<PAGE>
As filed with the Securities and Exchange Commission on August __, 1997
Registration No.________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
CENTURY SOUTH BANKS, INC.
(Exact Name of Registrant as Specified in its Charter)
Georgia 6711 58-1455591
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation Code Number)
or organization)
60 Main Street West
Dahlonega, Georgia 30533
706/864-1111
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JAMES A. FAULKNER
Century South Banks, Inc.
60 MAIN STREET WEST
DAHLONEGA, GEORGIA 30533
(Address, including zip code, and telephone number, including area code, of
agent for service)
THOMAS O. POWELL, ESQUIRE RICHARD R. CHEATHAM, ESQUIRE
Troutman Sanders LLP Kilpatrick Stockton LLP
600 Peachtree Street, N.E., Suite 5200 1100 Peachtree Street, N.E., Suite 2800
Atlanta, Georgia 30308 Atlanta, Georgia 30309
404/885-3294 404/815-6500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED* PER SHARE* OFFERING PRICE* REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK,
PAR VALUE $1.00
PER SHARE 2,268,097 SHARES $25.00 $56,702,425 $19,552.56
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In accordance with Rule 457(f)(1), the registration fee was calculated
based on the average of the high and low sales price reported on the Nasdaq
National Market on August 6, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
BANK CORPORATION OF GEORGIA
4951 Forsyth Road
Macon, Georgia 31203-4099
August __, 1997
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders
("Special Meeting") of BANK CORPORATION OF GEORGIA ("BCG") to be held at the
main office of BCG, located at 4951 Forsyth Road, Macon, Georgia, at 1:00 p.m.,
Macon time, on August __, 1997.
At this meeting, you will be asked to consider and vote upon the approval
of a merger agreement which provides for the merger (the "Merger") by and
between BCG and Century South Banks, Inc. ("CSBI") whereby, among other matters,
BCG will merge into and with CSBI and the shares of BCG common stock will be
converted into the right to receive shares of common stock of CSBI. If the
proposed Merger is consummated, each outstanding share of BCG common stock
(excluding treasury shares) shall cease to be outstanding and shall be converted
into and exchanged for the right to receive shares of CSBI common stock. The
affirmative vote of the holders of at least a majority of the shares of BCG
common stock entitled to vote at the Special Meeting is required for approval of
the merger agreement.
Enclosed are the following: (i) Notice of Special Meeting; (ii) Proxy
Statement/Prospectus; and (iii) Proxy for the Special Meeting. The Proxy
Statement/Prospectus describes in more detail the merger agreement and the
proposed Merger, including a description of the conditions on consummation of
the Merger and the effects of the Merger on the rights of BCG shareholders.
Please give this information your careful attention.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT AND CONSUMMATION OF THE TRANSACTION CONTEMPLATED THEREIN, AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREIN. IN VIEW OF THE
IMPORTANCE OF THE ACTION TO BE TAKEN, WE URGE YOU TO COMPLETE, SIGN, AND DATE
THE ENCLOSED PROXY AND TO RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING (IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE IN PERSON, EVEN IF YOU PREVIOUSLY RETURNED YOUR PROXY).
We look forward to seeing you at the Special Meeting.
Sincerely,
William H. Anderson, II
Chairman
<PAGE>
BANK CORPORATION OF GEORGIA
4951 Forsyth Road
MACON, GEORGIA 31203-4099
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held at 1:00 p.m. on August __, 1997
August __, 1997
To the Shareholders of Bank Corporation of Georgia
NOTICE IS HEREBY GIVEN that a special meeting of shareholders ("Special
Meeting") of Bank Corporation of Georgia ("BCG") will be held at the main office
of BCG, located at 4951 Forsyth Road, Macon, Georgia, at 1:00 p.m., Macon time,
on August __, 1997, for the following purposes:
1. THE MERGER. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of March 31, 1997 and amended July 11,
1997 (the "Merger Agreement"), by and between BCG and Century South Banks, Inc.
("CSBI"), pursuant to which, among other matters, BCG will merge with and into
CSBI (the "Merger") and the shares of BCG will be converted into the right to
receive shares of common stock of CSBI, all as more fully described in the
accompanying Proxy Statement/Prospectus. A copy of the Merger Agreement is set
forth in Appendix A to the accompanying Proxy Statement/Prospectus and is hereby
incorporated by reference herein.
2. OTHER BUSINESS. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements of the Special
Meeting.
Only shareholders of record at the close of business on August __, 1997,
are entitled to receive notice of and to vote at the Special Meeting or any
adjournments or postponements thereof. Approval of the Merger Agreement and the
consummation of the transactions contemplated thereby requires the affirmative
vote of the holders of a majority of the shares of BCG common stock entitled to
vote at the Special Meeting.
THE BOARD OF DIRECTORS OF BCG UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR APPROVAL OF THE MERGER AGREEMENT AND CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY.
BY ORDER OF THE BOARD OF DIRECTORS
Jerry Daniel, Secretary
<PAGE>
PROSPECTUS PROXY STATEMENT
---------- ---------------
CENTURY SOUTH BANKS, INC BANK CORPORATION OF GEORGIA
COMMON STOCK SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
(PAR VALUE $1.00 PER SHARE) ON AUGUST __, 1997
_______________________________
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $1.00 par value ("BCG Common Stock"), of Bank Corporation of Georgia
("BCG"), a Georgia corporation, in connection with the solicitation of proxies
by the BCG Board of Directors for use at a Special Meeting of Shareholders to be
held at 1:00 p.m., Macon time, on August __, 1997, at the main office of BCG,
located at 4951 Forsyth Road, Macon, Georgia, and at any adjournment or
adjournments thereof (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve an Agreement and Plan of Merger, dated as of March 31, 1997 and
amended July 11, 1997 (the "Merger Agreement"), by and between BCG and Century
South Banks, Inc. ("CSBI"), a Georgia corporation, which provides for, among
other things, the merger of BCG with and into CSBI (the "Merger"). See
"SUMMARY," "THE MERGER" and Appendix A to this Proxy Statement/Prospectus.
Upon consummation of the Merger, each outstanding share of BCG Common Stock
(excluding treasury shares), shall cease to be outstanding and shall be
converted into and exchanged for the right to receive 1.35 shares of common
stock, $1.00 par value (the "CSBI Common Stock") of CSBI (the "Merger
Consideration"). The last sale price of CSBI Common Stock and BCG Common Stock
as reported on the Nasdaq National Market on August __, 1997 was $_____ and
$_____ per share, respectively, and on March 14, 1997, the last trading day
preceding public announcement of the Merger was $18.25 and $20.00 per share,
respectively. See "THE MERGER- Merger Consideration." As a result, the final
Merger Consideration will not be determined until after the shareholders vote at
the Special Meeting. It is currently anticipated that the Merger will be
consummated not later than December 31, 1997.
The Merger is intended to be a tax-free reorganization within the meaning
of section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Generally, no gain or loss should be recognized for federal income tax purposes
by BCG shareholders as a result of the Merger, except that gain or loss should
be recognized with respect to cash received in lieu of fractional shares. See
"THE MERGER - Certain Federal Income Tax Consequences."
This Proxy Statement/Prospectus also constitutes a prospectus of CSBI
relating to the approximately _______ shares of CSBI Common Stock issuable to
BCG shareholders in the Merger. See "CERTAIN DIFFERENCES IN THE RIGHTS OF CSBI
AND BCG SHAREHOLDERS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES OF CSBI COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement/Prospectus is August __, 1997, and it is being
mailed or otherwise delivered to BCG shareholders on or about such
date.
1
<PAGE>
AVAILABLE INFORMATION
CSBI and BCG are each subject to the reporting and informational
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), and, in accordance therewith,
file reports and proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements, and
other information filed by CSBI and BCG with the Commission may be inspected and
copied at the principal office of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N. W., Washington, D.C. 20549, at the Commission's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains an Internet web site that contains
reports, proxy and information statements and other information regarding
issuers who file electronically with the Commission. The address of that site
is http://www.sec.gov. The common stock of CSBI and BCG are traded on the Nasdaq
National Market and reports, proxy statements, and other information concerning
CSBI and BCG are available for inspection and copying at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4, of which this Proxy
Statement/Prospectus is a part, and exhibits thereto (together with any
amendments thereto, the "Registration Statement"), which has been filed by CSBI
with the Commission under the Securities Act of 1933, as amended, and the rules
and regulations thereunder (the "Securities Act"), certain portions of which
have been omitted pursuant to the rules and regulations of the Commission and to
which portions reference is hereby made for further information. Statements
contained in this Proxy Statement/Prospectus concerning the provisions of
certain documents filed as exhibits to the Registration Statement are
necessarily brief descriptions thereof, and are not necessarily complete, and
each such statement is qualified in its entirety by reference to the full text
of such document.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST FROM: CENTURY SOUTH BANKS, INC., 60 MAIN
STREET WEST, DAHLONEGA, GEORGIA 30533, ATTENTION: CORPORATE SECRETARY, 706/864-
2121, AS TO CSBI DOCUMENTS; AND FROM BANK CORPORATION OF GEORGIA, 4951 FORSYTH
ROAD, MACON, GEORGIA 31203-4099, ATTENTION: CORPORATE SECRETARY, 912/757-2000,
AS TO BCG DOCUMENTS. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUESTS SHOULD BE MADE BY AUGUST ___, 1997.
All information contained herein with respect to CSBI and its subsidiaries
has been supplied by CSBI, and all information with respect to BCG and its
subsidiaries has been supplied by BCG.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY CSBI OR BCG. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH THIS
PROXY STATEMENT/PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CSBI OR ANY OF ITS
SUBSIDIARIES OR BCG OR ANY OF ITS SUBSIDIARIES SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
PURCHASE THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed by CSBI and BCG with the
Commission (CSBI File No. 2- 75364; BCG File No. 0-17851) under Section 13(a) or
15(d) of the Exchange Act are hereby incorporated by reference in this Proxy
Statement/Prospectus:
CSBI Documents:
(i) CSBI's Annual Report on Form 10-K for the year ended December 31, 1996
as filed on March 31, 1997;
(ii) CSBI's Quarterly Report on Form 10-Q for the three months ended March
31, 1997 as filed on May 14, 1997; and
(iii) the description of the CSBI Common Stock set forth in CSBI's
Registration Statements filed pursuant to Section 12 of the Exchange Act, and
any amendment or report filed for the purpose of updating any such description.
BCG Documents:
(i) BCG's Annual Report on Form 10-KSB for the year ended December 31, 1996
as filed on March ___, 1997 and Form 10-KA on April 29, 1997; and
(ii) BCG's Quarterly Reports on Form 10-QSB for the three months ended
March 31, 1997, as filed on May 15, 1997.
All documents filed by CSBI and BCG pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting are hereby
incorporated by reference in this Proxy Statement/Prospectus and shall be deemed
a part hereof from the date of filing of such document.
Any statement contained herein, in any supplement hereto or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Proxy Statement/Prospectus to the extent that a statement contained herein, in
any supplement hereto or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Proxy Statement/Prospectus, or any supplement hereto.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION...................................................................... 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................... 3
SUMMARY.................................................................................... 6
Parties to the Merger................................................................... 6
Special Meeting; Record Date............................................................ 6
The Merger.............................................................................. 6
Recent Developments..................................................................... 9
Market Prices and Dividends............................................................. 10
Comparison of Certain Unaudited Per Share Data.......................................... 11
Selected Financial Data................................................................. 12
GENERAL INFORMATION........................................................................ 14
Special Meeting......................................................................... 14
Record Date, Solicitation, and Revocability of Proxies.................................. 14
Vote Required........................................................................... 15
Recommendation of BCG's Board of Directors.............................................. 15
THE MERGER................................................................................. 15
General................................................................................. 15
Background of the Merger................................................................ 16
Reasons for the Merger.................................................................. 16
Merger Consideration.................................................................... 17
Fractional Shares....................................................................... 17
Effective Time.......................................................................... 17
Distribution of CSBI Certificates....................................................... 18
Certain Federal Income Tax Consequences................................................. 18
Management and Operations after the Merger.............................................. 19
Interests of Certain Persons in the Merger.............................................. 20
Conditions to Consummation.............................................................. 21
Regulatory Approvals.................................................................... 21
Amendment, Waiver, and Termination...................................................... 21
Conduct of Business Pending the Merger.................................................. 22
Expenses and Fees....................................................................... 23
Accounting Treatment.................................................................... 23
Resales of CSBI Common Stock............................................................ 23
PRO FORMA COMBINED FINANCIAL DATA.......................................................... 24
DESCRIPTION OF BCG......................................................................... 31
General................................................................................ 31
Employees.............................................................................. 31
Properties............................................................................. 31
Competition............................................................................ 31
Dividends.............................................................................. 31
Acquisitions........................................................................... 32
Services............................................................................... 32
Markets................................................................................ 32
Deposits............................................................................... 32
Loans.................................................................................. 32
Lending Policy......................................................................... 33
Loan Review and Non-Performing Assets.................................................. 33
Assets/Liability Management............................................................ 33
Investment Policy...................................................................... 34
Certain Relationship and Related Transactions......................................... 34
Ownership of BCG Stock................................................................. 35
Management's Discussion and Analysis of Financial Condition and Results of Operations.. 37
4
<PAGE>
CERTAIN DIFFERENCES IN THE RIGHTS OF CSBI AND BCG SHAREHOLDERS............................. 48
Authorized Capital Stock................................................................ 48
Directors............................................................................... 48
CERTAIN REGULATORY CONSIDERATIONS.......................................................... 49
Holding Company Regulation Generally.................................................... 49
Payment of Dividends.................................................................... 50
Monetary Policy......................................................................... 50
Capital Adequacy........................................................................ 50
Recent Legislative and Regulatory Action................................................ 51
FDIC Insurance Assessments for the BCG Banks............................................ 52
EXPERTS.................................................................................... 53
LEGAL MATTERS.............................................................................. 53
OTHER MATTERS.............................................................................. 53
INDEX TO FINANCIAL STATEMENTS.............................................................. 54
BCG Financial Statements................................................................ F-1
</TABLE>
APPENDICES
Appendix A - Agreement and Plan of Merger, dated as of March 31, 1997, and
amended on July 11, 1997, by and between CSBI and BCG
5
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. This summary is not intended to be a complete
description of the matters covered in this Proxy Statement/Prospectus and is
subject to and qualified in its entirety by reference to the more detailed
information contained elsewhere in this Proxy Statement/Prospectus, including
the Appendices hereto, and in the documents incorporated by reference in this
Proxy Statement/Prospectus. A copy of the Merger Agreement is set forth in
Appendix A to this Proxy Statement/Prospectus and reference is made thereto for
a complete description of the terms of the Merger. Shareholders are urged to
read carefully the entire Proxy Statement/Prospectus, including the Appendices.
As used in this Proxy Statement/Prospectus, the terms "CSBI" and "BCG" refer to
such corporations, respectively, and where the context requires, CSBI and its
subsidiaries or BCG and its subsidiaries.
PARTIES TO THE MERGER
CSBI. CSBI is a Georgia corporation and a bank holding company registered
under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). Through
its banking subsidiaries, CSBI provides a wide range of commercial and retail
banking services in Georgia and Tennessee. CSBI currently owns ten national
and state chartered bank subsidiaries which operate 22 full service banking
offices, 2 limited service facilities and 19 automated teller machines ("ATMs")
in nine counties in Georgia and one county in Tennessee.
For the year ended December 31, 1996, CSBI reported net income of $9.370
million. For the three months ended March 31, 1997, CSBI reported net income of
$1.922 million. As of March 31, 1997, CSBI had total consolidated assets of
$768.305 million and consolidated shareholders' equity of $76.300 million.
CSBI is continually evaluating acquisition opportunities and frequently
conducts due diligence activities in connection with possible acquisitions. As
a result, acquisition discussions and, in some cases, negotiations frequently
take place and future acquisitions involving cash, debt or equity securities can
be expected. Acquisitions typically involve the payment of a premium over book
and market value, and therefore some dilution of CSBI's book value and/or net
income per common share may occur in connection with any such future
acquisitions. See "PRO FORMA COMBINED FINANCIAL DATA."
CSBI's principal executive offices are located at 60 Main Street West,
Dahlonega, Georgia, and its telephone number is 706/864-1111. For additional
information regarding CSBI and its business, see "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
BCG. BCG is a Georgia corporation and a bank holding company registered
under the BHC Act. Through its banking subsidiaries BCG provides a wide range of
commercial and retail banking services. BCG owns two national bank
subsidiaries which operate 10 full service banking offices and 3 ATMs in 7
counties in Georgia. Pursuant to the Merger Agreement, BCG will merge with and
into CSBI, with CSBI resulting as the surviving entity. BCG's two banking
subsidiaries will become wholly-owned subsidiaries of CSBI.
For the year ended December 31, 1996, BCG reported net income of $3.313
million. For the three months ended March 31, 1997, BCG reported net income of
$944 thousand. As of March 31, 1997, BCG had total assets of $302.506 million
and shareholders' equity of $27.440 million.
BCG's principal executive offices are located at 4951 Forsyth Road, Macon,
Georgia, and its telephone number is 912/757-2000. For additional information
regarding BCG and its business, see "AVAILABLE INFORMATION," "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE," "DESCRIPTION OF BCG," "SUMMARY - Selected
Financial Data," and "CERTAIN REGULATORY CONSIDERATIONS."
SPECIAL MEETING; RECORD DATE
The Special Meeting will be held at 1:00 p. m., Macon time on August __,
1997, at the main office of BCG, located at 4951 Forsyth Road, Macon, Georgia.
At the Special Meeting, BCG's shareholders will consider and vote upon approval
of the Merger Agreement and the consummation of the transactions contemplated
therein. BCG's Board of Directors has fixed the close of business on August __,
1997 as the record date for determining the BCG shareholders entitled to receive
notice of and to vote at the Special Meeting (the "Record Date"). As of the
6
<PAGE>
Record Date, there were 2,274,357 shares of BCG Common Stock issued and
outstanding and entitled to be voted at the Special Meeting. For additional
information with respect to the Special Meeting, including the Record Date and
votes required for approval, see "GENERAL INFORMATION."
THE MERGER
General. The Merger Agreement provides that BCG shall merge with and into
CSBI, which shall be the surviving corporation of the Merger. Thereafter, BCG
shall cease to exist and BCG's subsidiaries will become wholly-owned
subsidiaries of CSBI. At the time the Merger becomes effective, each
outstanding share of BCG Common Stock (excluding treasury shares) shall cease to
be outstanding and shall be converted into and exchanged for the right to
receive shares of CSBI Common Stock. If the Merger Agreement is approved at the
Special Meeting, all required governmental and other consents and approvals are
obtained, and all of the other conditions to the obligations of the parties to
consummate the Merger are either satisfied or waived (as permitted), the Merger
will be consummated. A copy of the Merger Agreement is set forth in Appendix A
to this Proxy Statement/Prospectus. See "THE MERGER."
Merger Consideration. The Merger Agreement provides that, at the effective
time of the Merger, each outstanding share of BCG Common Stock (excluding shares
held by BCG or any of its subsidiaries or by CSBI or any of its subsidiaries, in
each case other than a fiduciary capacity or as a result of debts previously
contracted) shall cease to be outstanding and shall be converted into and
exchanged for the right to receive 1.35 shares of CSBI Common Stock. See "THE
MERGER -Merger Consideration."
Votes Required . Approval of the Merger Agreement and consummation of the
transactions contemplated therein requires the affirmative vote of the holders
of a majority of the outstanding shares of BCG Common Stock entitled to vote at
the Special Meeting. As of the Record Date, BCG's directors and executive
officers, and their affiliates, held approximately 57.25% of the outstanding
shares of BCG Common Stock entitled to vote at the Special Meeting. As of the
Record Date, CSBI, its directors and executive officers, and their affiliates,
owned 1,700 shares of the outstanding shares of BCG Common Stock. The vote of
the shareholders of CSBI is not required as a condition to consummation of the
transaction. See "GENERAL INFORMATION - Votes Required."
Recommendation of the BCG Board of Directors. The Board of Directors of
BCG believes that the Merger is in the best interests of BCG and its
shareholders and has unanimously approved the Merger Agreement and the
consummation of the transactions contemplated therein. BCG's Board of Directors
unanimously recommends that the shareholders vote FOR approval of the Merger
Agreement and the consummation of the transactions contemplated therein. In
deciding to approve the Merger Agreement and the consummation of the
transactions contemplated therein, BCG's Board of Directors considered a number
of factors, including the compatibility of the operations of BCG and CSBI, and
the financial condition, results of operations, and future prospects of BCG and
CSBI. See "THE MERGER - Reasons for the Merger."
Effective Time. If the Merger is approved by the requisite vote of BCG's
shareholders, all required governmental and other consents and approvals are
obtained, and the other conditions to the obligations of the parties to
consummate the Merger are either satisfied or waived (as permitted), the Merger
will be consummated and will become effective on the date and at the time that a
Certificate of Merger, is filed with the Secretary of State of the State of
Georgia (the "Effective Time"). Assuming satisfaction of all conditions to
consummation, the Merger is expected to be made effective during the fourth
quarter of 1997. CSBI and BCG each has the right, acting unilaterally, to
terminate the Merger Agreement should the Merger not be consummated by December
31, 1997. See "THE MERGER - Effective Time" and "Amendment, Waiver, and
Termination."
Delivery of BCG Certificates. Promptly after the Effective Time, each
record holder of shares of BCG Common Stock outstanding at the Effective Time
will be mailed a transmittal letter (with instructions) to use in effecting the
surrender and cancellation of those certificates in exchange for CSBI Common
Stock. CSBI shall not be obligated to deliver the consideration to which any
former holder of BCG Common Stock is entitled until such holder surrenders such
holder's certificate or certificates representing such holder's shares for
exchange. The certificate or certificates so surrendered shall be duly endorsed
as CSBI may require. See "THE MERGER - Distribution of CSBI Certificates."
Certain Federal Income Tax Consequences. The Merger is intended to be a
tax-free reorganization within the meaning of section 368(a) of the Code.
Generally, no gain or loss should be recognized for federal income tax
7
<PAGE>
purposes by BCG shareholders as a result of the Merger, except that gain or loss
will be recognized with respect to cash received in lieu of fractional shares. A
condition to consummation of the Merger is the receipt by each of CSBI and BCG
of an opinion of Troutman Sanders LLP, counsel to CSBI, as to the qualification
of the Merger as a tax-free reorganization and certain other federal income tax
consequences of the Merger. The opinion will be delivered by Troutman Sanders
LLP upon closing of the Merger in the form which has been included as an exhibit
to the Registration Statement regarding this Proxy Statement/Prospectus. See
"THE MERGER - Certain Federal Income Tax Consequences."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER AND OTHER FACTORS, EACH HOLDER OF
BCG COMMON STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISER TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER (INCLUDING THE
APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS).
Interests of Certain Persons in the Merger. Certain members of BCG's
management and the Board of Directors of BCG have interests in the Merger in
addition to their interests as shareholders of BCG generally. As of July 24,
1997, the directors and officers of BCG owned 1,015 shares of CSBI Common Stock
and the directors and executive officers of CSBI owned 1,700 shares of BCG
Common Stock. See "THE MERGER - Management and Operations After the Merger" and
"Interests of Certain Persons in the Merger."
For information regarding the number of shares and percentage ownership of
CSBI Common Stock that will be acquired by each of the directors and executive
officers of BCG, see "THE MERGER - Interests of Certain Persons in the Merger."
Conditions to Consummation. Consummation of the Merger is subject to
various conditions, including among other matters the following material
conditions: (i) approval of the Merger Agreement by BCG shareholders; (ii)
receipt of all governmental and other consents and approvals necessary to permit
consummation of the Merger, including those of the Board of Governors of the
Federal Reserve System (the "Federal Reserve") and the Department of Banking
and Finance of the State of Georgia (the "DBF"); and (iii) satisfaction of
certain other usual conditions, including the receipt of the tax opinion
discussed above. See "THE MERGER - Conditions to Consummation" and "Amendment,
Waiver, and Termination."
Regulatory Approvals. The Merger is subject to the prior approval of the
Federal Reserve and the DBF. On July 15, 1997, the DBF approved CSBI's
application to acquire BCG subject to BCG shareholder approval and the
maintenance of the BCG Banks' capital adequacy by CSBI after consummation of the
Merger. On July 11, 1997 the Federal Reserve approved CSBI's application to
acquire BCG by Merger. See "THE MERGER - Regulatory Approvals."
Conduct of Business Pending the Merger. CSBI and BCG have each agreed in
the Merger Agreement to, among other things, operate their respective businesses
and the business of their respective subsidiaries only in the ordinary course
and to take no action that would adversely affect their respective abilities to
perform their respective covenants and agreements under the Merger Agreement. In
addition, each party has agreed not to take certain actions relating to their
respective operations and their respective subsidiaries pending consummation of
the Merger without the prior written consent of the other party, except as
otherwise permitted by the Merger Agreement, including, among other things: (i)
becoming responsible for any obligation for borrowed money in excess of an
aggregate of $100,000, except in accordance with past practices; (ii) paying any
dividends, or otherwise acquiring or exchanging any shares of its capital stock
other than in accordance with past practice, or, subject to certain exceptions,
issuing any additional shares of its capital stock or giving any person the
right to acquire any such shares, or issuing any long-term debt; (iii) acquiring
control over any other entity; (iv) subject to certain exceptions, granting any
increase in compensation or benefits, or paying any bonus, to any of its
directors, officers or employees; (v) modifying or adopting any employee benefit
plans, including any employment contract; or (vi) taking any other action not in
the ordinary course of business. See "THE MERGER - Conduct of Business Pending
the Merger."
Termination. The Merger Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time by mutual consent of the
Boards of Directors of BCG and CSBI. In addition, the Merger Agreement may be
terminated, and the Merger abandoned, prior to the Effective Time by either CSBI
or BCG if (i)
8
<PAGE>
the other party breaches and does not timely cure any representation, warranty,
covenant or other agreement contained in the Merger Agreement and such breach,
individually or in the aggregate, has a Material Adverse Effect, as defined in
the Merger Agreement, on the non-breaching party (ii) any consent or approval of
certain regulatory authorities is denied by final nonappealable action of such
authority, or, (iii) the Merger has not been consummated by December 31, 1997,
or by either party in the event that the Board of Directors of the other party
shall have failed to reaffirm, following a written request by such party for
such reaffirmation after the other party shall have received any inquiry or
proposal with respect to an "Acquisition Proposal" (as defined in the Merger
Agreement), its approval of the Merger and the transactions contemplated by the
Merger Agreement (to the exclusion of any other "Acquisition Proposal"), or
shall have resolved not to reaffirm the Merger. See "THE MERGER -Amendment,
Waiver, and Termination."
Accounting Treatment. It is anticipated that the Merger will qualify as a
"pooling of interests" for financial reporting purposes. See "THE MERGER -
Accounting Treatment."
Resale of CSBI Common Stock. The CSBI Common Stock issued in connection
with the Merger will be freely transferable by the holders of such shares,
except for those holders who may be deemed to be "affiliates" (generally
including directors, certain executive officers, and 10% or more shareholders)
of BCG or CSBI under applicable federal securities laws. See "THE MERGER -
Resale of CSBI Common Stock."
Dissenters' Rights. Under Georgia corporate law, dissenters' rights of
appraisal do not exist because shares of BCG Common Stock are publicly traded.
RECENT DEVELOPMENTS
On July 16, 1997, CSBI announced a second quarter net loss of $741,735. The
loss resulted from special charges of $2,725,000 net of related taxes. The
second quarter 1997 net loss per share was $0.10. CSBI's year-to-date net
earnings for 1997 were $1,180,000 or $0.15 per share as compared to $4,811,000
or $0.62 per share for 1996. Of the net $2,725,000 special charges,
approximately $2,350,000 relates to provision for loan losses to reflect the
results of an in depth study of the loan portfolio at two subsidiary banks where
recent management changes have occurred and a revision of the estimation process
used by CSBI in the second quarter of 1997. The remainder of the special
charges were primarily due to write offs of certain equipment that has been
determined to be obsolete and the buy out of various vendor contracts and
leases. Before these special charges, second quarter 1997 net income was
$1,983,000 or $0.25 per share. CSBI's net income per share in the second
quarter 1996 was $0.34, which included a one time gain of approximately $350,000
after tax, resulting primarily from the recovery of the principal of previously
charged-off municipal securities.
9
<PAGE>
MARKET PRICES AND DIVIDENDS
CSBI Common Stock and BCG Common Stock are quoted and traded on the Nasdaq
National Market. The following table sets forth the high and low sale prices
per share of CSBI Common Stock and BCG Common Stock on the Nasdaq National
Market, and the dividends paid per share of CSBI Common Stock and BCG Common
Stock, with respect to each quarterly period since January 1, 1995.
Prior to May 1996, the BCG Common Stock was not traded on an established
market. From January 1 through May 31, 1996, management of BCG is aware of
trades of BCG Common Stock aggregating 42,300 shares at prices ranging from
$14.00 per share to $19.00 per share. During 1995, management of BCG is aware
of trades of BCG Common Stock aggregating 62,100 shares at prices ranging from
$8.28 per share to $15.00 per share.
<TABLE>
<CAPTION>
Sales Prices Per Sales Prices Per Dividends Declared
Share of CSBI Share of BCG Per Share of
Common Stock Common Stock Common Stock
-------------------- -------------------- ----------------------
High Low High Low CSBI BCG
-------------------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter 13 1/8 11 1/2 N/A N/A .0925 -
Second Quarter 14 11 3/4 N/A N/A .0938 -
Third Quarter 14 1/4 12 1/4 N/A N/A .095 .10
Fourth Quarter 17 1/2 12 3/4 N/A N/A .09625 -
1996
First Quarter 16 3/4 13 3/4 N/A N/A .0975 -
Second Quarter 15 1/4 13 1/2 19 17 .09875 -
Third Quarter 17 1/2 14 1/2 18 1/2 17 .100 .10
Fourth Quarter 19 16 1/4 17 16 .10125 -
1997
First Quarter 20 1/2 17 3/4 26 1/4 16.00 .1025 -
Second Quarter 20 18 25 1/4 23 1/4 .10375 -
</TABLE>
On August 6, 1997, the last reported sales prices of the BCG Common Stock
on the NASDAQ market was $25 per share. As of ________, 1997, there were
________ shares of the BCG Common Stock outstanding and _____ record holders of
such shares.
On March 14, 1997, the last trading day prior to public announcement that
CSBI and BCG had entered into a non-binding letter of intent to merge, the last
reported sale price per share of CSBI Common Stock on the Nasdaq National Market
was $18 1/4, an equivalent pro forma per share of BCG Common Stock pursuant to
the Merger Agreement of $_____ and the last reported sales price per share of
BCG Common Stock on the Nasdaq National Market was $20.00 On March 27, 1997,
the last trading day prior to the day on which CSBI and BCG executed the Merger
Agreement, the last reported sale price per share of CSBI Common Stock on the
Nasdaq National Market was $18-3/4 and the last reported sales price per share
of BCG Common Stock on the Nasdaq National Market was $24-7/8. On August __,
1997, the last reported sale price per share of CSBI Common Stock on the Nasdaq
National Market was $_____ and the last reported sales price per share of BCG
Common Stock on the Nasdaq National Market was $______.
BCG SHAREHOLDERS SHOULD OBTAIN CURRENT MARKET QUOTATIONS FOR CSBI AND BCG
COMMON STOCK.
10
<PAGE>
Comparison of Certain Unaudited Per Share Data
The following summary presents selected comparative unaudited per share
data for CSBI and BCG on a historical basis and on a pro forma combined and
equivalent pro forma per share of BCG Common Stock basis assuming the Merger had
been effective during the periods presented. The Merger is reflected under the
pooling-of-interests method of accounting and pro forma data is derived
accordingly. The information shown below should be read in conjunction with
the historical financial statements of CSBI and BCG, including the respective
notes thereto, included herein or incorporated by reference herein, and with
the unaudited pro forma financial information, including the notes thereto,
appearing elsewhere herein. See "AVAILABLE INFORMATION," "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE," "PRO FORMA COMBINED FINANCIAL DATA," "THE
MERGER - Accounting Treatment," "DESCRIPTION OF BCG - Management's Discussion
and Analysis of Financial Condition and Results of Operations," and "INDEX TO
FINANCIAL STATEMENTS - BCG Financial Statements."
<TABLE>
<CAPTION>
At or for the
Three Months At or for the
Ended Years Ended December 31,
------------------------
March 31, 1997 1996 1995 1994
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
CSBI COMMON STOCK
Net income per common share:
Historical - primary $ .25 $ 1.21 $1.02 $ .91
Historical - fully diluted .25 1.20 1.02 .91
Pro forma CSBI and BCG -
combined - fully diluted .26 1.15 1.00 .88
Dividends per common share:
Historical .10 .40 .38 .34
Book Value per common hare:
Historical $ 9.82 $ 9.72
Pro forma CSBI and BCG
combined 9.58 9.44
BCG COMMON STOCK
Net income per common share:
Historical - primary $ .40 $ 1.41 $1.35 $1.11
Historical - fully diluted .39 1.41 1.34 1.10
Equivalent pro forma CSBI
and BCG combined -
fully diluted/(1)/ .35 1.55 1.35 1.19
Dividends per common share:
Historical $ 0 $ .10 $ .10 $ .10
Equivalent pro forma
combined/(2)/ .14 .54 .51 .46
Book Value per common share:
Historical $12.01 $11.78
Equivalent pro forma CSBI
and BCG combined /(1)/ 12.93 12.74
</TABLE>
/(1)/ Determined by multiplying the applicable pro forma amount by the assumed
exchange ratio of 1.35 to 1.
/(2)/ Determined by multiplying the CSBI historical amount by the assumed
exchange ratio of 1.35 to 1.
11
<PAGE>
Selected Financial Data
Set forth as follows are certain unaudited historical consolidated selected
financial data relating to CSBI and BCG. This financial data should be read in
conjunction with the historical financial statements of CSBI and BCG, including
the respective notes thereto, appearing elsewhere or incorporated by reference
in this Proxy Statement/Prospectus. See "AVAILABLE INFORMATION," "INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE," "DESCRIPTION OF BCG - Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"BCG FINANCIAL STATEMENTS."
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
As of or for the
three months ended
March 31, As of or for the years ended December 31,
--------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(amounts in thousands, except per share and ratio data)
SUMMARY OF OPERATIONS:
Net interest income $ 8,408 7,943 33,661 31,159 28,066 24,023 21,290
Provision for possible loan losses 557 401 1,757 1,694 943 2,165 2,444
Net income 1,922 2,193 9,370 7,895 6,991 5,748 4,574
PER SHARE DATA:
Net income - primary .25 .28 1.21 1.02 .91 .77 .61
Net income - fully diluted .25 .28 1.20 1.02 .91 .76 .61
Cash dividends declared .10 .10 .40 .38 .34 .28 .22
Book value 9.82 9.06 9.72 8.95 7.91 7.61 6.89
Tangible book value 8.98 8.12 8.86 7.99 6.83 6.64 5.81
BALANCE SHEET SUMMARY:
Investments 146,710 154,967 146,770 151,146 153,828 124,991 104,694
Loans, net 502,921 466,545 501,847 469,462 435,886 381,245 357,293
Deposits 676,819 633,738 670,273 626,306 591,069 500,631 467,649
Assets 768,305 721,617 761,095 716,481 676,753 577,306 536,937
Long-term debt and other
borrowings:
Federal Home Loan Bank
advances 6,957 8,057 6,982 8,083 10,183 7,000
Other long-term debt 220 340 241 3,556 5,973 6,869 9,379
Other borrowings 300 900 - 501 1,850 200 --
Average shareholders' equity 75,908 70,043 71,806 66,105 59,706 52,859 48,671
Average total assets 748,542 714,179 720,014 683,407 628,329 558,044 511,063
FINANCIAL RATIOS:
Net income to average assets 1.04% 1.24% 1.30% 1.16% 1.11% 1.03% .89%
Overhead ratio* 2.78 2.46 2.56 2.69 2.85 2.57 2.50
Net income to average
shareholders' equity 10.27 12.59 13.05 11.94 11.71 10.87
Dividend payout ratio** 41.42 34.52 32.92 34.01 27.06 25.71 27.04
Average shareholders' equity
to average total assets 10.14 9.81 9.97 9.67 9.50 9.47 9.52
</TABLE>
* Represents noninterest expense less noninterest income divided by average
assets.
** Represents dividends declared divided by net income, including pooled
subsidiaries.
12
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Selected Financial Data
(UNAUDITED)
<TABLE>
<CAPTION>
As of or for the
three months ended
March 31, As of or for the years ended December 31,
--------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(amounts in thousands, except per share and ratio data)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net interest income $ 3,794 $ 3,470 $ 14,557 $ 13,252 $ 10,623 $ 9,809 $ 9,600
Provision for possible 87 121 409 465 447 524 380
loan losses
Net income 944 871 3,313 2,864 2,309 1,356 1,031
PER SHARE DATA:
Net income 0.39 0.39 1.41 1.35 1.11 1.07 0.82
Cash dividends declared n/a n/a 0.10 0.10 0.10 0.05 0.05
Book value 12.01 10.76 11.78 10.53 8.76 7.74 7.56
Tangible book value 11.44 10.20 11.12 10.26 8.56 7.48 6.95
BALANCE SHEET SUMMARY:
Investments 48,970 48,691 43,917 40,428 42,379 37,336 22,426
Loans, net 185,869 184,808 186,584 177,890 156,974 151,568 143,274
Deposits 271,253 236,008 258,698 224,224 211,692 195,792 186,342
Average shareholders' 27,081 22,169 24,506 20,832 17,318 15,445 14,313
equity
Average total assets 296,380 258,087 284,285 244,831 227,014 216,393 211,047
FINANCIAL RATIOS:
Net income to average assets 1.28% 1.36% 1.17% 1.17% 1.02% 0.64% 0.49%
Overhead ratio* 3.12% 3.16% 3.34% 3.52% 3.24% 3.64% 3.80%
Net income to average
shareholders' equity 13.96% 15.72% 13.52% 13.75% 13.33% 8.78% 7.20%
Dividend payout ratio n/a n/a 6.37% 6.67% 4.63% 3.98% 4.58%
Average shareholders' equity to 9.14% 8.59% 8.62% 8.51% 7.62% 7.13% 6.78%
average total assets
</TABLE>
* Represents non interest expense less non interest income divided by average
assets.
13
<PAGE>
GENERAL INFORMATION
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished by BCG to its
shareholders in connection with the solicitation of proxies by the Board of
Directors of BCG from holders of the outstanding shares of BCG Common Stock for
use at the Special Meeting of shareholders of BCG to be held at the main office
of BCG, located at 4951 Forsyth Road, Macon, Georgia, at 1:00 p.m., Macon time,
on August __, 1997 and at any adjournments and postponements thereof, to
consider and vote upon a proposal to approve the Merger Agreement and
consummation of the transactions contemplated therein, and to transact such
other business as may properly come before the Special Meeting.
This document is also being furnished by CSBI to BCG shareholders as a
prospectus in connection with the issuance by CSBI of shares of CSBI Common
Stock upon consummation of the Merger.
The Merger Agreement provides that BCG will merge with and into CSBI. CSBI
will be the surviving corporation of the Merger and will continue to be governed
by the laws of the State of Georgia. BCG's national banking subsidiaries, First
South Bank, National Association and Ameribank, National Association
("collectively, BCG Banks") will remain in existence under their respective
Articles of Association and Bylaws as wholly-owned subsidiaries of CSBI. At the
Effective Time, each share of issued and outstanding BCG Common Stock (excluding
treasury shares) shall cease to be outstanding and shall be converted into and
exchanged for the right to receive shares of CSBI Common Stock. All shares of
BCG Common Stock outstanding immediately before the Effective Time shall as a
result of the Merger no longer be outstanding and shall automatically be
canceled, retired and cease to exist, and each holder of a BCG stock certificate
shall cease to have any rights with respect thereto, except the right to receive
the shares of CSBI to be issued in consideration therefor upon the surrender of
such certificate, cash in lieu of fractional shares and without interest. See
"THE MERGER - Merger Consideration."
If the Merger Agreement is approved at the Special Meeting, all required
governmental and other consents and approvals are obtained, and all of the other
conditions to the obligations of the parties to consummate the Merger are either
satisfied or waived (as permitted), the Merger will be consummated. See "THE
MERGER - Effective Time."
RECORD DATE, SOLICITATION, AND REVOCABILITY OF PROXIES
The BCG Board of Directors has fixed the close of business on August __,
1997 as the Record Date for determining the BCG shareholders entitled to receive
notice of and to vote at the Special Meeting. Only holders of record of BCG
Common Stock as of the Record Date are entitled to notice of and to vote at the
Special Meeting. As of the Record Date, there were 2,274,357 shares of BCG
Common Stock issued and outstanding and held by approximately 883 record
holders. Holders of BCG Common Stock are entitled to one vote on each matter
considered and voted on at the Special Meeting for each share of BCG Common
Stock held of record at the close of business on the Record Date. The presence,
in person or by properly executed proxy, of the holders of a majority of the
outstanding shares of BCG Common Stock entitled to vote at the Special Meeting
is necessary to constitute a quorum at the Special Meeting. Abstentions will be
counted, but "broker non-votes" will not be counted, as shares present for
purposes of determining the presence of a quorum. Neither abstentions nor
"broker non-votes" will be counted as votes cast for purposes of determining
whether a proposal has received sufficient votes for approval.
Proxies in the form enclosed are solicited by BCG's Board of Directors.
Shares of BCG Common Stock represented by properly executed proxies, if such
proxies are received in time and are not revoked, will be voted in accordance
with the instructions indicated on the proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT AND
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREIN, AND AS DETERMINED BY A
MAJORITY OF THE MEMBERS OF THE BCG BOARD OF DIRECTORS AS TO ANY OTHER MATTER
THAT MAY COME BEFORE THE SPECIAL MEETING. ANY HOLDER OF BCG COMMON STOCK WHO
RETURNS A SIGNED PROXY BUT FAILS TO PROVIDE INSTRUCTIONS AS TO THE MANNER IN
WHICH SUCH HOLDER'S SHARES ARE TO BE VOTED WILL BE DEEMED TO
14
<PAGE>
HAVE VOTED IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT AND CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREIN.
A BCG shareholder who has given a proxy may revoke it at any time prior to
its exercise at the Special Meeting, by (i) giving written notice of revocation
to the Secretary of BCG, or (ii) properly submitting to BCG a duly executed
proxy bearing a later date. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed to BCG
as follows: Bank Corporation of Georgia, 4951 Forsyth Road, Macon, Georgia
31203-4099, Attention: Corporate Secretary.
The expense of soliciting proxies for the Special Meeting will be paid for
by BCG. In addition to the solicitation of shareholders of record by mail,
telephone or personal contact, BCG will be contacting brokers, dealers, banks or
voting trustees or their nominees who can be identified as record holders of BCG
Common Stock; such holders, after inquiry by BCG, will provide information
concerning the quantity of proxy and other materials needed to supply such
materials to beneficial owners, and BCG will reimburse them for the expense of
mailing the proxy materials to such persons.
VOTE REQUIRED
Approval of the Merger Agreement and consummation of the transactions
contemplated therein requires the affirmative vote of a majority of the
outstanding shares of BCG Common Stock. The Merger Agreement and the
consummation of the transactions contemplated therein do not require the
approval of the holders of CSBI Common Stock.
As of the Record Date, BCG's directors and executive officers, and their
affiliates, held approximately 57.25% of the outstanding shares of BCG Common
Stock entitled to vote at the Special Meeting. As of the Record Date, CSBI, its
directors and executive officers, and their affiliates, held less than 1% of the
outstanding shares of BCG Common Stock.
RECOMMENDATION OF BCG'S BOARD OF DIRECTORS
For the reasons described below, the Board of Directors of BCG unanimously
adopted the Merger Agreement, believes the Merger is in the best interests of
BCG and its shareholders, and unanimously recommends that shareholders of BCG
vote FOR approval of the Merger Agreement and the consummation of the
transactions contemplated therein. See "THE MERGER - Reasons for the Merger."
THE MERGER
The following describes certain material information pertaining to the
Merger. This description does not purport to be complete and is qualified in
its entirety by reference to the Appendices hereto, including the Merger
Agreement, a copy of which is set forth in Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference. All shareholders
are urged to read the Appendices in their entirety.
GENERAL
The Merger Agreement provides that BCG shall merge with and into CSBI. CSBI
will be the surviving corporation of the Merger and will continue to be governed
by the laws of the State of Georgia. At the time the Merger becomes effective,
each share of issued and outstanding BCG Common Stock shall cease to be
outstanding and (excluding treasury shares) shall be converted into and
exchanged for the right to receive shares of CSBI Common Stock. If the Merger
Agreement is approved at the Special Meeting, all required governmental and
other consents and approvals are obtained, and all other conditions to the
obligations of the parties to consummate the Merger are either satisfied or
waived (as permitted), the Merger will be consummated. A copy of the Merger
Agreement is set forth in Appendix A of this Proxy Statement/Prospectus. See
"Merger Consideration."
15
<PAGE>
BACKGROUND OF THE MERGER
In January of 1997, James A. Faulkner, the Chief Executive Officer of CSBI,
and Joseph W. Evans, the Chief Executive Officer of BCG, met to discuss the
possibility of a combination between CSBI and BCG. Due to their long term
relationship and because of Mr. Faulkner's three years of service as a director
of BCG (which ended May 22, 1996), they were familiar with each other's
companies and readily saw many of the benefits of a merger. Preliminary pro-
formas reflecting their collective estimates of internal growth rates, potential
savings, and revenue enhancements were run and seemed to validate their
perceptions of the earnings potential that could be created.
The two Chief Executive Officers next met with a management consultant who
had worked with both companies to discuss issues of organizational integration
and cultural compatibility. They tentatively agreed on their respective roles
should the Merger take place as well as an organizational chart.
In February of 1997, the discussion group was expanded to include the
Chairmen of CSBI and BCG and it was decided that the Chief Executive Officers
would negotiate an exchange ratio for presentation to the respective boards. On
February 26, 1997, Joseph W. Evans and William H. Anderson, II, the Chairman of
BCG, discussed the proposed transaction with the Board of BCG. The Board of
Directors discussed the business of CSBI and the opportunity presented by the
proposed merger.
The Board of Directors of BCG approved the merger with an exchange ratio of
1.4 shares of CSBI for each share of BCG on March 13, 1997. That ratio was
subsequently adjusted to 1.33 to 1 after discovering a computational error in
determining BCG's "fully diluted" shares and the exchange ratio was approved by
the Board of Directors of BCG on March 31, 1997.
On March 31, 1997, the parties executed the Agreement and issued a joint
press release on April 1, 1997 announcing the execution of the Agreement. On
July 11, 1997, the parties amended the Agreement primarily based on a decision
to conform the loan loss reserve practices followed by the parties. As a
result, the exchange ratio was adjusted to 1.35 to 1 and the parties' due
diligence period was extended to July 31, 1997. See "Recent Developments. "
REASONS FOR THE MERGER
The BCG Board of Directors, after consideration of relevant business,
financial, legal and market factors, approved the Merger Agreement. BCG's Board
of Directors did not assign any relative or specific weight to the factors
considered. The factors considered included:
(i) Comparing BCG's continuing as an independent entity to combining with
CSBI, particularly as to shareholder value. The Board considered the benefits
that could reasonably be expected to accrue to BCG shareholders from the
Merger, including the premium offered over BCG's then-current stock price or
stock price unaffected by acquisition speculation and the likelihood of a higher
stock price for BCG Common Stock than would be achieved by BCG operating on an
independent basis unaffected by acquisition speculation. The Board was of the
view that the Merger Consideration represented a fair multiple of BCG's per
share book value and earnings.
(ii) Certain financial and other information concerning CSBI. Such
information included, among other things, information with respect to the
business, operations, condition and future prospects of CSBI, particularly its
capital position and asset quality, including its ability to pay dividends and
its access to growing market areas in northern Georgia and southeastern
Tennessee not served by BCG whose markets are located in central and southeast
Georgia.
(iii) The anticipated synergies, efficiencies and economies of scale that
could be achieved by incorporating BCG's management expertise into a larger
organization.
(iv) The Board's review, based upon its due diligence investigation of
CSBI, of the business, operations, earnings and financial condition of CSBI on
an historical and prospective basis, and the enhanced
16
<PAGE>
opportunities for growth and expanded operations which will be made possible
through coordinated efforts with other CSBI subsidiaries, such as increasing the
aggregate lending limits of the collective institutions.
(v) The Board's consideration of the alternative to the Merger of remaining
independent and growing internally or having discussions with other potential
merger partners. The Board determined that a combination with CSBI would result
in greater long term value to the shareholders of BCG than either remaining
independent or being acquired by another institution. Factors considered in
reaching this conclusion included the increased liquidity provided to
shareholders of BCG through acquiring stock in CSBI, a publicly traded company
with greater liquidity than BCG, CSBI's overall performance historically and on
a prospective basis.
(vi) The Board additionally considered, discussed and determined that the
benefits of merging with CSBI would far outweigh the dilution in voting power
which BCG shareholders will experience upon consummation of the Merger as a
result of owning a smaller portion of the total CSBI Common Stock.
(vii) The non-financial terms and structure of the Merger, in particular,
the fact that the Merger is anticipated to be tax-free to BCG shareholders.
(viii) The likelihood of the Merger being approved by the appropriate
regulatory authorities.
(ix) The impact generally of the Merger on the various constituencies
served by BCG.
THE BOARD OF DIRECTORS OF BCG UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE MERGER AGREEMENT AND CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREIN.
MERGER CONSIDERATION
The Merger Agreement provides that, at the Effective Time, each issued and
outstanding share of BCG Common Stock (excluding shares held by BCG or by CSBI
or any of its subsidiaries, in each case other than in a fiduciary capacity or
as a result of debts previously contracted) shall cease to be outstanding and
shall be converted into and exchanged for the right to receive 1.35 shares of
CSBI Common Stock (the "Merger Consideration" ).
In the event BCG or CSBI changes the number of shares of BCG Common Stock
or CSBI Common Stock, or other common stock equivalents, on a fully diluted
basis, 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 shall be prior to the Effective Time, the Merger
Consideration shall be proportionately adjusted.
FRACTIONAL SHARES
Pursuant to the terms of the Merger 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 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 per share of CSBI
Common Stock at the Effective Time, which shall be the last sale price of such
common stock on the Nasdaq National Market (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. No such holder will be entitled to
dividends, voting rights, or any other rights as a shareholder in respect of any
fractional shares.
EFFECTIVE TIME
If the Merger Agreement is approved by the requisite vote of BCG
shareholders, and all other required governmental and other consents and
approvals are received, and if the other conditions to the obligations of the
parties to consummate the Merger are satisfied or waived (as permitted), the
Merger will be consummated and effected on the date and at the time a
Certificate of Merger, reflecting the Merger, is filed with the Secretary of
State of the State of Georgia (the "Effective Time"). Unless otherwise mutually
agreed upon in writing by the chief
17
<PAGE>
executive officers of each of CSBI and BCG, CSBI and BCG have agreed to 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, and (ii) the date on which the shareholders of BCG
approve the Merger Agreement or such later date as may be mutually agreed upon
in writing by the chief executive officers of CSBI and BCG. Assuming
satisfaction of all conditions to consummation of the Merger, the Merger is
expected to be made effective during the fourth quarter of 1997. Either CSBI or
BCG may terminate the Merger Agreement if the Merger has not been consummated by
December 31, 1997. See "Conditions to Consummation" and "Amendment, Waiver, and
Termination."
DISTRIBUTION OF CSBI CERTIFICATES
Promptly after the Effective Time, CSBI shall mail appropriate transmittal
materials to each record holder of BCG Common Stock for use in effecting the
surrender and cancellation of those certificates in exchange for CSBI Common
Stock (which shall contain an affidavit for lost or stolen stock certificates
and 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 CSBI by the former
shareholders of BCG). BCG SHAREHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES
FOR EXCHANGE UNTIL THEY RECEIVE SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS.
After the Effective Time, each holder of shares of BCG Common Stock issued and
outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to CSBI, and the certificates thus
surrendered will be canceled. Unless otherwise designated by a BCG shareholder
on the transmittal letter, certificates representing shares of CSBI Common Stock
issued to BCG shareholders in connection with the Merger will be issued and
delivered to the tendering BCG shareholder at the address on record with the BCG
Common Stock transfer agent. CSBI shall not be obligated to deliver the
consideration to which any former holder of BCG Common Stock is entitled until
such holder surrenders such holder's certificate or certificates representing
such holder's shares for exchange. The certificate or certificates so
surrendered shall be duly endorsed as CSBI may require. No party shall be
liable to a holder of BCG Common Stock for any property delivered in good faith
to a public official pursuant to any applicable abandoned property law.
After the Effective Time, holders of certificates will have no rights with
respect to the shares of BCG Common Stock represented thereby other than the
right to surrender such certificates and receive in exchange therefor the shares
of CSBI Common Stock, if any, to which such holders are entitled, as described
above. In addition, no dividend or other distribution payable to holders of
record of CSBI Common Stock will be paid to the holder of any BCG certificates
until such holder surrenders such certificates for exchange as instructed.
Subject to applicable law, upon surrender of the certificates, such holder will
receive the certificates representing the shares of CSBI Common Stock issuable
upon the exchange or conversion of such shares of BCG Common Stock, all withheld
dividends or other distributions (without interest), and any withheld cash
payments (without interest) to which such shareholder is entitled.
If any certificate for CSBI Common Stock is to be issued in a name other
than that in which BCG certificate surrendered for exchange is issued, the BCG
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person requesting such exchange shall affix any
requisite stock transfer tax stamps to the certificates surrendered, shall
provide funds for their purchase, or shall establish to the exchange agent's
satisfaction that such taxes are not payable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger. This discussion is based on the provisions of the
Code, the United States Department of the Treasury Regulations thereunder and
rulings and court decisions as of the date hereof, all of which are subject to
change, possibly retroactively. The discussion applies only to BCG
shareholders, if any, who hold their stock as a capital asset. CSBI and BCG
have not requested a ruling from the Internal Revenue Service (the "Service").
A condition to consummation of the Merger is the receipt by each of CSBI and BCG
of an opinion of Troutman Sanders LLP, counsel to CSBI, as to the qualification
of the Merger as a tax-free reorganization and certain other federal income tax
consequences of the Merger. The opinion will be delivered by Troutman Sanders
LLP upon closing of the
18
<PAGE>
Merger in the form which has been included as an Exhibit to the Registration
Statement regarding this Proxy Statement/Prospectus.
The Merger is intended to be a tax-free reorganization within the meaning
of section 368 (a) of the Code. Among other things, the following discussion is
based on BCG shareholders maintaining sufficient equity ownership interest in
CSBI after the Merger. The Service takes the position for purposes of issuing
an advance ruling on reorganizations, that the shareholders of an acquired
corporation (i.e., BCG) must maintain a continuing equity ownership interest in
the acquiring corporation (i.e., CSBI) equal, in terms of value, to at least 50%
of their interest in such acquired corporation. For this purpose, shares of BCG
Common Stock exchanged for cash in lieu of any fractional shares of CSBI Common
Stock will be treated as outstanding shares of BCG Common Stock at the Effective
Time. Moreover, shares of BCG Common Stock and CSBI Common Stock held by BCG
shareholders and otherwise sold, redeemed or disposed of prior or subsequent to
such time are taken into account. Management of CSBI has no plan or intention
to cause CSBI to redeem or otherwise reacquire the shares of CSBI Common Stock
issued in the Merger. In addition to the foregoing requirements certain
additional matters must be true with respect to the Merger. CSBI believes that
these additional factual matters will be satisfied.
Assuming the Merger is treated as a reorganization as defined in section
368(a) of the Code, the following should be certain federal income tax
consequences to BCG shareholders:
(i) No gain or loss will be recognized for federal income tax purposes by
BCG shareholders upon the exchange of their shares of BCG Common Stock for CSBI
Common Stock;
(ii) The basis of the shares of CSBI Common Stock to be received by BCG
shareholders will be the same as the basis of BCG Common Stock surrendered in
exchange therefor;
(iii) The holding period of CSBI Common Stock to be received by BCG
shareholders will include the period during which the shares of BCG Common Stock
surrendered in exchange therefor had been held, provided such shares were held
by such shareholders as a capital asset at the Effective Time; and
(iv) The payment of cash in lieu of fractional shares of CSBI Common Stock
will be treated as if the fractional shares were issued as part of the exchange
and then redeemed by CSBI. These cash payments will be treated as having been
received as distributions in full payment in exchange for the fractional shares
of CSBI Common Stock redeemed as provided in section 302(a) of the Code.
Generally, any gain or loss recognized upon such exchange will be capital gain
or loss, provided the fractional share would constitute a capital asset in the
hands of the exchanging shareholder.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER AND OTHER FACTORS, EACH HOLDER OF
BCG COMMON STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISER TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER (INCLUDING THE
APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS).
MANAGEMENT AND OPERATIONS AFTER THE MERGER
CSBI Directors. At the Effective Time, BCG will be merged into CSBI and the
BCG Banks will become wholly-owned subsidiaries of CSBI. CSBI and the BCG Banks
will continue to be governed by the laws of the State of Georgia and the United
States and operate in accordance with their respective Articles of
Incorporation, Articles of Association, and Bylaws as in effect on the date of
the Merger Agreement until otherwise amended or repealed after the Effective
Time. CSBI intends to operate the BCG Banks as wholly-owned subsidiaries of
CSBI following the Effective Time. Following the consummation of the Merger,
CSBI shall have 11 directors determined as follows:
(a) Immediately before the Effective Time all but five directors of
CSBI will resign as directors of CSBI;
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<PAGE>
(b) Three of the resulting vacancies on the Board of Directors of CSBI
will be filled by those three nominees designated by the president of BCG; and
(c) The remaining three vacancies on the Board of Directors of CSBI
shall be selected by majority vote of the eight directors then serving on the
CSBI Board of Directors.
CSBI 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 and Chief Executive Officer; and
(d) Joseph W. Evans, President, Chief Operating Officer and Chief
Financial Officer.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of August __, 1997, the directors and executive officers of BCG owned
1,015 shares of CSBI Common Stock. Other than as described herein, no director
or executive officer of CSBI or BCG, and no associate of any such person, has
any substantial interest, direct or indirect, in the Merger, other than an
interest arising from the ownership of BCG Common Stock, in which case the
director or officer receives no extra or special benefit not shared on a pro
rata basis by all other holders of BCG Common Stock.
Certain members of BCG's management and Board of Directors may be deemed to
have interests in the Merger in addition to their interests as shareholders of
BCG generally. In each case, the Board of Directors of BCG either was aware of
these factors or, with respect to interests that arose subsequent to the Merger
Agreement, was aware of their potential, and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby.
The Merger Agreement provides that, after the Effective Time, CSBI will
provide generally to officers and employees of BCG, employee benefits under
employee benefit plans, on terms and conditions that, when taken as a whole, are
substantially similar to those currently provided by CSBI and its subsidiaries
to their similarly situated officers and employees. For purposes of
participation and vesting (but not benefit accrual) under such employee benefit
plans, service with BCG prior to the Effective Time will be treated as service
with CSBI or its subsidiaries. The Merger Agreement also provides that CSBI
will honor all employment, severance, consulting and other compensation
contracts previously disclosed to CSBI between BCG and any current or former
director, officer or employee, and all provisions for vested amounts earned or
accrued through the Effective Time under BCG's 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 officers or employee's employment or similar
agreement. In the event the Parties are unsuccessful in modifying such
agreements containing change of control provisions, the parties estimate that
the maximum aggregate payments to those employees would be approximately $ -0-
----
for BCG and $1,525,813 for CSBI.
At the Effective Time, all rights with respect to BCG Common Stock pursuant
to stock options granted by BCG under the BCG Key Employee Stock Option Plan
("BCG Option Plan"), which are outstanding at the Effective Time, whether or not
then exercisable, will be converted into and become rights with respect to CSBI
Common Stock, and CSBI will assume each BCG stock option, in accordance with the
terms of the BCG Option Plan under which it was issued and the stock option
agreement by which it is evidenced. From and after the Effective Time; (i) each
BCG stock 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
stock option will be equal to the number of shares of BCG Common Stock subject
to such BCG option immediately prior to the Effective Time multiplied by 1.35;
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<PAGE>
(iii) the per share exercise price under each such BCG stock option will be
adjusted by dividing the per share exercise price under each such BCG stock
option by 1.35. In addition, each BCG stock option will, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction subsequent
to the Effective Time.
CONDITIONS TO CONSUMMATION
The obligations of BCG and CSBI to consummate the Merger are subject to the
satisfaction or waiver (to the extent permitted) of the following conditions:
(i) the Merger, the Merger Agreement and all other documents and instruments to
be delivered in connection therewith shall have been approved by the Boards of
Directors of BCG and CSBI and by the shareholders of BCG; (ii) the required
regulatory approvals described under "Regulatory Approvals" shall have been
received, generally without any conditions or requirements which would, in the
reasonable judgment of the Board of Directors of either CSBI or BCG, materially
adversely affect the economic or business benefits of the transactions
contemplated by the Merger Agreement so as to render inadvisable the
consummation of the Merger, (iii) each party shall have received any required
consents of third parties; (iv) the Registration Statement of which this Proxy
Statement/Prospectus is a part shall have been declared effective by the
Commission and shall not be subject to a stop order or any threatened stop
order, and the shares of CSBI Common Stock issuable in connection with the
Merger shall have been qualified, registered or otherwise approved for exchange
under the securities laws of the various states in which such qualification,
registration or approval is required; (v) CSBI and BCG shall have received an
opinion of Troutman Sanders LLP as to certain tax matters; (vi) the other
party's representations and warranties shall remain accurate, and the other
party shall have performed all of the agreements, covenants, acts and
undertakings to be performed by it pursuant to the Merger Agreement, and shall
have delivered certificates confirming satisfaction of the foregoing
requirements; (vii) each party shall have received an opinion of the other
party's counsel, dated the closing date, as to certain matters; (viii) CSBI and
BCG shall have received a letter from KPMG Peat Marwick LLP to the effect that
the Merger will qualify for pooling-of-interests accounting treatment; (ix) CSBI
shall have received a letter from each affiliate of BCG to the extent necessary
to assure CSBI that the transactions contemplated in the Merger Agreement will
qualify for pooling-of-interests accounting treatment; (x) each party shall have
received from the other party's independent certified public accounting firm
letters with respect to certain financial information regarding such party; and
(xi) each party shall have completed a due diligence investigation in regard to
the other party to its sole satisfaction. The tax opinion will be delivered by
Troutman Sanders LLP, upon closing of the Merger in the form which has been
included as an Exhibit to the Registration Statement regarding this Proxy
Statement/Prospectus.
No assurances can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the appropriate
party. As of the date of this Proxy Statement/Prospectus, the parties know of
no reason to believe that any of the conditions set forth above will not be
satisfied.
The conditions to consummation of the Merger may be waived, in whole or in
part, to the extent permissible under applicable law, by the party for whose
benefit the condition has been imposed, without the approval of the BCG
shareholders. See "Amendment, Waiver, and Termination."
REGULATORY APPROVALS
The Merger is subject to the prior approval of the Federal Reserve under
the BHC Act, and the DBF under the Financial Institutions Code of Georgia (the
"FICG"). On July 15, 1997, the DBF approved CSBI's application to acquire BCG
subject to BCG shareholder approval and the maintenance of BCG Banks' capital
adequacy by CSBI after the consummation of the Merger. On July 11, 1997, the
Federal Reserve approved CSBI's application to acquire BCG. The Merger may not
be consummated before the fifteenth day following the approval of the Merger by
the Federal Reserve, during which time the United States Department of Justice
and other interested parties have the opportunity to file suit seeking to enjoin
consummation of the Merger on antitrust grounds.
AMENDMENT, WAIVER, AND TERMINATION
To the extent permitted by law, BCG and CSBI, with the approval of their
respective Boards of Directors, may amend the Merger Agreement by written
agreement at any time without the approval of the shareholders of
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<PAGE>
BCG, provided that after the approval of the Merger by BCG's shareholders, no
amendment may decrease the consideration to be received by BCG shareholders
without the requisite approval of BCG shareholders.
Prior to or at the Effective Time, either CSBI or BCG, acting through its
respective Board of Directors, chief executive officer or other authorized
officer, may waive any default in the performance of any term of the Merger
Agreement by the other party, may waive or extend the time for the fulfillment
by the other party of any of its obligations under the Merger Agreement, and may
waive any of the conditions precedent to the obligations of such party under the
Merger Agreement, except any condition that, if not satisfied, would result in
the violation of an applicable law or governmental regulation.
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time by mutual consent of the Boards of Directors of
CSBI and BCG. In addition, the Merger Agreement may be terminated, and the
Merger abandoned, prior to the Effective Time by either CSBI or BCG if (i) the
other party breaches and does not timely cure any representation, warranty,
covenant or other agreement contained in the Merger Agreement and such breach,
individually or in the aggregate, has a "Material Adverse Effect" (as defined in
the Merger Agreement) on the non-breaching party, (ii) any consent or approval
of certain regulatory authorities is denied by final nonappealable action of
such authority, (iii) the Merger has not been consummated by December 31, 1997,
or by either party in the event that the Board of Directors of the other party
shall have failed to reaffirm, following a written request by such party for
such reaffirmation after either party shall have received any inquiry or
proposal with respect to an "Acquisition Proposal" (as defined in the Merger
Agreement), its approval of the Merger and the transactions contemplated by this
Agreement (to the exclusion of any other Acquisition Proposal), or shall have
resolved not to reaffirm the Merger. See "Expenses and Fees."
CONDUCT OF BUSINESS PENDING THE MERGER
Each party generally has agreed in the Merger Agreement, unless the prior
consent of the other party is obtained, and except as otherwise contemplated by
the Merger Agreement, to operate their respective businesses only in the
ordinary course, to preserve their respective businesses and assets and to
maintain their respective rights and franchises and to take no action that would
adversely affect either the ability of either party to perform such party's
covenants and agreements under the Merger Agreement or the ability of either
party to obtain any consents or approvals pursuant to any contract, law, order
or permit that are required for the transactions contemplated by the Merger
Agreement. In addition, the Merger Agreement contains certain other
restrictions applicable to the conduct of the business of each party prior to
consummation of the Merger, as described below.
Each party has agreed in the Merger Agreement not to take certain actions
relating to the operation of their respective businesses pending consummation of
the Merger without the prior approval of the other party. Those actions
generally include, without limitation: (i) amending its Articles or Bylaws; (ii)
becoming responsible for any obligation for borrowed money in excess of an
aggregate of $100,000, except in the ordinary course of their respective
businesses consistent with past practices; (iii) acquiring or exchanging any
shares of its capital stock or paying any dividend exceeding its prior quarter's
dividend or other distribution in respect of its capital stock; (iv) subject to
certain exceptions, issuing, selling or pledging additional shares of their
respective capital stock, any rights to acquire any such stock or any security
convertible into such stock; (v) adjusting or reclassifying any of its capital
stock, (vi) acquiring control over any other entity; (vii) granting any increase
in compensation or benefits to its employees or officers (except as previously
disclosed to the other party or as required by law), paying any bonus (except as
previously disclosed to the other party or in accordance with any existing
program or plan), entering into or amending any severance agreements with its
officers or granting any increase in compensation or other benefits to any of
its directors (except as previously disclosed to the other party); (viii)
entering into or amending any employment contract that it does not have the
unconditional right to terminate without certain liability, except as previously
disclosed to the other party and except for any amendment required by law; (ix)
adopting any new employee benefit plan or program or materially changing any
existing plan or program; (x) making any significant changes in accounting
methods, except for any change required by law; (xi) commencing any litigation
other than in accordance with past practice or settling any litigation for money
damages in excess of $100,000; or (xii) materially amending or terminating any
material contracts.
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<PAGE>
In addition, each party has agreed not to solicit, directly or indirectly,
any acquisition proposal from any other person or entity. Each party also has
agreed not to negotiate with respect to any such proposal, to provide
information to any party making such a proposal or to enter into any agreement
with regard to any such proposal except in compliance with its legal obligations
or the fiduciary obligations of its Board of Directors. The parties have also
agreed to use reasonable efforts to cause their respective advisors and other
representatives not to engage in any of the foregoing activities.
EXPENSES AND FEES
The Merger Agreement provides that each party shall be responsible for its
own costs and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by the Merger Agreement. In
addition, if within 12 months following the termination of the Merger Agreement
or the failure to consummate the Merger by reason of any failure of either party
to satisfy certain conditions, any third party acquires, merges with, combines
with, or purchases a significant amount of the assets of, or purchases 20% or
more of any equity security of, such party ("Business Combination"), then such
third party will be required to pay all of the other party's direct costs and
expenses relating to the Merger and an additional sum equal to $500,000.
ACCOUNTING TREATMENT
The Merger is anticipated to be accounted for on a pooling-of-interests
accounting basis. Under this method of accounting, as of the Effective Time,
the assets and liabilities of BCG would be added to those of CSBI at their
recorded book values and the shareholders' equity accounts of CSBI and BCG would
be combined on CSBI's consolidated balance sheet. The unaudited pro forma
financial information contained in this Proxy Statement/Prospectus has been
prepared using the pooling-of-interests accounting method to account for the
Merger. See "SUMMARY" and "PRO FORMA COMBINED FINANCIAL DATA."
RESALES OF CSBI COMMON STOCK
The shares of CSBI Common Stock issued in connection with the Merger will
be freely transferable under the Securities Act, except for shares issued to any
shareholder who may be deemed to be an "affiliate" (generally including, without
limitation, directors, certain executive officers, and beneficial owners of 10%
or more of any class of capital stock) of BCG for purposes of Rule 145 under the
Securities Act as of the date of the Special Meeting or for purposes of
applicable interpretations regarding pooling-of-interests accounting treatment.
Such affiliates may not sell their shares of CSBI Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act or an applicable exemption from the
registration requirements of the Securities Act and until such time as financial
results covering at least 30 days of combined operations of CSBI and BCG after
the consummation of the Merger have been published. CSBI will place restrictive
legends on certificates representing CSBI Common Stock issued to all persons who
are deemed to be "affiliates" of BCG under Rule 145. In addition, BCG has
agreed to use its reasonable efforts to cause each person or entity that is an
"affiliate" to enter into a written agreement in substantially the form attached
to the Merger Agreement relating to such restrictions on sale or other transfer.
This Proxy Statement/Prospectus does not cover resales of CSBI Common Stock
received by any person who may be deemed to be an affiliate of BCG.
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<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheet
March 31, 1997
(Unaudited)
The following unaudited pro forma condensed combined balance sheet includes CSBI
and the proposed acquisition of BCG as of March 31, 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 3,061,930 shares of CSBI common stock
(see note (a)). 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 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 $ 32,091 13,045 45,136
Federal funds sold 47,730 17,320 65,050
Interest-earning deposits in other banks 602 19,240 19,842
Investment securities 146,710 48,970 195,680
Loans, net 502,921 185,768 688,689
Premises and equipment, net 18,561 8,858 27,419
Goodwill and intangibles 6,529 1,302 7,831
Foreclosed assets 2,833 786 3,619
Other assets 10,328 7,217 17,545
-------- ------- ---------
Total assets $768,305 302,506 1,070,811
======== ======= =========
Liabilities:
Deposits:
Non-interest bearing $ 81,483 46,115 127,598
Time deposits greater than $100,000 102,076 26,584 128,660
Other 493,260 198,554 691,814
-------- ------- ---------
Total deposits $676,819 271,253 948,072
Federal Home Loan Bank advances 6,957 -- 6,957
Long-term debt 220 1,500 1,720
Other borrowings 300 -- 300
Other liabilities 7,709 2,313 10,022
-------- ------- ---------
Total liabilities $692,005 275,066 967,071
Shareholders' equity:
Common stock $ 7,826 2,285 777(b) 10,888
Surplus 28,854 6,170 (889)(b) 34,135
Retained earnings 40,510 19,231 59,741
Treasury stock (306) (112) 112(b) (306)
Reduction for ESOP loan guarantee (124) (196) (320)
Net unrealized holding gains (losses) on
investment securities (460) 62 (398)
-------- ------- ---------
Total shareholders' equity $ 76,300 27,440 103,740
Total liabilities and shareholders'
equity $768,305 302,506 1,070,811
======== ======= =========
</TABLE>
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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 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. The pro forma condensed combined statements of income
should be read in conjunction with the financial statements and related notes of
CSBI and BCG appearing elsewhere in or incorporated by reference in this Proxy
Statement/Prospectus.
For the Three Months ended March 31, 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 $15,768 6,259 -- 22,027
Interest expense 7,360 2,465 -- 9,825
------- ----- ----------- ------
Net interest income 8,408 3,794 -- 12,202
Provision for loan losses 557 87 -- 644
------- ----- ------
Net interest income after provision
for loan losses 7,851 3,707 -- 11,558
Noninterest income 1,597 773 -- 2,370
Noninterest expense 6,726 3,073 -- 9,799
------- ----- ----------- ------
Income before income taxes 2,722 1,407 4,129
Income taxes 800 463 -- 1,263
------- ----- ----------- ------
Net income $ 1,922 944 -- 2,866
======= ===== =========== ======
Earnings per share:
Primary $.25 .26
Fully diluted $.25 .26
Weighted average shares and share equivalents
outstanding (note c)
Primary 7,794 11,093
Fully diluted 7,794 11,093
</TABLE>
25
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
Pro Forma Condensed Combined Statement of Income
For the Three Months ended March 31, 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 $15,479 5,881 -- 21,360
Interest expense 7,536 2,411 -- 9,947
------- ----- ----------- ------
Net interest income 7,943 3,470 -- 11,413
Provision for loan losses 401 121 -- 522
------- ----- ----------- ------
Net interest income after provision
for loan losses 7,542 3,349 -- 10,891
Noninterest income 1,766 640 -- 2,406
Noninterest expense 6,136 2,683 -- 8,819
------- ----- ----------- ------
Income before income taxes and 3,172 1,306 -- 4,478
minority interest in earnings of
subsidiary
Income taxes 979 388 -- 1,367
Minority interest in earnings of subsidiary - 47 -- 47
------- ----- ----------- ------
Net income $ 2,193 871 -- 3,064
======= ===== =========== ======
Earnings per share:
Primary $.28 .28
Fully diluted $.28 .28
Weighted average shares and share equivalents
outstanding (note c)
Primary 7,775 10,807
Fully diluted 7,775 10,807
</TABLE>
26
<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 1.15
Fully diluted $1.20 1.15
Weighted average shares and share equivalents
outstanding (note c)
Primary 7,776 10,998
Fully diluted 7,778 11,016
</TABLE>
27
<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 1.00
Fully diluted $1.02 1.00
Weighted average shares and share equivalents
outstanding (note c)
Primary 7,773 10,715
Fully diluted 7,776 10,737
</TABLE>
28
<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 .88
Fully diluted $.91 .88
Weighted average shares and share equivalents
outstanding (note c)
Primary 7,663 10,588
Fully diluted 7,663 10,593
</TABLE>
29
<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 a merger agreement whereby CSBI
will acquire the 2,268,097 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 3,061,930 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.
30
<PAGE>
DESCRIPTION OF BCG
GENERAL
BCG is a bank holding company operating two community banks in Georgia.
BCG was incorporated under the laws of Georgia in 1980 and commenced operations
that year by acquiring 100% of the outstanding shares of Bank of Fort Valley.
All of BCG's activities are currently conducted by its wholly-owned community
banking subsidiaries, First South Bank, National Association, Macon, Georgia
("FSB"), and Ameribank, National Association, Savannah, Georgia ("Ameribank")
(FSB and Ameribank are sometimes referred to herein collectively as the "BCG
Banks" and each individually as a "BCG Bank"). During 1996, First South Bank of
Middle Georgia, National Association, Macon, Georgia and First South Bank of
Coweta County, National Association, Newnan Georgia were merged with FSB, and
FSB changed the address of its principal office to 4961 Forsyth Road, Macon,
Georgia 31210.
Employees
As of March 19, 1997, the BCG Banks had an aggregate of 155 full-time
equivalent employees and BCG had a total of 10 full-time equivalent employees.
Neither BCG, nor any of the BCG Banks is a party to any collective bargaining
agreement, and BCG and the BCG Banks believe that their employee relations are
good.
PROPERTIES
FSB's main office is located at 4961 Forsyth Road, Macon, Georgia adjacent
to BCG's headquarters and operations center located at 4951 Forsyth Road, Macon,
Georgia. Ameribank's main office is located at 7394 Hodgson Memorial Drive,
Savannah, Georgia. Each BCG Bank owns its main office. FSB leases its loan
operations office space from William H. Anderson, II, Chairman of the BCG Board
of Directors. In addition, FSB leases from Mr. Anderson the space in which the
BCG Corporate office and the FSB operations center are located. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." During 1996, Ameribank entered into a
sublease agreement for the Ameribank downtown Savannah location. This agreement
was entered into in conjunction with Ameribank's acquisition of a Bank South
(now NationsBank) facility. FSB operates one branch in each of Peach, Macon,
Johnson, Bibb and Coweta counties. Ameribank operates three branches, one,
acquired from Bank South (now NationsBank) in 1996, in Savannah, Georgia, one in
downtown Savannah, opened in 1996 and one in Rincon, Georgia, acquired through
BCG's acquisition of Effingham Bank & Trust in 1996. Effective December 1,
1996, Ameribank closed its Garden City, Georgia branch.
COMPETITION
The banking business is highly competitive. FSB competes with two other
banks in Peach County, two other banks in Macon County, one other bank in
Johnson County, eight other banks in Bibb County, and five other banks in Coweta
County. Ameribank competes with ten other banks in Chatham County and two other
banks in Effingham County. The BCG Banks also compete with other financial
service organizations, including thrifts, finance companies, credit unions and
certain governmental agencies. To the extent that the BCG Banks must maintain
non-interest-earning reserves against deposits, they may be at a competitive
disadvantage when compared with other financial service organizations that are
not required to maintain reserves against substantially equivalent sources of
funds.
Dividends
During 1996, BCG paid one cash dividend of $.10 per share to its
shareholders of record as of September 5, 1996. In March 1995, BCG paid one 75%
BCG Common Stock dividend to its shareholders. Also in 1995, BCG paid one cash
dividend of $.10 per share of BCG Common Stock to its shareholders of record as
of September 15, 1995. Although BCG intends to continue paying cash dividends,
the amount and frequency of cash dividends will be determined by BCG's Board of
Directors after consideration of earnings, capital requirements and
31
<PAGE>
the financial condition of BCG. No assurances can be given that cash dividends
will be declared in the future. Additionally, BCG's ability to pay cash
dividends will be dependent on cash dividends paid to it by the BCG Banks. The
ability of the BCG Banks to pay dividends to BCG is restricted by applicable
regulatory requirements.
ACQUISITIONS
On March 26, 1996, AmeriCorp, Inc. ("AmeriCorp"), a Georgia corporation
and which held 100% of the common stock of Ameribank, was merged with and into
BCG. The holders of common stock of AmeriCorp (other than BCG) received
.084615 shares of BCG Common Stock for each of their shares of AmeriCorp common
stock. Prior to the AmeriCorp Merger, BCG owned 66 2/3% of the AmeriCorp common
stock and 100% of the AmeriCorp preferred stock.
On February 9, 1996, Ameribank purchased certain assets, including
approximately $3.3 million in loans, and assumed certain liabilities, including
approximately $16.7 million in deposit liabilities, related to the banking
office of Bank South (now NationsBank) located at 1976 East Victory Drive in
Savannah, Georgia pursuant to a Branch Purchase and Assumption Agreement dated
October 18, 1995. Bank South (now NationsBank) also assigned the lease of the
former Bank South Center located at 7 East Congress Street, Savannah, Georgia to
Ameribank. Ameribank did not assume any of the deposits or other liabilities
related to the East Congress Street facility.
On June 6, 1996, BCG acquired Effingham Bank & Trust ("Effingham"), a full
service Georgia state chartered bank with one office in Rincon, Effingham
County, Georgia with approximately $25,000,000 in assets. The holders of
Effingham Common stock received .59 shares of BCG $1 par value common stock for
each share of common stock held by them for an aggregate of 204,928 shares of
BCG Common Stock. On October 1, 1996, Effingham was merged into Ameribank.
In March 1994, FSB sold substantially all of the assets and liabilities of
its Ashburn, Georgia branch to Ashburn Bank. In connection with the sale, FSB
transferred deposit liabilities totaling approximately $7,369,000 and assets,
consisting primarily of loans, of $4,787,000 and cash of approximately
$2,404,000. FSB recognized a gain of approximately $178,000 from the sale
before income tax expense. In September of 1994, BCG sold substantially all of
the assets and liabilities of First South Bank of Ben Hill County, Fitzgerald,
Georgia to Bankers First, FSB. BCG transferred approximately $14,540,000 in
deposit liabilities and $3,791,000 in assets, primarily loans, and approximately
$10,114,000 in cash to Bankers First, FSB. The gain on the sale of the First
South Bank of Ben Hill County assets and liabilities amounted to approximately
$636,000 before related income tax expense.
SERVICES
The BCG Banks are community-oriented, with an emphasis on lending to small
businesses and professionals and providing other customary banking services,
such as consumer and commercial checking accounts, NOW accounts, savings
accounts, certificates of deposit, lines of credit, Mastercard and VISA accounts
and money transfers. The BCG Banks finance commercial and consumer
transactions, make secured and unsecured loans, including residential mortgage
loans, and provide a variety of other banking services.
MARKETS
The primary markets for FSB are Bibb, Coweta, Johnson, Macon and Peach
Counties, Georgia. The primary markets for Ameribank are Effingham and Chatham
Counties, Georgia.
DEPOSITS
The BCG Banks offer a full range of depository accounts and services to
both consumers and businesses. At December 31, 1996, the BCG Banks' deposit
base, totaling approximately $258.7 million, consisted of approximately $44.7
million in non-interest-bearing demand deposits (17.3% of total deposits),
approximately $79.4 million in interest-bearing demand deposits (including money
market accounts) (30.7% of total deposits), approximately $9.4 million in
savings deposits (3.6% of total deposits), approximately $96.1 million in time
32
<PAGE>
deposits in amounts less than $100,000 (37.1% of total deposits), and
approximately $29.1 million in time deposits of $100,000 or more (11.3% of total
deposits).
LOANS
The BCG Banks make both secured and unsecured loans to individuals, firms
and corporations, and both consumer and commercial lending operations include
various types of credit for their customers. Secured loans include first and
second real estate mortgage loans. The BCG Banks also make direct installment
loans to consumers on both a secured and unsecured basis. At December 31, 1996,
consumer, real estate (including mortgage and construction loans) and commercial
loans represented approximately 6.0%, 70.6%, and 23.4%, respectively, of the BCG
Banks' total loan portfolio. The BCG Banks make a variety of real estate loans,
including loans for residential real estate construction, acquisition and
development loans, as well as loans for other purposes that are secured by real
estate.
Specific risk elements associated with each of the BCG Banks' lending
categories are as follows:
Commercial, financial
and agricultural Industry concentrations, inability to monitor
the condition of collateral (inventory,
accounts receivable and vehicles), lack of
borrower management expertise, increased
competition, and specialized or obsolete
equipment as collateral
Real estate - construction Inadequate collateral and long-term financing
agreements
Real estate - mortgage Changes in local economy and caps on
variable rate loans
Installment loans to individuals Loss of borrower's employment, changes in
local economy, the inability to monitor
collateral (vehicle, boats and mobile homes)
LENDING POLICY
The current lending strategy of each of the BCG Banks is to offer consumer,
real estate and commercial credit services to individuals and entities that meet
the particular BCG Bank's credit standards. Each BCG Bank provides its lending
officers with written guidelines for lending activities. Lending authority is
delegated by the Board of Directors of the particular BCG Bank to loan officers,
each of whom is limited in the amount of secured and unsecured loans which he or
she can make to a single borrower or related group of borrowers.
LOAN REVIEW AND NON-PERFORMING ASSETS
BCG reviews each of the BCG Bank's portfolio to determine deficiencies and
corrective action to be taken. Periodic reviews are conducted of borrowers with
total direct and indirect indebtedness of $100,000 or more and of all past-due
loans. Past-due loans are reviewed at least monthly by lending officers and a
summary report is reviewed monthly by senior management and quarterly by the
particular BCG Bank's Board of Directors. The loan review function periodically
reviews all relationships over $100,000, whether current or past due. The loan
review function reviews significant findings with the Board quarterly. In
addition, each BCG Bank maintains internal classifications of problem and
potential problem loans.
ASSET/LIABILITY MANAGEMENT
Each BCG Bank's Board of Directors is charged with establishing policies to
manage the assets and liabilities of the particular BCG Bank. Each Board's task
is to manage asset growth, net interest margin, liquidity and capital. The
Board directs the BCG Bank's overall acquisition and allocation of funds. On a
quarterly basis, the Board of each BCG Bank receives a report with regard to the
monthly asset and liability funds budget and income
33
<PAGE>
and expense budget in relation to the actual composition and flow of funds, the
ratio of the amount of rate-sensitive assets to the amount of rate-sensitive
liabilities, the ratio of loan loss reserves to outstanding loans, and other
variables, such as expected loan demand, investment opportunities, core deposit
growth within specified categories, regulatory changes, monetary policy
adjustments and the overall condition of the local, state and national economy.
INVESTMENT POLICY
Each BCG Bank's investment portfolio policy is to maximize income
consistent with liquidity, asset quality and regulatory constraints. The policy
is reviewed from time to time by the particular BCG Bank's Board of Directors.
Individual transactions, portfolio composition and performance are reviewed and
approved by the particular BCG Bank's Board of Directors or a committee thereof.
The Treasurer of each BCG Bank implements the policy and reports to the BCG
Bank's full Board of Directors on a quarterly basis information concerning
sales, purchases, resultant gains or losses, average maturity, federal taxable
equivalent yields, and appreciation or depreciation by investment categories.
In general, the BCG Banks' investment policy is to place all securities in
the Available for Sale portfolio upon purchase. As of December 31, 1996,
substantially all of the BCG Banks' securities were in the Available for Sale
security portfolio.
At December 31, 1996, a substantial portion of the BCG Banks' securities
consisted of single maturity, fixed-rate U.S. Treasury and Agency securities
with a weighted average maturity of the portfolio of less than five years. Also
included in the available for sale portfolio are certain mortgage-backed
securities which were purchased by FSB in 1996 and acquired when BCG acquired
Effingham. The primary risks in the BCG Banks' securities portfolio consist of:
Credit risk, or the risk of default of the issuer. Substantially all of
the securities are in Treasury and Agency securities; therefore, the
credit risk is primarily limited to the risk of default of the U.S.
Government and its agencies.
Interest rate risk, or the risk of adverse movements in interest rates on
the value of the portfolio. In general, a rise in interest rates will
cause the value of the BCG Banks' securities to decline. The longer the
maturity of an individual security, the greater the effect of a change in
interest rates on its value.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The BCG Banks have had, and expect to have in the future, banking
transactions in the ordinary course of business with directors and officers of
BCG and the BCG Banks and their associates, including corporations in which such
officers or directors are shareholders, directors and/or officers, on the same
terms (including interest rates and collateral) as those prevailing at the time
for comparable transactions with other persons. Such transactions have not
involved more than the normal risk of collectibility or presented other
unfavorable features. At December 31, 1996, loans to directors and officers and
their associates totaled $6,878,000, or 25.74% of total shareholders' equity.
On November 16, 1988, FSB entered into a lease agreement, as amended on
March 12, 1992 (the "Lease"), with William H. Anderson, II, Chairman of the
Board of Directors of BCG, pursuant to which Mr. Anderson rents to FSB the
office at which the FSB operations center, FSB loan servicing office and BCG's
executive offices are located. The initial term of the Lease expired on January
31, 1996, and at that time the term of the Lease was extended to January 31,
2004. Currently, Mr. Anderson receives monthly rental payments of $6,710.84.
During the 1996 fiscal year, rental payments by FSB totaled approximately
$82,000 under the Lease.
34
<PAGE>
OWNERSHIP OF BCG STOCK
The following table provides the number of shares and percentages of
outstanding shares of BCG Common Stock which were owned at August __, 1997, by
the directors and officers of BCG. Percentages of shares beneficially owned are
based on ______ shares outstanding at August __, 1997. The total percentage for
all directors and officers as a group was based on ______ shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES AND
Percentage Beneficially
Owned (*)
---------------------------------
Name of Beneficial Owner Number of Shares Percentage
- --------------------------------------------------- --------------------------------- ----------------------
<S> <C> <C>
Halstead T. Anderson, II,
Director 38,272/(1)/ 1.67
William H. Anderson, II,
Chairman of the Board and Director 530,911/(2)(3)(4)(5)(6)(7)(8)/ 23.23
Bank Corporation of Georgia Employee Stock
Ownership Plan 283,636/(9)/ 12.41
Joseph W. Evans,
President and Director 244,305/(16)(17)(18)/ 10.69
Oliver C. Bateman,
Director 285,886/(10)(11)(12)/ 12.51
Malcolm L. Butler,
Director 284,140/(11)(13)/ 12.43
Stephen W. Doughty,
Executive Vice President 70,916/(14)/ 3.10
Charles B. Evans, Jr.,
Director 22,715/(15)/ .59
W. Carl Joiner, Sr.,
Director 284,411/(11)(19)/ 12.45
Kenneth D. Sams,
Director 46,625/(20)/ 2.01
Southern Trust Corporation 174,856/(21)/ 7.65
Southern Trust Insurance Company 226,338/(22)/ 9.91
J. Thomas Wiley, Jr.,
Executive Vice President 65,916/(23)/ 2.88
All directors and executive officers as a group
(11 persons) 1,306,225 57.16
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Except as otherwise indicated, the persons named in the above table have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them. Information as to beneficial
ownership of common stock has been furnished by the respective persons
listed in the above table.
/(1)/ Includes 2,666 shares held in trust for his children over which Mr.
Anderson has voting power.
/(2)/ Includes 226,338 shares owned by Southern Trust Insurance Company over
which Mr. Anderson has voting power.
/(3)/ Includes 174,856 shares owned by Southern Trust Corporation over which
Mr. Anderson has voting power.
/(4)/ Includes 36,458 shares owned by RamBay Corporation over which Mr.
Anderson has voting power.
/(5)/ Includes 23,080 shares held in a Marital Trust for Vivian H. Anderson,
Mr. Anderson's mother, over which Mr. Anderson has voting power.
/(6)/ Includes 16,800 shares owned by Santee Partners, LTD over which
Mr. Anderson has voting power.
35
<PAGE>
/(7)/ Includes 5,682 shares owned by Vivian H. Anderson, Mr. Anderson's mother,
over which Mr. Anderson has voting power.
/(8)/ Mr. Anderson's mailing address is 682 Cherry Street, Macon,
Georgia 31210.
/(9)/ The address of the ESOP is 4951 Forsyth Road, Macon, Georgia
31210.
/(10)/ Includes 500 shares in his son's name over which Mr. Bateman has
voting power.
/(11)/ Includes 283,636 shares of Common Stock owned by BCG's Employee Stock
Ownership Plan (the "ESOP"), over which Messrs, Bateman, Butler and
Joiner exercise voting power over unallocated shares.
/(12)/ Mr. Bateman's mailing address is 2885 Walden Road, Macon, Georgia
31206.
/(13)/ Mr. Butler's mailing address is 115 McIntosh Drive, Savannah,
Georgia 31406.
/(14)/ Includes presently exercisable options to acquire 50,166 shares
of Common Stock.
/(15)/ Includes 8,715 shares in his children's name over which Mr. Evans
has voting power.
/(16)/ Includes 39,654 shares owned by Howell D. Evans, Mr. Evans' father, over
which Mr. Evans has voting power.
/(17)/ Includes presently exercisable options to acquire 35,000 shares
of Common Stock.
/(18)/ Mr. Evans' mailing address is P. O. Box 353, Smarr, Georgia
31086.
/(19)/ Mr. Joiner's mailing address is 853 Washington Avenue, Macon,
Georgia 31201.
/(20)/ Includes 45,850 shares owned by Cherokee Brick & Tile Company, over which
Mr. Sams has voting power.
/(21)/ The address of Southern Trust Corporation is 682 Cherry Street,
Macon, Georgia 31201.
/(22)/ The address of Southern Trust Insurance Company is 682 Cherry
Street, Macon, Georgia 31201.
/(23)/ Includes presently exercisable options to acquire 50,166 shares
of Common Stock.
36
<PAGE>
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF BCG
Years ended December 31, 1996, 1995 and 1994
This analysis has been prepared to provide insight into the consolidated
financial condition of BCG and addresses the factors which have affected BCG's
results of operations. Unless otherwise noted, the financial and other
information presented with respect to BCG in this discussion and elsewhere in
this Proxy Statement/Prospectus generally includes the accounts of the BCG
Banks. BCG's consolidated financial statements and accompanying notes which
follow are an integral part of this review and should be read in conjunction
with it.
GENERAL OVERVIEW OF BCG. Net income for 1996 was $3,312,690 as compared to
$2,863,658 for 1995. Pretax earnings increased $342,000 over 1995 primarily due
to an increase in net interest income of $1,305,000, a decrease in the provision
for loan losses of $56,000, an increase in other income of $701,000, offset by
increases in salaries and employee benefits of $460,000 and increases in other
operating expenses of $1,007,000.
The following table sets out certain ratios of BCG for the years indicated:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income to:
Average stockholders' equity 13.52% 13.75% 13.33%
Average assets 1.17% 1.17% 1.02%
Average equity to average assets 8.62% 8.51% 7.63%
</TABLE>
ASSET QUALITY. The allowance for loan losses represents an amount which,
in management's judgement, will be adequate to absorb losses on existing loans
that may become uncollectible. The adequacy of the allowance for loan losses is
evaluated monthly based on a regular review of the BCG Banks' loan portfolios,
with particular emphasis on non-accruing loans, past due loans, and other loans
that management believes require attention.
There was a favorable trend in the amount of loans past due by 90 days or
more over the last year. The percentage of these past dues to the total loan
portfolio was .39% at December 31, 1996, as compared to .63% at December 31,
1995. The BCG Banks' levels of non-performing assets have decreased from
$1,468,000 at December 31, 1995 to $1,040,000 at December 31, 1996, primarily
due to reduction of non-accrual loans. Non-performing assets are composed of
non-accrual loans (loans on which interest income is no longer being accrued),
and foreclosed assets (assets acquired in full or partial satisfaction of debt).
As a result of management's ongoing review of the loan portfolio, loans are
classified as non-accruing when it is not reasonable to expect collection of
interest under the original terms. These loans may be classified as non-accruing
even though the presence of collateral or the borrower's financial strength may
be sufficient to provide for ultimate repayment of principal.
37
<PAGE>
The following table provides data on the BCG Banks' levels of past due
loans as of December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Loans Past Due
(in thousands)
As of December 31,
1996 1995
------------------------------ --------------------------------
% of % of
Amount Total Loans Amount Total Loans
------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
Days Past Due
- -------------
Accruing Loans:
30-90 $1,042 .56% $1,936 1.20%
Over 90 225 .12% 30 .02%
------ --- ------ ----
Total 1,267 .68% 1,966 1.22%
------ --- ------ ----
Non-Accruals
30-90 -- -- -- --
Over 90 499 .27% 978 .61%
------ --- ------ ----
Total 499 .27% 978 .61%
------ --- ------ ----
Total Loans:
30-90 1,042 .56% 1,936 1.20%
Over 90 724 .39% 1,008 .63%
------ ------ ----
Total $1,766 .95% 2,944 1.83%
- ----- ====== === ====== ====
</TABLE>
Loans past due on interest and/or principal payments have decreased in
dollar terms by $1,168,000 (39.8%) between year end 1995 and 1996. Commercial
and commercial real estate loans 90 days or more past due as to principal or
interest are transferred to non-accruing status unless fully secured by
collateral. In addition, loans past due less than 90 days, which in the opinion
of management present significant uncertainty as to collectability of interest,
are also placed on non-accrual status. Installment loans and credit lines are
charged off when losses become apparent, and in no event later than 120 days
after the date on which the balance became past due.
The allowance represents an amount which, in management's judgement, will
be adequate to absorb losses on existing loans that may become uncollectible.
Management determines the allowance level and its allocation based upon its
judgment concerning factors affecting loan quality and its assumptions regarding
the economy. Based upon its extensive ongoing review of the loan portfolio,
management considers the 1996 year-end allowance for loan losses to be adequate
to cover potential losses in the BCG Banks' loan portfolio.
38
<PAGE>
The following table provides a reconciliation of the allowance for loan
losses for the years 1996 and 1995.
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
(In Thousands)
1996 1995
---- ----
<S> <C> <C>
Balance at beginning of period $2,652,412 2,316,054
Charge offs:
Commercial, financial and agricultural 15,293 95,999
Real estate 167,076 145,138
Consumer 78,165 111,106
---------- ---------
Total 360,534 351,334
---------- ---------
Recoveries:
Commercial, financial & agricultural 14,275 67,905
Real estate 46,632 85,879
Consumer 87,555 68,903
---------- ---------
Total 148,462 222,687
---------- ---------
Net Charge-offs 212,072 128,647
Additions charged to operations 409,000 465,005
---------- ---------
Balance at end of period $2,849,340 2,652,412
---------- ---------
Ratio of net charge-offs during the
period to average loans
outstanding during the period .11% .076%
---------- ---------
</TABLE>
The current levels of loans on non-accrual status and the portfolio of
other real estate owned impacts earnings as interest is not earned and
additional costs are incurred in the disposition of these assets. In order to
manage the non-performing assets, management of the BCG Banks has established
specific goals for the resolution of all loans on non-accrual status and all
other real estate owned.
EARNING ASSETS. In 1996, earning assets averaged $252.7 million, a 12.7%
increase from $224.2 million in 1995. The increase of $28.5 million is
comprised mainly of a $22.0 million increase in average loans, and an $8.3
million increase in average federal funds sold offset by a $3.2 million decrease
in interest bearing deposits in banks.
LOANS. Loans are the single-largest component of earning assets, as well
as the highest yielding component. Because of their importance, most other
assets and liabilities are managed to accommodate the needs of the loan
portfolio. At December 31, 1996 and 1995, loans represented 73.4% and 76.6% of
interest- earning assets and 64.3% and 68.5%, respectively, of total assets.
Net loans increased $8,694,095, or 4.89% in 1996, compared to an increase of
13.32% in 1995.
BCG's primary emphasis in terms of lending is on commercial business loans,
as it attempts to define its market niche and decrease its credit risk exposure.
From a marketing perspective, the BCG Banks believe that the credit needs of
small business owners are often not handled effectively by smaller banks and are
not attractive to larger banks which typically pursue larger credits. This
provides an opportunity to the BCG Banks within their markets. From a
perspective of credit risk reduction, the BCG Banks' credit standards require
that prospective commercial borrower's provide a high probability of adequate
cash flow for debt service, as well as commercial real estate collateral and
personal guarantees providing secondary loss protection for the BCG Banks. In
connection with this increased emphasis on commercial, business, and real estate
lending, the BCG Banks increased their commercial, financial and agricultural
loan and real estate loan portfolios by $5,482,602 and $20,924,617 during 1996
and 1995, representing increases of 3.7% and 16.2%, respectively.
39
<PAGE>
INVESTMENTS. BCG's investment portfolio constitutes the second-largest
component of total earning assets. The portfolio serves several functions such
as providing a vehicle for the investment of available funds at relatively
attractive rates, furnishing liquidity to meet increased loan demand and
supplying securities to pledge as collateral for public funds.
During 1996, holdings in investment securities increased $3,488,564 or
8.6%. At December 31, 1996, investment securities represented 17.3% of
interest-earning assets as compared to 17.4% at December 31, 1995. Securities
with a carrying value of approximately $18,433,000 were pledged as collateral
for public funds or other purposes as of December 31, 1996.
Unrealized gains and losses, net of tax, are reported as a separate
component of shareholders' equity, in accordance with SFAS No.115. Unrealized
gains, net of tax, amounted to approximately $289,000 at December 31, 1996,
compared to unrealized gains, net of tax, of approximately $779,000 at December
31, 1995.
DEPOSITS. Total deposits increased by approximately $34,474,826 or 15.4%,
in 1996, compared to increases of $12,531,498 in 1995.
Non-interest-bearing deposits constituted 17.3% of total deposits at
December 31, 1996 versus 16.8% at December 31, 1995. The increase of $6,994,000
from 1995 to 1996 is the result of management's continued marketing efforts to
attract non-interest-bearing, fee-generating transaction accounts.
INTEREST RATE SENSITIVITY. Interest rate sensitivity management seeks to
maximize net interest income as a result of changing interest rates, but to do
so without subjecting the interest margin to an imprudent degree of risk. BCG
attempts to do this by structuring the balance sheet so that repricing
opportunities exist for both assets and liabilities in roughly equivalent
amounts at approximately the same time intervals. Imbalances in these repricing
opportunities at any point in time constitute a bank's interest rate
sensitivity.
An indicator of the interest rate sensitivity structure of a financial
institution's balance sheet is the difference between its interest rate
sensitive assets and interest rate sensitive liabilities, which is referred to
as the "gap." BCG attempts to match the behavior of rate sensitive assets and
rate sensitive liabilities. While "gap" analysis is a traditional indicator of
interest rate risk, management has observed that the historical behavior of
certain categories of assets and liabilities vary significantly from those
indicated by the "gap". Consequently, it relies more heavily on simulation
models as its primary interest rate management tool. Based upon its simulation
model, management believes that BCG is not subject to any material risk due to
interest rate fluctuations.
40
<PAGE>
The schedule below reflects the gap positions of BCG's consolidated balance
sheet as of December 31, 1996.
RATE SENSITIVITY ANALYSIS
DECEMBER 31, 1996
RATE SENSITIVITY
<TABLE>
<CAPTION>
IMMEDIATELY ONE YEAR
RATE TWO TO 91 TO TO FIVE OVER FIVE
SENSITIVE 90 DAYS 365 DAYS YEARS YEARS TOTAL
------------ -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
LOANS $ - 103,537 30,282 43,986 12,364 190,169
INVESTMENT SECURITIES - 4,497 4,099 31,449 3,872 43,917
FEDERAL FUNDS SOLD 5,210 - - - - 5,210
FEDERAL HOME LOAN BANK DEPOSITS 3,054 15,588 - - - 18,642
INTEREST RATE SWAPS - - - 25,000 - 25,000
INTEREST RATE FLOORS 30,000 - - - 30,000
------------ -------- --------- -------- ------- -------
TOTAL EARNING ASSETS 8,264 153,622 34,381 100,435 16,236 312,938
------------ -------- --------- -------- ------- -------
SUPPORTING SOURCES OF FUNDS
NOW AND MONEY MARKET ACCOUNTS 79,418 - - - - 79,418
TIME CERTIFICATES OF DEPOSIT - 25,005 65,954 34,206 - 125,165
DEMAND DEPOSIT ACCOUNTS 44,709 - - - - 44,709
SAVINGS ACCOUNTS 9,406 - - - - 9,406
LONG-TERM DEBT/ BORROWED MONEY 1,500 - - - - 1,500
INTEREST RATE SWAPS 25,000 - - - - 25,000
------------ -------- --------- -------- ------- -------
TOTAL RATE SENSITIVE LIABILITIES 135,033 50,005 65,954 34,206 - 285,198
------------ -------- --------- -------- ------- -------
PERIODIC GAP - INTEREST EARNING ASSETS
(INTEREST BEARING LIABILITIES) (126,769) 103,617 (31,573) 66,229 16,236
------------ -------- --------- -------- ------- -------
CUMULATIVE GAP - INTEREST EARNING ASSETS
(INTEREST BEARING LIABILITIES) (126,767) (23,152) (54,725) 11,504 27,740 27,740
CUMULATIVE RATIO OF INTEREST EARNING
ASSETS TO INTEREST BEARING LIABILITIES 6% 87% 78% 104% 110%
</TABLE>
41
<PAGE>
The rate sensitivity table is a form of "gap" analysis. A ratio of
interest earning assets to interest bearing liabilities (more interest earning
assets repricing in a given period than interest bearing liabilities) greater
than 100% suggests that an increase in interest rates have a positive effect and
a decrease in interest rates have a negative effect on net interest income. A
ratio less than 100% would have the opposite effect.
Banking regulations currently prohibit the payment of interest on certain
types of demand deposits that are classified under the "gap" analysis as "rate
sensitive". To the extent that this regulation remains in effect, classifying
these deposits as "immediately rate sensitive" understates the benefit to the
net interest margin of rising rates and understates the detriment of falling
rates to the net interest margin.
At December 31, 1996, BCG's interest rate sensitive liabilities maturing
within one year exceeded interest rate sensitive assets maturing within one year
by approximately $54.7 million with non-interest bearing demand deposits
classified as "immediately rate sensitive". This equates to a negative gap of
22% of earning assets which is identical to its position at December 31, 1995.
If non-interest bearing demand deposits were excluded from the "immediately rate
sensitive" category, the negative gap would be reduced to $10.0 million or 4% of
earning assets, compared to $11.1 million or 7% at December 31, 1995.
Since interest rates and yields do not adjust at the same velocity, the
interest sensitivity gap is only an indicator of the potential effects of
interest rate changes on net interest income.
LIQUIDITY. Liquidity management involves the ability to meet cash flow
requirements of customers who may be depositors making withdrawals or borrowers
who require credit funding. BCG's cash flows are generated from interest and fee
income, as well as from loan repayments, deposit acquisition, and maturities or
sales of investments. BCG's liquidity needs are provided for primarily through
short-term securities, and the maturing of loans. Federal funds sold, which
averaged approximately $13,943,000 in 1996, represent BCG's primary source of
immediate liquidity and are maintained at a level adequate to meet immediate
needs. In addition, FSB has an agreement with the Federal Home Loan Bank
("FHLB") which provides additional liquidity. While BCG had no outstanding
advances from the FHLB at December 31, 1996, this agreement allows BCG to borrow
up to $22,000,000 secured by 1-4 single family residential mortgage loans.
Maturities in BCG's loan and investment portfolios are monitored regularly to
avoid matching short-term deposits with long-term loans and investments. Other
assets and liabilities are also monitored in an effort to provide the proper
balance between liquidity, safety and profitability. This monitoring process
must be continuous due to the constant flow of cash which is inherent in a
financial institution.
BCG manages its liquidity through changing deposit levels and patterns in
loan demand, its current liquidity position, its ability to control funding
needs and potential sources of funds. As part of managing liquidity, BCG
monitors its loan to deposit ratio on a daily basis. The target ratio is 85%.
At December 31, 1996 and 1995 the ratio was 72.1% and 79.3%, respectively.
BCG experienced an increase of $13,948,592 in cash and cash equivalents
during 1996. Operating activities provided $3,059,324, primarily through income
from operations of $3,312,690.
Investing activities provides $715,938 in cash and cash equivalents.
Proceeds from calls, maturities, and sales within the securities portfolio
provided $16,771,760. These proceeds were offset by purchases of investment
securities of $21,021,208, and a net increase in loans of $5,952,803. Also, BCG
received $12,687,620 in conjunction with the acquisition of certain assets and
liabilities of a banking unit.
Financing activities provided $10,173,330 of cash and cash equivalents
during 1996 due mainly to the net increase in deposits of $17,783,870, offset by
the repayment of FHLB advances of $6,100,000.
CAPITAL RESOURCES AND DIVIDENDS. At December 31, 1996, BCG had capital in
excess of regulatory minimums, as measured by its ending equity to assets ratio
of 9.21%, compared to 8.56% at December 31, 1995. The increase was primarily
the result of an increase in net earnings.
42
<PAGE>
RESULTS OF OPERATIONS-1996 VERSUS 1995
BCG's net income after minority interest in earnings of AmeriCorp for 1996
was $3,312,690 versus $2,863,658 for 1995, an increase of $449,032. 1996 income
was $1.41 per common share versus $1.35 per common share for 1995.
Net interest income increased $1,305,052 or 9.8% from $13,251,895 in 1995
to $14,556,947 in 1996. The effect of volume changes was to increase net
interest income by $1,908,536, and the effect of rate changes was to decrease
net interest income by $603,484. Yields on interest earning assets decreased
from 10.08% in 1995 to 9.67% in 1996. The cost of interest bearing liabilities
decreased from 4.89% to 4.64% over the same period. The effect of these changes
was to decrease the net interest spread from 5.19% in 1995 to 5.03% in 1996.
BCG is a party to interest rate swap agreements for the purpose of hedging
against short term decreases in interest rates. The notional amount on
agreements outstanding at December 31, 1996 was $25,000,000. The agreements
call for BCG to receive fixed rates of interest, averaging 6.32%, while paying
variable rates, based on the three month LIBOR. Weighted average rates paid by
BCG during 1996 were approximately 5.53%. Reductions in interest expense of
$243,000 resulting from the difference in rates have been netted with interest
expense on time deposits.
In addition BCG has purchased interest rate floor contracts with aggregate
notional amounts of $30,000,000, maturing in March 1997. Under the terms of the
agreement, BCG 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%. Increases in interest income at $58,000 resulting from a drop in the
federal funds rate below 5.5% have been netted with interest and fees on loans.
The provision for loan losses for 1996 was $409,000, compared to $465,005
for 1995. Net charge-offs for 1995 were $129,000 compared to net charge-offs of
$212,000 during 1996. The allowance for loan losses at December 31, 1996 and
1995 was $2,849,340 and $2,652,412, respectively. The allowance for loan losses
represented 1.50% and 1.46% of gross outstanding loans at December 31, 1996 and
1995, respectively. Nonaccrual loans decreased from $978,000 at December 31,
1995 to $499,000 at December 31, 1996.
Non-interest income increased by $700,915 or 29.6% from 1995 to 1996. This
increase was related to increases in service charge income of $208,773,
increases of $38,233 in gains on sale of loans, and increases in miscellaneous
other income of $444,639.
Non-interest expense increased by $1,719,628 or 15.7% from 1995 to 1996.
Included in the change is increases in salaries and benefits of $459,480
increases in occupancy expense of $229,855, increases in equipment expense of
$22,901, and an increase in other operating expense of $1,007,392 resulting
primarily from the opening of several new branches during 1996.
BCG recognized an income tax provision of $1,158,609 for 1996, compared to
a provision of $930,750 for 1995. Reductions in the valuation allowance of
$551,956 and $439,294 were recognized in 1996 and 1995, respectively.
RESULTS OF OPERATIONS-1995 VERSUS 1994
BCG's net income after minority interest in earnings of AmeriCorp for 1995
was $2,863,658 versus $2,309,280 for 1994, an increase of $544,378. 1995 income
was $1.35 per common share versus $1.11 per common share for 1994.
Net interest income increased $2,629,335 or 24.8% from $10,622,560 in 1994
to $13,251,895 in 1995. The effect of volume changes was to increase net
interest income by $683,406, and the effect of rate changes was to increase net
interest income by $1,945,929. Yields on interest earning assets increased from
8.59% in 1994 to 10.08% in 1995. The cost of interest bearing liabilities
increased from 3.97% to 4.89% over the same period. The effect of these changes
was to increase the net interest margin to 5.19% in 1995 from 5.11% in 1994.
43
<PAGE>
During 1995, BCG entered into interest rate swap agreements for the purpose
of hedging against short term decreases in interest rates. The notional amount
on agreements outstanding at December 31, 1995 was $15,000,000. The agreements
call for BCG to receive fixed rates of interest, averaging 7.26%, while paying
variable rates, based on the three month LIBOR. Weighted average rates paid by
BCG during 1995 were approximately 5.5%. Reductions in interest expense
resulting from the difference in rates of $160,000 have been netted with
interest expense on time deposits.
The provision for loan losses for 1995 was $465,005, compared to $447,003
for 1994. Net charge-offs for 1995 were $129,000 compared to net charge-offs of
$220,000 during 1994. The allowance for loan losses at December 31, 1995 and
1994 was $2,652,412 and $2,316,054, respectively. The allowance for loan losses
represented 1.46% and 1.48% of gross outstanding loans at December 31, 1995 and
1994, respectively. Nonaccrual loans increased from $529,000 at December 31,
1994 to $978,000 at December 31, 1995.
Non-interest income declined by $513,112 or 17.8% from 1994 to 1995.
Included in 1994 non-interest income is $814,035 of non-recurring gains realized
from the sale of certain banking units. This decrease was offset in 1995 by
increases of $42,097 in gains on sale of loans, and decreases in securities
losses of $304,809.
Non-interest expense increased by $731,881 or 7.1% from 1994 to 1995.
Included in the change are increases in salaries and benefits of $723,642,
increases in occupancy expense of $35,962, and increases in equipment expense of
$92,715, offset by a decrease in other operating expense of $120,438.
BCG recognized an income tax provision of $930,750 for 1995, compared to a
tax benefit of $151,321 for 1994. The net increase in expense for 1995 compared
to 1994 was due to the recognition of deferred tax assets of AmeriCorp (through
reduction of the valuation allowance) during 1994 of approximately $1,197,000.
A reduction in the valuation allowance of approximately $439,000 was recognized
in 1995.
INFLATION. Although inflation affects the growth of total assets, it is
difficult to measure its impact precisely. Net income is also affected by
inflation, but again there is no simple way to measure its effect on the various
types of income and expense. Interest rates and operating expense, in
particular, are significantly affected by inflation, but neither the timing nor
the magnitude of interest-rate changes coincide with changes in the Consumer
Price Index.
Due to the complexities of measuring the effects of inflation on BCG's
consolidated financial statements, management believes that it would be
misleading to attempt to quantify those effects.
ACCOUNTING FOR IMPAIRMENT OF A LOAN. As of January 1, 1995, BCG adopted
SFAS 114, "Accounting by Creditors for Impairment of a Loan." SFAS 114 requires
that impaired loans be measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate, which is the
contractual interest rate adjusted for any deferred loan fees or costs, premium
or discount, existing at the inception or acquisition of the loan, 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. As of January 1, 1995, BCG adopted
SFAS 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures" which amends SFAS 114 to require information about the recorded
investment in certain impaired loans and eliminates the provisions of SFAS 114
regarding how a creditor should report income on a impaired loan. SFAS 118
allows creditors to use existing methods for recognizing income on impaired
loans, including methods used by certain industry regulators. As of the date of
adoption, and as of December 31, 1995, the impact of SFAS 114 and SFAS 118 is
not considered material to BCG's consolidated financial statements. Based on
the immaterial amount of impaired loans and management's current policies
regarding providing for losses on problem loans, there have been no policy
changes as a result of the implementation of SFAS 114 and 118.
RISK ELEMENTS. The allowance for loan losses at December 31, 1996 was
$2,849,340 or 7.4% higher than at December 31, 1995. At December 31, 1996 the
allowance represented 1.50% of total loans as compared with 1.46% at December
31, 1995. At December 31, 1996 non-performing loans represented .38% of total
gross
44
<PAGE>
loans as compared with .55% at December 31, 1995. The allowance for loan losses
as a percentage of non-performing loans was 394% at December 31, 1996 as
compared with 263% at December 31, 1995.
CAPITAL RESOURCES. Shareholders' equity of $26,722,563 at December 31,
1996 reflects an increase of 20.2% over the same period in 1995, resulting in
book value per outstanding common share of $11.78 compared to $10.44 at December
31, 1995. Capital for BCG is above regulatory requirements, with GAAP equity of
9.21% of total assets at December 31, 1996.
Set forth below are pertinent capital ratios for BCG as of December 31,
1996:
Minimum Capital Requirement
---------------------------
Consolidated Tier 1 Capital to Risk-based 11.14%(1)
Assets: 4.00%
Total Capital to Risk-based 12.24%(2)
Assets: 8.00%
Leverage Ratio (Tier 1 Capital 9.30%(3)
to Total Average Assets): 3.00%
(1) Minimum for "Well-Capitalized Banks" = 6%.
(2) Minimum for "Well-Capitalized Banks" = 10%
(3) Minimum for "Well-Capitalized Banks" = 5%.
45
<PAGE>
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF BCG
Three Months ended March 31, 1997 and 1996
EARNINGS SUMMARY
Net income for the first three months of 1997 was $944,000, an increase of
$73,000 or 8.4% over the same period in 1996. The net income per share for the
three months ended March 31, 1997 and 1996 was $.40 and $.40, respectively. Net
interest income for the three months ended March 31, 1997 increased $324,000 or
9.3% over the same period in 1996. The increase is primarily due to an increase
in net interest earning assets over the same period in 1996.
The net interest margin, as a percentage of earning assets, decreased to
5.78% for the first three months of 1997 as compared to 5.89% for the same
period in 1996. Non-interest income for the three month period ended March 31,
1997 increased $133,000 or 20.8% over the same period in 1996. These increases
were primarily the result of increases in gains on sales of SBA loans and gains
on sales of other loans.
Non-interest expense increased by $390,000 in the first three months of
1997 from the same period in 1996, an increase of 14.5%. Increases in salaries
and employee benefits of $436,000 or 28.5% and in occupancy and equipment
expense of $120,000 or 33% over similar periods in 1996 are related to the
addition of three branches added during 1996.
For the first three months of 1997, return on equity was 13.9% on an
annualized basis versus 14.6% for the same period a year earlier. The decline in
return on equity was related to several factors, among which were the cessation
of tax benefits related to prior net operating losses from Ameribank and the
costs associated with the three new branches.
RISK ELEMENTS
The allowance for loan losses at March 31, 1997 was $2,765,000 or 3.2 %
higher than at March 31, 1996. At March 31, 1997, the allowance represented
1.46 % of total loans as compared with 1.42 % at March 31, 1996 and 1.50% at
December 31, 1996. At March 31, 1997 non-performing loans represented .19% of
total loans as compared with .38% at December 31, 1996 and .48% at March 31,
1996. The allowance for loan losses as a percentage of non-performing loans was
765% at March 31, 1997 as compared with 394% at December 31, 1996 and 794% at
March 31, 1996.
CAPITAL RESOURCES
Shareholders' equity of $27,439,579 at March 31, 1997 increased 2.8% from
December 31, 1996 and 11% over the same period in 1996 resulting in book value
per outstanding common of share of $12.01 compared to $11.78 at December 31,
1996 and $10.76 at March 31, 1996. Capital for BCG is above regulatory
requirements, with GAAP equity of 9.07% of total assets at March 31, 1997
compared to 9.21% at December 31, 1996 and 9.05% at March 31, 1996. The
increases in shareholders' equity was primarily the result of net earnings.
46
<PAGE>
Set forth below are pertinent capital ratios for the BCG Banks as of March
31, 1997:
<TABLE>
<CAPTION>
Minimal Capital Requirement First South Bank Ameribank
---------------- ---------
<S> <C> <C>
Tier One Capital to Risk-based Assets:
4.00%/1/ 12.25% 11.77%
Total Capital to Risk-based Assets:
8.00%/2/ 12.55% 12.95%
Leverage Ratio (Tier One Capital to Total
Assets): 3.00%/3/ 8.54% 8.05%
/1/ Minimum required ratio for "well
capitalized" banks is 6%
/2/ Minimum required ratio for "well
capitalized" banks is 10%
/3/ Minimum required ratio for "well
capitalized" banks is 5%
</TABLE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity management involves the ability to meet cash flow requirements of
customers who may be depositors making withdrawals or borrowers needing credit
funding. BCG's cash flows are generated from interest and fee income, as well
as from loan repayments, deposit acquisition, and maturities or sales of
investments. BCG's liquidity needs are provided for primarily through short-
term securities, and the maturing of loans. Federal funds sold represent BCG's
primary source of immediate liquidity and were maintained at a level adequate to
meet immediate needs. Federal funds averaged $23,111,000 and $11,360,000 for
the three months ended March 31, 1997 and March 31,1996, respectively.
Maturities in BCG's loan and investment portfolios are monitored regularly to
avoid matching short-term deposits with long-term loans and investments. Other
assets and liabilities are also monitored to provide the proper balance between
liquidity, safety, and profitability. This monitoring process must be
continuous due to the constant flow of cash which is inherent in a financial
institution.
BCG actively manages its interest rate sensitive assets and liabilities to
reduce the impact of interest rate fluctuations. At March 31, 1997, BCG's rate
sensitive liabilities exceeded rate sensitive assets due within one year by
$17,600,000. BCG manages its liquidity through the volatility of its deposits
and patterns in loan demand, its current liquidity position, its ability to
control funding needs and potential sources of funds. As part of managing
liquidity, BCG monitors its loan to deposit ratio on a daily basis. The target
ratio is 85%. At March 31, 1997 the ratio was 70%.
BCG experienced a net increase in cash and cash equivalents, its primary
source of liquidity, of $10,366,537 during the first three months of 1997.
Operating activities provided $1,823,461 of funds. Adjustments to net earnings
for non-cash expenses of depreciation, amortization, and provision for loan
losses are included in this amount as a net provision of funds. Investing
activities used $4,011,113 of funds, primarily due to an purchases of
securities available for sale of approximately $7,894,000 offset by calls and
maturities of securities available for sale of approximately $2,587,000, as well
as proceeds from the sale of premises and equipment of approximately $773,000.
Financing activities provided $12,554,189 from an increase in deposits during
the three month period ended March 31, 1997.
47
<PAGE>
EXECUTIVE OFFICERS
Executive officers of BCG are elected by the Board of Directors
annually at the first meeting of the Board following the annual meeting of BCG
shareholders and hold office until such officers' successors are chosen and
qualified, unless they sooner resign or are removed from office by the Board of
Directors.
Information is set forth below with respect to the age, positions with
BCG and its subsidiaries, and business experience of the executive officers of
BCG as of December 31, 1996.
<TABLE>
<CAPTION>
NAME (AGE) PRINCIPAL POSITION AND BUSINESS EXPERIENCE
- ---------- --------------------------------------------------------------
<S> <C>
Joseph W. Evans (47) Mr. Evans has been President of BCG since 1980, and was President of
FSB until 1991, when he became Chairman of FSB. He is currently a
director of BCG, FSB and Ameribank.
Stephen W. Doughty (45) Mr. Doughty has been a director of FSB since 1985, an executive
officer of FSB since 1987, and became President of FSB in 1991. Mr.
Doughty has been Executive Vice President of BCG since August 29,
1988. He is also a director of Ameribank.
J. Thomas Wiley, Jr. (44) Mr. Wiley has served as President, CEO and a director of Ameribank
since May, 1990. Mr. Wiley is also a director of FSB. Mr. Wiley has
served as Executive Vice President for FSB, and a member of its
Executive Committee and Board of Directors. He has been an
Executive Vice President of BCG since January 1, 1990.
</TABLE>
CERTAIN DIFFERENCES IN THE RIGHTS OF CSBI AND BCG SHAREHOLDERS
At the Effective Time, BCG shareholders automatically will become
shareholders of CSBI, and their rights as shareholders will be determined by
CSBI's Articles and Bylaws. The following is a summary of the material
differences in the rights of shareholders of CSBI and BCG. CSBI and BCG are
both Georgia corporations governed by the GBCC. Except as set forth below,
there are no material differences between the rights of security holders of BCG
and CSBI under their respective Articles or Bylaws. This summary does not
purport to be a complete discussion of, and is qualified in its entirety by
reference to the GBCC and the Articles and Bylaws of each entity.
AUTHORIZED CAPITAL STOCK
CSBI. CSBI is authorized to issue 15,000,000 shares of common stock, $1.00
par value of which 7,767,459 shares were issued and outstanding as of March 31,
1997. 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 CSBI Incentive Stock Option Plan, 500,000 shares were reserved pursuant to
the CSBI Dividend Reinvestment Plan, 100,000 shares were reserved pursuant to
the CSBI Employee Stock Ownership Plan, and 5,000 shares were reserved pursuant
to options granted to certain executive officers outside the CSBI Option Plan.
BCG. BCG is authorized to issue 3,000,000 shares of common stock, $1.00
par value of which 2,268,097 shares were issued and outstanding as of March 31,
1997. As of March 31, 1997, 404,766 shares of BCG Common Stock were reserved for
issuance upon the exercise of outstanding stock options and purchases under the
BCG Option Plan.
DIRECTORS
CSBI. The Bylaws of CSBI provide for a Board of Directors having not
less than five nor more than 15 members. The number of directors may be
increased at any time by the Board of Directors, or by a majority of the
48
<PAGE>
vote of the outstanding shares of CSBI Common Stock. Vacancies may be filled for
the unexpired term and until the shareholders have elected a successor, by the
affirmative vote of a majority of the remaining directors.
Pursuant to CSBI's Bylaws and Georgia law, any director may be removed from
office with or without cause by the affirmative vote of the holders of a
majority of the votes entitled to be cast by the holders of voting stock of
CSBI. Removal action may be taken at any shareholders meeting with respect to
which notice of such purpose has been given. A successor director may be elected
to serve the unexpired term at the same meeting.
BCG. The Bylaws of BCG provide for a board of directors of not less than
five nor more than 12 directors. The number of directors may be increased or
decreased from time to time by the board of directors by amendment of the
Bylaws. Vacancies, but not including vacancies resulting from removal from
office by the shareholders, may be filled by a majority vote of the remaining
directors, or if no directors are in office, then by election by the
shareholders.
BCG's Bylaws provide for the same method of removal of directors. However,
if the vacancy created by the removal is not filled by a shareholder election
within 60 days after the removal, the remaining directors shall by majority
vote, fill the vacancy.
CERTAIN REGULATORY CONSIDERATIONS
HOLDING COMPANY REGULATION GENERALLY
BCG is a registered bank holding company subject to regulation by the
Federal Reserve under the BHC Act. BCG is required to file financial
information with the Federal Reserve periodically and is subject to periodic
examination by the Federal Reserve.
The BHC requires every bank holding company to obtain the prior approval of
the Federal Reserve before (i) it may acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank that it does not
already control; (ii) it or any of its subsidiaries, other than a bank, may
acquire all or substantially all of the assets of a bank; and (iii) it may merge
or consolidate with any other bank holding company. In addition, a bank holding
company is generally prohibited from engaging in, or acquiring, direct or
indirect control of the voting shares of any company engaged in non-banking
activities. This prohibition does not apply to activities found by the Federal
Reserve, by order or regulation, to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. Some of the activities
that the Federal Reserve has determined by regulation or order to be closely
related to banking are: making or servicing loans and certain types of leases;
performing certain data processing services; acting as fiduciary or investment
or financial advisor; providing discount brokerage services; underwriting bank
eligible securities; underwriting debt and equity securities on a limited basis
through separately capitalized subsidiaries; and making investments in
corporations or projects designed primarily to promote community welfare.
BCG must also register with the DBF and file periodic information with the
DBF. As part of such registration, the DBF requires information with respect to
the financial condition, operations, management and intercompany relationships
of BCG and the BCG Banks and related matters. The DBF may also require such
other information as is necessary to keep itself informed as to whether the
provisions of Georgia law and the regulations and orders issued thereunder by
the DBF have been complied with, and the DBF may examine BCG.
BCG is an "affiliate" of the BCG Banks under the Federal Reserve Act, which
imposes certain restrictions on (i) loans by the Banks to BCG, (ii) investments
in the stock or securities of BCG by the Banks, (iii) the BCG Bank's taking the
stock or securities of an "affiliate" as collateral for loans by the BCG Banks
to a borrower and (iv) the purchase of assets from BCG by the BCG Banks.
Further, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.
The BCG Banks are national banks chartered under the National Bank Act and
are subject to examination by the Office of the Comptroller of the Currency (the
"OCC"). The OCC regulates or monitors all areas of the BCG
49
<PAGE>
Bank's operations and activities, including reserves, loans, mergers, issuance
of securities, payments of dividends, interest rates and establishment of
branches.
PAYMENT OF DIVIDENDS
BCG is a legal entity separate and distinct from the BCG Banks. Most of
the revenues of BCG result from dividends paid to it by the BCG Banks. There
are statutory and regulatory requirements applicable to the payment of dividends
by the BCG Banks, as well as by BCG to its shareholders.
Under the regulations of the OCC, the BCG Banks may declare dividends out
of their net profits. The approval of OCC is required if the total of all
dividends declared by a national banking association exceed the total of its net
profits for the year combined with its retained net profits for the preceding
two years.
The payment of dividends by BCG and the BCG Banks may also be affected or
limited by other factors, such as the requirement to maintain adequate capital
above regulatory guidelines. In addition, if, in the opinion of the applicable
regulatory authority, a bank under its jurisdiction is engaged in or is about to
engage in an unsafe or unsound practice (which, depending upon the financial
condition of the Banks, could include the payment of dividends), such authority
may require, after notice and hearing, that such bank cease and desist from such
practice. For 1996, BCG's cash dividend payout to stockholders was 6.8% of net
income.
MONETARY POLICY
The results of operations of the BCG Banks are affected by credit policies
of monetary authorities, particularly the Federal Reserve. The instruments of
monetary policy employed by the Federal Reserve include open market operations
in U.S. government securities, changes in the discount rate on bank borrowings
and changes in reserve requirements against bank deposits. In view of changing
conditions in the national economy and in the money markets, as well as the
effect of actions by monetary and fiscal authorities, including the Federal
Reserve, no prediction can be made as to possible future changes in interest
rates, deposit levels, loan demand or the business and earnings of the BCG
Banks.
CAPITAL ADEQUACY
The Federal Reserve and the OCC have implemented substantially identical
risk-based rules for assessing bank and bank holding company capital adequacy.
These regulations establish minimum capital standards in relation to assets and
off-balance sheet exposures as adjusted for credit risk. Banks and bank holding
companies are required to have (i) a minimum level of total capital (as defined)
to risk-weighted assets of 8%; (ii) a minimum Tier One Capital (as defined) to
risk-weighted assets of 4%; and (iii) a minimum stockholders' equity to risk-
weighted assets of 4%. In addition, the Federal Reserve and the OCC have
established a minimum 3% leverage ratio of Tier One Capital to total average
assets for the most highly-rated banks and bank holding companies. "Tier One
Capital" generally consists of common equity not including unrecognized gains
and losses on securities, minority interests in equity accounts of consolidated
subsidiaries and certain perpetual preferred stock less certain intangibles.
The Federal Reserve and the OCC will require a bank holding company and a bank,
respectively, to maintain a leverage ratio greater than 3% if either is
experiencing or anticipating significant growth or is operating with less than
well-diversified risks in the opinion of the Federal Reserve. The Federal
Reserve and the OCC use the leverage ratio in tandem with the risk-based ratio
to assess the capital adequacy of banks and bank holding companies.
The OCC and the Federal Reserve have proposed amending the capital
adequacy standards to provide for the consideration of interest rate risk in the
overall determination of a bank's capital ratio, requiring banks with greater
interest rate risk to maintain adequate capital for the risk. The proposed
revisions are not expected to have a significant effect on BCG's or the BCG
Banks' capital requirements, if adopted in their current form.
Effective December 19, 1992, a new Section 38 to the Federal Deposit
Insurance Act implemented the prompt corrective action provisions that Congress
enacted as a part of the Federal Deposit Insurance Corporation Improvement Act
of 1991 (the "1991 Act"). The "prompt corrective action" provisions set forth
five regulatory zones in which all banks are placed largely based on their
capital positions. Regulators are required to take
50
<PAGE>
increasingly harsh action as a bank's financial condition declines. Regulators
are also empowered to place in receivership or require the sale of a bank to
another depository institution when a bank's capital leverage ratio reaches two
percent. Better capitalized institutions are generally subject to less onerous
regulation and supervision than banks with lesser amounts of capital.
The FDIC has adopted regulations implementing the prompt corrective action
provisions of the 1991 Act, which place financial institutions in the following
five categories based upon capitalization ratios: (i) a "well capitalized"
institution has a total risk-based capital ratio of at least 10%, a Tier One
risk-based ratio of at least 6% and a leverage ratio of at least 5%; (ii) an
"adequately capitalized" institution has a total risk-based capital ratio of at
least 8%, a Tier One risk-based ratio of at least 4% and a leverage ratio of at
least 4%; (iii) an "undercapitalized" institution has a total risk-based capital
ratio of under 8%, a Tier One risk-based ratio of under 4% or a leverage ratio
of under 4%; (iv) a "significantly undercapitalized" institution has a total
risk-based capital ratio of under 6%, a Tier One risk-based ratio of under 3% or
a leverage ratio of under 3%; and (v) a "critically undercapitalized"
institution has a leverage ratio of 2% or less. Institutions in any of the
three undercapitalized categories would be prohibited from declaring dividends
or making capital distributions. The FDIC regulations also establish procedures
for "downgrading" an institution to a lower capital category based on
supervisory factors other than capital. Under the FDIC's regulations, the BCG
Banks are "well capitalized" institutions.
Set forth below are pertinent capital ratios for each of the BCG Banks and
BCG as of December 31, 1996.
<TABLE>
<CAPTION>
Minimal Capital Requirement BCG FSB Ameribank
--- --- ---------
<S> <C> <C> <C>
Tier One Capital to Risk-based
Assets: 4.00%/1/ 11.14% 11.69% 11.78%
Total Capital to Risk-based
Assets: 8.00%/2/ 12.34% 12.94% 12.44%
Leverage Ratio (Tier One Capital
to Total Average Assets): 3.00%/3/ 9.30% 8.76% 8.15%
</TABLE>
/1/ Minimum required ratio for "well
capitalized" banks is 6%
/2/ Minimum required ratio for "well
capitalized" banks is 10%
/3/ Minimum required ratio for "well
capitalized" banks is 5%
RECENT LEGISLATIVE AND REGULATORY ACTION
On April 19, 1995, the four federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community Reinvestment
Act (the "CRA"), which are intended to set distinct assessment standards for
financial institutions. The revised regulation contains three evaluation tests:
(i) a lending test which will compare the institution's market share of loans in
low-and moderate- income areas to its market share of loans in its entire
service area and the percentage of a bank's outstanding loans to low-and
moderate-income areas or individuals, (ii) a services test which will evaluate
the provisions of services that promote the availability of credit to low-and
moderate-income areas, and (iii) an investment test, which will evaluate an
institution's record of investments in organizations designed to foster
community development, small-and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue bonds.
The regulation is designed to reduce some paperwork requirements of the current
regulations and provide regulators, institutions and community groups with a
more objective and predictable manner with which to evaluate the CRA performance
of financial institutions. This regulation became effective on January 1, 1996
at which time evaluation under streamlined procedures began for institutions
with assets of less than $250 million that are owned by a holding company with
total assets of less than $1 billion.
51
<PAGE>
Congress and various federal agencies (including, in addition to the Bank
regulatory agencies, the Department of Housing and Urban Development, the
Federal Trade Commission and the Department of Justice) (collectively, the
"Federal Agencies") responsible for implementing the nation's fair lending laws
have been increasingly concerned that prospective home buyers and other
borrowers are experiencing discrimination in their efforts to obtain loans. In
recent years, the Department of Justice has filed suit against financial
institutions, which it determined had discriminated, seeking fines and
restitution for borrowers who allegedly suffered from discriminatory practices.
Most, if not all, of these suits have been settled (some for substantial sums)
without a full adjudication on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors that agencies will
consider in determining if lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Credit Opportunity Act and the Fair Housing Act. In the policy
statement, three methods of proving lending discrimination were identified: (i)
overt evidence of discrimination, when a lender blatantly discriminates on a
prohibited basis, (ii) evidence of disparate treatment, when a lender treats
applicants differently based on a prohibited factor even where there is no
showing that the treatment was motivated by prejudice or a conscious intention
to discriminate against a person, and (iii) evidence of disparate impact, when a
lender applies a practice uniformly to all applicants, but the practice has a
discriminatory effect, even where such practices are neutral on their face and
are applied equally, unless the practice can be justified on the basis of
business necessity.
On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory Improvement
Act"). The Regulatory Improvement Act contains funding for community
development projects through banks and community development financial
institutions and also numerous regulatory relief provisions designed to
eliminate certain duplicative regulations and paperwork requirements.
On September 29, 1994, President Clinton signed the Reigle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Federal Interstate Bill")
which amended federal law to permit bank holding companies to acquire existing
banks in any state effective September 29, 1995, and any interstate bank holding
company is permitted to merge its various bank subsidiaries into a single bank
with interstate branches after May 31, 1997. States have the authority to
authorize interstate branching prior to June 1, 1997, or alternatively, to opt
out of interstate branching prior to that date. The Georgia legislature did not
opt out.
On January 26, 1996, the Georgia Legislature adopted a bill (the "Georgia
Intrastate Bill") to permit, effective July 1, 1996, any Georgia bank or group
of affiliated banks under one holding company to establish new or additional
branch banks in any three counties within the State of Georgia in which it is
not currently operating. After July 1, 1998, all restrictions on state-wide
branching will be removed. Prior to adoption of the Georgia Intrastate Bill,
Georgia only permitted branching via merger or consolidation with an existing
bank or in certain other limited circumstances.
On July 3, 1997, President Clinton signed legislation to clarify that
branches of state-chartered banks, operating in host states are covered by the
laws of their home chartering state. The Riegle-Neal Amendment Act of 1997 is
intended to preserve the dual banking system by having state banks come under
only the rules of their chartering states. Other legislation dealing with bank
modernization is in various stages of the legislative process and no prediction
as to the outcome or the impact of such legislation can be made at this time.
FDIC INSURANCE ASSESSMENTS FOR THE BCG BANKS
The BCG Banks are subject to FDIC deposit insurance assessments for the
Bank Insurance Fund (the "BIF"). In the first five months of 1995, the BCG
Banks were assessed $.23 per $100 of deposits, based on a risk-based system
whereby banks were assessed on a sliding scale depending upon their placement in
nine separate supervisory categories, from $.23 per $100 of deposits for the
healthiest banks (those with the highest capital, best management and best
overall condition) to as much as $.31 per $100 of deposits for the less-healthy
institutions.
52
<PAGE>
On August 8, 1995, the FDIC lowered the BIF premium for healthy banks 83%
from $.23 per $100 in deposits to $.04 per $100 in deposits, while retaining the
$.31 level for the riskiest banks. The new rate took effect on September 29,
1995 retroactive to June 1, 1995. On September 15, 1995, the FDIC refunded
$119,908 to the BCG Banks for premium overpayments in the second and third
quarter of 1995. On November 14, 1995, the FDIC again lowered the BIF premium
for healthy banks from $.04 per $100 of deposits to zero for the highest rated
institutions (92% of the industry). As a result, the BCG Banks have paid only
the legally required annual minimum payment of $2,000 per year for insurance
beginning in January 1996. Had the current rates been in effect for all of 1994
and 1995, the annual FDIC insurance premiums paid by the BCG Banks would have
collectively been reduced by $588,908.
On September 29, 1996, the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 was enacted (the "1996 Act"). The 1996 Act's chief
accomplishment was to provide for the recapitalization of the Savings
Association Insurance Fund ("SAIF") by levying a one-time special assessment on
SAIF deposits to bring the fund to a reserve ratio equal to $.25 per $100 of
insured deposits and to provide that beginning in 1997, BIF assessments would be
used to help pay off the $780 million in annual interest payments on the $8
billion Financing Corporation ("FICO") bonds issued in the late 1980s as part of
the government rescue of the thrift industry. The law provides that BIF
assessments for FICO bond payments must be set at a rate equal to 20% of the
SAIF rates for such assessments for 1997, 1998 and 1999. After 1999, all FDIC
insured institutions will pay the same assessment rates. For the first six
months of 1997, the assessment for the FICO bond payments will be $.0132 per
$100 of deposits for BIF deposits and $.0648 per $100 of deposits for SAIF
deposits.
EXPERTS
The consolidated financial statements of CSBI as of December 31, 1996 and
1995, and for each of the years in the three-year period ended December 31,
1996, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of BCG at December 31, 1996 and 1995,
and for each of the years in the three-year period ended December 31, 1996 have
been included herein and in the registration statement in reliance upon the
report of Porter Keadle Moore, LLP, independent certified public accountants,
included herein, and upon the authority of said firm as experts in accounting
and auditing.
LEGAL MATTERS
The legality of the shares of CSBI Common Stock being offered hereby is
being passed upon for CSBI by Troutman Sanders LLP, Atlanta, Georgia. As of the
date of this Proxy Statement/Prospectus, certain members of Troutman Sanders LLP
beneficially owned approximately ______ shares of CSBI Common Stock. Troutman
Sanders LLP, counsel for CSBI, also will opine as to certain federal income tax
consequences of the Merger. See "THE MERGER - Certain Federal Income Tax
Consequences."
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, BCG's Board of Directors
knows of no matters that will be presented for consideration at the Special
Meeting other than as described in this Proxy Statement/Prospectus. However,
if any other matter shall come before the Special Meeting or any adjournments or
postponements thereof and shall be voted upon, the proposed proxy will be deemed
to confer authority to the individuals named as authorized therein to vote the
shares represented by such proxy as to any such matters that fall within the
purposes set forth in the Notice of Special Meeting as determined by a majority
of the Board of Directors of BCG.
53
<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 Income - 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 - March 31, 1997 and December 31, 1996 F-29
Consolidated Balance Sheets - March 31, 1997 and 1996 F-30
Consolidated Statements of Earnings - Three Months ended March 31, 1997 and 1996 F-31
Consolidated Statements of Cash Flows - Three Months ended March 31, 1997 and 1996 F-32
Notes to Consolidated Financial Statements - Three Months ended March 31, 1997 and 1996 F-33
</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
(Restated (Restated
1996 Note 2) Note 2)
------------- ------------ ------------
Interest income:
<S> <C> <C> <C>
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>
ADDITIONAL
PAID- RETAINED
COMMON STOCK IN CAPITAL EARNINGS
------------ ---------- ----------
<S> <C> <C> <C>
Balance, December 31, 1993, as previously reported $1,081,500 1,269,608 12,372,757
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
Cumulative effect of accounting change for
investment securities net of tax - - -
Issuance of common stock 1,333 12,164 -
Release of unearned ESOP shares - - -
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 - - -
Minority interest in unrealized loss on available
for sale securities at AmeriCorp - - -
---------- --------- ----------
Balance, December 31, 1994 1,271,536 4,268,539 13,340,173
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 - - -
Cash dividends paid - - (191,161)
Net earnings - - 2,863,658
Change in unrealized gain (loss) on securities
available for sale, net of tax - - -
Minority interest in unrealized gain on available
for sale securities at AmeriCorp - - -
---------- --------- ----------
Balance, December 31, 1995 2,128,774 4,507,789 15,200,657
Issuance of common stock 6,875 26,323 -
Release of unearned ESOP shares - - -
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
---------- --------- ----------
Balance, December 31, 1996 $2,284,864 6,170,157 18,286,889
========== ========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET UNREALIZED GAIN
(LOSS) ON SECURITIES
AVAILABLE FOR SALE, UNEARNED
NET OF TAX ESOP SHARES TREASURY STOCK TOTAL
-------------------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1993, as previously reported - (520,904) (17,940) 14,185,021
Adjustment in connection with pooling of interest
(note 2) - - - 1,940,930
--------- -------- -------- ----------
Balance, December 31, 1993, as restated - (520,904) (17,940) 16,125,951
Cumulative effect of accounting change for
investment securities net of tax 35,209 - - 35,209
Issuance of common stock - - - 13,497
Release of unearned ESOP shares - 220,005 - 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) - - (273,478)
Minority interest in unrealized loss on available
for sale securities at AmeriCorp 17,223 - - 17,223
--------- -------- -------- ----------
Balance, December 31, 1994 (221,046) (300,899) (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 - 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 - - 1,126,180
Minority interest in unrealized gain on available
for sale securities at AmeriCorp (125,713) - - (125,713)
--------- -------- -------- ----------
Balance, December 31, 1995 779,421 (270,809) (111,540) 22,234,292
Issuance of common stock - - - 33,198
Release of unearned ESOP shares - 74,313 - 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) (490,732)
--------- -------- -------- ----------
Balance, December 31, 1996 288,689 (196,496) (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): 17,783,870 12,531,499 37,809,430
Net increase in deposits
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 - -
See accompanying notes to consolidated financial statements.
</TABLE>
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 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
F-7
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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.
INVESTMENT SECURITIES AND INVESTMENT SECURITIES AVAILABLE FOR SALE,
CONTINUED
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 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.
F-8
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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.
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
F-9
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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.
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
F-10
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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.
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.
F-11
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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> <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> <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> <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> <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:
1997 $ 86,690,119
1998 26,357,225
1999 9,257,643
2000 2,132,182
2001 728,294
------------
$125,165,463
============
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> <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.
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> <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> <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> <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> <C>
Current $1,501,074 967,645 816,467
Deferred (343,739) (88,901) (36,868)
Utilization of net operating loss 553,230 491,300 266,000
carryforwards
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> <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> <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> <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
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%.
F-20
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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>
<CAPTION>
<S> <C> <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.
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.
F-21
<PAGE>
BANK CORPORATION OF GEORGIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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.
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
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 onetime 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> <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>
For Capital
Actual Adequacy Purposes
------ -----------------
Amount Ratio Amount Ratio
------ ----- ------ -----
<S> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets):
Consolidated $26,021 12.34% (equal to or greater than)16,869 8.00%
First South Bank, N.A. $16,438 12.94% (equal to or greater than)10,163 8.00%
Ameribank, N.A. $10,517 12.44% (equal to or greater than) 6,763 8.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $23,488 11.14% (equal to or greater than) 8,434 4.00%
First South Bank, N.A. $14,850 11.69% (equal to or greater than) 4,989 4.00%
Ameribank, N.A. $ 9,572 11.78% (equal to or greater than) 3,250 4.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $23,488 9.30% (equal to or greater than)10,102 4.00%
First South Bank, N.A. $14,850 8.76% (equal to or greater than) 6,658 4.00%
Ameribank, N.A. $ 9,572 11.54% (equal to or greater than) 3,138 4.00%
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Consolidated $25,768 12.22% (equal to or greater than)16,869 8.00%
First South Bank, N.A. $16,053 12.81% (equal to or greater than)10,025 8.00%
Ameribank, N.A. $ 9,715 13.15% (equal to or greater than) 5,910 8.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $23,235 11.14% (equal to or greater than) 8,343 4.00%
First South Bank, N.A. $15,237 11.67% (equal to or greater than) 5,223 4.00%
Ameribank, N.A. $ 8,754 11.90% (equal to or greater than) 2,943 4.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $23,235 8.99% (equal to or greater than)10,338 4.00%
First South Bank, N.A. $15,237 9.10% (equal to or greater than) 6,698 4.00%
Ameribank, N.A. $ 8,754 9.62% (equal to or greater than) 3,640 4.00%
</TABLE>
<TABLE>
<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. (equal to or greater than)12,703 (equal to or greater than)10.00%
Ameribank, N.A. (equal to or greater than) 8,454 (equal to or greater than)10.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. (equal to or greater than) 7,483 (equal to or greater than) 6.00%
Ameribank, N.A. (equal to or greater than) 4,875 (equal to or greater than) 6.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. (equal to or greater than) 8,322 (equal to or greater than) 5.00%
Ameribank, N.A. (equal to or greater than) 4,147 (equal to or greater than) 5.00%
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. (equal to or greater than)12,532 (equal to or greater than)10.00%
Ameribank, N.A. (equal to or greater than) 7,388 (equal to or greater than)10.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. (equal to or greater than) 7,834 (equal to or greater than) 6.00%
Ameribank, N.A. (equal to or greater than) 4,414 (equal to or greater than) 6.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated N/A N/A
First South Bank, N.A. (equal to or greater than) 8,372 (equal to or greater than) 5.00%
Ameribank, N.A. (equal to or greater than) 4,550 (equal to or greater than) 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
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash and due from banks $ 32,284,816 34,027,974
Federal Funds sold 17,319,695 5,210,000
Investment securities:
Available for sale 1,089,162 1,088,719
Held to maturity 47,880,577 42,828,598
------------ -----------
Total investment securities 48,969,739 43,917,317
------------ -----------
Loans 189,221,816 190,169,408
Less: Unearned discount (587,500) (736,360)
Less: Allowance for loan losses (2,765,000) (2,849,340)
------------ -----------
Loans, net 185,869,316 186,583,708
------------ -----------
Bank premises and equipment 8,858,478 9,801,980
Accrued interest receivable 1,952,648 2,333,047
Goodwill 1,301,759 1,323,231
Other assets 5,949,087 7,057,065
------------ -----------
$302,505,538 290,254,322
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 46,114,503 44,709,405
Interest bearing deposits 92,968,488 79,417,686
Savings 9,044,431 9,405,878
Time 123,125,199 125,165,463
------------ -----------
Total deposits 271,252,621 258,698,432
------------ -----------
Accrued interest payable and other liabilities 2,313,338 3,333,327
Long-term debt 1,500,000 1,500,000
------------ -----------
Total liabilities 275,065,959 263,531,759
------------ -----------
Stockholders' equity:
Common stock 2,284,864 2,284,864
Capital surplus 6,170,157 6,170,157
Retained earnings 19,230,919 18,286,889
Treasury stock (111,540) (111,540)
Unearned ESOP shares (196,496) (196,496)
Unrealized gain on securities available for sale, net of tax 61,675 288,689
------------ -----------
Total Stockholders' equity 27,439,579 26,722,563
------------ -----------
$302,505,538 290,254,322
============ ===========
</TABLE>
F-29
<PAGE>
BANK CORPORATION OF GEORGIA
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
--------------- ---------------
<S> <C> <C>
Cash and due from banks $ 32,284,816 7,626,954
Federal Funds sold 17,319,695 12,179,214
Investment securities:
Held to maturity 1,089,162 1,136,191
Available for sale 47,880,577 48,555,044
------------ -----------
Total investment securities 48,969,739 49,691,235
------------ -----------
Loans 189,221,816 188,308,301
Less: Unearned discount (587,500) (820,896)
Less: Allowance for loan losses (2,765,000) (2,679,468)
------------ -----------
Loans, net 185,869,316 184,807,937
------------ -----------
Bank premises and equipment 8,858,478 8,729,223
Accrued interest receivable 1,952,648 2,094,097
Goodwill 1,301,759 892,878
Other Assets 5,949,087 5,321,262
------------ -----------
$302,505,538 271,342,800
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
Deposits:
Demand $ 46,114,503 36,048,440
Interest bearing deposits 92,968,488 64,197,441
Savings 9,044,431 10,158,246
Time 123,125,199 125,604,365
------------ -----------
Total deposits 271,252,621 236,008,492
------------ -----------
Accounts payable and accruals 2,313,338 2,271,110
Other borrowed money -- 6,100,000
Long-term debt 1,500,000 2,400,000
------------ -----------
Total liabilities 275,065,959 246,779,602
------------ -----------
Stockholders' equity:
Common stock 2,284,864 2,282,266
Capital surplus 6,170,157 6,161,387
Retained earnings 19,230,919 16,070,894
Unearned ESOP shares (196,496) (270,809)
Treasury stock (111,540) (111,540)
Unrealized gain on securities AFS 61,675 431,000
------------ -----------
Total stockholders' equity 27,439,579 24,563,198
------------ -----------
</TABLE>
$302,505,538 271,342,800
=========== ===========
F-30
<PAGE>
BANK CORPORATION OF GEORGIA
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended:
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Interest income:
Interest and fees on loans $5,135,072 4,941,463
Interest on federal funds sold 126,415 170,534
Interest on investment securities 997,760 769,331
---------- ---------
Total interest income 6,259,247 5,881,328
---------- ---------
Interest expense:
Interest on NOW and money market accounts 718,235 479,152
Interest on savings and time deposits 1,720,052 1,868,528
Other borrowings 27,187 63,855
---------- ---------
Total interest expense 2,465,474 2,411,535
---------- ---------
Net interest income 3,793,773 3,469,793
Provision for loan losses 86,926 121,000
---------- ---------
Net interest income after provision for loan losses 3,706,847 3,348,793
---------- ---------
Other operating income:
Service charge on deposit accounts 360,402 359,637
Gain on sale of loans 156,534 5,739
Miscellaneous 256,144 275,124
---------- ---------
Total other operating income 773,080 640,500
---------- ---------
Other operating expenses:
Salaries and employee benefits 1,965,515 1,529,841
Occupancy and equipment 478,834 358,913
Miscellaneous 628,479 794,563
---------- ---------
Total operating expenses 3,072,828 2,683,317
---------- ---------
Earnings before income taxes and
minority interest in earnings of subsidiary 1,407,099 1,305,976
Income taxes 463,069 388,000
---------- ---------
Earnings before minority interest in earnings
of subsidiary 944,030 917,976
Minority interest in earnings of subsidiary -- 46,913
---------- ---------
Net earnings $ 944,030 871,063
========== =========
Net Earnings per share:
Primary $0.40 0.40
Fully diluted $0.39 0.40
Weighted average number of shares
Primary $2,388,192 2,198,338
Fully diluted $2,394,509 2,202,167
</TABLE>
F-31
<PAGE>
BANK CORPORATION OF GEORGIA
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended:
March 31,1997 March 31, 1996
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 944,030 871,063
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation 196,118 170,941
Amortization and accretion, net (23,330) (39,743)
Minority interests in earnings of subsidiary -- 46,916
Provision for loan losses 86,926 121,000
Gain on sale of premises and equipment (148,104) --
Change in:
Accrued interest receivable and other assets 1,787,810 311,265
Accrued interest payable and other liabilities (1,019,989) (710,566)
----------- -----------
Net cash flows provided by operating activities 1,823,461 770,873
----------- -----------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 2,587,103 2,312,624
Purchase of securities available for sale (7,894,161) (12,119,222)
Net change in loans 627,466 (7,184,327)
Purchase of premises and equipment (104,164) (976,616)
Proceeds from sales of premises and equipment 772,643 -
----------- -----------
Net cash flows used in investing activities (4,011,113) (17,967,541)
----------- -----------
Cash flows from financing activities:
Net increase in deposits 12,554,189 11,719,753
Repayment of other borrowings -- (100,000)
Proceeds from issuance of common stock -- 21,701
----------- -----------
Net cash flows provided by financing activities 12,554,189 11,713,454
----------- -----------
Net increase in cash and cash equivalents 10,366,537 (5,483,214)
Cash and cash equivalents at beginning of period 39,237,974 25,289,382
----------- -----------
Cash and cash equivalents at end of period $49,604,511 19,806,168
=========== ===========
</TABLE>
F-32
<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 10KSB 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.
During 1997, the Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS
128 supersedes APB Opinion 15. SFAS 128 simplifies current standards by
eliminating the presentation of primary EPS and requiring the presentation of
basic EPS, which includes no potential common shares and thus no dilution. The
Statement also requires entities with complex capital structures to present
basic and diluted EPS on the face of the income statement and also eliminates
the modified treasury stock method of computing potential common shares. The
Statement is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. Early application is not
permitted. On adoption, restatement of all prior-period EPS data presented is
required. Presently, BCG is unable to determine the impact that adoption of
SFAS 128 will have on the consolidated financial statements, but management
anticipates that the impact will not be material.
F-33
<PAGE>
PROXY STATEMENTS/PROSPECTUS
Appendix A - Merger Agreement dated March 31, 1997 and amended July 11, 1997
between CSBI and BCG.
F-34
<PAGE>
APPENDIX A
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.
<PAGE>
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of CSBI in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of 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
2
<PAGE>
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, 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.
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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.
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
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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
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
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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 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
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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 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.
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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.
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(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 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
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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 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
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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 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
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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 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
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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 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
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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 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.
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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.
(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.
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(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.
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(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 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 BUSINESS 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
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(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 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
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(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;
(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'
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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 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
20
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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 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.
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(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 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
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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 transactions contemplated by this Agreement.
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(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
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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.
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
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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 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.
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"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 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
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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.
"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.
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"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.
"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
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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, 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
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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
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to do any of the foregoing (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
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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:
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
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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.
ATTEST: "CSBI"
CENTURY SOUTH BANKS, INC.
____________________________________ By: ________________________________
Susan J. Anderson, Secretary James A. Faulkner, President
[CORPORATE SEAL]
ATTEST: "BCG"
BANK CORPORATION OF GEORGIA
____________________________________ By: _________________________________
William H. Anderson, II, Chairman
_________________________, Secretary By: _________________________________
Joseph W. Evans, President
[CORPORATE SEAL]
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LIST OF EXHIBITS
Exhibit 1 Affiliates Agreement
Exhibit 2 Opinion of Kilpatrick Stockton LLP
Exhibit 3 Opinion of Troutman Sanders LLP
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EXHIBIT A
AFFILIATE AGREEMENT
-------------------
Century South Banks, Inc.
455 Jesse Jewell Parkway, Suite 301
Gainesville, Georgia 30501
Attention: James A. Faulkner, President
Gentlemen:
The undersigned is a shareholder of Bank Corporation of Georgia ("BCG"), a
bank holding company organized under the laws of the State of Georgia and
located in Macon, Georgia, and will become a shareholder of Century South Banks,
Inc.("CSBI") pursuant to the transaction described in the Agreement and Plan of
Merger, dated as of March 31, 1997 (the "Agreement"), by and between BCG and
CSBI. Under the terms of the Agreement, BCG will be merged with and into CSBI
(the "Merger"), and the shares of the $1.00 par value common stock of BCG will
be converted into and exchanged for shares of the $1.00 par value common stock
of CSBI ("CSBI Common Stock"). This Affiliate Agreement represents an agreement
between the undersigned and CSBI regarding certain rights and obligations of the
undersigned in connection with the shares of CSBI to be received by the
undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein, the
undersigned and CSBI hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to BCG
he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the Rules and
Regulations of the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended ("1933 Act"), and the undersigned anticipates
that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that he will
not sell, transfer, or otherwise dispose of his interest in, or reduce his risk
relative to, any of the shares of CSBI Common Stock into which his shares of BCG
Common Stock are converted upon consummation of the Merger until such time as
CSBI notifies the undersigned that the requirements of SEC Accounting Series
Release Nos. 130 and 135 ("ASR 130 and 135") have been met. The undersigned
understands that ASR 130 and 135 relate to publication of financial results of
post-Merger combined operations of CSBI and BCG. CSBI agrees that it will
publish such results within 45 days after the end of the most recent calendar
quarter of CSBI containing the required period of post-Merger combined
operations and that it will notify the undersigned promptly following such
publication.
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants and agrees that:
(a) The CSBI Common Stock received by the undersigned as a result of
the Merger will be taken for his own account and not for others, directly, or
indirectly, in whole or in part.
(b) CSBI has informed the undersigned that any distribution by the
undersigned of CSBI Common Stock has not been registered under the 1933 Act and
that shares of CSBI Common Stock received pursuant to the Merger can only be
sold by the undersigned (1) following registration under the 1933 Act, or (2) in
conformity with the volume and other requirements of Rule 145(d) promulgated by
the SEC as the same now exist or may hereafter be amended, or (3) to the extent
some other exemption from registration under the 1933 Act might be available.
THE UNDERSIGNED UNDERSTANDS THAT CSBI IS UNDER NO OBLIGATION TO FILE A
REGISTRATION STATEMENT WITH THE SEC COVERING THE DISPOSITION OF THE
UNDERSIGNED'S SHARES OF CSBI COMMON STOCK.
4. Restrictions on Transfer. The undersigned understands and agrees that
stop transfer instructions with respect to the shares of CSBI Common Stock
received by the undersigned pursuant to the Merger will be given to CSBI's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
36
<PAGE>
"The shares represented by this certificate were issued pursuant to a
business combination and may not be sold nor may the owner thereof
reduce his risks relative thereto in any way, until such time as CSBI
has published the financial results covering at least 30 days of
combined operations after the effective date of the Merger through
which the business combination was effected. In addition, the shares
represented by this certificate may not be sold, transferred or
otherwise disposed of except or unless (1) covered by an effective
registration statement under the Securities Act of 1933, as amended,
(2) in accordance with (i) rule 145(d) (in the case of shares issued to
an individual who is not an affiliate of CSBI) or (ii) Rule 144 (in the
---
case of shares issued to an individual who is an affiliate of CSBI) of
the Rules and Regulations of such Act, or (3) in accordance with a
legal opinion satisfactory to counsel for CSBI that such sale or
transfer is otherwise exempt from the registration requirements of the
Act."
Such legend will also be placed on any certificate representing CSBI securities
issued subsequent to the original issuance of the CSBI Common Stock pursuant to
the Merger as a result of any stock dividend, stock split, or other
recapitalization as long as the CSBI Common Stock issued to the undersigned
pursuant to the Merger has not been transferred in such manner to justify the
removal of the legend therefrom. Upon the request of the undersigned, CSBI
shall cause the certificates representing the shares of CSBI Common Stock issued
to the undersigned in connection with the Merger to be reissued free of any
legend relating to restrictions on transfer by virtue of ASR 130 and 135 as soon
as practicable after the requirements of ASR 130 and 135 have been met. In
addition, if the provisions of Rules 144 and 145 are amended to eliminate
restrictions applicable to the CSBI Common Stock received by the undersigned
pursuant to the Merger, or at the expiration of the restrictive period set forth
in rule 145(d), CSBI, upon the request of the undersigned, will cause the
certificates representing the shares of CSBI Common Stock issued to the
undersigned in connection with the Merger to the reissued free of any legend
relating to the restrictions set forth in Rules 144 and 145(d) upon receipt by
CSBI of an opinion of its counsel to the effect that such legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise dispose
of the shares of CSBI Common Stock received by the undersigned, to the extent he
believes necessary, with his counsel or counsel for BCG.
6. Filing of Reports by CSBI. CSBI agrees, for a period of three years
after the effective date of the Merger, to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended, so that the public information provisions of Rule 145(d)
promulgated by the SEC as the same are presently in effect will be available to
the undersigned in the event the undersigned desires to transfer any shares of
CSBI Common Stock issued to the undersigned pursuant to the Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of CSBI Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
transfer agent for CSBI Common Stock together with such additional information
as the transfer agent may reasonably request. If CSBI's counsel concludes that
such proposed sale or transfer complies with the requirements of Rule 145(d),
CSBI shall cause such counsel to provide such opinions as may be necessary to
CSBI's Transfer Agent so that the undersigned may complete the proposed sale or
transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply with respect to BCG Common Stock held by, and
CSBI Common Stock issued in connection with the Merger to, (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own at
least 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, the undersigned's spouse and any such
relative collectively own at least 10% of any class of equity securities or of
the equity interest. The undersigned further recognizes that, in the event that
the undersigned is a director or executive officer of CSBI or becomes a director
or executive officer of CSBI upon consummation of the Merger, among other
things, any sale of CSBI Common Stock by the undersigned within a period of less
than six months following the effective time of the Merger may subject the
undersigned to liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
37
<PAGE>
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between CSBI and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Georgia.
This Affiliate Agreement is executed as of the ____, day of ________, 1997.
Very truly yours,
___________________________________________
Signature
___________________________________________
Print Name
___________________________________________
___________________________________________
___________________________________________
Address
AGREED TO AND ACCEPTED as of
__________________________, 1997
CENTURY SOUTH BANKS, INC.
By: ____________________________
James A. Faulkner, President
38
<PAGE>
EXHIBIT B
MATTERS TO WHICH
KILPATRICK STOCKTON LLP WILL OPINE
1. BCG is a bank holding company duly organized, validly existing, and in
good standing under the laws of the State of Georgia with corporate power and
authority to conduct its business and to own and use its Assets.
2. The deposits of the BCG Banks are insured by the Federal Deposit
Insurance Corporation to the extent provided by law.
3. BCG's authorized shares consists of 3,000,000 shares of BCG Common
Stock, of which 2,268,097 shares were outstanding as of March 31, 1997 and
__________ shares were outstanding as of the Closing Date. As of March 31, 1997,
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. As of the
Closing Date _________ shares of BCG Common Stock were reserved for issuance
upon the exercise of outstanding stock options and purchases under the BCG
Option Plan. The shares of BCG Common Stock have been duly authorized and
validly issued, were not issued in violation of any statutory preemptive rights
of shareholders, and are fully paid and nonassessable. To our Knowledge, there
are no options, subscriptions, warrants, calls, rights or commitments obligating
BCG to issue or acquire any of its equity securities except those issued
pursuant to the BCG Option Plan.
4. The execution and delivery by BCG of the Agreement do not, and if BCG
was now to perform its obligations under the Agreement such performance would
not, violate or contravene any provision of the Articles of Incorporation or
Bylaws of BCG or, to our Knowledge, result in any breach of, or default or
acceleration under any mortgage, agreement, lease, indenture, or other
instrument, order, judgment or decree to which BCG is a party or by which it is
bound other than pursuant to that certain Loan Agreement with First Liberty Bank
dated as of _________, 199_, a copy of which has been provided to CSBI.
5. The Agreement has been duly and validly executed and delivered by BCG,
and assuming valid authorization, execution and delivery by CSBI, constitutes a
valid and binding agreement of BCG enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally, provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
39
<PAGE>
EXHIBIT C
MATTERS TO WHICH
TROUTMAN SANDERS LLP
WILL OPINE
1. CSBI is a bank holding company duly organized, validly existing and in
good standing under the laws of the State of Georgia with corporate power and
authority to conduct its business and to own and use its Assets.
2. The execution and delivery by CSBI of the Agreement do not, and if CSBI
was now to perform its obligations under the Agreement, such performance would
not, violate or contravene any provision of the Articles of Incorporation or
Bylaws of CSBI or, to our Knowledge, result in any breach of, or default or
acceleration under any mortgage, agreement, lease, indenture, or other
instrument, order, judgment, or decree to which CSBI is a party or by which CSBI
is bound.
3. The Agreement has been duly and validly executed and delivered by CSBI,
and assuming valid authorization, execution and delivery by BCG, constitutes a
valid and binding agreement of CSBI enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally, provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
40
<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: _________________________________
____________________, Secretary William H. Anderson, II, Chairman
[CORPORATE SEAL]
By: _________________________________
Joseph W. Evans, President
"CSBI"
ATTEST: CENTURY SOUTH BANKS, INC.
__________________________________ By: _________________________________
Susan J. Anderson, Secretary James A. Faulkner, President
[CORPORATE SEAL]
41
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The provisions of the Georgia Business Corporation Code and the
Registrant's Bylaws set forth the extent to which the Registrant's directors and
officers may be indemnified against liabilities they may incur while serving in
such capacities. Under these indemnification provisions, the Registrant is
required to indemnify any of its directors or officers against any reasonable
expenses (including attorneys' fees) incurred by such director or officer in
defense of any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and whether formal or informal, to which such
director or officer was made a party, or in defense of any claim, issue or
matter therein, by reason of the fact that such director or officer is or was a
director or officer of the Registrant or who, while a director of the
Registrant, is or was serving at the Registrant's request as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
to the extent that such director or officer has been successful, on the merits
or otherwise, in such defense. The Registrant also must indemnify any of its
directors, and may indemnify any of its officers, against any liability incurred
in connection with any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, and
whether formal or informal, by reason of the fact that such director or officer
is or was a director or officer of the Registrant or who, while a director or
officer of the Registrant, is or was serving at the Registrant's request as a
director, officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
if such director or officer acted in a manner such director or officer believed
in good faith to be in, or not opposed to, the best interests of the Registrant,
or, with respect to any criminal proceeding, had no reasonable cause to believe
such director's or officer's conduct was unlawful, if a determination has been
made that the director or officer has met these standards of conduct. Such
indemnification in connection with a proceeding by or in the right of the
Registrant, however, is limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding. The Registrant may also
provide advancement of expenses incurred by a director or officer in defending
any such action, suit, or proceeding upon receipt of a written affirmation of
such officer or director that such director or officer has met certain standards
of conduct and an undertaking by or on behalf of such director or officer to
repay such advances unless it is ultimately determined that such director or
officer is entitled to indemnification by the Registrant.
The Registrant may not indemnify a director or officer in connection with a
proceeding by or in the right of the Registrant in which the director or officer
was adjudged liable to the Registrant, or in connection with a proceeding in
which he was adjudged liable on the basis that he improperly received a personal
benefit.
The Registrant's Articles of Incorporation contain a provision which
provides that, to the fullest extent permitted by the Business Corporation Code
of Georgia, directors of the Registrant shall not be personally liable to the
Registrant or its shareholders for monetary damages for breach of his duty of
care or any other duty as a director.
The Registrant maintains an insurance policy insuring the Registrant and
directors and officers of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
2(a) Agreement and Plan of Merger, dated as of March 31, 1997 and amended
July 11, 1997 by and between CSBI and BCG (included in Appendix A to
the Proxy Statement/Prospectus and incorporated by reference herein)
3(a) Articles of Incorporation, as amended (included as Exhibit 3(a) to
the Registrant's Form 10-K for the fiscal year ended December 31,
1996, previously filed with the Commission and incorporated by
reference herein)
II-1
<PAGE>
3(b) Bylaws, as amended (included as Exhibit 3(b) to the Registrant's
Form 10-K for the fiscal year ended December 31, 1996, previously
filed with the Commission and incorporated by reference herein)
4(a) See Exhibits 3(a) and 3(b) for provisions of the Articles of
Incorporation and Bylaws of the Registrant defining rights of
holders of Common Stock of the Registrant
5 Tax Opinion of Troutman Sanders LLP
8 Securities Opinion of Troutman Sanders LLP
11 Statement regarding computation of per share earnings (included in
Pro Forma Financial Information in this Registration Statement
23(a) Consent of Troutman Sanders LLP (included in Exhibits 5 and 8)
23(b) Consent of KPMG Peat Marwick LLP as to CSBI
23(c) Consent of Porter Keadle Moore, LLP as to BCG
25 Power of Attorney (included in the signature page of page 61 of this
Registration Statement)
99.1 Form of Proxy of BCG
- -----------------------------------
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; Provided,
--------
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
- -------
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-2
<PAGE>
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the Registrant's Articles of Incorporation or Bylaws,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Dahlonega, State
of Georgia, on August 8, 1997.
CENTURY SOUTH BANKS, INC.
By: /s/ James A. Faulkner
----------------------------------------------
James A. Faulkner, President and Chief
Executive Officer
By: /s/ Susan J. Anderson
----------------------------------------------
Susan J. Anderson, Senior Vice President and
Chief Financial Officer
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, James A. Faulkner and
Susan J. Anderson, and each one of them, their respective attorney-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
and all amendments to this Registration Statement (including post-effective
amendments), and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or their
respective substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
- ------------------------------------------------------- Chairman of the Board and Director
/s/
- ------------------------------------------------------- President, Chief Executive Officer, and Director
J. Russell Ivie
/s/
- ------------------------------------------------------- Director
James A. Faulkner
/s/
- ------------------------------------------------------- Director
E. H. Chambers, Jr.
/s/
- ------------------------------------------------------- Director
William L. Chandler
- ------------------------------------------------------- Director
Clarence B. Denard
/s/
- ------------------------------------------------------- Director
Thomas T. Folger, Jr.
/s/
- ------------------------------------------------------- Director
Sherman Green
/s/
- ------------------------------------------------------- Director
Dudley K. Owens
- ------------------------------------------------------- Director
William D. Reeves
/s/
- ------------------------------------------------------- Director
C. J. Sisson
/s/
- ------------------------------------------------------- Director
E. Paul Stringer
/s/
- ------------------------------------------------------- Director
Myron B. Turner
/s/
- ------------------------------------------------------- Director
Al J. Wimpy
/s/
- ------------------------------------------------------- Director
George A. Winn
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------- ------------
<S> <C> <C>
2(a) Agreement and Plan of Merger, dated as of March 31, 1997 and amended
July 11, 1997 by and between CSBI and BCG (included in Appendix A to the Proxy
Statement/Prospectus and incorporated by reference herein) N/A
3(a) Articles of Incorporation, as amended (included as Exhibit 3(a) to the
Registrant's Form 10-K for the fiscal year ended December 31, 1996,
previously filed with the Commission and incorporated by reference herein) N/A
3(b) Bylaws, as amended (included as Exhibit 3(b) to the Registrant's
Form 10-K for the fiscal year ended December 31, 1996, previously filed
with the Commission and incorporated by reference herein) N/A
4(a) See Exhibits 3(a) and 3(b) for provisions of the Articles of Incorporation
and Bylaws of the Registrant defining rights of holders of Common Stock
of the Registrant N/A
5 Tax Opinion of Troutman Sanders LLP 70
8 Securities Opinion of Troutman Sanders LLP 76
11 Statement regarding computation of per share earnings (included in Pro Forma Financial
Information in this Registration Statement N/A
23(a) Consent of Troutman Sanders LLP (included in Exhibits 5 and 8) N/A
23(b) Consent of KPMG Peat Marwick LLP as to CSBI 78
23(c) Consent of Porter Keadle Moore, LLP as to BCG 79
25 Power of Attorney (included in the signature page of page II-1 of this
Registration Statement)
99.1 Form of Proxy of BCG 80
</TABLE>
<PAGE>
EXHIBIT 5
TROUTMAN SANDERS LLP
ATTORNEYS AT LAW
A LIMITED LIABILITY PARTNERSHIP
NATIONSBANK PLAZA
600 PEACHTREE STREET, N.E. - SUITE 5200
ATLANTA, GEORGIA 30308-2216
TELEPHONE: 404-885-3000
FACSIMILE: 404-885-3900
INTERNET: Thomas. [email protected]
Thomas O. Powell 404-885-3294
[Closing Date]
Bank Corporation of Georgia
4951 Forsyth Road
Macon, Georgia 31203-4099
Century South Banks, Inc.
60 Main Street West
Dahlonega, Georgia 30533
Re: Proposed Merger Involving Bank Corporation of Georgia and Century
South Banks, Inc.
Ladies and Gentlemen:
We have acted as counsel to Century South Banks, Inc. ("CSBI"), in
connection with the proposed merger of Bank Corporation of Georgia ("BCG") with
and into Century South Banks, Inc. (the "Merger") First South Bank, National
Association and Ameribank, National Association (collectively, "BCG Banks") will
become wholly-owned subsidiaries of CSBI. The Merger will be effected pursuant
to the Agreement and Plan of Merger by and between CSBI and BCG dated as of
March 31, 1997 and amended July 11, 1997 (the "Agreement").
In our capacity as counsel to CSBI, our opinion has been requested with
respect to certain of the federal income tax consequences of the proposed
Merger. All capitalized terms used herein without definition shall have the
respective meanings specified in the Agreement and, unless otherwise specified,
all section references herein are to the Internal Revenue Code of 1986, as
amended (the "Code").
In rendering the opinions expressed herein, we have examined such documents
as we have deemed appropriate, including:
(1) the Agreement;
(2) the Registration Statement and Proxy Statement/Prospectus being filed
with the Securities and Exchange Commission regarding the Merger; and
(3) such additional documents as we have considered relevant.
In our examination of such documents, we have assumed, with your consent,
that all documents submitted to us as photocopies faithfully reproduce the
originals thereof, that such originals are authentic, that all such documents
have been or will be duly executed to the extent required, and that all
statements set forth in such documents are accurate. With your permission, we
have also assumed certain other factual matters set forth more fully below.
<PAGE>
EXHIBIT 8
TROUTMAN SANDERS LLP
ATTORNEYS AT LAW
A LIMITED LIABILITY PARTNERSHIP
NATIONSBANK PLAZA
600 PEACHTREE STREET, N.E. - SUITE 5200
ATLANTA, GEORGIA 30308-2216
TELEPHONE: 404-885-3000
FACSIMILE: 404-885-3995
INTERNET: [email protected]
Thomas O. Powell 404-885-3294
[Closing Date]
Bank Corporation of Georgia
4951 Forsyth Road
Macon, Georgia 31203-4099
Re: Merger of Bank Corporation of Georgia with and into Century South
Banks, Inc.
Ladies and Gentlemen:
We have served as counsel to Century South Banks, Inc. ("CSBI"), a
corporation organized and existing under the laws of the State of Georgia, in
connection with the execution and delivery of the Agreement and Plan of Merger,
dated March 31, 1997, and amended on July 11, 1997 (the "Agreement"), by and
between CSBI and Bank Corporation of Georgia ("BCG"). This opinion is delivered
pursuant to Section 9.3(d) of the Agreement.
This opinion letter is limited by, and shall be interpreted in accordance
with, the January 1, 1992 edition of Interpretive Standards Applicable to
------------------------------------
Certain Legal Opinions to Third Parties in Corporate Transactions, adopted by
- -----------------------------------------------------------------
the Legal Opinion Committee of the Corporate and Banking Law Section of the
State Bar of Georgia, which Interpretive Standards are incorporated in this
opinion letter by this reference. As a consequence, this opinion letter is
subject to a number of qualifications, exceptions, definitions, limitations on
coverage, and other limitations, all as more particularly described in the
Interpretive Standards, and this opinion should be read in conjunction
therewith. Capitalized terms used in this opinion letter and not otherwise
defined herein shall have meanings assigned to such terms in the Interpretive
Standards and the Agreement.
In rendering this opinion, we have examined the corporate books and records
of CSBI and the Registration Statement on Form S-4 filed by CSBI with the
Securities and Exchange Commission on August __, 1997, and made such other
investigations as we have deemed necessary. In such examinations we have
assumed the genuineness of all signatures on all original documents, the
conformity to the original documents of all copies submitted to us, and (except
where our opinion expressly addresses execution and delivery) the due execution
and delivery of all documents where due execution and delivery are prerequisite
to the effectiveness thereof.
As to questions of fact material to this opinion, we have relied solely
upon the representations and warranties as to factual matters contained in
certificates and statements of officers of CSBI and certain public officials and
upon the accuracy and completeness of the representations and warranties of the
parties to the Agreement. We have made no independent investigations with
regard thereto and, accordingly, we do not express any view or belief as to
matters that might have been disclosed by independent verification.
Based upon and subject to the foregoing, we are of the opinion that:
1. CSBI has the corporate power and authority to conduct its business as
described in the Proxy Statement included in the Registration Statement and to
own and use its Assets.
<PAGE>
2. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles of
Incorporation or Bylaws of CSBI, or, to our knowledge, any order, arbitration
award, judgment, or decree to which CSBI is a party or by which CSBI is bound.
3. The Agreement has been duly and validly executed and delivered by CSBI
and assuming valid authorization, execution and delivery by BCG, constitutes a
valid and binding agreement of CSBI enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally, provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
4. The shares of the $1.00 par value common stock of CSBI to be issued to
the shareholders of BCG upon consummation of the Merger have been registered
under the Securities Act of 1933, as amended, and when issued in accordance with
the Agreement, will be validly issued, fully paid and nonassessable.
We hereby confirm to you that CSBI is a corporation validly existing under
the laws of the State of Georgia. The foregoing statement is based solely upon
a certificate provided by the Georgia Secretary of State dated _______________
_____________, 1997 and is limited to the meaning ascribed to such certificate
by the Georgia Secretary of State.
We are admitted to practice law in the State of Georgia only and do not
hold ourselves out as being experts on the law of any other jurisdiction.
This opinion is limited to the matters expressly opined on herein, and no
opinion may be implied or inferred beyond those expressly stated. This opinion
is rendered as of the date hereof and we make no undertaking and expressly
disclaim any duty to supplement or update such opinion, if, after the date
hereof, facts or circumstances come to our attention or changes in the law occur
which could affect such opinion. This opinion is being furnished to you solely
for your benefit, and is not to be used, circulated, quoted or otherwise
referred to for any other purpose without our prior express written consent and
may not be relied upon by any other person without our express written consent.
Sincerely,
/s/ Thomas O. Powell
----------------------------------
Thomas O. Powell
cc: James A. Faulkner, President
Richard R. Cheatham, Esquire
2
<PAGE>
EXHIBIT 23(b)
Accountants' Consent
--------------------
The Board of Directors
Century South Banks, Inc:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the headings "Experts" in the Prospectus/Proxy
Statement.
KPMG PEAT MARWICK LLP
/s/
----------------------------------------
Atlanta, Georgia
August 4, 1997
<PAGE>
EXHIBIT 23(c)
CONSENT OF INDEPENDENT AUDITOR
We have issued our report dated March 5, 1997, except for note 14 as to which
the date is July 11, 1997 accompanying the consolidated financial statements of
Bank Corporation of Georgia and subsidiaries contained in this Form S-4
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in this Form S-4 Registration Statement and Prospectus
and to the use of our name as it appears under the caption "Experts."
PORTER KEADLE MOORE, LLP
/s/
--------------------------------------------
Successor to the practice of Evans, Porter,
Bryan & Co.
Atlanta, Georgia
August 4, 1997
<PAGE>
EXHIBIT 99.1
BANK CORPORATION OF GEORGIA
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William H. Anderson, II and Joseph W. Evans
as Proxies, each with the power to appoint his substitute, and hereby authorizes
either one or both of them to represent and to vote, as designated below, all
the shares of common stock of Bank Corporation of Georgia ("BCG") held of record
by the undersigned on August 11, 1997, at the Special Meeting of Shareholders to
be held at 1:00 p.m., Macon time, on August __, 1997, at the main office of BCG
located at 4951 Forsyth Road, Macon, Georgia.
1. PROPOSAL TO: (i) approve the Agreement and Plan of Merger, dated as of
March 31, 1997 and amended July 11, 1997 (the "Merger Agreement"), by and
between BCG and Century South Banks, Inc. ("CSBI"), pursuant to which, among
other matters, (a) BCG will merge with and into CSBI and (b) the shares of BCG
common stock will be converted into the right to receive shares of CSBI common
stock, as described in the Proxy Statement/Prospectus dated August __, 1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly become before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 ABOVE.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
DATED:______________________________, 1997
__________________________________________
Signature
__________________________________________
Signature if held jointly
