The
Company accounts for its ESOP in accordance with Statement of Position 93-6
(SOP 93- 6). Accordingly, the debt of the ESOP is recorded as debt and the
shares pledged as collateral are reported as unearned ESOP shares in the
statement of financial position. All shares held by the Company's ESOP
plan are considered "old ESOP" shares as defined by SOP 93-6; therefore, as
shares are released from collateral, the Company reports compensation
expense equal to the cost of the shares, and the shares become outstanding
for earnings per share computations. Dividends on allocated ESOP shares
are recorded as a reduction of retained earnings; dividends on unallocated
ESOP shares are recorded as a reduction of debt and accrued interest. ESOP
compensation expense was $74,300, $69,800 and $64,600 for years ended
December 31, 1996, 1995 and 1994, respectively. The ESOP shares as of
December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Allocated shares 244,808 233,577
Unreleased shares 38,828 50,059
------- -------
Total ESOP shares 283,636 283,636
------- -------
Fair value of unreleased shares $ 651,000 726,000
======= =======
</TABLE>
INCOME TAXES
The Company accounts for income taxes pursuant to the asset and liability
method which requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Additionally, the method
requires the recognition of future tax benefits, such as net operating loss
carryforwards, to the extent that realization of such benefits is more
likely than not. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
the assets and liabilities are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income tax expense in the period that includes the enactment
date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities results in deferred tax assets, an evaluation of the
probability of being able to realize the future benefits indicated by such
asset is required. A valuation allowance is provided for the portion of
the deferred tax asset when it is more likely than not that some portion or
all of the deferred tax asset will not be realized. In assessing the
realizability of the deferred tax assets, management considers the
scheduled reversals of deferred tax liabilities, projected future taxable
income, and tax planning strategies.
F-10
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
INTEREST RATE RISK MANAGEMENT
As part of the Company's overall interest rate risk management, the Company
uses interest rate swaps and interest rate floors. These contracts are
designated by the Company as hedges of interest rate exposures, and
interest income or expense derived from these contracts is recorded over
the life of the contract as an adjustment to interest income or expense.
NET EARNINGS PER SHARE
Net earnings per share are based on the weighted average number of shares
outstanding during each year including consideration of stock options,
which represent common stock equivalents. It is assumed that all dilutive
stock options are exercised at the beginning of the year and that the
proceeds are used to purchase shares of the Company's common stock. The
average market price during each year is used to compute equivalent shares
assumed to be acquired for primary earnings per share, whereas year-end
prices are used for fully diluted per-share amounts. Unearned ESOP shares
are not considered outstanding for purposes of earnings per share.
(2) ACQUISITIONS AND SALES
In November 1990, the Company acquired a 25% interest in the common stock
of AmeriCorp through the purchase of newly issued shares of AmeriCorp.
During 1992, the Company increased its ownership interest to 34% and in
December 1993 further increased its ownership to 67%. These investments in
AmeriCorp comprised both cash invested by the Company and stock issued by
AmeriCorp for management fees and accrued interest payable to the Company.
In March 1996, the Company issued 149,215 of its $1 par value common stock
in exchange for all of the remaining outstanding shares of AmeriCorp and
additionally paid certain acquisition costs. Dissenting and fractional
AmeriCorp shareholders were paid $67,432. The Company accounted for this
transaction, as well as incremental stock purchases, using the purchase
method. The reported purchase price for AmeriCorp was based on the fair
market value of the assets acquired and liabilities assumed as of the
closing dates, and the results of all operations have been included in the
consolidated financial statements since the initial 1990 acquisition, net
of respective minority interests for each year.
The Company had also made investments in AmeriCorp through the purchase of
preferred stock. The preferred stock, which was not convertible into common
stock, required the payment of dividends in cash or additional preferred
stock at a fixed rate of 8%. It was redeemable at the option of AmeriCorp
and contained liquidation preferences at par value.
At the time that the remaining AmeriCorp common stock was acquired in 1996,
the Company liquidated AmeriCorp through the payment of dividends-in-kind
of the remaining net assets of AmeriCorp including its investment in its
wholly-owned subsidiary, AmeriBank, and cancelled AmeriCorp's common and
preferred stock.
In February 1996, AmeriBank acquired certain assets and assumed certain
liabilities of the Victory Drive branch in Savannah, Georgia of Bank South,
N.A. As the result of the assumption of certain deposit and other
liabilities and the purchase of certain loans and other assets, AmeriBank
received $12,687,620 at closing. The excess purchase price over fair value
of the net liabilities assumed (goodwill) was approximately $355,000 and is
being amortized over 15 years using the straight line method.
F-11
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In June 1996, the Company acquired all of the outstanding common stock of
Effingham Bank & Trust ("Effingham"), a $25 million commercial bank located
in Rincon, Georgia in exchange for 204,928 shares of its $1 par value
common stock and approximately $53,352 paid for dissenting and fractional
shares. The number of shares exchanged for Effingham stock included 16,225
shares exchanged for Effingham shares under options which were exercised
during 1995 prior to the merger. The acquisition was accounted for as a
pooling of interests and, accordingly, the consolidated financial
statements for all periods presented have been restated to include the
financial position and results of operations as if the combination had
occurred on January 1, 1994.
The following is a reconciliation of the amounts of net interest income and
net earnings previously reported with the restated amounts:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net interest income:
The Company as previously reported in
1995 and 1994 $ 13,375,522 12,006,769 9,575,324
Effingham 1,115,425 1,245,126 1,047,236
---------- ---------- ----------
As restated $ 14,490,947 13,251,895 10,622,560
========== ========== ==========
Net earnings (loss):
The Company as previously reported in
1995 and 1994 $ 3,379,969 3,017,831 2,229,400
Effingham (67,279) (154,173) 79,880
---------- ---------- ----------
As restated $ 3,312,690 2,863,658 2,309,280
========== ========== ==========
</TABLE>
In March 1994, FSB sold substantially all the assets and liabilities of its
Ashburn banking unit to Ashburn Bank. The sale resulted in a cash payment
to Ashburn Bank of approximately $2,404,000 and a transfer of deposit
liabilities of $7,369,000 and assets, consisting primarily of loans, of
$4,787,000. FSB recognized a gain of approximately $178,000 as a result of
this sale.
In September 1994, the Company sold substantially all the assets and
liabilities of Ben Hill to Bankers First. The sale resulted in a cash
payment to Bankers First of approximately $10,114,000 and a transfer of
deposit liabilities of $14,540,000 and assets, consisting primarily of
loans, of $3,791,000. The gain on this sale amounted to $636,000.
F-12
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) INVESTMENT SECURITIES
Investment Securities and Securities AFS at December 31, 1996 and 1995
are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
December 31, 1996:
U.S. Treasury and
U.S. Government agencies $ 1,000,000 - 16,356 983,644
State, county and municipal 88,719 2,487 - 91,206
----------- --------- ------- ----------
$ 1,088,719 2,487 16,356 1,074,850
=========== ========= ======= ==========
December 31, 1995:
U.S. Treasury and
U.S. Government agencies $ 1,000,000 - 13,485 986,515
State, county and municipal 135,448 10,335 - 145,783
----------- --------- ------- ----------
$ 1,135,448 10,335 13,485 1,132,298
=========== ========= ======= ==========
SECURITIES AFS:
December 31, 1996:
U.S. Treasury and
U.S. Government agencies $36,524,815 573,088 133,688 36,964,215
Mortgage backed securities 5,891,062 35,910 62,589 5,864,383
----------- --------- ------- ----------
$42,415,877 608,998 196,277 42,828,598
=========== ========= ======= ==========
December 31, 1995:
U.S. Treasury and
U.S. Government agencies $35,892,851 1,417,154 6,894 37,303,111
Mortgage backed securities 2,055,131 - 64,937 1,990,194
----------- --------- ------- ----------
$37,947,982 1,417,154 71,831 39,293,305
=========== ========= ======= ==========
</TABLE>
F-13
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) INVESTMENT SECURITIES, CONTINUED
The amortized cost and fair value of Investment Securities and Securities
AFS at December 31, 1996, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Investment Securities Securities AFS
December 31, 1996 December 31, 1996
---------------------------------- ----------------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government agencies
Within 1 year $ - - 6,475,285 6,513,911
1 to 5 years 1,000,000 983,644 30,049,530 30,450,304
--------- --------- ---------- ----------
$ 1,000,000 983,644 36,524,815 36,964,215
========= ========= ========== ==========
State, county and municipal:
1 to 5 years $ 88,719 91,206 - -
--------- --------- ---------- ----------
$ 88,719 91,206 - -
========= ========= ========== ==========
Total securities:
Within 1 year $ - - 6,475,285 6,513,911
1 to 5 years 1,088,719 1,074,850 30,049,530 30,450,304
Mortgage-backed securities - - 5,891,062 5,864,383
--------- --------- ---------- ----------
$ 1,088,719 1,074,850 42,415,877 42,828,598
========= ========= ========== ==========
</TABLE>
Proceeds from sales of Securities AFS during 1996, 1995 and 1994 were
$9,526,180, $2,419,286 and $19,163,119, respectively. Gross gains of
$26,816, $2,000 and $8,114 and gross losses of $28,313, $12,767 and
$323,690 were realized on those sales in 1996, 1995 and 1994, respectively.
Securities AFS with a carrying value of approximately $18,433,000 and
$14,740,000 at December 31, 1996 and 1995, respectively, were pledged to
secure public deposits or for other purposes.
F-14
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(4) LOANS
Major classifications of loans at December 31, 1996 and 1995 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Commercial, financial and agricultural $ 44,429,766 48,887,045
Loans secured primarily by real estate 110,836,258 100,896,377
Construction 23,477,730 19,934,134
Consumer 11,425,654 11,756,065
------------ -----------
190,169,408 181,473,621
Less: Allowance for loan losses 2,849,340 2,652,412
Unearned discount 736,360 931,596
------------ -----------
$ 186,583,708 177,889,613
============ ===========
</TABLE>
The loan portfolio is comprised of loans originated throughout Georgia
and participations purchased.
Changes in the allowance for loan losses for the years ended December 31,
1996, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 2,652,412 2,316,054 2,254,768
Provisions charged to operating expense 409,000 465,005 447,003
Loan charge-offs (360,534) (351,334) (510,960)
Recoveries 148,462 222,687 291,243
Sales of banking units - - (166,000)
--------- --------- ---------
Balance, end of year $ 2,849,340 2,652,412 2,316,054
========== ========= =========
</TABLE>
(5) TIME DEPOSITS
At December 31, 1996 the scheduled maturities of time deposits are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 86,690,119
1998 26,357,225
1999 9,257,643
2000 2,132,182
2001 728,294
-----------
$ 125,165,463
===========
</TABLE>
At December 31, 1996 and 1995, the Company had individual time deposits
over $100,000 of approximately $29,078,000 and $29,602,000, respectively.
F-15
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(6) NOTES PAYABLE
Notes payable at December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Borrowings of the ESOP trust from a bank guaranteed by the
Company, payable in varying annual installments with
interest payable quarterly at the prime rate. The ESOP may
borrow a maximum of $600,000 on this note. $ - 270,809
Note payable to a bank in annual installments of $300,000
with interest payable quarterly at the prime rate and secured
by the common stock of all wholly-owned bank subsidiaries. 1,500,000 2,500,000
---------- ---------
$ 1,500,000 2,770,809
========== =========
</TABLE>
The note payable to a bank allows for additional borrowings up to $500,000
with the same repayment terms as described above. The loan agreement
contains covenants and restrictions pertaining to the maintenance of
certain financial ratios, limitations on the incurrence of additional debt,
and declaration of dividends or other capital transactions.
F-16
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) SHAREHOLDERS' EQUITY
During 1995, the Company's Board of Directors authorized a stock split to
be effected in the form of a 75% stock dividend. All references in the
financial statements to number of shares, per share amounts, and stock
option and ESOP data have been adjusted for the stock split.
The Company has a Stock Option Plan under which a maximum of 404,766 shares
of common stock have been reserved. The Plan also contains certain stock
appreciation rights whereby the Company would pay in cash or stock an
amount up to 200% of the excess of the fair market value of the Company's
stock at the date of exercise over the fair market value at the grant date.
Exercise of either the stock options or the stock appreciation rights
precludes exercise of the other. Stock options are granted with exercise
prices which approximate the market value of the Company's stock at the
grant date.
SFAS No. 123, "Accounting for Stock-Based Compensation," became effective
January 1, 1996. This statement encourages, but does not require, entities
to compute the fair value of options at the date of grant and to recognize
such costs as compensation expense immediately if there is no vesting
period or ratably over the vesting period of the options. The Company has
chosen not to adopt the cost recognition principles of this statement. No
compensation cost has been recognized for the stock option plan. Had
compensation cost for the plan been determined based upon the fair value of
the options at the grant dates consistent with the methods as provided in
SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net
earnings and net earnings per share would have been reduced to the proforma
amounts indicated below:
<TABLE>
<CAPTION>
1996
----
<S> <C> <C>
Net earnings As reported $ 3,312,690
Proforma $ 3,085,693
Net earnings per share As reported $ 1.41
Proforma $ 1.32
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted average
assumptions used for grants in 1996: dividend yield of 1%, volatility of
34%, a risk free interest rate of 6%, and an expected life of 8 years.
A summary status of the Company's Stock Option Plan as of December 31, 1996
and 1995, and changes during the years ending on those dates is presented
below:
<TABLE>
<CAPTION>
1996 1995
---- ----
Wtd. Avg. Wtd. Avg.
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding, beginning of year 208,415 $ 6.36 243,540 $ 5.98
Options granted during the year 36,625 $ 11.26 - $ -
Options exercised during the year (6,875) $ 4.83 (32,500) $ 4.29
Options cancelled during the year - $ - (2,625) $ 7.43
------- ------ ------- -----
Outstanding, end of year 238,165 $ 7.16 208,415 $ 6.36
------- ------ ------- -----
Options exercisable at year end 205,290 $ 6.43 173,415 $ 6.14
------- ------ ------- -----
Weighted average fair value of 10.00 $ -
options granted during the year ------ -----
</TABLE>
F-17
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) SHAREHOLDERS' EQUITY, CONTINUED
Options outstanding at December 31, 1996 had exercise prices ranging from
$5.57 to $13.00, with a weighted average exercise price of $7.16, and an
average remaining life of approximately 5 years.
Included in salaries and employee benefits expense for 1995 was
approximately $20,000 related to the exercise of 3,500 stock appreciation
rights by officers of the Company. There were no stock appreciation rights
exercised in 1996. Compensation expense is not being recorded on the
unexercised stock appreciation rights since, in management's opinion, there
is a higher probability that the stock options will be exercised.
The loan agreement covering the Company's $1,500,000 note payable restricts
the payment of dividends by bank subsidiaries to the amount as permitted by
the regulators and requires that the subsidiaries remain in compliance with
certain capital levels specified in the loan agreement. The loan agreement
further restricts the payment of cash dividends by the Company to its
stockholders. In any year, the Company may not, without advance approval by
the lender, pay dividends which together with the dividends paid in the
preceding two years, exceed 25% of consolidated net earnings for the three
year period.
(8) INTEREST EXPENSE
Interest expense for December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- -----
<S> <C> <C> <C>
NOW and money market deposits $2,291,925 1,910,498 1,984,458
Savings deposits 244,655 244,335 291,347
Time deposits 6,989,629 6,682,067 4,290,586
Notes payable and other 351,706 498,870 680,494
---------- --------- ---------
$9,877,915 9,335,770 7,246,885
========== ========= =========
</TABLE>
(9) INCOME TAXES
The components of income tax expense (benefit) for the years ended December
31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current $1,501,074 967,645 816,467
Deferred (343,739) (88,901) (36,868)
Utilization of net operating loss
carryforwards 553,230 491,300 266,000
Change in valuation allowance (551,956) (439,294) (1,196,920)
---------- -------- ----------
$1,158,609 930,750 (151,321)
========== ======== ==========
</TABLE>
F-18
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) INCOME TAXES, CONTINUED
The differences between income tax expense and the "expected" amount
computed by applying the statutory Federal income tax rate to earnings
before taxes and minority interest in earnings of subsidiary are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current "expected" tax expense $1,536,000 1,420,000 955,000
Increase (decrease) resulting from:
Reduction in deferred tax asset
valuation allowance (551,956) (439,294) (1,196,920)
Other 174,565 (49,956) 90,599
---------- --------- ----------
$1,158,609 930,750 (151,321)
========== ========= ==========
</TABLE>
The following summarizes the sources and expected tax consequences of
future taxable deductions (income) which comprise the net deferred tax
assets as of December 31, 1996 and 1995. The net deferred tax assets are
included as components of other assets within the consolidated balance
sheets.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Gross deferred income tax assets:
Allowance for loan losses $ 572,642 426,775
Other real estate 76,729 65,000
State tax credits 100,815 41,917
Net operating losses 1,925,446 2,431,306
Other 77,817 97,042
---------- ---------
Total gross deferred income tax assets 2,753,449 3,062,040
Less valuation allowance - (551,956)
---------- ---------
Net deferred income tax assets 2,753,449 2,510,084
Gross deferred income tax liabilities:
Unrealized gains on Securities AFS (124,113) (457,441)
Premises and equipment (230,864) (297,811)
Other (50,980) (83,133)
---------- ---------
Total gross deferred income tax liabilities (405,957) (838,385)
---------- ---------
Net deferred tax asset $2,347,492 1,671,699
========== =========
</TABLE>
The deferred tax asset valuation allowance reflects management's
estimate of future tax benefits from Federal and State of Georgia net
operating loss carryforwards and credits included in the total deferred tax
asset, which may not be realized based on the weight of available evidence.
During 1994 and 1995, the Company reduced the beginning of the year
valuation allowance at AmeriCorp to reflect changes in judgement as to the
realizability of the AmeriCorp and AmeriBank net operating losses as they
began to generate sufficient and predictable current taxable income during
these two years. The Effingham deferred tax asset valuation allowance was
reduced effective with its acquisition by the Company.
F-19
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Prior to 1996, AmeriCorp and AmeriBank filed separate consolidated and
Effingham filed separate Federal and State of Georgia income tax returns.
After the 1996 acquisitions, AmeriCorp, AmeriBank and Effingham are
included in the consolidated Company Federal and State of Georgia income
tax returns. Consolidated Federal and Georgia tax net operating losses,
approximating $4,600,000 and $8,955,000 at December 31, 1996, respectively,
are available to offset future consolidated taxable income. The use of
these carryforwards is limited to future consolidated taxable earnings and
to annual limitations imposed by the Internal Revenue Code. The Company may
use no more than $1,007,000 annually of its remaining Federal and State of
Georgia net operating losses which begin to expire in 2002.
(10) COMMITMENTS AND CONTINGENCIES
The Banks are parties to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of their
customers. These financial instruments include commitments to extend credit
and standby letters of credit. Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the
balance sheet. The contractual amounts of those instruments reflect the
extent of involvement the Banks have in particular classes of financial
instruments.
The Banks' exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of
those instruments. The Banks use the same credit policies in making
commitments and conditional obligations as they do for on-balance-sheet
instruments.
In most cases, the Banks require collateral or other security to support
financial instruments with credit risk.
<TABLE>
<CAPTION>
Approximate
Contractual Amount
------------------
1996 1995
---- ----
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $13,720,000 18,554,000
Standby letters of credit $ 905,000 655,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments may
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Banks evaluate each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary, upon extension of credit is based
on management's credit evaluation. Collateral held varies but may include
unimproved and improved real estate, certificates of deposit, or personal
property.
Standby letters of credit are conditional commitments issued by the Banks
to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The extent of
collateral held for those commitments at December 31, 1996 and 1995 varies.
The Company has entered into certain agreements for the purpose of managing
its exposure to short term interest rate fluctuations. Notional amounts are
used to express the volume of these transactions, however, they do not
represent cash flows and the amounts subject to credit risk are much
smaller.
The Company entered into several interest rate swap agreements during 1995
and 1996 to manage its exposure to short-term interest rate fluctuations.
At December 31, 1996, five agreements were outstanding with aggregate
notional amounts of $25,000,000, and maturities ranging from August 1997
F-20
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
through November 1999. Under the terms of the agreements, the Company will
receive fixed rates of interest averaging approximately 6.32%, while paying
floating rates of interest based on the three month LIBOR. Weighted average
rates paid by the Company during 1996 were approximately 5.53%.
In addition the Company has purchased interest rate floor contracts with
aggregate notional amounts of $30,000,000, maturing in March 1997. Under
the terms of the agreement, the Company will be reimbursed on a quarterly
basis for decreases in the federal funds rate for any period during the
agreement in which the federal funds rate falls below 5.5%. At December
31, 1996, the federal funds rate was 5.25%. Amortization of premiums
related to the purchase of these contracts amounted to approximately
$44,000 for 1996.
During 1996, in anticipation of the maturity of the interest rate floor
contracts in March 1997, the Company entered into forward interest rate
floor contracts effective beginning April, 1997 with aggregate notional
amounts of $30,000,000 maturing through May, 1999. Under the terms of
these agreements, the Company will be reimbursed on a quarterly basis, for
decreases in the federal funds rate for any period during the agreement in
which the federal funds rate falls below 5.0%. Amortization of premiums
related to the purchase of these contracts amounted to approximately
$26,000.
The Company is exposed to credit loss in the event of non-performance by
the other party to the interest rate floor and interest rate swap
agreements; however, based on management's credit analysis, the Company
does not anticipate non-performance by the counterparty.
During 1996, AmeriBank assumed the lease of a branch facility. The minimum
lease payments amount to approximately $17,000 per month and are subject to
increases based on the Consumer Price Index and other costs. The lease
agreement expires in December 2007.
(11) RELATED PARTY TRANSACTIONS
In the normal course of business, executive officers and directors of the
Company and certain business organizations and individuals associated with
them, maintain a variety of banking relationships with the Banks.
Transactions with executive officers and directors are made on terms
comparable to those available to other Bank customers. The following table
summarizes related party loan activity during 1996:
<TABLE>
<S> <C>
Beginning balance $ 2,898,000
New loans 5,992,000
Repayments (2,012,000)
---------
Ending balance $ 6,878,000
=========
</TABLE>
The Company leases its administrative office under an operating lease
arrangement with the Chairman of the Board of Directors. The lease term
extends through January, 2003 and is renewable for 8 years at that time.
Rental expense under this agreement will amount to approximately $84,000
annually.
Outstanding deposits to related parties amounted to approximately
$8,238,000 and $8,156,000 at December 31, 1996 and 1995, respectively.
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires that the Company disclose estimated fair values for its financial
instruments. Fair value estimates, methods, and assumptions are set forth
below.
F-21
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
CASH AND CASH EQUIVALENTS
For cash, due from banks, federal funds sold and interest-bearing deposits
with other banks due within three months, the carrying amount is a
reasonable estimate of fair value.
INVESTMENT SECURITIES AND INVESTMENT SECURITIES AVAILABLE FOR SALE
For securities held for investment purposes, fair values are based on
quoted market prices.
LOANS
The fair value of fixed rate loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings. For variable rate loans, the
carrying amount is a reasonable estimate of fair value.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date. The
fair value of fixed maturity certificates of deposit is estimated using the
rates currently offered for deposits of similar remaining maturities.
NOTES PAYABLE
Because the Company's notes payable carry a variable rate, the carrying
amount is a reasonable estimate of fair value.
FHLB ADVANCES
The fair value of FHLB Advances is estimated by discounting the future cash
flows using the current rates at which advances of like maturity would be
made.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT AND FINANCIAL
GUARANTEES WRITTEN
Because commitments to extend credit and standby letters of credit are made
using variable rates and are for terms less than one year, the contract
value is a reasonable estimate of fair value.
INTEREST RATE SWAPS AND INTEREST RATE FLOORS
The fair value of interest rate swaps and interest rate floors is obtained
from dealer quotes. These values represent the estimated amount the Company
would receive to terminate the contracts or agreements, taking into account
current interest rates and when appropriate, the current creditworthiness
of the counterparties.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result
from offering for sale at one time the Company's entire holdings of a
particular financial instrument. Because no market exists for a significant
portion of the Company's financial instruments, fair value estimates are
based on many judgments. These estimates are subjective in nature and
involve uncertainties and matters of significant judgement and therefore
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. Significant assets and
liabilities that are not considered financial instruments include deferred
income taxes, premises and equipment, and goodwill. In addition, the tax
ramifications related to the realization of the unrealized gains and losses
can have a significant effect on fair value estimates and have not been
considered in the estimates.
F-22
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
The carrying amount and estimated fair values of the Company's financial
instruments at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- --------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 39,237,974 39,237,974 25,289,382 25,289,382
Investment securities 1,088,719 1,074,850 1,135,448 1,131,943
Securities AFS 42,828,598 42,828,598 39,293,305 39,293,305
Loans 186,583,708 185,720,314 177,889,613 179,112,329
Liabilities:
Deposits 258,698,432 259,754,641 224,223,006 225,068,763
Notes payable 1,500,000 1,500,000 2,770,809 2,770,809
Federal Home Loan Bank advances - - 6,100,000 6,100,000
Unrecognized financial
instruments:
Commitments to extend credit 13,720,000 13,720,000 18,554,000 18,554,000
Standby letters of credit 905,000 905,000 655,000 655,000
Interest rate swaps - 225,140 - 610,076
Interest rate floors 111,000 213,052 47,250 212,454
</TABLE>
(13) REGULATORY MATTERS
The Banks and the Company are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Banks' financial statements. Under
certain adequacy guidelines and the regulatory framework for prompt
corrective action, the Banks must meet specific capital guidelines that
involve quantitative measures of the Banks' assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Banks' capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Banks to maintain minimum amounts and ratios of total and Tier
1 capital to risk-weighted assets and of Tier 1 capital to average assets.
Management believes, as of December 31, 1996, that the Bank meets all
capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Comptroller
of the Currency categorized the Banks as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well capitalized the Banks must maintain minimum total risk-based, Tier 1
risk-based and Tier 1 leverage ratios as set forth in the table. There are
no conditions or events since that notification that management believes
have changed the Bank's category.
F-23
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(13) REGULATORY MATTERS, CONTINUED
The Banks' and the Company's actual capital amounts (in 000's) and ratios
are also presented in the table.
<TABLE>
<CAPTION>
Actual
------
Amount Ratio
------ -----
<S> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets):
Consolidated $26,021 12.34% greater than and equal to
First South Bank, N.A. $16,438 12.94% greater than and equal to
Ameribank, N.A. $10,517 12.44% greater than and equal to
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $23,488 11.14% greater than and equal to
First South Bank, N.A. $14,850 11.69% greater than and equal to
Ameribank, N.A. $ 9,572 11.78% greater than and equal to
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $23,488 9.30% greater than and equal to
First South Bank, N.A. $14,850 8.76% greater than and equal to
Ameribank, N.A. $ 9,572 11.54% greater than and equal to
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Consolidated $25,768 12.22% greater than and equal to
First South Bank, N.A. $16,053 12.81% greater than and equal to
Ameribank, N.A. $ 9,715 13.15% greater than and equal to
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $23,235 11.14% greater than and equal to
First South Bank, N.A. $15,237 11.67% greater than and equal to
Ameribank, N.A. $ 8,754 11.90% greater than and equal to
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $23,235 8.99% greater than and equal to
First South Bank, N.A. $15,237 9.10% greater than and equal to
Ameribank, N.A. $ 8,754 9.62% greater than and equal to
<CAPTION>
For Capital
Adequacy Purposes
-----------------
Amount Ratio
------ -----
<S> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets):
Consolidated 16,869 8.00%
First South Bank, N.A. 10,163 8.00% greater than and equal to
Ameribank, N.A. 6,763 8.00% greater than and equal to
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 8,434 4.00%
First South Bank, N.A. 4,989 4.00% greater than and equal to
Ameribank, N.A. 3,250 4.00% greater than and equal to
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 10,102 4.00%
First South Bank, N.A. 6,658 4.00% greater than and equal to
Ameribank, N.A. 3,138 4.00% greater than and equal to
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Consolidated 16,869 8.00%
First South Bank, N.A. 10,025 8.00% greater than and equal to
Ameribank, N.A. 5,910 8.00% greater than and equal to
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 8,343 4.00%
First South Bank, N.A. 5,223 4.00% greater than and equal to
Ameribank, N.A. 2,943 4.00% greater than and equal to
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 10,338 4.00%
First South Bank, N.A. 6,698 4.00% greater than and equal to
Ameribank, N.A. 3,640 4.00% greater than and equal to
<CAPTION>
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
-----------------
Amount Ratio
------ -----
<S> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. 12,703 greater than and equal to 10.00%
Ameribank, N.A. 8,454 greater than and equal to 10.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. 7,483 greater than and equal to 6.00%
Ameribank, N.A. 4,875 greater than and equal to 6.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. 8,322 greater than and equal to 5.00%
Ameribank, N.A. 4,147 greater than and equal to 5.00%
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. 12,532 greater than and equal to 10.00%
Ameribank, N.A. 7,388 greater than and equal to 10.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. 7,834 greater than and equal to 6.00%
Ameribank, N.A. 4,414 greater than and equal to 6.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. 8,372 greater than and equal to 5.00%
Ameribank, N.A. 4,550 greater than and equal to 5.00%
</TABLE>
At December 31, 1995, the ratios for First South Bank, N.A. include the
capital of Coweta and Middle Georgia. These charters were merged with FSB
during 1996.
(14) SUBSEQUENT EVENTS
On March 17, 1997, the Company's Board of Directors signed a statement of
intent to merge with Century South Banks, Inc. ("CSBI"). On March 31, 1997,
CSBI and the Company signed the Merger Agreement setting forth the terms
and conditions of the Merger. On July 11, 1997, the parties amended the
Merger Agreement such that the Company's shareholders will receive 1.35
shares of CSBI stock for each share of the Company's stock they hold. The
Company expects the Merger to be consummated by the end of the fourth
quarter 1997.
F-24
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(15) BANK CORPORATION OF GEORGIA (PARENT COMPANY ONLY) FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Balance Sheets
December 31, 1996 and 1995
Assets
------
1995
Restated
1996 Note 2
---- ------
<S> <C> <C>
Cash $ 91,651 -
Accrued dividend receivable - 380,647
Investments in common stock of subsidiaries 25,874,466 20,124,010
Investment in preferred stock of subsidiary - 3,944,700
Other assets 2,600,768 1,393,076
----------- ----------
$28,566,885 25,842,433
=========== ==========
Liabilities and Shareholders' Equity
------------------------------------
Accrued expenses and other liabilities $ 344,322 837,332
Notes payable 1,500,000 2,770,809
----------- ----------
Total liabilities 1,844,322 3,554,789
Shareholders' equity 26,722,563 22,234,292
----------- ----------
$28,566,885 25,842,433
=========== ==========
</TABLE>
F-25
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(15) BANK CORPORATION OF GEORGIA (PARENT COMPANY ONLY) FINANCIAL INFORMATION,
CONTINUED
Statements of Earnings
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
(Restated (Restated
1996 Note 2) Note 2)
---- ------- -------
<S> <C> <C> <C>
Income:
Dividends from subsidiaries $ 2,655,405 1,379,181 3,473,425
Management fees 540,000 540,000 420,000
Interest -- -- 843
---------- --------- ---------
Total income 3,195,405 1,919,181 3,894,268
---------- --------- ---------
Expenses:
Interest 153,525 218,225 211,187
Salaries and employee benefits 674,022 782,455 575,516
Other 711,199 490,213 398,944
---------- --------- ---------
Total expenses 1,538,746 1,490,893 1,185,647
---------- --------- ---------
Earnings before income tax benefit and equity
in undistributed earnings of subsidiaries 1,656,659 428,288 2,708,621
Income tax benefit 796,791 315,300 300
---------- --------- ---------
Earnings before equity in undistributed
earnings of subsidiaries 2,453,450 743,588 2,708,921
Dividends received in excess of earnings of
subsidiaries -- - (399,641)
Equity in undistributed earnings of
subsidiaries 859,240 2,120,070 -
---------- --------- ---------
Net earnings $ 3,312,690 2,863,658 2,309,280
========== ========= =========
</TABLE>
F-26
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(15) BANK CORPORATION OF GEORGIA (PARENT COMPANY ONLY) FINANCIAL INFORMATION,
CONTINUED
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
(Restated Restated
1996 Note 2) Note 2
---- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,312,690 2,863,658 2,309,280
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Equity in undistributed earnings of subsidiaries (859,240) (2,120,070) --
Dividends received in excess of earnings of subsidiaries -- -- 399,641
Change in accrued dividend receivable 300,000 (307,810) 2,680
Preferred stock dividends in kind (52,491) (302,800) (285,600)
Amortization 55,869 23,549 128,387
Change in other assets (714,979) (525,618) -
Change in accrued expenses and other liabilities (439,658) 283,614 205,574
---------- ---------- ----------
Net cash provided (used) by operating
activities 1,602,191 (85,477) 2,759,962
---------- ---------- ----------
Cash flows from investing activities:
Investment in bank subsidiaries -- -- (2,087,533)
Other -- -- (203,714)
---------- ---------- ----------
Net cash used by investing activities -- -- (2,291,247)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from (repayment of) notes payable (1,196,496) -- (500,000)
Proceeds from issuance of common stock 33,198 90,429 13,497
Cash paid to dissenting shareholders (120,784) -- --
Purchase of treasury stock -- -- (93,600)
Dividends paid (226,458) (191,161) (107,324)
---------- ---------- ----------
Net cash used by financing
activities (1,510,540) (100,732) (687,427)
---------- ---------- ----------
Net increase (decrease) in cash $ 91,651 (186,209) (218,712)
Cash at beginning of year -- 186,209 404,921
---------- ---------- ----------
Cash at end of year $ 91,651 -- 186,209
========== ========== ==========
</TABLE>
F-27
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(15) BANK CORPORATION OF GEORGIA (PARENT COMPANY ONLY) FINANCIAL INFORMATION,
CONTINUED
Statements of Cash Flows, continued
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
(Restated Restated
1996 Note 2) Note 2
---- --------- --------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 181,403 219,965 153,753
Income taxes $1,279,700 1,149,000 990,000
Supplemental schedule of noncash investing and financing
activities:
Change in unrealized loss on investment securities $ 599,221 1,000,467 (221,046)
available for sale, net of tax, including $108,489 in
1996 previously attributed to the minority interest
Increase (decrease) in unearned ESOP Shares $ (74,313) (30,090) (220,005)
Change in AmeriCorp deferred tax asset valuation allowance $ -- -- 763,632
applied to reduce goodwill
Redemption of the preferred stock investment in AmeriCorp $4,077,838 -- --
Receipt of dividend in kind $ 44,257 -- --
Issuance of common stock in conjunction with the purchase of $1,785,260 -- --
the remaining minority interest of AmeriCorp resulting in
good will of $504,325
</TABLE>
F-28
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 11,568,992 15,385,724
Interest bearing deposits 16,581,710 18,642,250
Federal Funds sold 5,260,000 5,210,000
Investment securities:
Available for sale 55,820,175 42,828,598
Held to maturity 1,089,606 1,088,719
------------ -----------
Total investment securities 56,909,781 43,917,317
------------ -----------
Loans 197,945,120 190,169,408
Less: Unearned discount (509,647) (736,360)
Allowance for loan losses (2,955,161) (2,849,340)
------------ -----------
Loans, net 194,480,312 186,583,708
------------ -----------
Bank premises and equipment 8,898,078 9,801,980
Accrued interest receivable 2,559,195 2,333,047
Goodwill 1,285,052 1,323,231
Other assets 4,552,944 7,057,065
------------ -----------
$302,096,064 290,254,322
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Demand $ 45,543,946 44,709,405
NOW and money market accounts 94,210,866 79,417,686
Savings 9,232,652 9,405,878
Time 120,730,082 125,165,463
------------ -----------
Total deposits 269,717,546 258,698,432
------------ -----------
Other liabilities 2,633,435 3,333,327
Long-term debt 1,500,000 1,500,000
------------ -----------
Total liabilities 273,850,981 263,531,759
------------ -----------
Stockholders' equity:
Common stock, $1 par value; 2,291,124
and 2,284,864 shares issued respectively 2,291,124 2,284,864
Additional paid in capital 6,238,180 6,170,157
Retained earnings 19,905,763 18,286,889
Net unrealized gain on securities-AFS 118,052 288,689
Treasury stock (16,767 shares) (111,540) (111,540)
Unearned ESOP shares (196,496) (196,496)
------------ -----------
Total stockholders' equity 28,245,083 26,722,563
------------ -----------
$302,096,064 290,254,322
============ ===========
</TABLE>
F-29
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Cash and due from banks $ 11,568,992 11,865,303
Interest bearing deposits 16,581,710 0
Federal Funds sold 5,260,000 17,475,529
Investment securities:
Available for sale 55,820,175 42,938,154
Held to maturity 1,089,606 1,088,103
------------ -------------
Total investment securities 56,909,781 44,026,257
------------ -------------
Loans 197,945,120 190,928,773
Less: Unearned discount (509,647) (834,028)
Allowance for loan losses (2,955,161) (2,835,306)
Loans, net 194,480,312 187,259,439
------------ -------------
Bank premises and equipment 8,898,078 9,506,476
Accrued interest receivable 2,559,195 2,153,881
Goodwill 1,285,052 957,269
Other assets 4,552,944 6,250,151
------------ -------------
$302,096,064 279,494,305
============ =============
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits:
Demand $ 45,543,946 38,650,552
NOW and money market accounts 94,210,866 68,292,234
Savings 9,232,652 10,260,147
Time 120,730,082 125,867,745
------------ -------------
Total deposits 269,717,546 243,070,678
------------ -------------
Other liabilities 2,633,435 2,098,255
Other borrowed money 0 6,700,000
Long-term debt 1,500,000 2,500,000
------------ -------------
Total liabilities 273,850,981 254,368,933
------------ -------------
Stockholders' equity:
Common stock, $1 par value; 2,291,124
and 2,282,266 shares issued respectively 2,291,124 2,282,266
Additional paid in capital 6,238,180 6,161,387
Retained earnings 19,905,763 16,953,034
Net unrealized gain on securities-AFS 118,052 111,034
Treasury stock, at cost, 16,767 shares (111,540) (111,540)
Unearned ESOP shares (196,496) (270,809)
------------ -------------
Total stockholders' equity 28,245,083 25,125,372
------------ -------------
$302,096,064 279,494,305
============ =============
</TABLE>
F-30
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Interest income:
Interest and fees on loans $10,257,833 10,144,007
Interest on federal funds sold 752,715 320,386
Interest on investment securities 1,749,357 1,619,469
----------- ----------
Total interest income 12,759,905 12,083,862
----------- ----------
Interest expense:
Interest on NOW and money market accounts 1,573,645 1,032,259
Interest on savings and time deposits 3,608,012 3,890,245
Other borrowings 70,480 74,506
----------- ----------
Total interest expense 5,252,137 4,997,010
----------- ----------
Net interest income 7,507,768 7,086,852
Provision for possible loan losses 190,900 272,000
----------- ----------
Net interest income after provision for
possible loan losses 7,316,868 6,814,852
----------- ----------
Other operating income:
Service charge on deposit accounts 748,103 821,730
Securities gains (losses) 0 (6,581)
Gain on sale of SBA loans 92,239 5,739
Other 1,043,417 812,237
----------- ----------
Total other operating income 1,883,759 1,633,125
----------- ----------
Other operating expenses:
Salaries and employee benefits 3,919,127 3,264,241
Occupancy 527,598 433,934
Equipment 460,976 412,968
Other 2,354,991 2,408,416
----------- ----------
Total operating expenses 7,262,692 6,519,559
----------- ----------
Earnings before income taxes and
minority interests 1,937,935 1,928,418
Income tax expense 319,918 215,309
----------- ----------
Earnings before minority interests 1,618,017 1,713,109
Minority interests 0 46,913
----------- ----------
Net earnings $ 1,618,017 1,666,196
=========== ==========
Net earnings per share:
Primary 0.67 0.71
Fully diluted 0.66 0.71
Weighted average shares outstanding:
Primary 2,427,000 2,337,000
Fully diluted 2,436,000 2,346,000
</TABLE>
F-31
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Interest income:
Interest and fees on loans $5,122,761 5,202,544
Interest on federal funds sold 428,329 149,852
Interest on investment securities 949,568 850,138
---------- ---------
Total interest income 6,500,658 6,202,534
---------- ---------
Interest expense:
Interest on NOW and money market accounts 855,410 553,107
Interest on savings and time deposits 1,887,960 2,021,717
Other borrowings 43,293 10,651
---------- ---------
Total interest expense 2,786,663 2,585,475
---------- ---------
Net interest income 3,713,995 3,617,059
Provision for possible loan losses 103,974 151,000
---------- ---------
Net interest income after provision for
possible loan losses 3,610,021 3,466,059
---------- ---------
Other operating income:
Service charge on deposit accounts 387,701 462,083
Securities gains (losses) 0 (6,581)
Other 722,978 537,123
---------- ---------
Total other operating income 1,110,679 992,625
---------- ---------
Other operating expenses:
Salaries and employee benefits 1,953,612 1,734,400
Occupancy 262,129 245,929
Equipment 247,611 242,060
Other operating expense 1,726,512 1,526,846
---------- ---------
Total operating expenses 4,189,864 3,749,235
---------- ---------
Earnings before income taxes and
minority interests 530,836 709,449
Income tax expense (benefit) (143,151) (172,691)
---------- ---------
Net earnings $ 673,987 882,140
========== =========
Net earnings per share:
Primary 0.28 0.39
Fully diluted 0.28 0.39
Weighted average shares outstanding:
Primary 2,353,000 2,262,000
Fully diluted 2,354,000 2,268,000
</TABLE>
F-32
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,618,017 1,666,196
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 407,509 321,509
Amortization and accretion, net (32,090) (65,810)
Minority interests in earnings
of subsidiary 0 46,913
Provision for loan losses 190,900 272,000
Gain on sale of premises and equipment (148,104) 0
Loss on sale of investment securities 0 6,581
Change in:
Other assets 2,373,956 (312,073)
Other liabilities (699,892) (1,045,739)
------------ ------------
Net cash flows provided by operating activities 3,710,296 889,577
------------ -----------
Cash flows from investing activities:
Proceeds from maturities of securities AFS 2,597,768 2,824,624
Proceeds from sales of securities AFS 0 5,573,063
Purchase of securities AFS (15,786,583) (13,098,125)
Net increase in loans (8,087,504) (9,641,829)
Proceeds from sales of premises and equipment 857,840 0
Purchases of premises and equipment ( 213,343) (1,904,226)
------------ ------------
Net cash flows used in investing activities (20,631,822) (16,246,493)
------------ ------------
Cash flows from financing activities:
Net increase in deposits 11,019,114 18,853,939
Repayment of other borrowings 0 (6,200,000)
Proceeds from other borrowings 0 6,800,000
Dividends paid 0 0
Purchase of treasury stock 0 (64,867)
Proceeds from issuance of common stock 75,140 21,701
------------ -----------
Net cash flows provided by financing activities 11,094,254 19,410,773
------------ -----------
Net change in cash and cash equivalents (5,827,272) 4,053,857
------------ -----------
Cash and cash equivalents at beginning of period 39,237,974 25,286,975
------------ -----------
Cash and cash equivalents at end of period $ 33,410,702 29,340,832
============ ===========
</TABLE>
F-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included herein have been prepared by BCG, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although BCG believes that the disclosures contained herein are
adequate to make the information presented not misleading. In the opinion of
management, the information furnished in the condensed consolidated financial
statements reflects all adjustments which are ordinary in nature and necessary
to present fairly BCG's financial position, results of operations and changes in
financial position for such interim period. These financial statements should
be read in conjunction with BCG's financial statements and the notes thereto as
of December 31, 1996, included in BCG's annual report on Form 10-KSB for the
year ended December 31, 1996.
BCG is a bank holding company whose business is primarily conducted by its
wholly-owned banking subsidiaries First South Bank, N. A. ("FSB") and Ameribank,
N. A. ("Ameribank"). The accounting principles followed by BCG and its
subsidiaries, and the methods of applying those principles conform with
generally accepted accounting principles and with general practices within the
banking industry, where applicable.
BCG's consolidated financial statements include the accounts of the parent
company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
There are statutory and regulatory requirements applicable to payment of
dividends by the Banks as well as by BCG to its shareholders. No cash dividends
were declared during the three month period ended June 30, 1997 or the six month
period ended June 30, 1997.
As part of the overall interest rate risk management, BCG uses interest rate
swaps and interest rate floors. These contracts are designated by BCG as hedges
of interest rate exposures, and interest income or expense derived from these
contracts is recorded over the life of the contract as an adjustment to interest
income or expense.
F-34
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheet
June 30, 1997
(Unaudited)
The following unaudited pro forma condensed combined balance sheet combines the
historical consolidated balance sheets of CSBI and BCG giving effect to the
Merger as if the Merger had been effective June 30, 1997. The acquisition of
BCG will be accounted for using the pooling-of-interests method of accounting.
The proposed acquisition will involve the acquisition of 100% of the issued and
outstanding shares of BCG in exchange for 3,070,382 shares of CSBI Common Stock
(see note (a)). This pro forma condensed combined balance sheet assumes that as
part of the Merger, 3,070,382 shares of CSBI Common Stock will be issued in
exchange for all the shares of BCG Common Stock outstanding at June 30, 1997
at an exchange ratio of 1.35 to 1. This pro forma condensed combined balance
sheet should be read in conjunction with the separate financial statements and
related notes of CSBI and BCG appearing elsewhere in or incorporated by
reference in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
Pro forma
Pro forma CSBI and
CSBI BCG adjustments BCG combined
--------- -------- --------------- -------------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 35,185 11,569 46,754
Federal funds sold 31,260 5,260 36,520
Interest-earning deposits in other banks 59 16,582 16,641
Investment securities 141,623 56,910 198,533
Loans, net 512,853 194,480 707,333
Premises and equipment, net 18,324 8,898 27,222
Goodwill and intangibles 6,347 1,285 7,632
Foreclosed assets 2,198 1,180 3,378
Other assets 11,606 5,932 17,538
-------- ------- ---------
Total assets $759,455 302,096 1,061,551
======== ======= =========
Liabilities:
Deposits:
Non-interest bearing $ 83,847 45,544 129,391
Time deposits greater than $100,000 99,725 29,147 128,872
Other 486,605 195,027 681,632
-------- ---------
Total deposits $670,177 269,718 939,895
Federal Home Loan Bank advances 6,931 -- 6,931
Long-term debt 152 1,500 1,652
Other borrowings -- -- --
Other liabilities 6,947 2,633 9,580
-------- ------- ---------
Total liabilities $684,207 273,851 958,058
Shareholders' equity:
Common stock $ 7,826 2,291 779 (b) 10,896
Surplus 28,855 6,238 (891)(b) 34,202
Retained earnings 38,961 19,906 58,867
Treasury stock (306) (112) 112 (b) (306)
Reduction for ESOP loan guarantee (51) (196)(d) (247)
Net unrealized holding gains (losses) on
investment securities (37) 118 81
-------- ------- ---------
Total shareholders' equity $ 75,248 28,245 103,493
Total liabilities and shareholders'
equity $759,455 302,096 1,061,551
======== ======= =========
</TABLE>
1
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Pro Forma Financial Information
Pro Forma Condensed Combined Statements of Income
The following unaudited pro forma condensed combined consolidated statements of
income of CSBI and BCG give effect to the proposed acquisition of all issued and
outstanding shares of BCG Common Stock in exchange for 1.35 shares of CSBI
Common Stock to be issued to BCG shareholders using the pooling-of-interests
method of accounting giving effect to the Merger as if the Merger had been
effective as of the beginning of the periods presented. The pro forma
information assumes that 3,070,382 shares of CSBI Common Stock will be issued in
exchange for all the shares of BCG Common Stock outstanding at the Effective
Date. The pro forma condensed combined consolidated statements of income should
be read in conjunction with the separate financial statements and related notes
of CSBI and BCG appearing elsewhere in or incorporated by reference in this
Joint Proxy Statement/Prospectus.
For the Six Months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro forma
CSBI and
Pro forma BCG
CSBI BCG adjustments combined
---------- -------- ------------- -----------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $ 31,840 12,760 -- 44,600
Interest expense 14,754 5,252 -- 20,006
---------- -------- ------------- -----------
Net interest income 17,086 7,508 -- 24,594
Provision for loan losses 4,669 191 -- 4,860
---------- -------- -----------
Net interest income after provision
for loan losses 12,417 7,317 -- 19,734
Noninterest income 3,241 1,884 -- 5,125
Noninterest expense 14,179 7,263 -- 21,442
---------- -------- ------------- -----------
Income before income taxes 1,479 1,938 -- 3,417
Income taxes 299 320 -- 619
---------- -------- ------------- -----------
Net income $ 1,180 1,618 -- 2,798
========== ======== ============= ===========
Earnings per share:
Primary $ .15 .67 .25
Fully diluted $ .15 .66 .25
Weighted average shares and share equivalents
outstanding (note c):
Primary 7,794 2,427 867 11,088
Fully diluted 7,794 2,436 858 11,088
</TABLE>
2
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Pro Forma Condensed Combined Statement of Income
For the Six Months ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro forma
Pro forma CSBI and BCG
CSBI BCG adjustments combined
---- ---- ----------- --------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $31,320 12,084 -- 43,404
Interest expense 14,679 4,997 -- 19,676
------- ------ ------------ ------
Net interest income 16,641 7,087 -- 23,728
Provision for loan losses 870 272 -- 1,142
------- ------ ------------ ------
Net interest income after provision
for loan losses 15,771 6,815 -- 22,586
Noninterest income 3,501 1,633 -- 5,134
Noninterest expense 12,304 6,520 -- 18,824
------- ------ ------------ ------
Income before income taxes and 6,968 1,928 -- 8,896
minority interest in earnings of
subsidiary
Income taxes 2,157 215 -- 2,372
Minority interest in earnings of subsidiary -- 47 -- 47
------- ------ ------------ ------
Net income $ 4,811 1,666 -- 6,477
======= ====== ============ ======
Earnings per share:
Primary $ .62 .71 .59
Fully diluted $ .62 .71 .59
Weighted average shares and share equivalents
outstanding (note c):
Primary 7,775 2,337 847 10,959
Fully diluted 7,775 2,346 838 10,959
</TABLE>
3
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Pro Forma Condensed Combined Statement of Income
For the Year ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro forma
Pro forma CSBI and
CSBI BCG adjustments BCG combined
--------- -------- ------------ -------------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $62,826 24,435 -- 87,261
Interest expense 29,165 9,878 -- 39,043
------- ------ ------------ ------
Net interest income 33,661 14,557 -- 48,218
Provision for loan losses 1,757 409 -- 2,166
------- ------ ------------ ------
Net interest income after provision
for loan losses 31,904 14,148 -- 46,052
Noninterest income 6,624 3,069 -- 9,693
Noninterest expense 25,051 12,698 -- 37,749
------- ------ ------------ ------
Income before income taxes and
minority interest in
earnings of subsidiary 13,477 4,519 -- 17,996
Income taxes 4,107 1,159 -- 5,266
Minority interest in earnings of subsidiary -- 47 -- 47
------- ------ ------------ ------
Net income $ 9,370 3,313 -- 12,683
======= ====== ============ ======
Earnings per share:
Primary $ 1.21 1.41 1.15
Fully diluted $ 1.20 1.41 1.15
Weighted average shares and share equivalents
outstanding (note c):
Primary 7,776 2,345 877 10,998
Fully diluted 7,778 2,342 896 11,016
</TABLE>
4
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Pro Forma Condensed Combined Statement of Income
For the Year ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Pro forma
Pro forma CSBI and
CSBI BCG adjustments BCG combined
--------- -------- ------------ -------------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $ 59,739 22,588 -- 82,327
Interest expense 28,580 9,336 -- 37,916
------- ------ ------------ ------
Net interest income 31,159 13,252 -- 44,411
Provision for loan losses 1,694 465 -- 2,159
------- ------ ------------ ------
Net interest income after provision
for loan losses 29,465 12,787 -- 42,252
Noninterest income 6,165 2,368 -- 8,533
Noninterest expense 24,523 10,979 -- 35,502
------- ------ ------------ ------
Income before income taxes and
minority interest in
earnings of subsidiary 11,107 4,176 -- 15,283
Income taxes 3,212 931 -- 4,143
Minority interest in earnings of subsidiary -- 381 -- 381
------- ------ ------------ ------
Net income $ 7,895 2,864 -- 10,759
======= ====== ============ ======
Earnings per share:
Primary $ 1.02 1.35 1.00
Fully diluted $ 1.02 1.34 1.00
Weighted average shares and share equivalents
outstanding (note c):
Primary 7,773 2,115 827 10,715
Fully diluted 7,776 2,130 831 10,737
</TABLE>
5
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Pro Forma Condensed Combined Statement of Income
For the Year ended December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
Pro forma
Pro forma CSBI and
CSBI BCG adjustments BCG combined
--------- -------- ------------ -------------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $ 49,032 17,870 -- 66,902
Interest expense 20,966 7,247 -- 28,213
------- ------ ------------ ------
Net interest income 28,066 10,623 -- 38,689
Provision for loan losses 943 447 -- 1,390
------- ------ ------------ ------
Net interest income after provision
for loan losses 27,123 10,176 -- 37,299
Noninterest income 4,993 2,881 -- 7,874
Noninterest expense 22,891 10,247 -- 33,138
------- ------ ------------ ------
Income before income taxes and minority
interest in earnings of subsidiary 9,225 2,810 -- 12,035
Income tax expense <benefit> 2,234 <151> -- 2,083
Minority interest in earnings of subsidiary -- 652 -- 652
------- ------ ------------ ------
Net income $ 6,991 2,309 -- 9,300
======= ====== ============ ======
Earnings per share:
Primary $ .91 1.11 .88
Fully diluted $ .91 1.10 .88
Weighted average shares and share equivalents
outstanding (note c):
Primary 7,663 2,077 848 10,588
Fully diluted 7,663 2,103 827 10,593
</TABLE>
6
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Notes to Pro Forma Financial Statements
The following notes describe the pro forma adjustments necessary to reflect the
proposed acquisition of BCG as described in note (a).
(a) On March 31, 1997, CSBI entered into the Merger Agreement whereby CSBI
will acquire the 2,274,357 outstanding shares of BCG Common Stock in
an exchange of its common shares. Pursuant to the terms of the Merger
Agreement, as amended, CSBI will exchange 1.35 of its common shares
for each BCG share outstanding.
(b) Reflects the issuance of 3,070,382 shares of CSBI Common Stock in
exchange for all of the outstanding BCG Common Stock and the
retirement of 16,767 shares of BCG treasury stock.
(c) Pro forma weighted average number of common shares and share
equivalents includes the historical amounts for CSBI increased by the
additional shares that would have been outstanding had the acquisition
of BCG taken place as of the beginning of the respective periods and
by the assumed additional common share equivalents relating to
outstanding BCG stock options during the respective periods.
(d) Represents the cost basis of unreleased shares in the BCG ESOP Plan.
At the Effective Time, each share of BCG Common Stock included in the
BCG ESOP Plan will be exchanged for 1.35 shares of CBSI Common Stock.
After the Merger is consummated, the BCG ESOP Plan will remain in
existence and will continue to release shares to employee accounts in
accordance with past practices.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALLIED HOLDINGS, INC.
December 30, 1997 /s/ James A. Faulkner
------------------------------------
James A. Faulkner, Vice Chairman and
Chief Executive Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
2.1 Agreement and Plan of Merger
4
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of March 31, 1997, by and between BANK CORPORATION OF GEORGIA ("BCG"), a
corporation organized and existing under the laws of the State of Georgia, with
its principal office located in Macon, Georgia, and CENTURY SOUTH BANKS, INC.
("CSBI"), a corporation organized and existing under the laws of the State of
Georgia, with its principal office located in Gainesville, Georgia.
PREAMBLE
The Boards of Directors of BCG and CSBI are of the opinion that the
transaction described herein is in the best interest of the parties and their
respective shareholders. This Agreement provides for the acquisition of BCG by
CSBI pursuant to the merger of BCG with and into CSBI under the Articles of
Incorporation and Bylaws of CSBI At the effective time of such merger, the
outstanding shares of the capital stock of BCG shall be converted into the right
to receive shares of the common stock of CSBI (except as provided herein). As a
result, shareholders of BCG shall become shareholders of CSBI. The transaction
described in this Agreement is subject to the approvals of the shareholders of
BCG, the Board of Governors of the Federal Reserve System and the Department of
Banking and Finance of the State of Georgia and the satisfaction of certain
other conditions described in this Agreement. It is the intention of the
parties to this Agreement that the Merger (i) for federal income tax purposes
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code, and (ii) for accounting purposes shall qualify for
treatment as a "pooling of interests".
Immediately following the Closing of the merger, First South Bank, National
Association and Ameribank, National Association, both wholly-owned national bank
subsidiaries of BCG (collectively, "BCG Banks") will remain in existence under
their respective Articles of Association and Bylaws as wholly-owned subsidiaries
of CSBI.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE I
TRANSACTION AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, BCG shall be merged with and into CSBI in accordance with the
provisions of Section 14-2-1101 of the GBCC and with the effect provided in
Section 14-2-1106 of the GBCC (the "Merger"). CSBI shall be the Surviving
Corporation resulting from the Merger and the separate existence of BCG shall
cease. The Merger shall be consummated pursuant to the terms of this Agreement,
which has been approved and adopted by the respective Boards of Directors of
CSBI and BCG.
1.2 Time and Place of Closing. The Closing will take place at 9:30 a.m. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:30 a.m.), or at such other time as the Parties,
acting through their Chief Executive Officers, may mutually agree. The place of
Closing shall be at the offices of Troutman Sanders LLP, Atlanta, Georgia, or
such other place as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger contemplated by this Agreement shall become
effective on the date and at the time the Articles of Merger reflecting the
Merger shall become effective with the Secretary of State of the State of
Georgia. Subject to the terms and conditions hereof, unless otherwise mutually
agreed upon in writing by the Chief Executive Officers of each Party, the
Parties shall use their reasonable efforts to cause the Effective Time to occur
on the last business day of the month in which occurs the last to occur of (i)
the effective date (including expiration of any applicable waiting period) of
the last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, (ii) the date on which the shareholders of
BCG approve this Agreement to the extent such approval is required by applicable
Law; or (iii) such later date as may be mutually agreed upon in writing by the
Chief Executive Officers of each Party.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of CSBI in
effect immediately prior to the
1
<PAGE>
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of CSBI in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 Directors. Upon the Effective Time, CSBI shall have eleven (11)
directors determined as follows:
(a) Immediately before the Effective Time all but five (5) directors
of CSBI will resign as directors of CSBI;
(b) Three (3) of the resulting vacancies on the Board of Directors of
CSBI will be filled by those three (3) nominees designated by the president of
BCG; and
(c) The remaining three (3) vacancies on the Board of Directors of
CSBI shall be selected by majority vote of the eight (8) directors then serving
on the CSBI Board of Directors.
2.4 Officers. The officers of CSBI in office immediately prior to the
Effective Time, shall serve as the officers of CSBI from and after the Effective
Time in accordance with the Bylaws of CSBI except the officers who shall serve
in the offices and capacities as follows:
(a) William H. Anderson, II, Chairman;
(b) J. Russell Ivie, Vice-Chairman;
(c) James A. Faulkner, Vice-Chairman, Chief Executive Officer; and
(d) Joseph W. Evans, President, Chief Operating Officer and Chief
Financial Officer.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of CSBI Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time; and
(b) Subject to the conditions set forth herein, each share of BCG
Common Stock shall be exchanged for one and thirty-three one hundredths (1 and
33/100) shares of CSBI Common Stock (the "Merger Consideration"); and
(c) Each share of BCG Common Stock (excluding shares held by CSBI or
any of its Subsidiaries or by BCG, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and excluding shares
held by shareholders who perfect their dissenters' rights of appraisal as
provided in Section 3.4 of this Agreement) issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive the Merger Consideration.
3.2 Anti-Dilution Provisions. In the event BCG or CSBI changes the number
of shares of BCG Common Stock or CSBI Common Stock, respectively, issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date therefor
(in the case of a stock split or similar recapitalization) shall be prior to the
Effective Time, the Merger Consideration shall be proportionately adjusted.
3.3 Shares Held by BCG or CSBI. Each of the shares of BCG Common Stock
held by BCG or by any CSBI Companies, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.4 Dissenting Shareholders. Any holder of shares of BCG Common Stock who
perfects his dissenters' rights of appraisal in accordance with and as
contemplated by Sections 14-2-1301, et seq. of the GBCC shall be entitled to
-- ---
receive the value of such shares in cash as determined pursuant to such
provision of Law; provided,
2
<PAGE>
however, that no such payment shall be made to any dissenting shareholder unless
and until such dissenting shareholder has complied with the applicable
provisions of the GBCC and surrendered to BCG the certificate or certificates
representing the shares for which payment is being made. In the event that after
the Effective Time a dissenting shareholder of BCG fails to perfect, or
effectively withdraws or loses, his right to appraisal and of payment for his
shares, BCG shall issue and deliver the consideration to which such holder of
shares of BCG Common Stock is entitled under this Article 3 (without interest)
upon surrender by such holder of the certificate or certificates representing
shares of BCG Common Stock held by him.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of BCG Common Stock exchanged pursuant to the
Merger, who would otherwise have been entitled to receive a fraction of a share
of CSBI Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of CSBI Common Stock multiplied
by the market value of one share of CSBI Common Stock at the Effective Time, in
the case of shares exchanged pursuant to the Merger, or the date of exercise, in
the case of options. The market value of one share of CSBI Common Stock at the
Effective Time or the date of exercise, as the case may be, shall be the last
sale price of such common stock on NASDAQ (as reported by The Wall Street
Journal or, if not reported thereby, any other authoritative source) on the last
business day preceding the Effective Time or the date of exercise, as the case
may be. No such holder will be entitled to dividends, voting rights, or any
other rights as a shareholder in respect of any fractional shares.
3.6 Conversion of Stock Options.
(a) At the Effective Time, all rights with respect to BCG Common
Stock pursuant to stock options ("BCG Option") granted by BCG under the BCG Key
Employee Stock Option Plan ("BCG Option Plan"), which are outstanding at the
Effective Time, whether or not exercisable, shall be converted into and become
rights with respect to CSBI Common Stock, and CSBI shall assume each BCG Option,
in accordance with the terms of the BCG Option Plan and stock option agreement
by which it is evidenced. From and after the Effective Time, (i) each BCG Option
assumed by CSBI may be exercised solely for shares of CSBI Common stock, (ii)
the number of shares of CSBI Common Stock subject to such BCG Option shall be
equal to the number of shares of BCG Common Stock subject to such BCG Option
immediately prior to the Effective Time multiplied by 1.33, and (iii) the per
share exercise price under each such BCG Option shall be adjusted by dividing
the per share exercise price under each such BCG Option by 1.33 and rounding
down to the nearest cent.
(b) All restrictions or limitations on transfer with respect to BCG
Common Stock awarded under the BCG Option Plan or any other plan, program, or
arrangement of BCG or BCG Banks, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program or arrangement, shall remain in full force and
effect with respect to shares of CSBI Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, CSBI shall
cause the exchange agent selected by CSBI (the "Exchange Agent"), to mail to
the former shareholders of BCG appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of BCG Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After
the Effective Time, each holder of shares of BCG Common Stock (other than shares
to be canceled pursuant to Section 3.3 of this Agreement or as to which
dissenters' rights of appraisal have been perfected as provided in Section 3.4
of this Agreement) issued and outstanding at the Effective Time shall surrender
the certificate or certificates representing such shares to the Exchange Agent
and shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.5 of this Agreement, each holder of shares of BCG Common
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional share of CSBI Common Stock to which such holder may be
otherwise entitled (without interest). CSBI shall not be obligated to deliver
the consideration to which any former holder of BCG Common Stock is entitled as
a result of the Merger until such holder surrenders his certificate or
certificates representing the shares of BCG Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates of BCG Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
Any other provision of this Agreement notwithstanding, neither CSBI nor the
Exchange Agent shall be liable to a holder of BCG Common Stock for any amounts
paid or property delivered in good faith to a public official pursuant to any
applicable abandoned property Law.
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4.2 Rights of Former Shareholders. At the Effective Time, the stock
transfer books of BCG shall be closed as to holders of BCG Common Stock
immediately prior to the Effective Time and no transfer of BCG Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of BCG Common Stock (other than
shares to be canceled pursuant to Sections 3.3 and 3.4 of this Agreement) shall
from and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1 and 3.5 of this Agreement in
exchange therefor. To the extent permitted by Law, former shareholders of
record of BCG shall be entitled to vote after the Effective Time at any meeting
of CSBI shareholders the number of whole shares of BCG Common Stock into which
their respective shares of BCG Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing BCG Common
Stock for certificates representing CSBI Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by CSBI on the CSBI Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares issuable pursuant to this Agreement, but no dividend
or other distribution payable to the holders of record of CSBI Common Stock as
of any time subsequent to the Effective Time shall be delivered to the holder of
any certificate representing shares of BCG Common Stock issued and outstanding
at the Effective Time until such holder surrenders such certificate for exchange
as provided in Section 4.1 of this Agreement. However, upon surrender of such
BCG Common Stock certificate, both the CSBI Common Stock certificate (together
with all such undelivered dividends or other distributions without interest) and
any undelivered cash payments to be paid for fractional share interests (without
interest) shall be delivered and paid with respect to each share represented by
such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BCG
BCG hereby represents and warrants to CSBI as follows:
5.1 Organization, Standing, and Power. BCG is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and is duly registered as a bank holding company under the BHC Act. BCG
has the corporate power and authority to carry on its business as now conducted
and to own, lease and operate its Assets. BCG is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of the
United States and foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on BCG.
5.2 Authority, No Breach By Agreement.
(a) BCG has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transaction contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the Merger contemplated herein, have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of BCG subject to the approval of this Agreement by the holders of a
majority of the outstanding shares of BCG Common Stock. Subject to such
requisite shareholder approval, this Agreement represents a legal, valid, and
binding obligation of BCG, enforceable against BCG in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by BCG, nor
the consummation by BCG of the transaction contemplated hereby, nor compliance
by BCG with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of BCG's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any BCG Bank under, any
Contract or Permit of any BCG Bank, where such Default or Lien, or any failure
to obtain such Consent, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BCG, or, (iii) subject to receipt of the
requisite approvals referred to in Section 9.1(b) of this Agreement, violate any
Law or Order applicable to any BCG Bank or any of their respective Assets.
(c) No notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by BCG of the Merger and the other
transactions contemplated in this Agreement other than (i) in connection or
compliance with the provisions of the Securities Laws, applicable state
corporate and securities Laws, (ii) Consents required from Regulatory
Authorities, (iii) notices to or filings with the IRS or the Pension Benefit
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Guaranty Corporation with respect to any employee benefit plans, and (iv)
Consents, filings or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BCG.
5.3 Capital Stock.
(a) The authorized capital stock of BCG consists of 3,000,000 shares
of BCG Common Stock. At the close of business on March 31, 1997, there were
2,268,097 shares of BCG Common Stock issued and outstanding and 212,915 shares
of BCG Common Stock were reserved for issuance upon the exercise of outstanding
stock options and purchases under the BCG Option Plan. All of the issued and
outstanding shares of BCG Common Stock are, and all of the shares of CSBI Common
Stock to be issued in exchange for shares of BCG Common Stock upon consummation
of the Merger, when issued in accordance with the terms of this Agreement, will
be, duly and validly issued and outstanding and fully paid and nonassessable
under the GBCC. None of the outstanding shares of BCG Common Stock has been, and
none of the shares of CSBI Common Stock to be issued in exchange for shares of
BCG Common Stock upon consummation of the Merger will be, issued in violation of
any preemptive rights of the current or past shareholders of BCG.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
provided pursuant to the BCG Option Plan, or the Bank Corporation of Georgia
Employee Stock Ownership Plan ("BCG ESOP") or pursuant to options to purchase
shares of BCG Common Stock outside the BCG Option Plan or as Previously
Disclosed, as of the date of this Agreement, there are no shares of capital
stock or other equity securities of BCG outstanding and no outstanding options,
warrants, scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of BCG or contracts, commitments,
understandings, or arrangements by which BCG is or may be bound to issue
additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock.
5.4 Financial Statements. BCG has Previously Disclosed and delivered to
CSBI prior to the execution of this Agreement copies of all BCG Financial
Statements for periods ended prior to the date hereof and will deliver to CSBI
copies of all BCG Financial Statements prepared subsequent to the date hereof.
The BCG Financial Statements (as of the dates thereof and the periods covered
thereby) (i) are or, if dated after the date of this Agreement, will be in
accordance with the books and records of BCG and the BCG Banks, which are or
will be, complete and correct and which have been or will have been, maintained
in accordance with good business practices, and (ii) present or will present,
fairly the consolidated financial position of BCG and the BCG Banks as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows of BCG and the BCG Banks for the periods
indicated, in accordance with GAAP (subject to exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments that are
not material).
5.5 Absence of Undisclosed Liabilities. Neither BCG nor either BCG Bank
has any Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on either BCG or any of the BCG Banks
except Liabilities which are accrued or reserved against in the consolidated
balance sheets of BCG as of December 31, 1996 and March 31, 1997 included in the
BCG Financial Statements or reflected in the notes thereto. Neither BCG nor
either of the BCG Banks has incurred or paid any Liability since March 31, 1997,
except for such Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on BCG.
5.6 Absence of Certain Changes or Events. Since March 31, 1997, except as
disclosed in SEC Documents filed by BCG prior to the date of this Agreement, (i)
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BCG, and (ii) neither BCG nor either of the BCG Banks has taken any
action, or failed to take any action, prior to the date of this Agreement, which
action or failure, if taken after the date of this Agreement, would represent or
result in a material breach or violation of any of the covenants and agreements
of BCG provided in Article 7 of this Agreement.
5.7 Tax Matters.
(a) All tax returns required to be filed by or on behalf of BCG or
any of the BCG Banks have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on BCG, and all returns filed are complete and accurate to the
Knowledge of BCG. All
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Taxes shown on filed returns have been paid. As of the date of this Agreement,
there is no audit examination, deficiency, or refund Litigation with respect to
any Taxes that is reasonably likely to result in a determination that would
have, individually or in the aggregate, a Material Adverse Effect on BCG, except
as reserved against in the BCG Financial Statements delivered prior to the date
of this Agreement. All Taxes and other Liabilities due with respect to completed
and settled examinations or concluded Litigation have been paid.
(b) Except as Previously Disclosed, neither BCG nor any of the BCG
Banks has executed an extension or waiver of any statute of limitations on the
assessment or collection of any Tax due that is currently in effect, and no
unpaid tax deficiency has been asserted in writing against or with respect to
BCG or any of the BCG Banks, which deficiency is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BCG.
(c) Adequate provision for any Taxes due or to become due for BCG or
any of the BCG Banks for the period or periods through and including the date of
the respective BCG Financial Statements has been made and is reflected on such
BCG Financial Statements.
(d) Deferred Taxes of BCG and the BCG Banks have been provided for in
accordance with GAAP. Effective January 1, 1993, BCG adopted Financial
Accounting Standards Board Statement 109, "Accounting for Income Taxes."
(e) BCG and each BCG Bank has performed all due diligence procedures
required under Internal Revenue Code Section 6722 relating to taxpayer
identification numbers, have complied with all other information reporting
requirements of the IRS, and BCG and each BCG Bank has complied with the
withholding requirements under Internal Revenue Code Section 3406, except for
any nonperformance or noncompliance which, individually or in the aggregate, is
not reasonably likely to have a Material Adverse Effect on either BCG or any BCG
Bank
5.8 Compliance with Laws. BCG is duly registered as a bank holding company
under the BHC Act. Each of the BCG Banks has in effect all permits necessary to
own, lease or operate their Assets and to carry on their respective business as
now conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
BCG or any of the BCG Banks, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BCG. Neither BCG
nor any of the BCG Banks:
(a) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BCG; and
(b) except as Previously Disclosed, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
either BCG or any of the BCG Banks are not in compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BCG or any of the BCG Banks, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on either
BCG or any BCG Bank, or (iii) requiring either BCG or any of the BCG Banks to
enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding, or to adopt any
board of directors resolution or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of dividends.
5.9 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of BCG, threatened against either BCG or any of the BCG Banks,
or against any Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
either BCG or any of the BCG Banks, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
either BCG or any of the BCG Banks, that are reasonably likely to have,
individually or in the aggregate a Material Adverse Effect on BCG or any of the
BCG Banks.
5.10 Reports. Since January 1, 1991, BCG and each of the BCG Banks has
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements, (ii) other Regulatory Authorities, and (iii) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on either BCG or any
of the BCG Banks). As of their respective dates, each of such reports
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and documents, including the financial statements, exhibits, and schedules
thereto, complied in all material respects with all applicable Laws. As of their
respective dates, each such report and document did not, in all material
respects, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
5.11 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by either BCG or any of the BCG Banks
or any Affiliate thereof to CSBI pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by either BCG or any of the BCG Banks or any Affiliate thereof for
inclusion in the Registration Statement to be filed by CSBI with the SEC, will,
when the Registration Statement becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein not misleading. None of the information supplied or
to be supplied by either BCG or any of the BCG Banks or any Affiliate thereof
for inclusion in the Proxy Statement to be mailed to BCG shareholders in
connection with the Shareholders' Meeting, and any other documents to be filed
by either BCG or any of the BCG Banks or any Affiliate thereof with the SEC or
any other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Proxy Statement, when first mailed to the shareholders of BCG, be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that either BCG or any of the BCG Banks or
any Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
5.12 Accounting, Tax and Regulatory Matters. Neither BCG nor any of the BCG
Banks or any Affiliate thereof has taken any action or has any Knowledge of any
fact or circumstance that is reasonably likely to (i) prevent the Merger from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement. To the Knowledge of BCG, there
exists no fact, circumstance, or reason why the requisite Consents referred to
in Section 9.1(b) of this Agreement cannot be received in a timely manner
without the imposition of any condition or restriction of the type described in
the second sentence of such Section 9.1(b).
5.13 Assets. Except as Previously Disclosed or as disclosed or reserved
against in the BCG Financial Statements, BCG and each BCG Bank have good and
marketable title, free and clear of all Liens, to all of their respective
Assets. All material tangible properties used in the business of BCG and each
BCG Bank are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with BCG's past practices.
All Assets which are material to BCG's and BCG Banks' businesses held under
leases or subleases by BCG or any of the BCG Banks, are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect. The policies of fire, theft, liability,
and other insurance maintained with respect to the Assets or businesses of BCG
and the BCG Banks provide adequate coverage under current industry practices
against loss or Liability, and the fidelity and blanket bonds in effect as to
which BCG or any of the BCG Banks is a named insured are reasonably sufficient.
The Assets of BCG and the BCG Banks include all assets required to operate the
business of BCG and the BCG Banks as presently conducted.
5.14 Environmental Matters.
(a) To the Knowledge of BCG, BCG and BCG Banks' Participation
Facilities, and their respective Loan Properties are, and have been, in
substantial compliance with all Environmental Laws, except for violations which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BCG or any of the BCG Banks.
(b) There is no Litigation pending or, to the Knowledge of BCG,
threatened before any court, governmental agency or authority or other forum in
which either BCG, BCG Banks or any of their respective
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Participation Facilities have been or, with respect to threatened Litigation,
may be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material (as defined below) or oil, whether or not
occurring at, on, under or involving a site owned, leased or operated by either
BCG, BCG Banks or any of their respective Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BCG.
(c) There is no Litigation pending or, to the Knowledge of BCG,
threatened before any court, governmental agency or board or other forum in
which any of their respective Loan Properties (or any BCG Bank in respect of
such Loan Property) has been or, with respect to threatened Litigation, may be
named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material or oil,
whether or not occurring at, on, under or involving a Loan Property, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on either BCG or any
of the BCG Banks.
(d) To the Knowledge of BCG, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on either BCG or any of the BCG Banks.
(e) To the Knowledge of BCG, there have been no releases of Hazardous
Material or oil in, on, under or affecting any Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on either BCG or any of the BCG Banks.
(f) Notwithstanding the foregoing, with respect to any of the BCG
Banks' Loan Properties, BCG has not conducted any independent investigation and
is making these representations and warranties only with respect to its
Knowledge.
5.15 Employee Benefit Plans.
(a) BCG has Previously Disclosed, and delivered or made available to
CSBI prior to the execution of this Agreement copies in each case of, all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by BCG or any Affiliate thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which such persons are eligible to participate
(collectively, the "BCG Benefit Plans"). Any of the BCG Benefit Plans which is
an "employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "BCG ERISA Plan." Each BCG ERISA Plan which
is also a "defined benefit plan" (as defined in Section 414(j) of the Internal
Revenue Code) is referred to herein as a "BCG Pension Plan". No BCG Pension
Plan is or has been a multi-employer plan within the meaning of Section 3(37) of
ERISA.
(b) All BCG Benefit Plans are in compliance in all material respects
with the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BCG. Each BCG
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
IRS, and BCG is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. BCG has not engaged in a transaction
with respect to any BCG Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any BCG Companies to a
tax or penalty imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) or ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BCG.
(c) No BCG ERISA Plan which is a defined benefit plan has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A) of
ERISA, based on actuarial assumptions set forth for such plan's most recent
actuarial valuation, and the fair market value of the assets of any such plan
exceeds the plan's "benefit liabilities," as that term is defined in Section
4001(a)(16) of ERISA, when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal requirements.
Since the date of the most recent actuarial valuation, there has been (i) no
material change in the financial position of any BCG Pension Plan, (ii) no
change in the actuarial assumptions with respect to any BCG Pension Plan, and
(iii) no increase in benefits under any BCG Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably
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likely to have, individually or in the aggregate, a Material Adverse Effect on
BCG or materially affect the funding status of any such plan. Neither any BCG
Pension Plan nor any "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by BCG, or the single-
employer plan of any entity which is considered one employer with BCG under
Section 4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302
of ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated
funding deficiency" within the meaning of Section 412 of the Internal Revenue
Code or Section 302 of ERISA, which is reasonably likely to have a Material
Adverse Effect on BCG. BCG has not provided, and is not required to provide,
security to a BCG Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by BCG with respect to any ongoing, frozen or terminated single-
employer plan or the single-employer plan of any ERISA Affiliate, which
Liability is reasonably likely to have a Material Adverse Effect on BCG. Except
as Previously Disclosed, BCG has not incurred any withdrawal Liability with
respect to a multi employer plan under Subtitle B of Title IV or ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on BCG. No
notice of a "reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any BCG Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as Previously Disclosed, BCG has no obligations to provide
health and life benefits under any of the BCG Benefit Plans after termination of
employment, except as required by Section 601 of ERISA and Section 4980 B of the
Internal Revenue Code and BCG retains the right to amend or terminate any such
Plan.
(f) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
officer, director or any employee of BCG from BCG under any BCG Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any BCG Benefit
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of BCG and its respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the BCG Financial Statements to the extent required
by and in accordance with GAAP.
5.16 Material Contracts. Except as Previously Disclosed or otherwise
reflected in the BCG Financial Statements, neither BCG, any of the BCG Banks nor
any of their respective Assets, businesses or operations, is a party to, or is
bound or affected by, or receives benefits under, (i) any employment, severance,
termination, consulting or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $100,000, and (ii) any Contract
relating to the borrowing of money by BCG, any of the BCG Banks or the guarantee
by BCG or any of the BCG Banks of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, trade payables, and Contracts relating to borrowings or
guarantees made in the ordinary course of business) (together with all Contracts
referred to in Sections 5.13 and 5.15(a) of this Agreement, the "BCG
Contracts"). Neither BCG nor any of the BCG Banks is in Default under any BCG
Contract, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on either BCG or any
of the BCG Banks. All of the indebtedness of BCG and the BCG Banks for money
borrowed is prepayable at any time by BCG without penalty or premium.
5.17 State Takeover Laws. BCG has not taken any necessary action which
would require the transaction contemplated by this Agreement to comply with any
applicable state takeover Law.
5.18 Continuity of Stock Ownership.
(a) To the Knowledge of BCG, there is no plan or intention by the
holders of BCG Shares to sell, exchange, or otherwise dispose of a number of
CSBI Shares received in the Merger that would reduce the ownership of CSBI
Shares by the holders of BCG Shares to a number of CSBI Shares having a value,
as of the date of the Merger, of less than fifty percent (50%) of the value of
all the formerly outstanding BCG Shares as of the same date. For purposes of
this representation, CSBI Shares Exchanged for cash pursuant to Section 1.5,
surrendered by dissenters or exchanged for cash in lieu of fractional CSBI
Shares will be treated as outstanding on
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the date of the Merger. Moreover, BCG Shares and CSBI Shares held by holders of
BCG Shares and otherwise sold, redeemed, or disposed of prior or subsequent to
the Merger will be considered in making this representation;
(b) CSBI will acquire at least ninety percent (90%) of the fair
market value of the net Assets and at least seventy percent (70%) of the fair
market value of the gross assets held by BCG immediately prior to the
transaction. For purposes of this representation, amounts paid by BCG to
dissenters, BCG assets used to pay its Merger expenses, and all redemptions and
distributions (except for regular, normal dividends) made by BCG immediately
preceding the Merger, will be included as assets of BCG held immediately prior
to the Merger; and
(c) The liabilities of BCG to be assumed by CSBI by virtue of the
Merger and the liabilities to which the Assets of BCG are subject were incurred
by BCG in the ordinary course of business.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CSBI
CSBI hereby represents and warrants to BCG as follows:
6.1 Organization, Standing, and Power. CSBI is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and is duly registered as a bank holding company under the BHC Act.
CSBI has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. CSBI is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI.
6.2 Authority, No Breach By Agreement.
(a) CSBI has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transaction contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the Merger contemplated herein, have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of CSBI. This Agreement represents a legal, valid, and binding
obligation of CSBI, enforceable against CSBI in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by CSBI, nor
the consummation by CSBI of the transaction contemplated hereby, nor compliance
by CSBI with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of CSBI's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any CSBI Companies under, any
Contract or Permit of any CSBI Companies, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on CSBI, or, (iii) subject to receipt
of the requisite approvals referred to in Section 9.1(b) of this Agreement,
violate any Law or Order applicable to any CSBI Companies or any of their
respective Assets.
(c) No notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by CSBI of the Merger and the other
transactions contemplated in this Agreement other than (i) in connection or
compliance with the provisions of the Securities Laws, applicable state
corporate and securities Laws, (ii) Consents required from Regulatory
Authorities, (iii) notices to or filings with the IRS or the Pension Benefit
Guaranty Corporation with respect to any employee benefit plans, and (iv)
Consents, filings or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on CSBI.
6.3 Capital Stock.
(a) The authorized capital stock of CSBI consists of 15,000,000
shares of CSBI Common Stock. At the close of business on March 31, 1997, there
were 7,761,624 shares of CSBI Common Stock issued and outstanding. As of March
31, 1997, 50,000 shares of CSBI Common Stock were reserved for issuance upon the
exercise of outstanding stock options and purchases under the Century South
Banks, Inc. Incentive Stock Option Plan ("CSBI Option Plan"), 100,000 shares
were reserved pursuant to the Century South Banks, Inc. Dividend
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Reinvestment Plan ("Dividend Reinvestment Plan"), 100,000 shares were reserved
pursuant to the Century South Banks, Inc. Employee Stock Ownership Plan ("CSBI
ESOP"), and 5,000 shares were reserved pursuant to options granted to certain
executive officers outside the CSBI Option Plan. All of the issued and
outstanding shares of CSBI Common Stock are, and all of the shares of CSBI
Common Stock to be issued in exchange for shares of BCG Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the GBCC. None of the outstanding shares of CSBI Common
Stock has been, and none of the shares of CSBI Common Stock to be issued in
exchange for shares of BCG Common Stock upon consummation of the Merger will be,
issued in violation of any preemptive rights of the current or past shareholders
of CSBI.
(b) Except as set forth in Section 6.3(a) of this Agreement, or as
provided pursuant to the CSBI Option Plan, the CSBI Dividend Reinvestment Plan,
or the CSBI ESOP, or pursuant to options to purchase shares of CSBI Common Stock
outside the CSBI Option Plan or as Previously Disclosed, as of the date of this
Agreement, there are no shares of capital stock or other equity securities of
CSBI outstanding and no outstanding options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of CSBI or contracts, commitments, understandings, or arrangements by
which CSBI is or may be bound to issue additional shares of its capital stock or
options, warrants, or rights to purchase or acquire any additional shares of its
capital stock.
6.4 Financial Statements. CSBI has Previously Disclosed and delivered to
BCG prior to the execution of this Agreement copies of all CSBI Financial
Statements for periods ended prior to the date hereof and will deliver to BCG
copies of all CSBI Financial Statements prepared subsequent to the date hereof.
The CSBI Financial Statements (as of the dates thereof and the periods covered
thereby) (i) are or, if dated after the date of this Agreement, will be in
accordance with the books and records of the CSBI Companies, which are or will
be, complete and correct and which have been or will have been, maintained in
accordance with good business practices, and (ii) present or will present,
fairly the consolidated financial position of the CSBI Companies as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows of the CSBI Companies for the periods indicated, in
accordance with GAAP (subject to exceptions as to consistency specified therein
or as may be indicated in the notes thereto or, in the case of interim financial
statements, to normal recurring year-end adjustments that are not material).
6.5 Absence of Undisclosed Liabilities. No CSBI Companies have any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of CSBI as of
December 31, 1996 and March 31, 1997 included in the CSBI Financial Statements
or reflected in the notes thereto. No CSBI Companies have incurred or paid any
Liability since March 31, 1997, except for such Liabilities incurred or paid in
the ordinary course of business consistent with past business practice and which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CSBI.
6.6 Absence of Certain Changes or Events. Since March 31, 1997, except as
disclosed in SEC Documents filed by CSBI prior to the date of this Agreement,
(i) there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on CSBI, and (ii) the CSBI Companies have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of CSBI
provided in Article 7 of this Agreement.
6.7 Tax Matters.
(a) All Tax returns required to be filed by or on behalf of any of
the CSBI Companies have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on CSBI, and all returns filed are complete and accurate to the
Knowledge of CSBI. All Taxes shown on filed returns have been paid. As of the
date of this Agreement, there is no audit examination, deficiency, or refund
Litigation with respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the aggregate, a Material
Adverse Effect on CSBI, except as reserved against in the CSBI Financial
Statements delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid.
(b) Except as Previously Disclosed, none of the CSBI Companies has
executed an extension or waiver of any statute of limitations on the assessment
or collection of any Tax due that is currently in effect, and no unpaid tax
deficiency has been asserted in writing against or with respect to any CSBI
Companies, which deficiency
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is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CSBI.
(c) Adequate provision for any Taxes due or to become due for any of
the CSBI Companies for the period or periods through and including the date of
the respective CSBI Financial Statements has been made and is reflected on such
CSBI Financial Statements.
(d) Deferred Taxes of the CSBI Companies have been provided for in
accordance with GAAP. Effective January 1, 1993, CSBI adopted Financial
Accounting Standards Board Statement 109, "Accounting for Income Taxes."
(e) The CSBI Companies have performed all due diligence procedures
required under Internal Revenue Code Section 6722 relating to taxpayer
identification numbers, have complied with all other information reporting
requirements of the IRS, and the CSBI Companies have complied with the
withholding requirements under Internal Revenue Code Section 3406, except for
any nonperformance or noncompliance which, individually or in the aggregate, is
not reasonably likely to have a Material Adverse Effect on the CSBI Companies.
6.8 Compliance with Laws. CSBI is duly registered as a bank holding
company under the BHC Act. Each of the CSBI Companies has in effect all permits
necessary to own, lease or operate their Assets and to carry on their business
as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on CSBI, and there has occurred no Default under any such Permit, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI. None of the CSBI Companies:
(a) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CSBI; and
(b) except as Previously Disclosed, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any of the CSBI Companies are not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CSBI, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI, or (iii) requiring any CSBI
Companies to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of dividends.
6.9 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of CSBI, threatened against any CSBI Companies, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CSBI, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any CSBI Companies, that are reasonably
likely to have, individually or in the aggregate a Material Adverse Effect on
CSBI.
6.10 Reports. Since January 1, 1991, each of the CSBI Companies has filed
all reports and statements, together with any amendments required to be made
with respect thereto, that it was required to file with (i) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements,
(ii) other Regulatory Authorities, and (iii) any applicable state securities or
banking authorities (except, in the case of state securities authorities,
failures to file which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI). As of their respective dates,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of their respective dates, each such report and document
did not, in all material respects, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
6.11 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any CSBI Companies or any
Affiliate thereof to BCG pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
CSBI Companies or any Affiliate thereof for inclusion in the Registration
Statement to be filed by CSBI with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to
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be supplied by any CSBI Companies or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to BCG shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by any CSBI Companies
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of BCG, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
any CSBI Companies or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
6.12 Accounting, Tax and Regulatory Matters. No CSBI Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the Merger from qualifying
for pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement. To the Knowledge of CSBI, there exists no
fact, circumstance, or reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner without the
imposition of any condition or restriction of the type described in the second
sentence of such Section 9.1(b).
6.13 Assets. Except as Previously Disclosed or as disclosed or reserved
against in the CSBI Financial Statements, CSBI and each CSBI Subsidiary have
good and marketable title, free and clear of all Liens, to all of their
respective Assets. All material tangible properties used in the business of
CSBI and each CSBI Subsidiary are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
CSBI's past practices. All Assets which are material to CSBI and CSBI
Subsidiaries= businesses held under leases or subleases by CSBI or any of the
CSBI Subsidiaries, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of CSBI and the CSBI Subsidiaries provide adequate coverage under
current industry practices against loss or Liability, and the fidelity and
blanket bonds in effect as to which CSBI or any of the CSBI Subsidiaries is a
named insured are reasonably sufficient. The Assets of CSBI and the CSBI
Subsidiaries include all assets required to operate the business of CSBI and the
CSBI Subsidiaries as presently conducted.
6.14 Environmental Matters.
(a) To the Knowledge of CSBI, CSBI and CSBI Subsidiaries=
Participation Facilities, and their respective Loan Properties are, and have
been, in substantial compliance with all Environmental Laws, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI or any of the CSBI Subsidiaries.
(b) There is no Litigation pending or, to the Knowledge of CSBI,
threatened before any court, governmental agency or authority or other forum in
which either CSBI, CSBI Subsidiaries or any of their respective Participation
Facilities have been or, with respect to threatened Litigation, may be named as
a defendant (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release into the environment of
any Hazardous Material (as defined below) or oil, whether or not occurring at,
on, under or involving a site owned, leased or operated by either CSBI, CSBI
Subsidiaries or any of their respective Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CSBI.
(c) There is no Litigation pending or, to the Knowledge of CSBI,
threatened before any court, governmental agency or board or other forum in
which any of their respective Loan Properties (or any CSBI Subsidiaries in
respect of such Loan Property) has been or, with respect to threatened
Litigation, may be named as a defendant or potentially responsible party (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material
or oil, whether or not occurring at, on, under or involving a Loan Property,
except for such Litigation pending or threatened that is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on either
CSBI or any of the CSBI Subsidiaries.
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(d) To the Knowledge of CSBI, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on either CSBI or any of the CSBI Subsidiaries.
(e) To the Knowledge of CSBI, there have been no releases of
Hazardous Material or oil in, on, under or affecting any Participation Facility
or Loan Property, except such as are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on either CSBI or any of the CSBI
Subsidiaries.
(f) Notwithstanding the foregoing, with respect to any of the CSBI
Subsidiaries= Loan Properties, CSBI has not conducted any independent
investigation and is making these representations and warranties only with
respect to its Knowledge.
6.15 Employee Benefit Plans.
(a) CSBI has Previously Disclosed, and delivered or made available to
BCG prior to the execution of this Agreement copies in each case of, all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by CSBI or any Affiliate thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which such persons are eligible to participate
(collectively, the "CSBI Benefit Plans"). Any of the CSBI Benefit Plans which
is an "employee pension benefit plan," as that term is defined in Section 3(2)
of ERISA, is referred to herein as a "CSBI ERISA Plan." Each CSBI ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "CSBI Pension Plan". No CSBI
Pension Plan is or has been a multi-employer plan within the meaning of Section
3(37) of ERISA.
(b) All CSBI Benefit Plans are in compliance in all material respects
with the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CSBI. Each CSBI
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
IRS, and CSBI is not aware of any circumstances likely to result in revocation
of any such favorable determination letter. CSBI has not engaged in a
transaction with respect to any CSBI Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any CSBI
Companies to a tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) or ERISA in amounts which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on CSBI.
(c) No CSBI ERISA Plan which is a defined benefit plan has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A) of
ERISA, based on actuarial assumptions set forth for such plan's most recent
actuarial valuation, and the fair market value of the assets of any such plan
exceeds the plan's "benefit liabilities," as that term is defined in Section
4001(a)(16) of ERISA, when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal requirements.
Since the date of the most recent actuarial valuation, there has been (i) no
material change in the financial position of any CSBI Pension Plan, (ii) no
change in the actuarial assumptions with respect to any CSBI Pension Plan, and
(iii) no increase in benefits under any CSBI Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CSBI or
materially affect the funding status of any such plan. Neither any CSBI Pension
Plan nor any "single-employer plan", within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by CSBI, or the single-employer plan
of any entity which is considered one employer with CSBI under Section 4001 of
ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA
(whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, which is reasonably likely to have a Material Adverse
Effect on CSBI. CSBI has not provided, and is not required to provide, security
to a CSBI Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by CSBI with respect to any ongoing, frozen or terminated single-
employer plan or the single-employer plan of any ERISA Affiliate, which
Liability is reasonably likely to have a Material Adverse Effect on CSBI. Except
as Previously Disclosed, CSBI has not incurred any withdrawal
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Liability with respect to a multi employer plan under Subtitle B of Title IV or
ERISA (regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have a Material Adverse Effect on CSBI.
No notice of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any CSBI Pension Plan or by any ERISA Affiliate within
the 12-month period ending on the date hereof.
(e) Except as Previously Disclosed, CSBI has no obligations to
provide health and life benefits under any of the CSBI Benefit Plans after
termination of employment, except as required by Section 601 of ERISA and
Section 4980 B of the Internal Revenue Code, CSBI retains the right to amend or
terminate any such Plan.
(f) Except as Previously Disclosed, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
officer, director or any employee of CSBI from CSBI under any CSBI Benefit Plan
or otherwise, (ii) increase any benefits otherwise payable under any CSBI
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of CSBI and its respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the CSBI Financial Statements to the extent
required by and in accordance with GAAP.
6.16 Material Contracts. Except as Previously Disclosed or otherwise
reflected in the CSBI Financial Statements, neither CSBI, any of the CSBI
Subsidiaries nor any of their respective Assets, businesses or operations, is a
party to, or is bound or affected by, or receives benefits under, (i) any
employment, severance, termination, consulting or retirement Contract providing
for aggregate payments to any Person in any calendar year in excess of $100,000,
and (ii) any Contract relating to the borrowing of money by CSBI, any of the
CSBI Subsidiaries or the guarantee by CSBI or any of the CSBI Subsidiaries of
any such obligation (other than Contracts evidencing deposit liabilities,
purchases of federal funds, fully-secured repurchase agreements, trade payables,
and Contracts relating to borrowings or guarantees made in the ordinary course
of business) (together with all Contracts referred to in Sections 6.13 and
6.15(a) of this Agreement, the "CSBI Contracts"). Neither CSBI nor any of the
CSBI Subsidiaries is in Default under any CSBI Contract, other than Defaults
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on either CSBI or any of the CSBI Subsidiaries. All of
the indebtedness of CSBI and the CSBI Subsidiaries for money borrowed is
prepayable at any time by CSBI without penalty or premium.
ARTICLE 7
CONDUCT OF BUSICNESS PENDING CONSUMMATION
7.1 Affirmative Covenants of BCG. Unless the prior written consent of CSBI
shall have been obtained, and except as otherwise contemplated herein, BCG
agrees:
(a) to operate its business and cause the BCG Banks to operate their
respective businesses in the usual, regular, and ordinary course;
(b) to preserve intact its business organizations and Assets and
maintain its rights and franchises;
(c) to use its best efforts to cause its representations and
warranties to be correct at all times; and
(d) to take no action which would (i) adversely affect the ability of
any Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred to
in the last sentence of Section 9.1(b) of this Agreement or (ii) adversely
affect in any material respect the ability of either Party to perform its
covenants and agreements under this Agreement.
7.2 Negative Covenants of BCG. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, BCG
covenants and agrees that it and each of the BCG Banks will not do or agree or
commit to do, any of the following without the prior written consent of the
Chief Executive Officer of CSBI, which consent shall not be unreasonably
withheld:
(a) amend the Articles of Incorporation, Articles of Association,
Bylaws or other governing
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instruments of either BCG or any of the BCG Banks; or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $100,000 except in the ordinary
course of the business of BCG and the BCG Banks consistent with past practices
(which shall include creation of deposit liabilities, purchases of federal
funds, and entry into repurchase agreements fully secured by U.S. government or
agency securities), or impose, or suffer the imposition, on any share of stock
of the BCG Banks held by BCG of any Lien or permit any such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under current employee benefit plans, dividend
reinvestment plans or voluntary stock purchase plans), directly or indirectly,
any shares, or any securities convertible into any shares, of the capital stock
of BCG, or declare or pay any dividend or make any other distribution in respect
of BCG's capital stock provided that BCG may, in its sole discretion (to the
extent legally and contractually permitted to do so), but shall not be obligated
to, declare and pay a quarterly cash dividend consistent with its past
practices; or
(d) except for this Agreement, or as Previously Disclosed, issue or
sell, pledge, encumber, authorize the issuance of, enter into any Contract to
issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of either BCG or any of the BCG
Banks' common stock, or any stock appreciation rights, or any option, warrant,
conversion, or other right to acquire any such stock other than in the ordinary
course under current employee benefit plans, dividend reinvestment plans or
voluntary stock purchase plans; or
(e) adjust, split, combine or reclassify any capital stock of BCG or
issue or authorize the issuance of any other securities in respect of or in
substitution for shares of either BCG or any of the BCG Banks' common stock or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any Asset
having a book value in excess of $100,000 other than in the ordinary course of
business for reasonable and adequate consideration; or
(f) acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, or (ii)
acquisitions of control by BCG in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees
or officers of either BCG or any of the BCG Banks (including such discretionary
increases as may be contemplated by existing employment agreements) exceeding
five percent (5%) individually or in the aggregate on an annual basis, except in
accordance with past practice Previously Disclosed or as required by Law; pay
any bonus except in accordance with past practice Previously Disclosed or the
provisions of any applicable program or plan adopted by its Board of Directors
prior to the date of this Agreement; enter into or amend any severance
agreements with officers of BCG; grant any increase in fees or other increases
in compensation or other benefits to directors of either BCG or any of the BCG
Banks except in accordance with past practice Previously Disclosed; or
(h) enter into or amend any employment Contract between BCG and any
Person (unless such amendment is required by Law or this Agreement) that BCG
does not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(i) adopt any new employee benefit plan of BCG or make any material
change in or to any existing employee benefit plans of BCG other than any such
change that is required by Law or that, in the opinion of counsel, is necessary
or advisable to maintain the tax qualified status of any such plan; or
(j) make any significant change in any accounting methods or systems
of internal accounting controls, except as may be appropriate to conform to
changes in regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of BCG for money damages
in excess of $100,000 or material restrictions upon the operations of BCG; or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
7.3 Affirmative Covenants of CSBI. Unless the prior written consent of BCG
shall have been obtained, and except as otherwise contemplated herein, CSBI
agrees
(a) to operate its business and cause the CSBI Companies to operate
their respective businesses in the usual, regular, and ordinary course;
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(b) to preserve intact its business organizations and Assets and
maintain its rights and franchises;
(c) to use its best efforts to cause its representations and
warranties to be correct at all times; and
(d) to take no action which would (i) adversely affect the ability of
any Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred to
in the last sentence of Section 9.1(b) of this Agreement or (ii) adversely
affect in any material respect the ability of either Party to perform its
covenants and agreements under this Agreement.
7.4 Negative Covenants of CSBI. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, CSBI
covenants and agrees that it and each of the CSBI Companies will not do or
agree or commit to do, any of the following without the prior written consent of
the Chief Executive Officer of BCG, which consent shall not be unreasonably
withheld:
(a) amend the Articles of Incorporation, Articles of Association,
Bylaws or other governing instruments of either CSBI or any of the CSBI
Companies; or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $100,000 except in the ordinary
course of the business of CSBI and the CSBI Companies consistent with past
practices (which shall include creation of deposit liabilities, purchases of
federal funds, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or impose, or suffer the imposition, on any
share of stock of the CSBI Companies held by CSBI of any Lien or permit any such
Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under current employee benefit plans, dividend
reinvestment plans or voluntary stock purchase plans), directly or indirectly,
any shares, or any securities convertible into any shares, of the capital stock
of CSBI, or declare or pay any dividend or make any other distribution in
respect of CSBI's capital stock provided that CSBI may, in its sole discretion
(to the extent legally and contractually permitted to do so), but shall not be
obligated to, declare and pay a quarterly cash dividend consistent with its past
practices; or
(d) except for this Agreement, or as Previously Disclosed, issue or
sell, pledge, encumber, authorize the issuance of, enter into any Contract to
issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of either CSBI or any of the CSBI
Companies' common stock, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock other than in the
ordinary course under current employee benefit plans, dividend reinvestment
plans or voluntary stock purchase plans; or
(e) adjust, split, combine or reclassify any capital stock of CSBI or
issue or authorize the issuance of any other securities in respect of or in
substitution for shares of either CSBI or any of the CSBI Companies' common
stock or sell, lease, mortgage or otherwise dispose of or otherwise encumber any
Asset having a book value in excess of $100,000 other than in the ordinary
course of business for reasonable and adequate consideration; or
(f) acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, or (ii)
acquisitions of control by CSBI in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees
or officers of either CSBI or any of the CSBI Companies (including such
discretionary increases as may be contemplated by existing employment
agreements) exceeding five percent (5%) individually or in the aggregate on an
annual basis, except in accordance with past practice Previously Disclosed or as
required by Law; pay any bonus except in accordance with past practice
Previously Disclosed or the provisions of any applicable program or plan adopted
by its Board of Directors prior to the date of this Agreement; enter into or
amend any severance agreements with officers of CSBI; grant any increase in fees
or other increases in compensation or other benefits to directors of either CSBI
or any of the CSBI Companies except in accordance with past practice Previously
Disclosed; or
(h) enter into or amend any employment Contract between CSBI and any
Person (unless such amendment is required by Law or this Agreement) that CSBI
does not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(i) adopt any new employee benefit plan of CSBI or make any material
change in or to any existing employee benefit plans of CSBI other than any such
change that is required by Law or that, in the opinion
17
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of counsel, is necessary or advisable to maintain the tax qualified status of
any such plan; or
(j) make any significant change in any accounting methods or systems
of internal accounting controls, except as may be appropriate to conform to
changes in regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of CSBI for money
damages in excess of $100,000 or material restrictions upon the operations of
CSBI; or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
7.5 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) is reasonably likely to cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.6 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports (other than currency transaction reports) promptly after the
same are filed. If financial statements are contained in any such reports filed
with the SEC, such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows for the periods then ended in accordance with GAAP
(subject in the case of interim financial statements to normal recurring year-
end adjustments that are not material). As of their respective dates, such
reports filed with the SEC will comply in all material respects with the
Securities Laws and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement, Proxy Statement, Shareholder Approval. As soon
as practicable after execution of this Agreement, CSBI shall file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state blue sky or
securities Laws in connection with the issuance of the shares of CSBI Common
Stock upon consummation of the Merger. BCG shall furnish all information
concerning it and the holders of its capital stock as CSBI may reasonably
request in connection with such action. BCG shall call a Shareholders' Meeting,
to be held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon approval of this
Agreement and such other related matters as it deems appropriate. In connection
with the Shareholders' Meeting, (i) BCG shall assist CSBI in the preparation and
filing of a Proxy Statement (which shall be included in the Registration
Statement) with the SEC and mail it to BCG's shareholders, (ii) the Parties
shall furnish to each other all information concerning them that they may
reasonably request in connection with such Proxy Statement, (iii) the Board of
Directors of BCG shall unanimously recommend (subject to compliance with their
fiduciary duties as advised by counsel to its shareholders the approval of this
Agreement, and (iv) the Board of Directors and officers of BCG shall use their
best efforts to obtain such shareholders' approval (subject to compliance with
their fiduciary duties as advised by counsel).
8.2 Applications. CSBI shall promptly prepare and file, and BCG shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement. CSBI shall permit
BCG to review such applications prior to filing same.
8.3 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, CSBI shall execute and file the Articles of Merger
with the Secretary of State of the State of Georgia in connection with the
Closing.
8.4 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use its reasonable efforts to
take all actions, and to do all things necessary, proper, or advisable
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under applicable Laws, as promptly as practicable so as to permit consummation
of the Merger at the earliest possible date and to otherwise enable consummation
of the transactions contemplated hereby and shall cooperate fully with the other
Party hereto to that end (it being understood that any amendments to the
Registration Statement filed by CSBI in connection with the CSBI Common Stock to
be issued in the Merger or a resolicitation of proxies as a consequence of an
acquisition agreement by CSBI or any of its Subsidiaries shall not violate this
covenant), including, without limitation, using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement. Each Party shall use its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
8.5 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party will keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transaction contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
other Party concerning its and its Subsidiaries' businesses, operations, and
financial condition except in furtherance of the transaction contemplated by
this Agreement. If this Agreement is terminated prior to the Effective Time,
each Party shall promptly return all documents and copies thereof, and all work
papers containing confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
8.6 Press Releases. Prior to the Effective Time, BCG and CSBI shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, however, that nothing in this Section
8.6 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.7 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby or with the consent of the other Party, neither
Party nor any of its respective Affiliate, nor any investment banker, attorney,
accountant or other representative (collectively "Representatives") retained by
such Party shall directly or indirectly solicit any Acquisition Proposal by any
Person. Except to the extent necessary to comply with the fiduciary duties of a
Party's Board of Directors as advised by counsel, neither Party nor any of its
respective Affiliates or Representatives thereof shall furnish any non-public
information that it is not legally obligated to furnish, negotiate with respect
to, or enter into any Contract with respect to, any Acquisition Proposal, but
either Party may communicate information about such an Acquisition Proposal to
its stockholders if and to the extent that it is required to do so in order to
comply with its legal obligations as advised by counsel. Either Party shall
promptly notify the other verbally and in writing in the event that such Party
receives any inquiry or proposal relating to any such transaction. Each Party
shall (i) immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (ii) direct and use its reasonable efforts to cause
all of its Representatives not to engage in any of the foregoing.
8.8 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for pooling-of-interests accounting
treatment and treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.9 State Takeover Laws. BCG shall take all necessary steps to exempt the
transactions contemplated by this Agreement from, or if necessary challenge the
validity or applicability of, any applicable state takeover Law.
8.10 Articles of Incorporation Provisions. BCG shall take all necessary
action to ensure that the entering into of this Agreement and the consummation
of the Merger does not and will not result in the grant of any rights to any
Person under the Articles of Incorporation, Bylaws or other governing
instruments of BCG or restrict or impair
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the ability of CSBI to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of BCG that may be acquired or controlled by
it.
8.11 Agreement of Affiliates. BCG has Previously Disclosed all Persons
whom it reasonably believes is an "affiliate" of BCG for purposes of Rule 145
under the 1933 Act. BCG shall use its reasonable efforts to cause each such
Person to deliver to CSBI not later than 30 days after the date of this
Agreement, a written agreement, substantially in the form of Exhibit 1,
providing that such Person will not sell, pledge, transfer, or otherwise dispose
of the shares of BCG Common Stock held by such Person except as contemplated by
such agreement or by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of CSBI Common Stock to be received by such
Person upon consummation of the Merger except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder and until
such time as the financial results covering at least 30 days of combined
operations of CSBI and BCG have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies. If the Merger
will qualify for pooling-of-interests accounting treatment, shares of CSBI
Common Stock issued to such affiliates of BCG in exchange for shares of BCG
Common Stock shall not be transferable until such time as financial results
referred to in this Section 8.11 have been published as set forth in this
Section 8.11, regardless of whether each such affiliate has provided the written
agreement referred to in this Section 8.11 (and CSBI shall be entitled to place
restrictive legends upon certificates for shares of CSBI Common Stock issued to
affiliates of BCG pursuant to this Agreement to enforce the provisions of this
Section 8.11). CSBI shall not be required to maintain the effectiveness of the
Registration Statement under the 1933 Act for the purposes of resale of CSBI
Common Stock by such affiliates.
8.12 Employee Benefits and Contracts. Following the Effective Time, CSBI
shall provide generally to officers and employees of BCG employee benefits under
employee benefit plans on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the CSBI Companies to their
similarly situated officers and employees. For purposes of participation and
vesting under such employee benefit plans, the service of the employees of BCG
prior to the Effective Time shall be treated as service with the CSBI Companies
participating in such employee benefit plans. Except as set forth herein, CSBI
also shall honor in accordance with their terms all employment, severance,
consulting and other compensation Contracts Previously Disclosed to CSBI between
BCG and any current or former director, officer, or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the BCG Benefit Plans. Each Party will exercise its
best efforts to amend any agreement it has with its respective officers and
employees to except the Merger from qualifying under any change of control
provision under such officer's or employee's employment, option or similar
agreement
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations
of each Party to perform this Agreement and consummate the Merger are subject to
the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6 of this Agreement:
(a) Shareholder Approval. The shareholders of BCG shall have
--------------------
approved this Agreement, and the consummation of the Merger as and to the extent
required by Law and by the provisions of any of its governing instruments.
(b) Regulatory Approvals. All Consents of, filings and
--------------------
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including, without limitation, requirements relating to
the raising of additional capital or the disposition of Assets) which in the
reasonable judgment of the Board of Directors of either Party would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b) of this Agreement) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party.
(d) Legal Proceedings. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes illegal
consummation of the
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transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of CSBI Common Stock issuable pursuant to the Merger shall have been
received.
(f) Pooling Letters. Each of the Parties shall have received a
---------------
letter, dated as of the Effective Time, in form and substance reasonably
acceptable to such Party, from KPMG Peat Marwick LLP to the effect that the
Merger will qualify for pooling-of-interests accounting treatment.
(g) Tax Matters. BCG and CSBI shall have received a written opinion
-----------
of counsel from Troutman Sanders LLP in form reasonably satisfactory to each of
them (the "Tax Opinion"), to the effect that for federal income tax purposes (i)
the Merger will constitute a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, (ii) the exchange in the Merger of BCG Common
Stock for CSBI Common Stock will not give rise to gain or loss to the
stockholders of BCG with respect to such exchange (except to the extent of any
cash received), and (iii) neither BCG nor CSBI will recognize gain or loss as a
consequence of the Merger except for income and deferred gain recognized
pursuant to Treasury regulations issued under Section 1502 of the Internal
Revenue Code. In rendering such Tax Opinion, Troutman Sanders LLP shall be
entitled to rely upon representations of officers of BCG and CSBI reasonably
satisfactory in form and substance to such counsel.
9.2 Conditions to Obligations of CSBI. The obligations of CSBI to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by CSBI pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. The representations and
------------------------------
warranties of BCG set forth or referred to in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties the inaccuracies of which
relate to matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BCG.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of BCG to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. BCG shall have delivered to CSBI (i) a certificate,
------------
dated as of the Effective Time and signed on its behalf by its Chief Executive
Officer and its Chief Financial Officer, to the effect that the conditions of
its obligations set forth in Section 9.2(a) and 9.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by BCG
Board of Directors and shareholders evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as CSBI and its counsel shall request.
(d) Opinion of Counsel. CSBI shall have received an opinion of
------------------
Kilpatrick Stockton LLP, counsel to BCG, dated as of the Closing, in form
reasonably satisfactory to CSBI, as to the matters set forth in Exhibit 2
hereto.
(e) Accountant's Letters. CSBI shall have received from Porter Keadle
--------------------
Moore, LLP letters dated not more than five (5) days prior to (i) the date of
the Proxy Statement and (ii) the Effective Time, with respect to certain
financial information regarding BCG, in form and substance reasonably
satisfactory to CSBI, which letters shall be based upon customary specified
procedures undertaken by such firm.
(f) Affiliates Agreements. CSBI shall have received from each
---------------------
affiliate of BCG the affiliates' letters referred to in Section 8.11 hereof, to
the extent necessary to assure in the reasonable judgment of CSBI that the
transaction contemplated hereby will qualify for pooling-of-interests accounting
treatment.
(g) Due Diligence Investigation. On or before June 30, 1997, CSBI
---------------------------
shall have completed a due diligence investigation in regard to BCG and shall
have resolved to its sole satisfaction any issues which arise in the course of
such investigation.
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9.3 Conditions to Obligations of BCG. The obligations of BCG to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by BCG pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. The representations and
------------------------------
warranties of CSBI set forth or referred to in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties the inaccuracies of which
relate to matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of CSBI to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. CSBI shall have delivered to BCG (i) a certificate,
------------
dated as of the Effective Time and signed on its behalf by its Chief Executive
Officer and its Chief Financial Officer, to the effect that the conditions of
its obligations set forth in Section 9.3(a) and 9.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by CSBI
Board of Directors evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transaction contemplated hereby, all in such reasonable
detail as BCG and its counsel shall request.
(d) Opinion of Counsel. BCG shall have received an opinion of
------------------
Troutman Sanders LLP, counsel to CSBI, dated as of the Effective Time, in form
reasonably satisfactory to BCG, as to matters set forth in Exhibit 3 hereto.
(e) Due Diligence Investigation. On or before June 30, 1997, BCG
---------------------------
shall have completed a due diligence investigation in regard to CSBI and shall
have resolved to its sole satisfaction any issues which arise in the course of
such investigation.
(f) Accountant's Letters. BCG shall have received from KPMG Peat
--------------------
Marwick letters dated not more than five (5) days prior to (i) the date of the
Proxy Statement and (ii) the Effective Time, with respect to certain financial
information regarding CSBI, in form and substance reasonably satisfactory to
BCG, which letters shall be based upon customary specified procedures undertaken
by such firm.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of BCG,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of the Board of Directors of CSBI and the Board
of Directors of BCG; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of a breach by the other Party of any representation or warranty contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach and which breach
would provide the non-breaching party the ability to refuse to consummate the
Merger under the standard set forth in Section 9.2(a) of this Agreement in the
case of CSBI and Section 9.3(a) of this Agreement in the case of BCG; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
(i) any Consent of any Regulatory Authority required for consummation of the
Merger shall have been denied by final nonappealable action of such authority or
if any action taken by such authority is not appealed within the time limit for
appeal, or (ii) the shareholders of BCG fail to vote their approval of this
Agreement and the transaction contemplated hereby as required by the GBCC at the
Shareholders' Meeting where the transaction was presented to such shareholders
for approval and voted upon; or
(d) By the Board of Directors of either Party in the event that the
Merger shall not have been
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consummated by December 31, 1997, but only if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate pursuant to this
Section 10.1(d); or
(e) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
that any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date specified in
Section 10.1(d) of this Agreement; or
(f) By CSBI in the event that the Board of Directors of BCG shall
have failed to reaffirm, following a written request by CSBI for such
reaffirmation after BCG shall have received any inquiry or proposal with respect
to an Acquisition Proposal, its approval of the Merger (to the exclusion of any
other Acquisition Proposal), or shall have resolved not to reaffirm the Merger.
10.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 10.1 of this Agreement, this Agreement
shall become void and have no effect, except that (i) the provisions of this
Section 10.2 and Article 11 and Section 8.5(b) of this Agreement shall survive
any such termination and abandonment, and (ii) a termination pursuant to
Sections 10.1(b) or 10.1(e) of this Agreement shall not relieve the breaching
Party from Liability for an uncured willful breach of a representation,
warranty, covenant, or agreement giving rise to such termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for this Section 10.3 and
Articles 2, 3, 4, and 11 and Section 8.11 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. Except as otherwise provided herein, the capitalized
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or Assets of, or other business combination involving such Party or
any of its Subsidiaries or the acquisition of a substantial equity interest
in, or a substantial portion of the Assets of, such Party or any of its
Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person or (ii) any officer, director, partner,
employee, or direct or indirect beneficial owner of any 10% or greater equity
or voting interest of such Person.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by reference.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not carried
on the books and records of such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and wherever located.
"BCG BANKS" shall have the meaning set forth on page 1 of this
Agreement.
"BCG BENEFIT PLANS" shall have the meaning set forth in Section 5.15
of this Agreement.
"BCG COMMON STOCK" shall mean the $1.00 par value common stock of BCG.
"BCG FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of BCG as of March 31,
1997 and as of December 31, 1996 and 1995, and the related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the three months ended March 31, 1997, and
for each of the four fiscal years ended December 31, 1996, 1995, 1994, 1993,
as filed by BCG in SEC Documents, and (ii) the consolidated balance sheets of
BCG (including related notes and schedules, if any) and related statements of
income, changes in
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<PAGE>
shareholders' equity, and cash flows (including related notes and schedules,
if any) included in SEC Documents filed with respect to periods ended
subsequent to March 31, 1997, with related prior year comparable financial
statements.
"BCG STOCK PLAN" shall mean the existing stock option and other stock-
based compensation plans of BCG.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CSBI COMMON STOCK" shall mean the $1.00 par value common stock of
CSBI.
"CSBI COMPANIES" shall mean, collectively, CSBI and all CSBI
Subsidiaries.
"CSBI FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of CSBI as of
March 31, 1997, and as of December 31, 1996 and 1995, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
Mach 31, 1997, and for each of the four years ended December 31, 1996, 1995,
1994, 1993, as filed by CSBI in SEC Documents and (ii) the consolidated
statements of condition of CSBI (including related notes and schedules, if
any) and related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to March 31, 1997.
"CSBI SUBSIDIARIES" shall mean the Subsidiaries of CSBI.
"CLOSING" shall mean the closing of the transaction contemplated
hereby, as described in Section 1.2 of this Agreement.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of any
kind or character, or other document to which any Person is a party or that
is binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the
giving of notice would give rise to a right to terminate or revoke, change
the current terms of, or renegotiate, or to accelerate, increase, or impose
any Liability under, any Contract, Order or Permit.
"EFFECTIVE TIME" shall mean the date and time at which the Articles of
Merger reflecting the Merger shall become effective with the Secretary of
State of the State of Georgia.
"ENVIRONMENTAL LAWS" shall mean all Laws which are administered,
interpreted or enforced by the United States Environmental Protection Agency
and state and local agencies with jurisdiction over pollution or protection
of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall have the meaning provided in Section 5.15 of
this Agreement.
"ERISA PLAN" shall have the meaning provided in Section 5.15 of this
Agreement.
"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred
to in this Agreement and any other related instrument or document without
being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
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<PAGE>
"GBCC" shall mean the Georgia Business Corporation Code.
"GEORGIA ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by CSBI and BCG and filed with the Secretary of State of the State
of Georgia relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environment
Response, Compensation, and Liability Act, 42 U.S.C. '' 9601 et seq., or any
similar federal, state or local Law.
"IRS" shall mean the Internal Revenue Service.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person shall mean the knowledge
after due inquiry of the Chairman, President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer, any Senior or Executive Vice
President of such Person or with respect to BCG, Richard R. Cheatham, Esquire
and F. Sheffield Hale, Esquire, and with respect to CSBI, Thomas O. Powell,
Esquire.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institution Subsidiaries
of a Party, pledges to secure deposits and other Liens incurred in the
ordinary course of the banking business, and (iii) Liens which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on a Party.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to
it), or the transactions contemplated by this Agreement, but shall not
include regular, periodic examinations of depository institutions and their
Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality
in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken
as a whole, or (ii) the ability of such Party to perform its obligations
under this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "material adverse impact" shall
not be deemed to include the impact of (x) changes in banking and similar
Laws of general applicability or interpretations thereof by courts or
governmental authorities and (y) changes in GAAP or regulatory accounting
principles generally applicable to Banks and their holding companies.
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"MERGER" shall mean the merger of BCG with and into CSBI referred to
in Section 1.1 of this Agreement.
"MERGER CONSIDERATION" shall mean the aggregate consideration to be
received for all of the shares of BCG Common Stock.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management (including any property or facility held in a joint venture) and,
where required by the context, said term means the owner or operator of such
facility or property, but only with respect to such facility or property.
"PARTY" shall mean either BCG or CSBI, and "Parties" shall mean BCG
and CSBI.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its capital stock, Assets, Liabilities, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in
a representative capacity.
"PREVIOUSLY DISCLOSED" shall mean information delivered in writing
prior to the date of this Agreement in the manner and to the Party or counsel
or both described in Section 11.8 of this Agreement and entitled "Previously
Disclosed Information Delivered Pursuant to the Agreement and Plan of Merger"
describing in reasonable detail the matters contained therein or identifying
the information disclosed, provided that in the case of Subsidiaries acquired
after the date of this Agreement, such information may be so delivered by the
acquiring Party to the other Party prior to the date of such acquisition.
"PROXY STATEMENT" shall mean the proxy statement used by BCG to
solicit the approval of its shareholders of the transactions contemplated by
this Agreement and shall include the prospectus of CSBI relating to shares of
CSBI Common Stock to be issued to the shareholders of BCG.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC by CSBI under the 1933 Act
in connection with the transactions contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, all state regulatory
agencies having jurisdiction over the Parties and their respective
Subsidiaries, the NASD, and the SEC.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all reports and registration statements
filed, or required to be filed, by a Party or any of its Subsidiaries with
any Regulatory Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended,
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<PAGE>
and the rules and regulations of any Regulatory Authority promulgated
thereunder.
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
BCG to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, Banks, associations,
or other entities of which the entity in question owns or controls 5% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 5% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, however,
there shall not be included any such entity acquired through foreclosure or
any such entity the equity securities of which are owned or controlled in a
fiduciary capacity.
"SURVIVING CORPORATION" shall mean CSBI as the surviving corporation
resulting from the Merger.
"TAXES" shall mean any federal, state, county, local, foreign and
other taxes, assessments, charges, fares, and impositions, including interest
and penalties thereon or with respect thereto.
11.2 Expenses.
(a) General. Except as otherwise provided in this Section 11.2, each
-------
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel.
(b) Breach by BCG with Subsequent Business Combination. In addition
--------------------------------------------------
to the foregoing, if, after the date of this Agreement and within 12 months
following
(i) any termination of this Agreement
(1) by CSBI pursuant to Sections 10.1(b), 10.1(e) (but only on
the basis of the failure of BCG to satisfy any of the conditions
enumerated in Section 9.2, other than Section 9.2(d) or (e)) or
10.1(f) of this Agreement, or
(2) by either Party pursuant to Section 10.1(c)(ii) (with respect
to approval of the shareholders of BCG), or
(ii) failure to consummate the Merger by reason of any failure of BCG
to satisfy the conditions enumerated in Section 9.1(a) (as such section relates
to approval of the shareholders of BCG), or Section 9.2, other than Section
9.2(d) or (e),
any third-party shall acquire, merge with, combine with, purchase a significant
amount of assets of, or engage in any other business combination with, or
purchase any equity securities involving an acquisition of fifty-one percent
(51%) or more of the voting stock of, BCG, or enter into any binding agreement
to do any of the foregoing (collectively, a "Business Combination"), such third-
party that is a party to the Business Combination shall pay to CSBI, prior to
consummation of the Business Combination the sum of $500,000 in cash which sum
represents compensation for CSBI's loss as the result of the transaction
contemplated by this Agreement not being consummated. In the event such third-
party shall refuse to pay such amounts, the amounts shall be an obligation of
BCG and shall be paid by BCG promptly upon notice to BCG by CSBI.
(c) Breach by CSBI with Subsequent Business Combination. In addition
---------------------------------------------------
to the foregoing, if, after the date of this Agreement and within 12 months
following
(i) any termination of this Agreement by BCG pursuant to Sections
10.1(b), 10.1(e) (but only on the basis of the failure of CSBI to satisfy
any of the conditions enumerated in Section 9.3, other than Section 9.3(d)
or (e)) of this Agreement; or
(ii) failure to consummate the Merger by reason of any failure of CSBI
to satisfy the conditions enumerated in Section 9.3, other than Section 9.3(d)
or (e),
any third-party shall acquire, merge with, combine with, purchase a significant
amount of assets of, or engage in any other business combination with, or
purchase any equity securities involving an acquisition of fifty-one percent
(51%) or more of the voting stock of, CSBI, or enter into any binding agreement
to do any of the foregoing
27
<PAGE>
(collectively, a "Business Combination"), such third-party that is a party to
the Business Combination shall pay to BCG, prior to consummation of the Business
Combination the sum of $500,000 in cash which sum represents compensation for
BCG's loss as the result of the transaction contemplated by this Agreement not
being consummated. In the event such third-party shall refuse to pay such
amounts, the amounts shall be an obligation of CSBI and shall be paid by CSBI
promptly upon notice to CSBI by BCG.
(d) Non-Exclusive Remedy for Willful Breach. Nothing contained in
---------------------------------------
this Section 11.2 shall constitute or shall be deemed to constitute liquidated
damages for the willful breach by a Party of the terms of this Agreement or
otherwise limit the rights of the nonbreaching Party.
11.3 Brokers and Finders. Each Party represents and warrants to the other
Party that neither it nor any of its officers, directors, employees, or
Affiliates has employed any broker or finder or incurred any Liability for any
financial advisory fees, investment bankers' fees, brokerage fees, commissions,
or finders' fees in connection with this Agreement or the transactions
contemplated hereby. In the event of a claim by any broker or finder based upon
his or its representing or being retained by or allegedly representing or being
retained by any Party, such Party agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transaction contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of BCG Common Stock, there shall be made no
amendment decreasing the consideration to be received by BCG shareholders
without the further approval of such shareholders.
11.6 Waivers.
(a) Prior to or at the Effective Time, CSBI, acting through its Board
of Directors, Chief Executive Officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by BCG, to waive or extend the time for the compliance or fulfillment by BCG of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of CSBI under this Agreement, except
any condition which, if not satisfied, would result in the violation of any Law.
No such waiver shall be effective unless in writing signed by a duly authorized
officer of CSBI.
(b) Prior to or at the Effective Time, BCG, acting through its Board
of Directors, Chief Executive Officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by CSBI, to waive or extend the time for the compliance or fulfillment by CSBI
of any and all of its obligations under this Agreement, and to waive any or all
of the conditions precedent to the obligations of BCG under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of BCG.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
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CSBI: Century South Banks, Inc.
P. O. Box 3366
455 Jesse Jewell Parkway, Suite 301
Gainesville, Georgia 30501
404/532-5086 - FAX
Attn: James A. Faulkner, President
Copy to Counsel: Thomas O. Powell, Esquire
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308-2216
404/885-3900 - FAX
BCG: Bank Corporation of Georgia
4951 Forsyth Road
Macon, Georgia 31203-4099
912/757-2023 - FAX
Attn: Joseph W. Evans, President
Copy to Counsel: Richard R. Cheatham, Esquire
Kilpatrick Stockton LLP
1100 Peachtree Street, N.E.
Atlanta, Georgia 30309
404/815-6555 - FAX
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.13 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
11.14 Interpretation of Agreement. The parties hereto acknowledge and agree
that each party has participated in the drafting of this Agreement and that this
document has been reviewed by the respective counsel for the parties hereto and
the normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be applied to the interpretation
of this Agreement. No inference in favor, or against, any party shall be drawn
from the fact that one party has drafted any portion hereof.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
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<PAGE>
ATTEST: "CSBI"
CENTURY SOUTH BANKS, INC.
By: /s/ James A. Faulkner
____________________________________ _________________________________
Susan J. Anderson, Secretary James A. Faulkner, President
[CORPORATE SEAL]
ATTEST: "BCG"
BANK CORPORATION OF GEORGIA
By: /s/ William H. Anderson, II
____________________________________ _________________________________
________________________, Secretary William H. Anderson, II, Chairman
[CORPORATE SEAL] By: /s/ Joseph W. Evans
_________________________________
Joseph W. Evans, President
30
<PAGE>
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This Amendment to Agreement and Plan of Merger, dated as of July 11, 1997
(the "Amendment"), by and among Bank Corporation of Georgia ("BCG"), a
corporation organized and existing under the laws of the State of Georgia and
Century South Banks, Inc. ("CSBI"), a corporation organized and existing under
the laws of the State of Georgia:
WHEREAS, pursuant to the terms of that certain Agreement and Plan of Merger
dated as of March 31, 1997 by and between BCG and CSBI (the "Merger Agreement"),
BCG will merge with and into CSBI and shares of BCG will be converted into the
right to receive shares of common stock of CSBI; and
WHEREAS, the parties wish to amend the Merger Agreement pursuant to the
terms of Section 11.5 thereof.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. The number, one and thirty-three one hundredths (1 and 33/100), used
in the second line of Section 3.1(b) and the ninth and eleventh lines of Section
3.6(a) shall be changed to the number, one and thirty-five one hundredths (1 and
35/100) such that the exchange ratio equals one and thirty-five one hundredths
(1.35) to one.
2. The date reference "June 30, 1997" appearing in the first lines of
Section 9.2(g) and 9.3(e) shall be changed to "July 31, 1997. "
3. Except as amended hereby, the terms, conditions, covenants,
agreements, representations and warranties contained in the Merger Agreement
shall remain unaffected hereby and shall continue in full force and effect.
4. This Amendment may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers as of the date first written
above.
"BCG"
ATTEST: BANK CORPORATION OF GEORGIA
By: /s/ William H. Anderson, II
- ---------------------------- ---------------------------------
, Secretary William H. Anderson, II, Chairman
- ----------------
[CORPORATE SEAL]
By: /s/ Joseph W. Evans
---------------------------------
Joseph W. Evans, President
"CSBI"
ATTEST: CENTURY SOUTH BANKS, INC.
By: /s/ James A. Faulkner
- ---------------------------- ----------------------------
Susan J. Anderson, Secretary James A. Faulkner, President
[CORPORATE SEAL]
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SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This Amendment to Agreement and Plan of Merger, dated as of October 15,
1997 (the "Amendment"), by and between Bank Corporation of Georgia ("BCG"), a
corporation organized and existing under the laws of the State of Georgia, and
Century South Banks, Inc. ("CSBI"), a corporation organized and existing under
the laws of the State of Georgia:
WHEREAS, pursuant to the terms of that certain Agreement and Plan of Merger
dated as of March 31, 1997 by and between BCG and CSBI (the "Merger Agreement"),
as amended by that certain Amendment to Agreement and Plan of Merger by and
between BCG and CSBI dated July 11, 1997, BCG will merge with and into CSBI and
shares of BCG will be converted into the right to receive shares of common stock
of CSBI; and
WHEREAS, the parties wish to amend the Merger Agreement pursuant to the
terms of Section 11.5 thereof.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. The fifth sentence of the first paragraph of the Preamble is hereby
amended by deleting same and inserting in lieu thereof the following:
"The transaction described in this Agreement is subject to the approvals of
the shareholders of BCG, the shareholders of CSBI, the Board of Governors
of the Federal Reserve System and the Department of Banking and Finance of
the State of Georgia and the satisfaction of certain other conditions
described in this Agreement."
2. Section 1.3(ii) is hereby amended by deleting same and inserting in
lieu thereof the following:
"(ii) the date on which the respective shareholders of BCG and CSBI, voting
separately, shall have approved this Agreement to the extent such approval
is required by applicable Law; or"
3. The third sentence of Section 5.11 is hereby amended by deleting same
and inserting in lieu thereof the following:
"None of the information supplied or to be supplied by either BCG or any of
the BCG Banks or any Affiliate thereof for inclusion in the Joint Proxy
Statement to be mailed to BCG shareholders and CSBI shareholders in
connection with the BCG Shareholders' Meeting and the CSBI Shareholders'
Meeting, respectively, and any other documents to be filed by either BCG or
any of the BCG Banks or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with
respect to the Joint Proxy Statement, when first mailed to the shareholders
of BCG and CSBI, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Joint Proxy Statement or any amendment
thereof or supplement thereto, at the time of each of the BCG Shareholders'
Meeting and the CSBI Shareholders' Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of any proxy for either of such shareholders' meetings."
4. The second sentence of Section 6.2(a) is hereby amended by inserting
the following at the end of such sentence:
"subject to the approval of this Agreement by a majority of the votes cast
in person or by proxy by holders of shares of CSBI Common Stock at the
CSBI Shareholders' Meeting."
5. The third sentence of Section 6.2(a) is hereby amended by deleting the
first word of such sentence and inserting in lieu thereof the following:
"Subject to such requisite shareholder approval, this"
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6. The third sentence of Section 6.11 is hereby amended by deleting same
and inserting in lieu thereof the following:
None of the information supplied or to be supplied by any CSBI Companies or
any Affiliate thereof for inclusion in the Joint Proxy Statement to be
mailed to BCG shareholders and CSBI shareholders in connection with the BCG
Shareholders' Meeting and the CSBI Shareholders' Meeting, respectively, and
any other documents to be filed by any CSBI Companies or any Affiliate
thereof with the SEC or any other Regulatory Authority in connection with
the transactions contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Joint Proxy Statement, when
first mailed to the shareholders of BCG and CSBI, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Joint
Proxy Statement or any amendment thereof or supplement thereto, at the time
of each of the BCG Shareholders' Meeting and the CSBI Shareholders'
Meeting, be false or misleading with respect to any material fact, or omit
to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for
either of such shareholders' meetings."
7. The third sentence of Section 8.1 is hereby amended by deleting same
and inserting in lieu thereof the following:
"Each of CSBI and BCG shall take, in accordance with applicable Law,
applicable stock exchange or NASDAQ rules and its respective articles of
incorporation and bylaws, all action necessary to convene, respectively, a
CSBI Shareholders' Meeting to consider and vote upon the issuance of the
shares of CSBI Common Stock to be issued in the Merger pursuant to this
Agreement and any other matters required to be approved by CSBI
shareholders for consummation of the Merger, and a BCG Shareholders'
Meeting to consider and vote upon the approval of this Agreement and any
other matters required to be approved by BCG's shareholders for
consummation of the Merger, respectively, as promptly as practicable after
the Registration Statement is declared effective.
8. The fourth sentence of Section 8.1 is hereby amended by deleting same
and inserting in lieu thereof the following:
"In connection with the CSBI Shareholders' Meeting and the BCG
Shareholders' Meeting, (i) BCG shall assist CSBI in the preparation and
filing of the Joint Proxy Statement (which shall be included in the
Registration Statement) with the SEC and mail it to BCG's shareholders and
CSBI's shareholders, (ii) the Parties shall furnish to each other all
information concerning them that they may reasonably request in connection
with such Joint Proxy Statement, (iii) the Board of Directors of each of
CSBI and BCG shall unanimously recommend (subject in the case of BCG to
compliance with their fiduciary duties as advised by counsel) to their
respective shareholders the approval of this Agreement, and (iv) the Board
of Directors and officers of each of CSBI and BCG shall use their best
efforts to obtain such approval of their respective shareholders (subject
in the case of BCG to compliance with their fiduciary duties as advised by
counsel).
9. Section 9.1(a) is hereby amended by deleting "BCG" and inserting in
lieu thereof the following:
"each of BCG and CSBI"
10. Section 9.3(c) is hereby amended by deleting "CSBI Board of Directors"
and inserting "CSBI's Board of Directors and CSBI's shareholders" in lieu
thereof.
11. Sections 9.2(e) and 9.3(f) are hereby amended by deleting all
references to "Proxy Statement" in such sections and inserting "Joint Proxy
Statement" in lieu thereof.
12. Section 10.1(c) is hereby amended by deleting same and inserting in
lieu thereof the following:
"By the Board of Directors of either Party (provided that the terminating
Party is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event (i)
any Consent of any Regulatory Authority required for consummation of the
Merger shall have been denied by final nonappealable action of such
authority or if any action taken by such authority is not appealed within
the time limit for appeal, (ii) the shareholders of BCG fail to vote their
approval of this Agreement and the transaction contemplated hereby as
required by the GBCC at the BCG Shareholders' Meeting where the
transaction was presented to such shareholders for approval and voted
upon, or (iii) the shareholders of CSBI fail to vote their approval of
this Agreement and the transaction contemplated hereby
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at the CSBI Shareholders' Meeting where the transaction was presented to
such shareholders for approval and voted upon; or"
13. Section 11.1 is hereby amended by deleting " 'PROXY STATEMENT' shall
mean the proxy statement used by BCG to solicit the approval of its shareholders
of the transactions contemplated by this Agreement and shall include the
prospectus of CSBI relating to shares of CSBI Common Stock to be issued to the
shareholders of BCG."
14. Section 11.1 is hereby amended by inserting the following between the
definitions of "Internal Revenue Code" and "Knowledge":
" 'JOINT PROXY STATEMENT' shall mean the joint proxy statement used by BCG
and CSBI to solicit the approval of their respective shareholders of the
transactions contemplated by this Agreement and shall include the
prospectus of CSBI relating to shares of CSBI Common Stock to be issued to
the shareholders of BCG."
15. Section 11.1 is hereby amended by deleting " 'SHAREHOLDER'S MEETING'
shall mean the meeting of the shareholders of BCG to be held pursuant to Section
8.1 of this Agreement, including any adjournment or adjournments thereof."
16. Section 11.1 is hereby amended by inserting the following between the
definitions of "BCG Financial Statements" and "BCG Stock Plan":
" 'BCG SHAREHOLDERS' MEETING' shall mean the meeting of the shareholders of
BCG to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof."
17. Section 11.1 is hereby amended by inserting the following between the
definitions of "CSBI Financial Statements" and "CSBI Subsidiaries":
" 'CSBI SHAREHOLDERS' MEETING' shall mean the meeting of the shareholders
of CSBI to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof."
18. Section 11.2(c) is hereby amended by deleting Sections 11.2(c)(i) and
11.2(c)(ii) and inserting in lieu thereof the following:
" (i) any termination of this Agreement
(1) by BCG pursuant to Sections 10.1(b), 10.1(e) (but only on the
basis of the failure of CSBI to satisfy any of the conditions enumerated in
Section 9.3, other than Section 9.3(d) or (e)) of this Agreement, or
(2) by either Party pursuant to Section 10.1(c)(iii) (with
respect to approval of the shareholders of CSBI), or
(ii) failure to consummate the Merger by reason of any failure of CSBI
to satisfy the conditions enumerated in Section 9.1(a) (as such section
relates to approval of the shareholders of CSBI), or Section 9.3, other
than Section 9.3(d) or (e),"
19. Except as amended hereby, the terms, conditions, covenants,
agreements, representations and warranties contained in the Merger Agreement
shall remain unaffected hereby and shall continue in full force and effect.
20. This Amendment may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers as of the date first written
above.
"BCG"
ATTEST: BANK CORPORATION OF GEORGIA
By: /s/ William H. Anderson, II
- -------------------------------- ---------------------------------------
Jerry Daniel, Secretary William H. Anderson, II, Chairman
[CORPORATE SEAL]
By: /s/ Joseph W. Evans
---------------------------------------
Joseph W. Evans, President
"CSBI"
ATTEST: CENTURY SOUTH BANKS, INC.
By: /s/ James A. Faulkner
- -------------------------------- --------------------------------------
Susan J. Anderson, Secretary James A. Faulkner, President
[CORPORATE SEAL]
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