<PAGE>
As filed with the Securities and Exchange Commission on October 27, 1999
Registration No. 333-_____
- --------------------------------------------------------------------------------
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)
<TABLE>
<S> <C> <C>
Georgia 6711 58-1455591
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Incorporation or Classification Code Number) Identification Number)
Organization)
</TABLE>
60 Main Street West
Dahlonega, Georgia 30533
(706) 864-3915
(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
(706) 864-3915
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
With copies to:
Thomas O. Powell, Esquire James C. Stewart, Esquire
Troutman Sanders LLP Housley Kantarian & Bronstein P.C.
600 Peachtree Street, N.E. 1220 19th Street, N.W.
Suite 5200 Suite 700
Atlanta, Georgia 30308-2216 Washington, D.C. 20036
(404) 885-3294 (202) 822-9611
Approximate date of commencement of proposed sale 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. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [_]
_______________
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/(1)/ Per Share Offering Price Registration Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00
par value per share 976,528 /(2)/ $14,647,921/(3)/ $4,073
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The footnotes to this calculation are contained on the following page.
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>
Calculation of Registration Fee
_________________
/(1)/ Based upon an estimate of the maximum number of shares of the
Registrant's common stock which may be issued in connection with the
proposed merger (the "Merger") of Haywood Bancshares, Inc. ("Haywood")
with and into HBI Acquisition Corp. ("HAC"), a wholly-owned subsidiary of
the Registrant.
/(2)/ Not applicable.
/(3)/ Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f). Haywood had 1,250,356 shares outstanding on
October 20, 1999. Pursuant to Rules 457(f) (1) and (3), the registration
fee was calculated based on (i) the average of the high and low prices of
Haywood common stock reported on the American Stock Exchange on October
20, 1999 multiplied by the maximum number of shares of Haywood common
stock to be canceled in the Merger, minus (ii) the minimum amount of cash
to be paid by the Registrant to Haywood shareholders ($11,984,662).
<PAGE>
Proxy Statement of Prospectus of
Haywood Bancshares, Inc. Century South Banks, Inc.
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Haywood Bancshares, Inc. and Century South
Banks, Inc. have approved a merger in which Haywood will become a wholly-owned
subsidiary of CSBI. CSBI is a $1.2 billion bank holding company that provides a
wide range of commercial and retail banking services in Georgia, Tennessee and
Alabama. We are sending you this proxy statement/prospectus to ask you to vote
in favor of the merger.
If we complete the merger, each share of your Haywood common stock
will be converted into the right to receive either:
. a fraction of a share of CSBI common stock determined by a
formula (This fraction is known as the "exchange ratio." The
precise exchange ratio will depend upon the market value of CSBI
common stock. If CSBI's market value is between $24.00 and $27.00
per share, the exchange ratio will be 0.8874. However, if CSBI's
market value is greater than $27.00 per share, the exchange ratio
will be decreased so that your Haywood common stock will be
valued at approximately $23.95 per share. If CSBI's market value
is less than $24.00 per share, the exchange ratio will be
increased so that your Haywood common stock will be valued at
approximately $21.30 per share.); or
. an amount of cash equal to the exchange ratio (determined as
described above) multiplied by the market value of CSBI common
stock.
In the event Haywood's shareholders' equity (which generally is the
difference between Haywood's assets and liabilities, subject to several
adjustments pursuant to the merger agreement) is less than $21 million as of the
end of the month immediately preceding the effective time of the merger, the
exchange ratio will be reduced proportionately. As of ______________, 1999,
Haywood's shareholders' equity, as determined under the merger agreement, was
approximately $__________ million.
The market value of CSBI common stock will be equal to the average
closing price of CSBI common stock on the Nasdaq National Market over a 20-day
trading period ending ten days prior to the effective time of the merger. CSBI
common stock trades on the Nasdaq National Market under the symbol "CSBI." On
__________, 1999, the closing price of CSBI common stock was $_______.
If you own 100 shares or more of Haywood common stock, you may
indicate a preference to receive CSBI common stock, cash or a combination of
both in the merger by completing the election form/letter of transmittal
enclosed with this proxy statement/prospectus. If you do not select a preference
by _______________, CSBI will make the determination as to whether you will
receive stock, cash or a combination of both. Even if you select a preference by
_____________, the amount of CSBI common stock or cash to be received by you is
subject to allocation and pro rata adjustments to the extent required to ensure
that 50% of the total merger consideration paid by CSBI is paid in CSBI common
stock and 50% is paid in cash. If you own less than 100 shares of Haywood common
stock, you will receive cash upon completion of the merger.
The merger cannot be completed without the approval of Haywood
shareholders. Haywood has scheduled a special meeting of its shareholders to
vote on the merger.
Your vote is very important. Whether or not you plan to attend the
special shareholder meeting, please take the time to vote by completing and
mailing the enclosed proxy card. If you sign, date and mail your proxy card
without indicating how you want to vote, Haywood will vote your proxy in favor
of the merger. If you do not return your card, the effect will be the same as a
vote against the merger.
Each member of Haywood's board of directors supports the acquisition
of Haywood by CSBI and Haywood's board of directors unanimously recommends that
you vote in favor of the merger.
This proxy statement/prospectus provides detailed information about
the merger. You should read it carefully. The merger involves risks. See "Risk
Factors" on page 11 of this proxy statement/prospectus.
The date, time and place of the special meeting are:
_________ ____, 1999, 7:30 p.m.
Haywood Savings Bank, Inc., SSB
370 North Main Street
Waynesville, North Carolina
On behalf of your board of directors, we thank you for your support and
urge you to vote FOR approval of the merger.
________________________________ _______________________________
William P. Burgin Larry R. Ammons
Chairman of the Board President and Managing Officer
Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved of the securities to be issued
under this proxy statement/prospectus or determined if this proxy
statement/prospectus is accurate or adequate. Any representation to the contrary
is a criminal offense.
These securities are not savings or deposit accounts or other
obligations of any bank or non-bank subsidiary of any of the parties, and they
are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance
Fund or any other governmental agency.
This proxy statement/prospectus is dated _________ ____, 1999
and was first mailed to shareholders on or about _________ ____, 1999.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about CSBI and Haywood from documents that are not
included in or delivered with this proxy statement/prospectus. You can obtain
documents incorporated by reference in this proxy statement/prospectus,
excluding any exhibits to those documents (unless the exhibit is specifically
incorporated by reference into the document referenced in this proxy
statement/prospectus), by requesting them in writing or by telephone from:
Century South Banks, Inc. Haywood Bancshares, Inc.
60 Main Street West 370 North Main Street
Dahlonega, Georgia 30533 Waynesville, North Carolina 28786
Attention: Secretary Attention: Secretary
Telephone: (706) 864-1111 Telephone: (828) 456-9092
You will not be charged for any of the documents that you request
(other than certain exhibits to those documents). If you would like to request
documents from us, please do so by _______, 1999 in order to receive them before
Haywood's special shareholder meeting.
See "Where You Can Find More Information" on page 58.
<PAGE>
HAYWOOD BANCSHARES, INC.
370 North Main Street
Waynesville, North Carolina 28786
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
________ ____, 1999
To the Shareholders of Haywood Bancshares, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of
Haywood Bancshares, Inc. will be held at the main office of Haywood Savings
Bank, Inc., SSB, located at 370 North Main Street, Waynesville, North Carolina,
at 7:30 p.m., local time, on ________ _____, 1999, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of August 5, 1999, and amended as of October 15, 1999,
by and among Haywood, Century South Banks, Inc., and a wholly-owned subsidiary
of CSBI, providing for the merger of Haywood with and into CSBI's subsidiary. A
copy of the merger agreement is attached as Appendix A to the enclosed proxy
statement/prospectus.
2. To transact any other business as may properly come before the
special meeting or any adjournments or postponements of the meeting.
Only holders of record of Haywood common stock at the close of
business on __________ ___, 1999 are entitled to receive notice of, and to vote,
at the special meeting or any adjournments or postponements of the meeting.
Approval of the merger agreement requires the affirmative vote of at least a
majority of all of the votes entitled to be cast at the special meeting. Holders
of Haywood common stock have no appraisal or dissenters' rights under North
Carolina law in connection with the merger.
HAYWOOD'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HAYWOOD
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
Each shareholder, whether or not he or she plans to attend the special
meeting, is requested to sign, date and return the enclosed proxy without delay
in the enclosed postage-paid envelope. Any proxy given by the shareholder may
be revoked by filing with Haywood's Secretary a written revocation or a duly
executed proxy bearing a later date. Any shareholder present at the special
meeting may revoke his or her proxy and vote personally on each matter brought
before the special meeting. However, if you are a shareholder whose shares are
not registered in your own name, you will need additional documentation from
your record holder to vote personally at the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Paul W. Trantham, Secretary
- --------------------------------------------------------------------------------
IMPORTANT: The prompt return of proxies will save Haywood the expense of
further requests for proxies in order to insure a quorum at the special meeting.
A self-addressed envelope is enclosed for your convenience. No postage is
required if mailed in the United States.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY........................................................................ 1
The Companies................................................................. 1
The Merger.................................................................... 1
What Haywood Shareholders Will Receive........................................ 1
How Haywood Shareholders Can Elect Stock, Cash or Both........................ 2
Haywood's Reasons for the Merger.............................................. 2
Haywood's Special Meeting of Shareholders..................................... 2
Haywood's Board of Directors' Recommendation to Haywood Shareholders.......... 2
Record Date; Voting Power..................................................... 2
Vote Required................................................................. 2
Interests of Persons Involved in the Merger that are Different from Yours..... 2
Conditions to the Merger...................................................... 2
Termination of the Merger Agreement........................................... 3
Haywood and CSBI's Stock Option Agreement..................................... 3
Regulatory Matters............................................................ 3
Accounting Treatment.......................................................... 3
Important Federal Tax Consequences............................................ 3
No Appraisal or Dissenters' Rights............................................ 4
Market Prices of CSBI and Haywood Common Stock; Dividend Payments............. 5
CSBI and Haywood Selected Comparative Per Share Data.......................... 6
CSBI Selected Financial Data.................................................. 8
Haywood Selected Financial Data............................................... 9
CSBI and Haywood Pro Forma Selected Financial Data............................ 10
RISK FACTORS................................................................... 11
A WARNING ABOUT FORWARD-LOOKING STATEMENTS..................................... 13
THE SPECIAL MEETING............................................................ 14
General....................................................................... 14
Meeting Date, Time and Place and Record Date.................................. 14
Matters to be Considered...................................................... 14
Vote Required................................................................. 14
Voting of Proxies............................................................. 14
Revocability of Proxies....................................................... 15
Solicitation of Proxies....................................................... 15
Recommendation of Haywood's Board of Directors................................ 15
Information About Haywood's Auditors.......................................... 16
THE MERGER..................................................................... 17
General....................................................................... 17
Background of the Merger...................................................... 17
Haywood's Reasons for the Merger.............................................. 18
CSBI's Reasons for the Merger................................................. 19
Opinion of Trident............................................................ 19
Merger Consideration.......................................................... 23
Election Procedures........................................................... 23
Allocation Rules.............................................................. 24
Effective Time of the Merger.................................................. 25
Exchange of Certificates...................................................... 26
Important Federal Income Tax Consequences..................................... 26
Management and Operations After the Merger.................................... 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Interests of Haywood's Employees and Directors in the Merger.................. 29
Conditions to Consummation.................................................... 31
Conversion of Haywood Savings................................................. 32
Regulatory Matters............................................................ 32
Amendment, Waiver and Termination............................................. 34
Conduct of Business Pending the Merger........................................ 35
The Option Agreement.......................................................... 36
Expenses and Fees............................................................. 38
Accounting Treatment.......................................................... 38
Resales of CSBI Common Stock.................................................. 38
No Appraisal or Dissenters' Rights............................................ 39
PRO FORMA COMBINED FINANCIAL DATA.............................................. 40
INFORMATION ABOUT CSBI......................................................... 45
General....................................................................... 45
Subsidiaries.................................................................. 45
Acquisitions.................................................................. 45
Additional Information........................................................ 46
INFORMATION ABOUT HAYWOOD..................................................... 47
General....................................................................... 47
Haywood Savings............................................................... 47
Subsidiaries of Haywood Savings............................................... 48
Additional Information........................................................ 48
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................. 49
COMPARATIVE RIGHTS OF HAYWOOD SHAREHOLDERS AND CSBI SHAREHOLDERS............... 51
Authorized Capital Stock...................................................... 51
Directors..................................................................... 51
Voting Requirements Generally................................................. 52
Dividends..................................................................... 52
Amendments to Articles of Incorporation and Bylaws............................ 53
Special Meetings of Shareholders.............................................. 53
Advance Notice Provisions of Shareholder Proposals............................ 53
Liability of Directors........................................................ 53
Indemnification of Directors and Officers..................................... 54
Mergers, Share Exchanges and Sales of Assets.................................. 55
EXPERTS........................................................................ 57
LEGAL MATTERS.................................................................. 57
SHAREHOLDER PROPOSALS AND OTHER MATTERS........................................ 57
WHERE YOU CAN FIND MORE INFORMATION............................................ 58
</TABLE>
Appendix A - Agreement and Plan of Merger, dated as of August 5, 1999, and
amended as of October 15, 1999, by and among Haywood Bancshares, Inc., Century
South Banks, Inc. and HBI Acquisition Corp.
Appendix B - Opinion of Trident Securities, a division of McDonald Investments
Inc.
Appendix C - Stock Option Agreement
ii
<PAGE>
SUMMARY
This summary highlights selected information from this document and
may not contain all of the information that is important to you. To understand
the merger fully, and for more complete descriptions of the legal terms of the
merger, you should read carefully this entire document and the documents we have
referred you to. (The term "we" or "our" refers to both CSBI and Haywood
together.)
The Companies (Pages 45 and 47)
Century South Banks, Inc.
60 Main Street West
Dahlonega, Georgia 30533
(706) 864-3915
CSBI is a $1.2 billion bank holding company. Through its banking
subsidiaries, CSBI provides a wide range of commercial and retail banking
services in Georgia, Tennessee and Alabama.
Haywood Bancshares, Inc.
370 North Main Street
Waynesville, North Carolina 28786
(828) 456-9092
Haywood is a $150 million bank holding company. Through its banking
subsidiary, Haywood is primarily a real estate mortgage lender whose business
revolves around the origination of one-to-four family residential mortgage loans
in Western North Carolina.
The Merger (Page 17)
The acquisition of Haywood by CSBI is governed by a merger agreement.
We encourage you to read the merger agreement, which is attached as Appendix A.
What Haywood Shareholders Will Receive
(Page 23)
If we complete the merger, each share of your Haywood common stock
will be converted into the right to receive either:
. a fraction of a share of CSBI common stock determined by a formula
(This fraction is known as the "exchange ratio." The precise exchange
ratio will depend upon the market value of CSBI common stock. If
CSBI's market value is between $24.00 and $27.00 per share, the
exchange ratio will be 0.8874. However, if CSBI's market value is
greater than $27.00 per share, the exchange ratio will be decreased so
that your Haywood common stock will be valued at approximately $23.95
per share. If CSBI's market value is lower than $24.00 per share, the
exchange ratio will be increased so that your Haywood common stock
will be valued at approximately $21.30 per share.); or
. an amount of cash equal to the exchange ratio (determined as described
above) multiplied by the market value of CSBI common stock.
In the event Haywood's shareholders' equity (which generally is the
difference between Haywood's assets and liabilities, subject to several
adjustments pursuant to the merger agreement) is less than $21 million as of the
end of the month immediately preceding the effective time of the merger, the
exchange ratio will be reduced. The exchange ratio will be reduced by
multiplying it by a fraction, the numerator of which is Haywood's shareholders'
equity and the denominator of which is $21 million. As of ______, 1999,
Haywood's shareholders' equity, as determined under the merger agreement, was
approximately $_____________ million.
The market value of CSBI common stock, as determined under the merger
agreement, will be equal to the average closing price of CSBI common stock on
the Nasdaq National Market over a 20-day trading period ending ten days prior to
the effective time of the merger. CSBI common stock trades on the Nasdaq
National Market under the symbol "CSBI." On __________, 1999, the closing price
of CSBI common stock was $_______. Accordingly, if that is the market value of
CSBI common stock at the effective time of the merger, you will receive merger
consideration valued at $_____ for each share of Haywood common stock owned by
you.
If you own more than 100 shares of Haywood common stock, you may
designate the relative amount of CSBI common stock and cash you desire to
receive in the merger. However, the proportionate amounts you actually receive
will depend upon the proportionate amount of stock and cash that Haywood
shareholders elect to receive in
1
<PAGE>
the aggregate when compared to the actual proportionate amount of cash and stock
comprising the total merger consideration paid by CSBI. Under the terms of the
merger agreement, 50% of the total merger consideration paid by CSBI must be
paid in CSBI common stock and 50% must be paid in cash.
How Haywood Shareholders Can Elect Stock, Cash or Both (23)
If you own more than 100 shares of Haywood common stock, you may indicate a
preference to receive CSBI common stock, cash or a combination of both in the
merger by completing the enclosed election form/letter of transmittal. If you
do not select a preference by _______________, CSBI will make a determination
for you. Even if you select a preference by _____________, the amount of CSBI
common stock and cash to be received by you is subject to allocation and pro
rata adjustments to the extent required to ensure that 50% of the total merger
consideration paid by CSBI is paid in CSBI common stock and 50% is paid in cash.
Neither Haywood's board of directors, nor its financial advisor, makes any
recommendation as to whether you should choose CSBI common stock or cash for
your shares of Haywood common stock. You should consult with your own financial
advisor on this decision.
Haywood's Reasons for the Merger (Page 18)
Haywood's board of directors believes that the merger will create
value for Haywood shareholders. It also believes that CSBI is offering a fair
price to Haywood shareholders for their shares of Haywood common stock. The
merger will turn your Haywood shares into cash and/or shares of a larger and
more diversified financial services company. Haywood's board of directors
believes that the merger will enable Haywood to serve its customers better than
its competitors by offering more diverse products and services. In addition,
since CSBI's subsidiaries promote a community bank philosophy, the board
believes that the same commitment to customer service now existing at Haywood's
principal subsidiary, Haywood Savings Bank, Inc., SSB, will continue following
the merger.
Haywood's Special Meeting of Shareholders (Page 14)
Haywood's special meeting of shareholders to vote on the merger will
be held at 370 North Main Street, Waynesville, North Carolina, at 7:30 p.m., on
________ ___, 1999.
Haywood's Board of Directors' Recommendation to Haywood Shareholders (Page 15)
Haywood's board of directors believes that the merger is in the best
interest of Haywood shareholders and recommends that you vote "FOR" the proposal
to approve the merger agreement.
Record Date; Voting Power ( Page 14)
You may vote at Haywood's special meeting if you owned Haywood common
stock as of the close of business on ________ ___, 1999. You will have one vote
for each share of Haywood common stock you owned on that date.
Vote Required (Page 14)
The merger must be approved by at least a majority of all of the votes
entitled to be cast at Haywood's special meeting. As of _______, 1999,
Haywood's directors, executive officers and their affiliates beneficially owned
approximately ____% of the outstanding shares of Haywood common stock entitled
to vote at Haywood's special meeting. Each of Haywood's directors has agreed,
subject to several conditions, to vote his shares of Haywood common stock in
favor of the merger. Each of Haywood's executive officers who is not also a
director is expected to vote in favor of the merger agreement as well.
Interests of Persons Involved in the Merger that are Different from Yours
(Page 29)
Haywood's officers and directors may have interests in the merger that
differ from the interests of Haywood shareholders generally, including
employment arrangements for several officers and continuation of their services
as directors.
Conditions to the Merger (Page 31)
The completion of the merger depends on the fulfillment of a number of
conditions, including the following:
. Haywood shareholders must approve the merger agreement;
. we must receive all required regulatory approvals and any waiting
periods required by law must have passed;
2
<PAGE>
. we must receive a legal opinion confirming the tax-free nature of the
shares of CSBI common stock received for shares of Haywood common stock;
. each parties' representations and warranties, which are contained in the
merger agreement, must be accurate in all material respects;
. each party must have delivered officers' certificates and its counsel's
legal opinions to the other; and
. shares of CSBI common stock issuable pursuant to the merger must be
approved for listing on the Nasdaq National Market.
Unless prohibited by law, either CSBI or Haywood can elect to waive a
condition that has not been satisfied and complete the merger anyway. We cannot
be certain whether or when any of these conditions will be satisfied, or waived
where permissible, or that we will complete the merger.
Termination of the Merger Agreement (Page 34)
Notwithstanding the approval of the merger by Haywood shareholders at
Haywood's special meeting, CSBI and Haywood can agree at any time to terminate
the merger agreement before completing the merger.
Either CSBI or Haywood can also terminate the merger agreement:
. if the merger is not approved by at least a majority of all of the votes
entitled to be cast at the special meeting;
. if the other party materially violates any of its representations or
warranties under the merger agreement and fails to cure the violation;
. if we do not complete the merger by March 31, 2000; or
. if any government body whose approval is necessary to complete the
merger makes a final decision not to approve the merger.
CSBI can also terminate the merger if Haywood receives an acquisition
offer from a third party and Haywood's board of directors fails to reaffirm the
merger at the request of CSBI.
Haywood and CSBI's Stock Option Agreement (Page 36)
To increase the likelihood that the merger will be completed, Haywood
and CSBI have entered into an option agreement that permits CSBI, under several
specified circumstances, to purchase shares of Haywood common stock representing
19.9% of Haywood's currently outstanding common stock at a price of $16.30 per
share. As of the date of this proxy statement/prospectus, we do not believe that
any circumstance necessary to permit CSBI to purchase shares under the option
agreement has occurred.
Regulatory Matters (Page 32)
We cannot complete the merger unless we obtain the approval of various
regulatory agencies. While we do not know of any reason why we would not obtain
the regulatory approvals in a timely manner, we cannot be certain when or if we
will obtain them.
Accounting Treatment (Page 38)
The merger will be accounted for as a purchase, which means that the
price paid above the fair value of Haywood's net assets will be accounted for as
goodwill, an intangible asset that will be subtracted from the combined
company's earnings over time.
Important Federal Tax Consequences (Page 26)
Our obligations to complete the merger are conditioned upon our
receipt of an opinion from counsel to the effect that the merger will qualify as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
Provided that the merger qualifies as a reorganization, neither CSBI
nor Haywood will recognize any gain or loss for federal income tax purposes as a
result of the merger. The federal income tax consequences of the merger to you
as a Haywood shareholder depend on whether you receive shares of CSBI common
stock, cash or a combination of common stock and cash in exchange for your
Haywood common stock. In general, a Haywood shareholder will not recognize any
gain or loss as a result of the receipt of CSBI common stock in exchange for
Haywood common stock, but will recognize gain, if any, with respect to any cash
received, including cash received for fractional shares of CSBI common stock.
3
<PAGE>
Under the merger agreement, you may be required to receive some cash
even if you elect to receive only CSBI common stock, or to receive some CSBI
common stock even if you elect to receive only cash. You should consult with
your tax advisor about the tax consequences of the merger in light of your
individual circumstances, including the application of any federal, state, local
or foreign law.
No Appraisal or Dissenters' Rights (Page 39)
Under North Carolina law, you are not entitled to appraisal or
dissenters' rights.
4
<PAGE>
Market Prices of CSBI and Haywood Common Stock; Dividend Payments
<TABLE>
<CAPTION>
CSBI Common Stock Haywood Common Stock
----------------- --------------------
High Low Dividend High Low Dividend
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter $20.50 $17.75 $0.10250 $18.25 $16.68 $0.14
Second Quarter 20.00 18.00 0.10375 17.13 15.75 0.14
Third Quarter 20.38 18.00 0.10500 21.75 17.06 0.14
Fourth Quarter 25.00 19.75 0.10625 22.63 20.50 0.15
1998
First Quarter $25.75 $23.50 $0.10750 $23.00 $21.13 $0.15
Second Quarter 38.25 24.50 0.10875 23.00 22.25 0.15
Third Quarter 38.00 25.00 0.11000 22.38 17.75 0.15
Fourth Quarter 30.50 25.75 0.11125 17.75 15.75 0.16
1999
First Quarter $30.13 $22.63 $0.12000 $16.13 $13.75 $0.16
Second Quarter 27.50 22.00 0.12000 15.00 13.38 0.16
Third Quarter 25.00 20.88 0.12000 20.25 14.13 0.16
Fourth Quarter
(through October
__, 1999)
</TABLE>
The following table sets forth the closing sales prices per share of CSBI
common stock and Haywood common stock on August 4, 1999, the last trading day
prior to the public announcement of the merger agreement, and on __________,
1999, the latest practicable date prior to the mailing of this proxy
statement/prospectus, as well the equivalent per share value of Haywood common
stock on those dates.
<TABLE>
<CAPTION>
CSBI Haywood Equivalent Price of
Common Stock Common Stock Haywood Common Stock/(1)/
------------ ------------ -------------------------
<S> <C> <C> <C>
August 4, 1999 $22.125 $14.125 $21.36
________ _______, 1999
</TABLE>
___________________
/(1)/ The equivalent prices per share of Haywood common stock have been
calculated by multiplying the exchange ratio by the closing price of CSBI
common stock on that date.
CSBI common stock was held by approximately _____ shareholders of
record as of _________, 1999.
Haywood common stock was held by approximately _____ shareholders of
record as of ________, 1999.
Because the exchange ratio is fixed within certain average closing
prices of CSBI common stock and because the closing price of CSBI common stock
is subject to fluctuation, the market value of the shares of CSBI common stock
that you may receive in the merger may increase or decrease prior to and
following the merger. You are urged to obtain current market quotations for CSBI
common stock.
5
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
HAYWOOD BANCSHARES, INC. AND SUBSIDIARIES
Selected Comparative Per Share Data
(Unaudited)
<TABLE>
<CAPTION>
As of or for the
As of or for the six year ended
months ended December 31,
June 30, 1999 1998
-------------- --------
<S> <C> <C>
CSBI Common Stock
Net income per common share:
Historical - basic $ 0.66 $ 1.32
Historical - diluted 0.65 1.30
Pro forma CSBI and Haywood
combined - basic 0.66 1.21
combined - diluted 0.65 1.19
Pro forma CSBI, Haywood and Lanier
combined - basic 0.65 1.20
combined - diluted 0.64 1.18
Dividends per common share:
Historical 0.24 0.44
Pro forma CSBI and Haywood combined/(1)/ 0.24 0.44
Pro forma CSBI, Haywood and Lanier combined/(1)/
Book value per common share:
Historical 10.93 10.77
Pro forma CSBI and Haywood combined/(2)/ 11.50 11.36
Pro forma CSBI, Haywood and Lanier combined/(2)/ 11.02 10.85
Haywood Common Stock
Net income per common share:
Historical - basic $ 0.65 $ 0.21
Historical - diluted 0.65 0.21
Equivalent pro forma CSBI and Haywood/(3)/
combined - basic 0.59 1.07
combined - diluted 0.58 1.06
Equivalent pro forma CSBI, Haywood and Lanier/(3)/
combined - basic 0.58 1.06
combined - diluted 0.57 1.05
Dividends per common share:
Historical 0.32 0.61
Equivalent pro forma CSBI and Haywood combined/(4)/ 0.21 0.39
Equivalent pro forma CSBI, Haywood and Lanier combined/(4)/ 0.21 0.39
Book value per common share:
Historical 17.50 17.23
Equivalent pro forma CSBI and Haywood combined/(3)/ 10.21 10.08
Equivalent pro forma CSBI, Haywood and Lanier combined/(3)/ 9.78 9.63
</TABLE>
_____________________
6
<PAGE>
/(1)/ Pro forma combined dividends per common share represent historical
dividends per share paid by CSBI.
/(2)/ Determined by dividing pro forma combined shareholders' equity by pro
forma shares outstanding as follows:
<TABLE>
<CAPTION>
CSBI and Haywood
Pro Forma Equity Pro Forma Shares
---------------- ----------------
<S> <C> <C>
(in thousands)
12/31/98 139,068 12,244
06/30/99 141,556 12,309
CSBI, Haywood and Lanier*
Pro Forma Equity Pro Forma Shares
---------------- ----------------
(in thousands)
12/31/98 149,697 13,794
06/30/99 152,667 13,859
</TABLE>
* On October 20, 1999, CSBI entered into a definitive agreement to
acquire Lanier Bankshares, Inc., a bank holding company
headquartered in Gainesville, Georgia with consolidated assets, as
of June 30, 1999, of approximately $115 million. It is expected
that the acquisition, which is subject to shareholder and
regulatory approvals, will be accounted for as a pooling of
interests and will be valued at approximately $40 million.
/(3)/ For CSBI and Haywood combined, determined by multiplying the applicable
pro forma amount by the assumed exchange ratio of 0.8874 to 1. For CSBI,
Haywood and Lanier combined, determined by multiplying the applicable
pro forma amount by the exchange ratio of 0.8874 to 1.
/(4)/ For CSBI and Haywood combined, determined by multiplying the applicable
CSBI historical amount by the assumed exchange ratio of 0.8874 to 1. For
CSBI, Haywood and Lanier combined, determined by multiplying the
applicable CSBI historical amount by the exchange ratio of 0.8874 to 1.
7
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES/(1)/
Selected Financial Data
(Unaudited)
<TABLE>
<CAPTION>
As of or for the six
months ended June 30, As of or for the years ended December 31,
--------------------- ---------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(Amounts in thousands, except per share data and percentages)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Net interest income $ 28,730 $ 28,270 $ 56,867 $ 53,604 $ 50,837 $ 46,613 $ 40,595
Provision for possible loan losses 1,179 1,114 3,135 5,397 2,350 2,261 1,464
Net income 7,697 7,841 15,378 10,969 13,823 11,591 10,012
Per Share Data:
Net income - basic $ 0.66 $ 0.67 $ 1.32 $ 0.95 $ 1.21 $ 1.03 $ 0.84
Net income - diluted 0.65 0.66 1.30 0.93 1.18 1.01 0.82
Cash dividends declared 0.24 0.22 0.44 0.42 0.40 0.38 0.34
Book value 10.93 10.40 10.77 9.99 9.32 8.33 7.51
Tangible book value 10.56 9.82 10.38 9.36 8.62 7.65 6.81
Balance Sheet Summary:
Investments $ 197,767 $ 177,698 $ 171,566 $ 204,691 $ 215,973 $ 211,698 $ 211,584
Loans, net 879,875 828,836 833,853 796,951 729,123 681,655 622,014
Deposits 1,040,735 1,018,959 993,308 1,033,778 991,239 905,155 847,572
Assets 1,206,419 1,160,037 1,146,720 1,170,023 1,120,205 1,035,846 966,095
Federal funds purchased 11,500 -- -- 970 1,360 -- 80
Long-term debt and
other borrowings 33 487 -- -- -- -- --
Federal Home Loan Bank
advances 14,230 8,331 16,280 6,881 6,982 14,183 15,183
Average shareholders' equity 127,845 118,322 121,204 112,052 100,867 90,664 81,136
Average total assets 1,172,040 1,147,842 1,151,993 1,133,676 1,072,562 984,993 904,086
Financial Ratios:
Net income to average assets 1.32% 1.38% 1.33% 0.97% 1.29% 1.18% 1.11%
Overhead ratio 2.75% 2.70% 2.68% 2.91% 2.72% 2.88% 2.89%
Net income to average
shareholders' equity 12.14% 13.36% 12.69% 9.79% 13.70% 12.78% 12.34%
Dividend payout ratio 33.95% 30.09% 31.29% 32.53% 22.32% 19.87% 16.22%
Average shareholders' equity
to average total assets 10.91% 10.31% 10.52% 9.88% 9.40% 9.20% 8.97%
</TABLE>
_________________________
/(1)/ On April 13, 1999, CSBI completed a merger with Independent Bancorp, Inc.
and its subsidiary bank, The Independent Bank of Oxford in Oxford,
Alabama. This acquisition was accounted for as a pooling of interests
and, accordingly, all financial information preceding the date of the
merger has been restated to include the financial position and results of
operations of the acquired entity.
8
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARIES
Selected Financial Data
(Unaudited)
<TABLE>
<CAPTION>
As of or for the six
months ended June 30, As of or for the years ended December 31,
--------------------- -------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(Amounts in thousands, except per share data and percentages)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Net interest income $ 2,543 $ 2,523 $ 5,025 $ 4,694 $ 4,831 $ 4,826 $ 5,323
Provision for loan losses 20 10 20 20 15 20 60
Net income 808 244 258 1,876 1,094 1,361 1,705
Per Share Data:
Net income - basic $ 0.65 $ 0.20 $ 0.21 $ 1.52 $ 0.89 $ 1.11 $ 1.34
Net income - diluted 0.65 0.20 0.21 1.52 0.87 1.08 1.30
Cash dividends declared 0.32 0.30 0.61 0.57 0.53 0.49 0.45
Book value 17.50 17.68 17.23 17.73 16.94 16.63 15.93
Tangible book value 16.98 17.11 16.69 17.15 16.29 15.98 15.24
Balance Sheet Summary:
Investments $ 30,920 $ 27,517 $ 29,769 $ 27,049 $ 11,963 $ 18,520 $ 23,998
Loans, net 108,885 113,169 110,793 114,150 109,344 104,019 99,879
Deposits 118,275 116,963 116,762 118,670 107,343 108,763 110,205
Assets 149,224 151,718 150,956 153,480 130,901 132,069 132,431
Long-term debt and other borrowings -- -- -- -- -- -- --
Federal Home Loan Bank advances 7,000 10,500 10,500 10,500 -- -- --
Other long-term debt -- -- -- -- -- -- --
Other borrowings -- -- -- -- 1,200 -- --
Average shareholders' equity 21,537 22,751 21,876 20,562 20,132 20,973 20,046
Average total assets 150,234 152,201 151,047 149,178 132,115 133,434 135,878
Financial Ratios:
Net income to average assets 1.08% 0.32% 0.17% 1.26% 0.83% 1.02% 1.25%
Overhead ratio 1.64% 2.79% 3.04% 1.09% 2.39% 1.97% 1.88%
Net income to average shareholders'
equity 7.50% 2.14% 1.18% 9.12% 5.43% 6.49% 8.50%
Dividend payout ratio 49.23% 150.00% 290.48% 37.50% 59.55% 44.14% 33.58%
Average shareholders' equity to
average total assets 14.34% 14.95% 14.48% 13.78% 15.24% 15.72% 14.75%
</TABLE>
9
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
AND HAYWOOD BANCSHARES, INC. AND SUBSIDIARIES
Pro Forma Selected Financial Data
(Unaudited)
<TABLE>
<CAPTION>
CSBI and Haywood CSBI, Haywood and Lanier
---------------- ------------------------
As of or for the As of or for As of or for the As of or for the
six months ended, the year ended six months ended year ended
June 30, December 31, June 30, December 31,
1999 1998 1999 1998
----------------- ------------- ---------------- ---------------
(Amounts in thousands, except per share data and percentages)
<S> <C> <C> <C> <C>
Summary of Operations:
Net interest income $ 30,811 $ 60,917 $ 33,320 $ 65,767
Provision for loan losses 1,199 3,155 1,289 3,445
Net income 8,071 14,729 8,996 16,546
Per Share Data:
Net income - basic $ 0.66 $ 1.21 $ 0.65 $ 1.20
Net income - diluted 0.65 1.19 0.64 1.18
Cash dividends declared 0.24 0.44 0.24 0.44
Book value 11.50 11.36 11.02 10.85
Tangible book value 10.79 10.61 10.38 10.19
Balance Sheet Summary:
Investments $ 224,706 $ 196,683 $ 254,121 $ 222,295
Loans, net 988,760 944,646 1,061,242 1,020,746
Deposits 1,159,010 1,110,070 1,259,653 1,211,817
Assets 1,360,883 1,303,312 1,475,524 1,419,063
Federal funds purchased 11,500 -- 11,500 --
Long-term debt and other borrowings 13,344 13,346 14,870 14,902
Federal Home Loan Bank advances 21,230 26,780 21,230 26,780
Average shareholders' equity 140,540 134,752 151,462 144,733
Average total assets 1,327,514 1,308,879 1,443,236 1,415,217
Financial Ratios:
Net income to average assets 1.22% 1.13% 1.25% 1.17%
Overhead ratio 2.61% 2.74% 2.58% 2.67%
Net income to average shareholders' 11.49% 10.93% 11.88% 11.43%
equity
Dividend payout ratio 36.36% 36.36% 36.92% 36.67%
Average shareholders' equity to
average total assets 10.59% 10.30% 10.49% 10.23%
</TABLE>
10
<PAGE>
RISK FACTORS
If the merger is consummated, you may receive shares of CSBI common stock
in exchange for your shares of Haywood common stock. An investment in CSBI
common stock is subject to a number of risks and uncertanties, many of which
also apply to your existing investment in Haywood common stock. Risks and
uncertainties relating to economic conditions and other matters that would
affect other financial institutions in similar ways are generally not summarized
below. Those risks, among others, are highlighted on page 13 under the heading
"A Warning About Forward-Looking Statements."
However, there are a number of other risks and uncertainties relating to
CSBI and your decision on the merger that you should consider in addition to the
risks and uncertainties associated with financial institutions generally. Many
of these risks and uncertainties could affect CSBI's future financial results
and may cause CSBI's future earnings and financial condition to be less
favorable than CSBI's expectations. This section summarizes those risks.
You may not receive the form of merger consideration you requested.
The merger agreement provides that, in the aggregate, the merger
consideration will be paid 50% in CSBI common stock and 50% in cash, regardless
of the number of shareholders electing stock consideration or cash
consideration. In the event that the aggregate number of shares of CSBI common
stock in respect of which stock elections or cash elections are received is
greater than 50% of the total merger consideration, the shares as to which stock
elections or cash elections (as the case may be) have been made will be
converted into the right to receive cash consideration and/or stock
consideration in the manner described under "THE MERGER -- Allocation Rules."
Accordingly, there is a risk that you will not receive the form of merger
consideration you requested.
The merger consideration may be reduced.
If Haywood's shareholders' equity is less than $21 million at the end of
the month immediately preceding the effective time of the merger, the exchange
ratio will be reduced proportionately and Haywood's shareholders will receive
less for their shares. Haywood's shareholders' equity generally is equal to the
difference between its assets and liabilities, subject to several adjustments
pursuant to the merger agreement. Haywood's shareholders' equity will be
reduced if Haywood incurs losses as the result of declines in earnings or
increases in expenses or if the value of certain investments must be written
down because of declines in their market value. For purposes of the merger
agreement, Haywood may disregard the effect of several costs related to the
merger in calculating shareholders' equity. At June 30, 1999, Haywood's
shareholders' equity calculated in accordance with the merger agreement was
approximately $21.1 million. There can be no assurance, however, that Haywood's
shareholders' equity will not decline so much that the merger consideration will
be reduced.
CSBI's operating costs after the merger and other recent acquisitions may be
greater than expected, and CSBI's costs savings from the merger and other recent
acquisitions may be less than expected, or CSBI may be unable to obtain those
cost savings as soon as expected.
CSBI's rapid growth over the last several years resulting from
acquisitions it has made - as well as the possibility of future growth from
acquisitions - produces risks of unknown liabilities that may cause costs after
the merger and other past and potential future acquisitions to be greater than
expected. Expectations concerning future earnings depend in part on CSBI being
able to combine the operations of acquired institutions with CSBI's own
operations promptly and efficiently, and also on CSBI being correct in its
assumptions about the financial impact of its acquisitions.
CSBI expects that it can achieve cost savings as a result of its
acquisition of Haywood and its other recently completed acquisitions. There is
a risk that the anticipated savings may not be realized or that they may be less
than CSBI expects.
11
<PAGE>
CSBI may be unable to successfully integrate Haywood and other acquired
businesses or may have more trouble integrating acquired businesses than
expected.
There is a risk that the maintenance of an acquired institution's -
including Haywood's - key customers and personnel and the conversion of its
systems and procedures to CSBI's systems and procedures may not be possible or
completed on schedule or may be more difficult and costly than expected, which
could cause the acquired operations to perform below expectations. Maintaining
an acquired institution's key customers and personnel and converting its systems
and procedures to CSBI's systems and procedures is an important part of CSBI's
acquisition program.
Prior to acquiring an institution, CSBI frequently estimates that it will
be able to maintain most of the institution's key customers and personnel and
convert its systems and procedures with a minimal amount of costs and diversion
of management time and attention. There is a risk that integrating Haywood and
other acquired businesses may take a greater amount of resources than CSBI
expects.
Haywood's directors may have interests in the merger that are different from
yours, which may present them with potential conflicts of interest.
In considering the recommendation of the merger by Haywood's board of
directors, you should be aware that Haywood's directors may have interests in
the merger that may present them with potential conflicts of interest. These
interests relate to, among others, provisions in the merger agreement regarding
directors' indemnification, continuation of service on the surviving
corporation's and its subsidiary's board of directors, employment arrangements
for certain directors, and, due to the change in control of Haywood, advance
funding of benefits previously earned by certain directors and officers of
Haywood. There is a risk that these interests may have influenced the decision
by Haywood's board of directors to recommend to you the merger. See "THE MERGER
- -- Interests of Haywood's Employees and Directors in the Merger."
Your merger consideration may be fixed despite a change in CSBI's stock price.
Each share of Haywood common stock owned by you will be converted into the
right to receive either a fraction of a share of CSBI common stock or an amount
of cash based on the average closing price of CSBI common stock over a 20-day
trading period ending ten days prior to the effective time of the merger. If
the average closing price of CSBI common stock during this time is between
$24.00 and $27.00 per share, each share of Haywood common stock will be
converted into merger consideration with a value equal to 0.8874 of a share of
CSBI common stock. Accordingly, there is a risk that you will receive less
value for your shares of Haywood common stock if CSBI's average closing price is
nearer to $24.00 than $27.00. The price of CSBI common stock when the merger
takes place may vary from its price at the date of this proxy
statement/prospectus and at the date of Haywood's special meeting. Such
variations in the price of CSBI common stock may result from changes in the
business, operations or prospects of CSBI, regulatory considerations, general
market and economic conditions and other factors. At the time of Haywood's
special meeting, you will not know the exact value of the consideration you will
receive when the merger is completed.
If you elect to receive CSBI common stock, the value of the shares could decline
between the date the exchange ratio is fixed and the date you actually receive
your share certificates.
The exchange ratio will be based on the average closing prices for CSBI
common stock during the 20-day period ending ten days prior to the effective
time of the merger. If you receive CSBI common stock in the merger, by the time
you actually receive your certificate(s) for such stock, the market price of
CSBI common stock could be lower than the price at which the exchange ratio was
fixed. Until you receive your certificate(s), you will not be able to sell your
CSBI common stock on the open market and thus will not be able to avoid losses
resulting from a decline in the trading prices of CSBI common stock during this
period.
CSBI's computer systems, or those of its service providers, suppliers, or
customers, may not operate properly on year 2000-sensitive dates.
The year 2000 issue refers generally to the data structure problem that
will prevent systems from properly recognizing dates after the year 1999. CSBI
has appointed a year 2000 committee with a full-time year 2000 coordinator to
conduct a comprehensive review of its operational and financial systems to
determine how the
12
<PAGE>
year 2000 will impact the operation of these systems. The committee has
developed a plan to identify all critical systems and developed solutions for
all systems that are found not to be ready for the year 2000. In addition,
confirmations have been received from CSBI's primary processing vendors and
counterparties that plans have been developed to address processing of
transactions in the year 2000. However, because the identification and solving
of all year 2000 issues is a complex problem, there is a risk that CSBI's
computer systems and the systems of other companies with whom CSBI conducts
business will not be ready for the year 2000 prior to December 31, 1999.
Additionally, if our commercial customers are not ready for the year 2000 prior
to December 31, 1999, and they suffer adverse effects on their operations as a
result, their ability to meet their obligations to CSBI may be adversely
affected.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this proxy statement/prospectus,
and, in the case of CSBI, the public documents to which CSBI refers, that are
subject to risks and uncertainties. These forward-looking statements include
information about possible or assumed future results of our operations or the
performance of CSBI after the merger. Also, when we use words such as
"believes," "expects," "anticipates" or similar expressions, we are making
forward-looking statements. Many possible events or factors could affect our
future financial results and performance. This could cause our results or
performance to differ materially from those expressed in our forward-looking
statements. You should consider these important factors when you vote on the
merger. Factors that may cause actual results to differ materially from those
contemplated by our forward-looking statements include the following:
. CSBI's operating costs after the merger and other recent acquisitions
may be greater than expected, and CSBI's cost savings from the merger
and other recent acquisitions may be less than expected, or CSBI may be
unable to obtain those cost savings as soon as expected;
. CSBI may be unable to successfully integrate Haywood and other acquired
businesses or may have more trouble integrating acquired businesses
than expected;
. Competition among depository and other financial institutions may
increase significantly;
. Changes in the interest rate environment may reduce operating margins;
. General economic or business conditions, including acquisition and
growth opportunities, may be worse than expected;
. Legislative or regulatory changes may adversely affect our businesses;
and
. Disruption in data processing caused by computer malfunctions
associated with the year 2000 problem may be greater than expected.
We have based our forward-looking statements on our current expectations
about future events. Although we believe that the expectations reflected in our
forward-looking statements are reasonable, we cannot guarantee you that these
expectations actually will be achieved. We are under no duty to update any of
the forward-looking statements after the date of this proxy statement/prospectus
to conform those statements to actual results. In evaluating these statements,
you should consider various factors, including the risks outlined in the section
entitled "Risk Factors," beginning on page 11. You should also consider the
cautionary statements contained in our filings with the Securities and Exchange
Commission. These factors may cause our actual results to differ materially
from our forward-looking statements.
13
<PAGE>
THE SPECIAL MEETING
General
This proxy statement/prospectus is being mailed by Haywood to Haywood
shareholders on or about ______ __, 1999, together with the notice of the
special meeting of shareholders of Haywood and a form of proxy solicited by
Haywood's board of directors for use at the special meeting and at any
adjournments or postponements of the meeting.
Meeting Date, Time and Place and Record Date
The special meeting will be held at the main office of Haywood Savings
Bank, Inc., SSB, located at 370 North Main Street, Waynesville, North Carolina,
at 7:30 p.m., local time, on ______ ____, 1999. Only holders of Haywood common
stock of record at the close of business on _________ ______, 1999 will be
entitled to receive notice of and to vote at the special meeting. As of the
record date, there were 1,250,356 shares of Haywood common stock outstanding and
entitled to vote, with each such share entitled to one vote.
Matters to be Considered
At the special meeting, Haywood shareholders will be asked to consider and
vote upon a proposal to approve the Agreement and Plan of Merger, dated as of
August 5, 1999, and amended as of October 15, 1999, by and among Haywood, CSBI
and a wholly-owned subsidiary of CSBI. Under the merger agreement, Haywood will
merge with and into CSBI's subsidiary, becoming a subsidiary of CSBI, and shares
of Haywood common stock will be converted into the right to receive either
shares of CSBI common stock, cash or both. Haywood shareholders may also be
asked to consider any other business that properly comes before the special
meeting. Finally, Haywood shareholders may be asked to vote on a proposal to
adjourn or postpone the special meeting, which could be used to allow more time
for soliciting additional votes to approve the merger agreement. Each copy of
this proxy statement/prospectus mailed to Haywood shareholders is accompanied by
a form of proxy for use at the special meeting.
Vote Required
Under North Carolina law, approval of the merger agreement requires the
affirmative vote of at least a majority of all of the votes entitled to be cast
at the special meeting. On the record date, there were approximately _______
outstanding shares of Haywood common stock, each of which is entitled to one
vote at the special meeting. On that date, the directors and officers of
Haywood and their affiliates beneficially owned a total of approximately ______%
of the outstanding shares of Haywood common stock. Each of Haywood's directors
has agreed, subject to several conditions, to vote his shares of Haywood common
stock in favor of the merger. Each of Haywood's officers who is not also a
director is expected to vote in favor of the merger agreement. At the date of
this proxy statement/prospectus, neither CSBI nor any of its affiliates owned
any of the outstanding shares of Haywood common stock. The presence, in person
or by proxy, of shares of Haywood common stock representing a majority of
Haywood's outstanding shares entitled to vote at the special meeting is
necessary in order for there to be a quorum at the special meeting. There must
be a quorum present in order for the vote on the merger agreement to occur.
Voting of Proxies
Shares of Haywood common stock represented by properly executed proxies
received at or prior to the special meeting will be voted at the special meeting
in the manner specified by the holders of such shares. Properly executed
proxies which do not contain voting instructions will be voted "FOR" approval
and adoption of the merger agreement, and as determined by a majority of the
proxies, as to any other matter that may come before the special meeting,
including, among other things, a motion to adjourn or postpone the special
meeting to another time for the purpose of soliciting additional proxies or
otherwise. However, no proxy with instructions to vote against the merger will
be voted in favor of any adjournment or postponement of the special meeting.
Any shareholder present in person or by proxy (including broker non-votes, which
generally occur when a broker who holds shares in street name for a customer
does not have the authority to vote on certain non-routine matters because its
customer
14
<PAGE>
has not provided any voting instructions with respect to the matter) at the
special meeting who abstains from voting will be counted for purposes of
determining whether a quorum exists.
Because approval of the merger agreement requires the affirmative vote of
at least a majority of all the votes entitled to be cast at the special meeting,
abstentions and broker non-votes will have the same effect as negative votes.
Accordingly, Haywood's board of directors urges its shareholders to complete,
date, and sign the accompanying form of proxy and return it promptly in the
enclosed, postage-paid envelope.
If any other matters are properly presented at the special meeting, the
person or persons named in the form of proxy enclosed with this proxy
statement/prospectus and acting thereunder will have discretion to vote on such
matters in accordance with their best judgment, unless the proxy indicates
otherwise. Haywood has no knowledge of any matters to be presented at the
special meeting, other than the matters described in this proxy
statement/prospectus.
Revocability of Proxies
The grant of a proxy on the enclosed form of proxy does not preclude you
from voting in person or otherwise revoking a proxy. You may revoke a proxy at
any time prior to its exercise by delivering to the Secretary of Haywood either
a duly executed revocation or a proxy bearing a later date. In addition, you
may revoke a proxy prior to its exercise by voting in person at the special
meeting. All written notices of revocation and other communications with
respect to the revocation of Haywood proxies should be addressed to Haywood
Bancshares, Inc., 370 North Main Street, Waynesville, North Carolina 28786,
Attention: Secretary. Attendance at the special meeting will not in and of
itself constitute revocation of a proxy.
Solicitation of Proxies
Haywood will pay all of the costs of soliciting proxies in connection with
the special meeting, except that CSBI will pay the costs of filing the
registration statement with the SEC, of which this proxy statement/prospectus is
a part, and one-half of the costs of printing the registration statement and
this proxy statement/prospectus.
Solicitation of proxies may be made in person or by mail, telephone, or
facsimile, or other form of communication by directors, officers, and employees
of Haywood, who will not be specially compensated for such solicitation.
Nominees, fiduciaries, and other custodians will be requested to forward
solicitation materials to beneficial owners and to secure their voting
instructions, if necessary, and will be reimbursed for the expenses incurred in
sending proxy materials to beneficial owners.
No person is authorized to give any information or to make any
representation not 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 Haywood, CSBI or any other person. The delivery of this
proxy statement/prospectus does not, under any circumstances, create any
implication that there has been no change in the business or affairs of Haywood
or CSBI since the date of the proxy statement/prospectus.
Recommendation of Haywood's Board of Directors
Haywood's board of directors has unanimously approved the merger agreement
and the transactions contemplated thereby, believes that the merger is in the
best interests of Haywood and its shareholders, and recommends that Haywood
shareholders vote "FOR" approval of the merger agreement.
In the course of reaching its decision to approve the merger agreement and
the transactions contemplated in the merger agreement, Haywood's board of
directors, among other things, consulted with its legal advisors regarding the
legal terms of the merger agreement and with its financial advisor, Trident
Securities, a division of McDonald Investments Inc., as to the fairness, from a
financial point of view, of the consideration to be received by the holders of
Haywood common stock in the merger. For a discussion of the factors considered
by Haywood's board of directors in reaching its conclusion, see "THE MERGER --
Background of the Merger" and "--Haywood's Reasons for the Merger."
Haywood shareholders should note that certain members of management and
directors of Haywood have certain interests in, and may derive certain benefits
as a result of, the merger that are in addition to their interests as
15
<PAGE>
shareholders of Haywood. See "THE MERGER -- Interests of Haywood's Employees
and Directors in the Merger."
Information About Haywood's Auditors
A representative of KPMG LLP is expected to be present at the special
meeting and will have the opportunity to make a statement if he or she desires
and respond to appropriate questions.
16
<PAGE>
THE MERGER
The descriptions of the terms and conditions of the merger, the merger
agreement, and any related documents in this proxy statement/prospectus are
qualified in their entirety by reference to the copy of the merger agreement
attached as Appendix A to this proxy statement/prospectus, to the registration
statement, of which this proxy statement/prospectus is a part, and to the
exhibits to the registration statement.
General
The merger agreement provides that, if all of the conditions set forth in
the merger agreement are satisfied or waived, Haywood will merge with and into
CSBI's wholly-owned subsidiary. CSBI's subsidiary will be the surviving
corporation in the merger. At the time the merger becomes effective, each share
of issued and outstanding Haywood common stock (excluding shares held by CSBI,
Haywood and their respective subsidiaries, other than shares held on behalf of
third parties ("Excluded Shares")) will be converted into the right to receive
either a fraction of a share of CSBI common stock which will be determined by a
formula described below in "Merger Consideration," cash or a combination of
stock and cash. 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.
Background of the Merger
In late 1997, Haywood's board of directors retained Trident Securities, a
division of McDonald Investments Inc. ("Trident") to analyze the strategic
alternatives available to Haywood. The board of directors was aware of the
trend towards consolidation in the financial services industry and believed that
it was appropriate to inform itself regarding the potential value of Haywood in
a business combination. The board of directors also anticipated that it would
soon complete the sale of its largest foreclosed asset which had been on
Haywood's books for several years. This sale would significantly reduce
Haywood's level of non-performing assets and was expected to have a positive
impact on Haywood's value. The board of directors was also concerned with
Haywood's ability to remain competitive in an industry which required increasing
investments in technology and in which profit margins were continually shrinking
in its main lines of business.
On January 15, 1998, a representative of Trident presented his firm's
analysis to the board of directors. The analysis discussed the current
operating environment for financial institutions and assessed Haywood's current
business and its prospects under its current business plan. The analysis
reviewed the pricing data from recent acquisitions of financial institutions
with similar characteristics to Haywood. Based on its analysis of these
transactions and of Haywood, Trident estimated that the range of value for
Haywood in a business combination would be $27.00 to $31.00 per share. The
Trident analysis included a discussion of companies which Trident believed would
be interested in discussing a transaction in the event the board of directors
desired to further inform itself regarding the potential value of Haywood in a
business combination. After extensive discussion of its alternatives, Haywood's
board of directors authorized Trident to prepare an information memorandum
containing financial and other information about Haywood and to contact
potentially interested parties on a confidential basis regarding their interest
in a potential business combination with Haywood and the valuation they would
place on Haywood in such a transaction.
The information memorandum was not completed until April 1998 when audited
financial statements for the last fiscal year became available. Trident first
contacted the regional bank holding company which Trident believed would have
the greatest interest in a business combination due to its presence in Haywood's
market and its history of acquisitions. After this party indicated an interest
at a price below Trident's anticipated range of value, Haywood's board of
directors instructed Trident in June 1998 to contact the two next most likely
acquirers, one of which was CSBI. While neither CSBI nor the other party made a
proposal, CSBI indicated that it might be interested in further discussions
after it had concluded an acquisition it was negotiating at that time.
In July 1998, Trident began contacting a group of nine institutions it had
previously identified as potentially interested but whose level of interest was
projected to be lower than the first group. Six of these companies entered into
confidentiality agreements and received the information memorandum. By
September of 1998, three of these institutions had given oral indications of
interest in stock-for-stock transactions either at the low end of or below the
valuation range. Trident also contacted the institution it had originally
identified as the most
17
<PAGE>
likely acquirer but this party indicated that due to changes in market
conditions, it would not value Haywood as highly as it had previously.
On September 17, 1998, a representative of Trident met with Haywood's
board of directors to review the oral indications of interest and the state of
the market. The Trident representative noted that stock prices for banks and
thrifts had fallen substantially during the summer and merger activity had
slowed correspondingly. In addition, Haywood had incurred a loss during the
second quarter. Due to declines in the trading prices of acquiring banks,
Trident believed that the valuation range for Haywood in a business combination
should now be adjusted to between $23.50 to $27.00. All three of the oral
indications of interest were within this adjusted range. After extensive
discussion, the board of directors authorized members of management to meet with
executives from the three parties that had expressed interest and instructed
Trident to obtain final written indications of interest for the board of
directors' review.
On October 7, 1998, a representative of Trident again met with Haywood's
board of directors to discuss the final written indications of interest. After
extensive discussion, the board of directors decided to adjourn the meeting for
a week to allow directors more time to study the indications of interest. On
October 13, 1998, the board of directors met again and determined to pursue
further discussions with the party which had submitted the highest indication of
interest. Negotiation of a definitive acquisition agreement, however, was
delayed while the other party sought regulatory approval of another transaction.
When discussions resumed in January 1999, the other party sought to revise the
terms of its proposal. Negotiations with this party were terminated in March
1999 and Haywood did not have any further discussions with any parties while it
prepared for its annual meeting of shareholders in April.
Following Haywood's annual meeting, Trident again contacted CSBI which
indicated that it was still interested in exploring a potential combination. On
May 25, 1999, CSBI submitted a written indication of interest. On June 2, 1999,
representatives of Trident again met with Haywood's board of directors and
presented their analysis of the proposal. The representatives of Trident noted
that the market for stock of financial institutions had not recovered from the
declines in the prior summer which had continued to inhibit acquisition
activity. The board of directors authorized the continuation of discussions
with CSBI including the conduct of reciprocal due diligence and negotiation of a
definitive agreement.
On August 5, 1999, Haywood's board of directors met to consider the merger
agreement. Representatives of Trident and Haywood's special counsel reviewed
the results of their due diligence and the terms of the merger agreement in
detail. Further, the representative of Trident presented an opinion of his firm
that the consideration to be received by Haywood's shareholders was fair from a
financial point of view. After extensive discussion, the board of directors
unanimously approved the merger agreement.
Haywood's Reasons for the Merger
Haywood's board of directors believes that the merger is in the best
interest of Haywood shareholders. Haywood's board of directors considered a
number of factors in deciding to approve and recommend the terms of the merger
to Haywood shareholders, including:
. the financial condition, results of operations, and future prospects of
Haywood;
. the value of the consideration to be received by Haywood shareholders
relative to the book value and earnings per share of Haywood common
stock;
. the competitive and regulatory environment for financial institutions
generally;
. the fact that many Haywood shareholders will be able to exchange their
Haywood common stock for shares of common stock of a larger and more
diversified entity, the stock of which is more widely held and more
actively traded;
. the likelihood of receiving requisite regulatory approvals;
18
<PAGE>
. the expectation that the merger will be a tax-free transaction to
Haywood shareholders (except for cash received for whole or fractional
shares of Haywood common stock) for federal income tax purposes;
. the prospects for growth and expanded products and services, and other
anticipated positive impacts on the employees, customers and
communities served by Haywood;
. the financial and valuation analyses prepared by Trident;
. the potential for appreciation in the value of CSBI common stock; and
. the nature and compatibility of CSBI's management and business
philosophy with Haywood.
The foregoing discussion of the information and factors considered by
Haywood's board of directors is not intended to be exhaustive. Haywood's board
of directors did not assign any relative or specific weights to the foregoing
factors, and individual directors may have given different weights to different
factors.
CSBI's Reasons for the Merger
CSBI's board of directors, after consideration of relevant business,
financial, legal and market factors, approved the merger agreement. In reaching
this decision, CSBI's board of directors considered all material factors,
although it did not assign any relative or specific weight to any individual
factor. CSBI's board of directors also took into account its stated strategic
long-term goal of expanding CSBI throughout the Southeast, so as to become one
of the leading independent bank holding companies in the region. In this
regard, CSBI looked at the profit position of Haywood, giving consideration to
Haywood's size, its shareholder base and management expertise. In addition,
CSBI considered Haywood's Western North Carolina location a natural complement
to its North Georgia market and an attractive platform from which to continue
building a significant market presence in the area. After considering these
factors, CSBI determined that the merger would help accomplish its long-term
goals and would enhance value for CSBI shareholders, while permitting CSBI to
continue to grow and expand as an independent bank holding company.
Opinion of Trident
In October 1997, Haywood retained Trident to act as its financial advisor
in connection with Haywood's consideration of possible alternatives for
enhancing shareholder value. The engagement provided for Trident to prepare a
financial analysis of Haywood and to advise Haywood's board of directors with
regard to strategic alternatives. On January 15, 1998, Trident presented its
report to the board of directors. Upon receipt and review of the report,
Trident was authorized to assist Haywood in exploring the possibility of a
merger with another financial institution.
On August 5, 1999, Trident presented a report to Haywood's board of
directors summarizing the financial terms of the merger and providing updated
market information with respect to thrift mergers and acquisitions. Trident
also analyzed the advantages and disadvantages of the merger from a financial
point of view and presented the results of its due diligence investigation of
CSBI. In addition, Trident rendered its written opinion to Haywood's board of
directors to the effect that, as of that date, the consideration to be received
by Haywood's shareholders pursuant to the merger agreement was fair to them
from a financial point of view. Trident has confirmed and delivered its
fairness opinion to Haywood that the consideration to be received by Haywood's
shareholders is fair, from a financial point of view, as of the date of this
proxy statement/prospectus. A copy of the opinion which sets forth certain
assumptions made, matters considered and limitations on the reviews undertaken,
is attached to this proxy statement/prospectus as Appendix B. Trident has
consented to the inclusion of such opinion and a summary of the matters
considered in forming its opinion in this proxy statement/prospectus.
Trident's opinion is directed to the board of directors of Haywood and is
directed only to the fairness, from a financial point of view, of the
consideration to be received by Haywood shareholders based on conditions as
they existed and could be evaluated as of the date of the opinion. Trident's
opinion does not constitute a recommendation to any Haywood shareholder as to
how such shareholder should vote at the special meeting, nor does Trident's
opinion address the underlying business decision to effect the
19
<PAGE>
merger. This summary of Trident's opinion is qualified in its entirety by
reference to the full text of such opinion, which is attached to this proxy
statement as Appendix B. Shareholders are urged to read Trident's opinion in
its entirety for a description of the assumptions made and matters considered
and the limits on the review undertaken in rendering such opinion.
In connection with rendering its opinion, Trident reviewed and analyzed,
among other things, the following: (i) the merger agreement; (ii) certain
publicly available information concerning Haywood, including the audited
financial statements of Haywood for each of the years in the three-year period
ended December 31, 1998 and the unaudited financial statements of Haywood for
the three months ended March 31, 1999; (iii) certain publicly available
information concerning CSBI, including the audited financial statements of CSBI
for each of the years in the three-year period ended December 31, 1998 and the
unaudited financial statements of CSBI for the three months ended March 31,
1999; (iv) certain other internal information, primarily financial in nature,
concerning the business and operations of Haywood and CSBI furnished to Trident
by Haywood and CSBI for purposes of Trident's analysis; (v) information with
respect to the trading markets for Haywood common stock and CSBI common stock;
(vi) certain publicly available information with respect to other companies that
Trident believed to be comparable to Haywood and CSBI and the trading markets
for such other companies' securities; and (vii) certain publicly available
information concerning the nature and terms of other transactions that Trident
considered relevant to its inquiry. Trident also met with certain officers and
employees of Haywood and CSBI to discuss the foregoing, as well as other
matters, which it believed relevant to its inquiry. No limitations were imposed
by either Haywood, its board of directors, or management with respect to the
investigation made or procedures followed by Trident.
In its review and analysis, and in arriving at its opinion, Trident assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to it by Haywood and CSBI, or that was publicly available,
the accuracy of the representations and warranties of the officers and the
employees of Haywood and CSBI with whom Trident held discussions, and the
accuracy of the representations and warranties of Haywood and CSBI in the merger
agreement, and did not attempt independently to verify any such information.
Trident further assumed that there are no conditions in the regulatory approvals
of the merger agreement that will have a material adverse effect upon the
contemplated economic benefits of the merger. The financial information
provided to Trident by Haywood was of the type normally produced by the
management of Haywood and reviewed by Haywood's board of directors at its
regular meetings and the board of directors and management of Haywood have
represented to Trident that they have no reason to believe that Trident's
reliance thereon was unreasonable. Trident did not conduct a physical
inspection of the properties or facilities of Haywood, and it did not make or
obtain any independent evaluations or appraisals of any of such properties or
facilities.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial or summary description. Trident believes
that its analyses and the summary set forth below must be considered as a whole,
and that selecting portions of its analyses without considering all of the
analyses, or reviewing the summary without considering all factors and analyses,
would create an incomplete view of the processes underlying the analyses set
forth in Trident's reports and its opinion. In performing its analyses, Trident
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control
of Haywood. The results of the specific analyses performed by Trident may
differ from Haywood's actual values or actual future results due to changing
economic conditions, changes in company strategy and policies, as well as a
number of other factors. Such individual analyses were prepared to provide
valuation guidance solely as part of Trident's overall valuation analysis and
the determination of the fairness of the consideration to be paid to Haywood's
shareholders. The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future. In
addition, as described above, Trident's opinion and presentations to Haywood's
board of directors were among the many factors taken into consideration by the
board of directors in making its determination to approve the merger agreement.
The summaries below reflect all of the material analyses, factors and
assumptions considered by Trident and the material valuation methods used by
Trident in arriving at its opinion as to fairness.
State of the Market. Trident reviewed the current and historical trading
market for thrift and bank equities, and current and historical trends in
the acquisition markets for banks and thrifts. Trident focused on the
acquisition market for thrifts with particular attention to the segments of
the market which it believed to be the most relevant to Haywood, such as
thrifts of similar size and profitability, thrifts with similar capital
20
<PAGE>
structures and asset quality, and thrifts located in the same geographic
region. Trident also studied the trading market for Haywood common stock
and compared the performance of Haywood common stock over the preceding 12
months to the performance of the Standard and Poor's 500 Index and an index
of thrift stocks.
Financial Analysis of Haywood. Trident examined Haywood's financial
performance for the period December 31, 1995 through March 31, 1999 by
analyzing the composition of its balance sheet, adjusting and normalizing
its earnings, and calculating a variety of operating and financial ratios
for Haywood. Trident compared Haywood's deposit market share with other
financial institutions operating in the same market.
Comparison to Actively-Traded Thrifts. Trident evaluated Haywood's
strengths and weaknesses by comparing the financial performance of Haywood
to that of the following groups of actively-traded thrifts:
. all U.S. thrifts;
. all Southeastern thrifts;
. all North Carolina thrifts;
. thrifts, with tangible capital between 12% and 16%;
. thrifts with a return on equity during the trailing four quarters
between 5% and 8%;
. thrifts with a return on assets during the trailing four quarters
between 0.85% and 1.05%;
. thrifts with total assets between $100 million and $200 million; and
. seven actively-traded thrifts Trident believed were most similar to
Haywood in terms of size, capital structure, profitability and asset
quality.
Trident compared Haywood to the aforementioned groups of actively-traded
thrifts on the basis of its stock price, balance sheet composition, capital
ratios, asset quality and reserve coverage, asset and deposit growth,
return on average equity, and the components of earnings during the
trailing four quarters.
Prospective Acquirers. Trident presented Haywood with a list of other
financial institutions with operations in the Southeast region that it
believed to be prospective acquirers. These prospective acquirers were
categorized based on Trident's perceived level of interest from the
prospective acquirer and "fit" with Haywood.
Process. Trident reviewed the process that led to the merger agreement.
Trident presented a list of the financial institutions that were contacted
regarding a possible business combination with Haywood, and the response
from each company contacted.
21
<PAGE>
Guideline Transactions. Trident presented the pricing ratios for seven
pending or completed thrift merger transactions in which the target thrift
was of similar size and capital structure as Haywood. Trident then
compared a number of financial ratios for Haywood to those of the target
thrift institutions.
<TABLE>
<CAPTION>
Haywood Low Median High
------- --- ------ ----
<S> <C> <C> <C> <C>
Price/Earnings 19.2x 13.7x 17.4x 29.3x
Price/Book Value 122.3% 106.2% 129.9% 194.9%
Price/T. Book Value 126.1% 106.2% 129.9% 194.9%
Price/Assets 17.9% 15.0% 18.4% 30.4%
Core Deposit Premium 5.3% 2.6% 6.4% 23.8%
</TABLE>
Review of Due Diligence Examination of CSBI. Trident presented a summary
of its on-site due diligence examination of CSBI. CSBI's historical
balance sheets and income statements were presented, along with a variety
of financial ratios and graphs that analyzed CSBI's financial condition and
operating results through March 31, 1999. Trident discussed CSBI's
business strategy, strengths and weaknesses, profitability, growth net
interest margin, non-interest income, operating expenses, intangible
assets, borrowed funds, market area, capital, asset quality and reserve
coverage, concentrations of credit and loan portfolio composition, use of
derivatives, interest-rate risk, year 2000 preparations, regulatory exam
results, subsidiary activities, culture, technological expertise, stock
pricing, and other issues.
Contribution Analysis. Trident analyzed the contribution of each company
to the pro forma company relative to the approximate ownership of the pro
forma company. The analysis indicated that Haywood shareholders would hold
approximately 5.1% of the pro forma company's diluted shares. Haywood's
approximate contributions are listed below by category:
<TABLE>
<CAPTION>
Haywood CSBI
------- ----
<S> <C> <C>
Assets 11.5% 88.5%
Equity 9.9% 90.1%
Tangible Equity 5.2% 94.8%
Net Income 5.4% 94.6%
</TABLE>
Summary of Proposed Transaction. Trident presented a summary of the
financial terms of the merger. Trident discussed the advantages and
disadvantages of the merger from a financial point of view. Trident also
presented pro forma financial statements for the combined company and
discussed the possible affects of earnings dilution and accretion on CSBI's
common stock price.
During its investigation, Trident did not discover any conditions that
would prevent it from rendering its fairness opinion to Haywood's board of
directors. As discussed above, Trident relied, without independent verification,
upon the accuracy and completeness of all of the financial and other information
provided by Haywood and CSBI.
Trident, as part of its investment banking business, is continually engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwriting, and valuations for corporate and
other purposes. Trident has extensive experience with the valuation of financial
institutions. Trident served as Haywood's sales agent in its mutual-to-stock
conversion in 1987. In addition, in the ordinary course of business, Trident may
trade the securities of Haywood for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. Haywood's board of directors selected Trident as Haywood's
financial advisor because of its previous experience with Trident, because
Trident is a nationally recognized investment banking firm specializing in
financial institutions, and because of its substantial experience in
transactions similar to the merger. Trident is not affiliated with Haywood or
CSBI.
For its services as financial advisor, Haywood paid Trident $5,000 as a
retainer and $10,000 upon delivery of a financial and strategic analysis report.
Haywood then paid Trident a fee of $25,000 upon execution of the merger
agreement. An additional fee equal to 1.00% of the total merger consideration,
less $25,000, will be payable to Trident upon consummation of the merger (a
balance due of approximately $226,300 based on the total merger consideration
and the aforementioned fee structure). Haywood has also agreed to reimburse
Trident for its reasonable out-of-pocket expenses and to indemnify Trident
against certain liabilities, including certain liabilities under federal
securities laws.
22
<PAGE>
Merger Consideration
At the effective time of the merger, each issued and outstanding share of
Haywood common stock, (except for Excluded Shares) will be converted into, and
become exchangeable for the merger consideration to be paid by CSBI. The
aggregate merger consideration will consist of equal amounts, by value, of CSBI
common stock and cash. Excluded Shares will be canceled.
Each holder of Haywood common stock (except those who own less than 100
shares) may elect to receive in exchange for each of his or her shares of
Haywood common stock:
. a fraction of a share of CSBI common stock (the "Per Share Stock
Consideration") determined by a formula that will depend upon the
market value of CSBI common stock. If CSBI's market value is between
$24.00 and $27.00 per share, the Per Share Stock Consideration will be
0.8874. However, if CSBI's market value is greater than $27.00 per
share, the Per Share Stock Consideration will be decreased so that
your Haywood common stock will be valued at approximately $23.95 per
share. If CSBI's market value is lower than $24.00 per share, the Per
Share Stock Consideration will be increased so that your Haywood
common stock will be valued at approximately $21.30 per share; or
. an amount of cash (the "Per Share Cash Consideration") equal to the
Per Share Stock Consideration multiplied by the market value of CSBI
common stock.
In the event Haywood's shareholders' equity (which is the difference
between Haywood's assets and liabilities) is less than $21 million as of the end
of the month immediately preceding the effective time of the merger, the
exchange ratio will be reduced proportionately. For purposes of the merger
agreement, Haywood may disregard the effect of certain costs related to the
merger in calculating shareholders' equity. The exchange ratio will be reduced
by multiplying it by a fraction, the numerator of which is Haywood's
shareholders' equity and the denominator of which is $21 million. At June 30,
1999, Haywood's shareholders' equity, as determined under the merger agreement,
was approximately $21.1 million.
The market value of CSBI common stock will be equal to the average closing
price of CSBI common stock on the Nasdaq National Market over a 20-day trading
period ending ten days prior to the effective time of the merger.
Under the merger agreement, each holder of shares of Haywood common
stock converted pursuant to the merger, who would otherwise have been entitled
to receive a fraction of a share of CSBI common stock will 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 last sale price for CSBI common
stock on the Nasdaq National Market on the business day prior to the effective
time of the merger.
The amount of CSBI common stock and cash to be received at the election
of each Haywood shareholder will be subject to allocation and pro rata
adjustments to the extent required to ensure that 50% of the total merger
consideration is paid in CSBI common stock and 50% is paid in cash as called for
by the merger agreement. See "-- Allocation Rules."
Election Procedures
CSBI has appointed Registrar and Transfer Company as its exchange agent
in connection with the merger. Immediately prior to the effective time of the
merger, CSBI will deposit with the exchange agent, for the benefit of Haywood
shareholders, CSBI common stock share certificates and cash to be issued or paid
pursuant to the allocation rules described below. In accordance with the
allocation procedures, Haywood shareholders as of the record date (other than
those owning less than 100 shares and holders of Excluded Shares) will be
entitled to elect to receive for each share of Haywood common stock either:
. the Per Share Stock Consideration (shares as to which the election is
made being "Stock Election Shares"); or
23
<PAGE>
. the Per Share Cash Consideration (shares as to which the election is
made being "Cash Election Shares").
Under the merger agreement, shares of Haywood common stock in respect of
which no election is made, or is deemed not to have been made, are referred to
as "No Election Shares." Subject to the allocation rules described below, No
Election Shares of Haywood common stock will be converted into Stock Election
Shares or Cash Election Shares as determined by CSBI in its sole discretion.
All shareholder elections must be made on the election form/letter of
transmittal that is being provided along with this proxy statement/prospectus.
CSBI will make available one or more election form(s)/letter(s) of transmittal
as may be reasonably requested by all persons who become holders of Haywood
common stock between the date this proxy statement/prospectus is mailed and the
close of business on the business day prior to the election deadline. To be
effective, an election form/letter of transmittal must be received, properly
completed and accompanied by the stock certificate(s) as to which the election
is being made, to the exchange agent no later than the election deadline (5:00
p.m., local time, on _________________). A record holder that fails to submit an
effective election form/letter of transmittal prior to the election deadline
will be deemed not to have made an election and the holder's shares shall
constitute No Election Shares. In the event that any stock certificate has been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate to have been lost, stolen or destroyed, and, the
posting of a bond in a customary amount as indemnity against any claim that may
be made against it with respect to the certificate, the exchange agent will
issue in exchange for the lost, stolen or destroyed certificate the merger
consideration deliverable in respect of the Haywood common stock represented by
the certificate. If the merger is not approved at the special meeting (unless
the special meeting is adjourned or postponed to a later date), stock
certificates that have previously been delivered to the exchange agent will be
returned to the shareholder(s) of record.
Elections may be revoked or changed upon written notice to the exchange
agent prior to the election deadline. If a holder revokes the election
form/letter of transmittal, and does not properly resubmit the form, the
holder's shares will be deemed No Election Shares. The exchange agent may use
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and any good faith decisions of the exchange
agent shall be binding and conclusive. Neither CSBI nor the exchange agent is
under any obligation to notify any person of any defect in an election form.
Neither Haywood's board of directors, nor its financial advisor, makes
any recommendation as to whether you should choose CSBI common stock or cash for
your shares of Haywood common stock. You should consult with your own financial
advisor on this decision.
Allocation Rules
If necessary, the exchange agent will allocate among Haywood shareholders
Stock Election Shares and Cash Election Shares so that 50% of the total
consideration paid by CSBI in exchange for shares of Haywood common stock is
paid in CSBI common stock (the "Stock Amount") and 50% is paid in cash (the
"Cash Amount").
Allocation of CSBI Common Stock When Stock Is Oversubscribed. If the value
of Stock Election Shares received by the exchange agent exceeds the Stock
Amount, then:
. each Cash Election Share will remain unchanged and will be converted
into the right to receive the Per Share Cash Consideration;
. the exchange agent will select, on a pro rata basis, first from among
holders of No Election Shares and then, if necessary, from among
holders of Stock Election Shares, a sufficient number of such shares
("Cash Designee Shares") so that the sum of Cash Designee Shares and
Cash Election Shares multiplied by the Per Share Cash Consideration
equals as closely as practicable the Cash Amount); and
. any Stock Election Shares and any No Election Shares, in each case,
not so selected as Cash Designee Shares shall be converted into the
right to receive the Per Share Stock Consideration.
24
<PAGE>
In the event the exchange agent is required to designate from among all
Stock Election Shares the Cash Designee Shares to receive cash, each holder of
Stock Election Shares will be allocated a pro rata portion of the remainder of
the total Cash Designee Shares less the number of No Election Shares which are
Cash Designee Shares. Such proration shall reflect the proportion that the
number of Stock Election Shares of each holder of Stock Election Shares bears to
the total number of Stock Election Shares.
Allocation of Cash When Cash Is Oversubscribed. If the value of Cash
Election Shares received by the exchange exceeds the Cash Amount, then:
. each Stock Election Share and each No Election Share will be converted
into the right to receive the Per Share Stock Consideration;
. the Exchange Agent will select, on a pro rata basis, from among
holders of Cash Election Shares, a sufficient number of such shares
("Stock Designee Shares") so that the number of Stock Designee Shares
multiplied by the Per Share Cash Consideration equals as closely as
practicable the difference between the value of Cash Election Shares
received and the Cash Amount; and
. any Cash Election Shares not so selected as Stock Designee Shares
shall be converted into the right to receive an amount of cash equal
to the Per Share Cash Consideration.
In the event the exchange agent is required to designate from among all
holders of Cash Election Shares the Stock Designee Shares to receive the Per
Share Stock Consideration, each holder of Cash Election Shares shall be
allocated a pro rata portion of the total Stock Designee Shares. Such proration
shall reflect the proportion that the number of Cash Election Shares of each
holder of Cash Election Shares bears to the total number of Cash Election
Shares.
Due to the limitations on the number of shares of Haywood common stock to
be converted into the right to receive the Per Share Stock Consideration and the
Per Share Cash Consideration, no assurance can be given that you will receive
the form of merger consideration you requested.
Effective Time of the Merger
If the merger agreement is approved by the requisite votes of Haywood
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 the Articles
of Merger reflecting the merger become effective with the North Carolina
Secretary of State. Unless otherwise mutually agreed upon in writing by the
chief executive officers of CSBI and Haywood, CSBI and Haywood will use their
reasonable efforts to cause the effective time of the merger to occur on the
last business day of the month in which occurs the last to occur of:
. 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;
. the date on which Haywood shareholders approve the merger agreement;
or
. a later date if agreed upon in writing by the chief executive officers
of CSBI and Haywood.
Assuming satisfaction of all of the conditions to consummation of the
merger, the merger is expected to be made effective during the first quarter of
2000.
Either CSBI or Haywood may terminate the merger agreement prior to the
effective time, under certain circumstances. See "-- Conditions to
Consummation" and "-- Amendment, Waiver and Termination."
25
<PAGE>
Exchange of Certificates
Immediately prior to the effective time of the merger, CSBI will deposit
with the exchange agent certificates representing shares of CSBI common stock
and cash to be issued or paid to Haywood shareholders. This proxy
statement/prospectus is accompanied by an election form/letter of transmittal
for each Haywood shareholder (except those who own less than 100 shares) to
elect to receive CSBI common stock, cash or combination of both to the extent
permitted by the merger agreement. See " Election Procedures." The election
form/letter of transmittal contains instructions on how to surrender Haywood
common stock certificates to the exchange agent and receive CSBI common stock,
cash or a combination of both, as the case may be.
For those Haywood shareholders who do not submit an effective form of
election/letter of transmittal, the Exchange Agent will forward to them, as soon
as practicable after the merger becomes effective, a letter of transmittal for
their use to send in their certificates for shares of Haywood common stock,
containing appropriate instructions for surrendering such certificates at that
time. After the exchange agent receives their stock certificates with a
properly completed letter of transmittal, it will issue and mail to them CSBI
common stock, cash or a combination of both, as the case may be.
Risk of loss and title to certificates representing shares of Haywood
common stock will remain with the holder until proper delivery of such
certificates to CSBI by former Haywood shareholders. As provided in the merger
agreement, each Haywood shareholder of record shall also receive cash in lieu of
any fractional share of CSBI common stock to which such shareholder would be
otherwise entitled (without interest). CSBI will not be obligated to deliver
the consideration to which any former holder of Haywood common stock is entitled
until the holder surrenders the certificate or certificates representing all of
his or her shares for exchange. The certificate or certificates so surrendered
must be duly endorsed as CSBI may require. CSBI will not be liable to a holder
of Haywood common stock for any property delivered in good faith to a public
official pursuant to any applicable abandoned property law.
After the effective time of the merger, record holders of certificates
that represented outstanding Haywood common stock immediately prior to the
effective time will have no rights with respect to the certificates other than
the right to surrender the certificates and receive in exchange for the
certificates the consideration to which the holder is entitled pursuant to the
merger agreement.
In the event that any dividend or distribution, the record date for which
is on or after the effective time of the merger, is declared by CSBI on CSBI
common stock, no such dividend or other distributions will be delivered to the
holder of a certificate representing shares of Haywood common stock immediately
prior to the effective time until such holder surrenders all of his or her
certificate(s) as set forth above.
In addition, holders of certificates that represented outstanding Haywood
common stock immediately prior to the effective time of the merger who receive
shares of CSBI common stock in the merger will be entitled to vote after the
effective time at any meeting of CSBI shareholders the number of whole shares of
CSBI common stock into which such shares have been converted, even if the holder
has not surrendered his or her certificate(s) as set forth above.
Any merger consideration deposited with the exchange agent that remains
unclaimed by Haywood shareholders for 12 months after the effective time of the
merger will be returned to CSBI. Thereafter, Haywood shareholders that have not
previously complied with the exchange procedures pursuant to the merger
agreement may look only to CSBI for payment of any merger consideration upon
surrender of their certificates of Haywood common stock.
Important Federal Income Tax Consequences
The following summarizes the material federal income tax consequences of
the merger to Haywood shareholders. This summary is based on current law, which
is subject to change at any time, possibly with retroactive effect. This summary
is not a complete description of all of the tax consequences of the merger and,
in particular, may not address federal income tax consequences applicable to you
if you are subject to special treatment under federal income tax law, such as
rules relating to Haywood shareholders who are not citizens or residents of the
United States, who are financial institutions, tax-exempt organizations,
insurance companies or dealers in securities, shareholders who acquired their
shares of Haywood common stock pursuant to the exercise of options or
26
<PAGE>
similar derivative securities or otherwise as compensation, and shareholders who
hold their shares of Haywood common stock as part of a straddle or conversion
transaction. In addition, this summary does not address the tax consequences of
the merger under applicable state, local or foreign laws. This discussion
assumes you hold your shares of Haywood common stock as a capital asset within
the meaning of Section 1221 of the Internal Revenue Code. Each Haywood
shareholder should consult with his or her tax advisor about the tax
consequences of the merger in light of his or her individual circumstances,
including the application of any federal, state, local or foreign law.
The merger is intended to be a "reorganization" under Section 368(a) of
the Internal Revenue Code. A condition to completing the merger is that, on the
closing date, CSBI and Haywood receive an opinion from Troutman Sanders LLP,
counsel to CSBI, that the merger will qualify as a reorganization. The closing
date opinion will be based on customary assumptions and customary
representations made by Haywood and CSBI. An opinion of counsel represents the
counsel's best legal judgment and is not binding on the Internal Revenue Service
or any court. If the merger does not qualify as a reorganization, the exchange
of Haywood common stock for CSBI common stock in the merger will be a taxable
transaction.
Neither Haywood nor CSBI intends to waive the condition that it receive
an opinion that the merger will qualify as a reorganization. If, however,
Haywood decides to waive the condition, Haywood will recirculate this document
to disclose the waiver and to make all related material disclosures, and will
resolicit proxies from the Haywood shareholders.
Provided the merger qualifies as a reorganization, neither Haywood nor
CSBI will recognize any gain or loss for federal income tax purposes. The
federal income tax consequences to you as a Haywood shareholder will depend on
whether you receive shares of CSBI common stock, cash, or a combination of CSBI
common stock and cash for your Haywood common stock. The consequences of each
of these three possibilities are summarized separately below. Because the
merger agreement may require you to receive some cash even if you elect to
receive only CSBI common stock, or to receive some CSBI common stock even if you
elect to receive only cash, you should consider the tax consequences under the
heading "Receipt of CSBI Common Stock and Cash" even if you intend to select to
receive only CSBI common stock or only cash.
Receipt of CSBI Common Stock Only. This section applies to you if you
receive only shares of CSBI common stock, or only shares of CSBI common stock
plus cash instead of a fractional share, in exchange for all your Haywood common
stock. If this section applies to you:
. You will not recognize any gain or loss on the exchange of your
Haywood common stock for CSBI common stock, except for the receipt of
cash instead of a fractional share.
. Your aggregate tax basis for the shares of CSBI common stock,
including any fractional share interest, received for your Haywood
common stock will be the same as your aggregate tax basis for the
Haywood common stock.
. Your holding period for shares of CSBI common stock, including any
fractional share interest, received for your Haywood common stock will
include your holding period for the Haywood common stock exchanged for
the CSBI common stock.
. If you receive cash instead of a fractional share of CSBI common
stock, you will recognize gain or loss equal to the difference between
the amount of the cash received and your tax basis allocable to the
fractional share. This gain or loss generally will be capital gain or
loss.
Receipt of Cash Only. This section applies to you if you exchange all
your Haywood common stock solely for cash in the merger. If this section
applies to you:
. The exchange of your Haywood common stock for cash will be a taxable
transaction.
. The exchange of your Haywood common stock for cash generally will be
treated as a sale of the stock except as provided below. Accordingly,
you should recognize gain or loss equal to the difference
27
<PAGE>
between the amount of cash received and your tax basis in your Haywood
common stock. The gain or loss generally will be capital gain or loss.
. If you or a person related to you for purposes of Section 302 of the
Internal Revenue Code will own shares or rights to acquire shares of
CSBI common stock after the merger, the entire amount of cash received
for your Haywood common stock might be taxable as a dividend in
certain circumstances. This potential treatment of the cash as a
dividend should not apply if (i) the CSBI common stock you and related
persons directly or indirectly own after the merger, as a percentage
of all CSBI common stock, is less than (ii) the percentage of all CSBI
common stock you and related persons would directly or indirectly own
after the merger if all outstanding Haywood common stock were
exchanged solely for shares of CSBI common stock.
You should consult your tax advisor to determine whether your exchange of
Haywood stock for cash will be treated as a sale of stock, as typically will be
the case, or potentially as a dividend.
Receipt of CSBI Common Stock and Cash. This section applies to you if
you exchange your Haywood common stock for shares of CSBI common stock and cash,
excluding cash received instead of a fractional share. This section applies
whether you elect to receive both CSBI common stock and cash or whether, even
though you elect to receive solely CSBI common stock or solely cash, you receive
both stock and cash because of the proration provisions of the merger agreement.
If this section applies to you:
. You will recognize any gain you realize up to the amount of cash
received, excluding cash paid instead of a fractional share, but will
not recognize any loss on the exchange of your Haywood common stock
for CSBI common stock and cash. The amount of gain or loss you realize
will be the difference between your tax basis for your Haywood common
stock and the sum of the fair market value, on the date of the merger,
of the CSBI common stock you receive and the cash you receive.
. The amount of gain recognized generally will be a capital gain. Under
certain circumstances, however, the amount of gain you recognize could
be taxable as a dividend to the extent of the portion of Haywood's
accumulated earnings, as computed for federal income tax purposes,
allocable to your stock at the time of the merger. This potential
treatment of your recognized gain as a dividend depends on the amount
of CSBI common stock that you, as well as persons related to you for
purposes of Section 302 of the Internal Revenue Code, directly or
indirectly own after the merger. None of your gain should be treated
as a dividend if (i) the CSBI common stock you and related persons
directly or indirectly own after the merger, as a percentage of all
CSBI common stock, is less than (ii) the percentage of all CSBI common
stock that you and related persons would directly or indirectly own
after the merger if all the outstanding Haywood common stock were
exchanged solely for shares of CSBI common stock.
. Your aggregate tax basis for the shares of CSBI common stock,
including any fractional share interest, received for your Haywood
common stock will be the same as your aggregate tax basis for the
Haywood common stock, plus the amount of gain you recognize, minus the
amount of cash you receive, excluding cash paid instead of a
fractional share.
. Your holding period for shares of CSBI common stock, including any
fractional share interest, received for your Haywood common stock will
include your holding period for the Haywood common stock exchanged for
the CSBI common stock.
. If you exchange two or more "blocks" of Haywood common stock for which
you paid different prices per share or otherwise have different tax
bases, the amounts of gain realized and recognized should be computed
separately for each block. As a result, you may not reduce the amount
of gain to be recognized for one block of Haywood common stock by a
loss you realize on another block.
. If you receive cash instead of a fractional share, you will recognize
gain or loss equal to the difference between the amount of cash
received and your tax basis allocable to the fractional share. This
gain or loss generally will be capital gain or loss.
28
<PAGE>
You should consult your tax advisor to determine whether the gain you recognize
on the exchange of your Haywood common stock for CSBI common stock and cash is
to be treated as capital gain or as a dividend.
Management and Operations After the Merger
Directors and Executive Officers of Haywood and Haywood Savings. At the
effective time of the merger, Haywood will merge with and into a wholly-owned
subsidiary of CSBI. Although Haywood will cease to exist, each director of
Haywood and its banking subsidiary, Haywood Savings Bank, Inc., SSB, in office
at the effective time of the merger may, at his discretion, serve as a director
of CSBI's subsidiary and Haywood Savings until the later of attaining age 70 or
five years after the effective time of the merger, but in no event later than
the director's 75th birthday. After the effective time of the merger, we expect
that all but one of the executive officers of Haywood and Haywood Savings in
office immediately prior to the effective time of the merger will serve as
executive officers of CSBI's subsidiary and Haywood Savings.
Directors and Officers of CSBI and Subsidiary. The directors and executive
officers of CSBI and its subsidiary in office at the effective time of the
merger will remain in their positions in accordance with their respective
bylaws.
Interests of Haywood's Employees and Directors in the Merger
General. Some of Haywood's employees and directors may be deemed to have
interests in the merger in addition to their interests as shareholders of
Haywood generally. These interests include, among others, proposed employee
benefits for those who remain employees of Haywood Savings after the merger,
severance benefits for employees who are terminated after the merger, retention
bonuses for employees who remain with Haywood until the merger, an employment
agreement with Haywood's current President and Managing Officer, insurance
coverage for Haywood's directors and officers and, due to the change in control
of Haywood, advance funding of benefits previously earned by certain directors
and officers of Haywood, as described below.
Employee Benefits. The merger agreement generally provides that CSBI will
furnish to those who remain employees of Haywood Savings after the effective
time of the merger benefits under employee benefit plans which, when taken as a
whole, are substantially similar to those currently provided by CSBI and its
subsidiaries to their similarly situated employees. Furthermore, CSBI will waive
any pre-existing condition exclusion under any employee health plan to the
extent the condition was covered under the relevant Haywood benefit plan and the
individual was covered by the Haywood benefit plan on the date which immediately
precedes the effective time of the merger. For purposes of participation,
vesting and benefit accrual under CSBI's employee benefit plans, service with
Haywood prior to the effective time of the merger will be treated as service
with CSBI or its subsidiaries.
Severance Plan. Haywood has adopted a severance plan covering all full-
time employees other than Mr. Ammons and Vice President Jack T. Nichols, who
have separate severance arrangements under their employment agreements described
below. Under Haywood's severance plan, employees are entitled to severance
payments if they are terminated for reasons other than cause in connection with,
or within 24 months after, a change in control. Employees also have the right to
receive severance payments if they voluntarily terminate their employment within
24 months after a change in control if their annual base rate of salary is
reduced or they are transferred to a location outside of the counties in which
Haywood currently operates. Severance payments are equal to one week's salary at
the employee's existing rate of salary for every full year of employment with a
minimum severance payment of four weeks' salary and a maximum severance payment
of 26 weeks' salary.
Retention Bonus Plan. Haywood has established a retention bonus plan under
which each employee who remains with Haywood through the closing of the merger
will be entitled to a bonus equal to one month's salary.
Employment Agreements. Haywood, Haywood Savings and its President and
Managing Officer, Larry R. Ammons, are currently bound by an employment
agreement that provides, among other things, for a payment to Mr. Ammons
following a change in control of Haywood. In order to avoid payment under the
terms of the existing employment agreement and as a condition to the merger,
Haywood, Haywood Savings and Mr. Ammons will cancel the existing contract prior
to the merger and, as of the date of the merger, Haywood Savings, CSBI and Mr.
Ammons will enter into a new employment agreement pursuant to which Mr. Ammons
will serve as Chairman of the board of directors
29
<PAGE>
of Haywood Savings. The new employment agreement is for a term of five years and
provides for an annual salary of $133,400. Mr. Ammons' compensation will be
reviewed by the board of directors of Haywood Savings at least annually and may
be increased, but not decreased, from time to time in such amounts as the board
of directors may decide. During the term of the employment agreement, Mr. Ammons
will be entitled to benefits substantially similar to those provided to
executive officers of CSBI and its affiliated companies.
In the event Mr. Ammons' employment is terminated during the first 24
months of the term of the employment agreement, Haywood Savings will pay him an
amount (the "Maximum Amount") equal to the difference between (i) the product of
2.99 times the average annual compensation he received during the five-year
period immediately prior to the date of the change of control and (ii) the sum
of any other "parachute payments" (as defined in the Internal Revenue Code) that
he receives on account of the change in control. If Mr. Ammons' employment is
terminated after the first 24 months of the term of the employment agreement,
Haywood Savings will pay him an amount equal to the Maximum Amount multiplied by
a fraction, where the denominator of the fraction is 36 and the numerator is the
number of whole calendar months remaining in the term of the employment
agreement.
For 36 months after the employment agreement is terminated, Mr. Ammons,
his dependents, beneficiaries and estate shall continue to be covered under all
employee benefit plans of Haywood Savings, including, without limitation,
Haywood Savings' pension plan, life insurance and health insurance.
Haywood, Haywood Savings and Vice President Jack T. Nichols are also bound
by an employment agreement that provides, among other things, for a payment to
Mr. Nichols following a change in control. In the event Mr. Nichols' employment
is terminated following a change in control, he is entitled to a payment equal
to the difference between (i) the product of 2.99 times the average annual
compensation he received during the five-year period immediately prior to the
date of the change in control and (ii) the sum of any other parachute payments
he receives as a result of the change in control. Under Mr. Nichols' agreement,
an event of termination would include a material reduction in his duties to
which he has not consented. It is anticipated that Mr. Nichols will become
entitled to a payment of approximately $197,000 under his agreement as a result
of the merger. As discussed below, funds sufficient to satisfy this obligation
will be placed in a grantor trust for the benefit of Mr. Nichols.
Directors. Each director of Haywood and Haywood Savings may, at his
discretion, serve as a director of CSBI's subsidiary (the surviving corporation
in the merger) and Haywood Savings until the later of attaining age 70 or five
years after the effective time of the merger, but in no event later than the
director's 75th birthday. Accordingly, those who continue to serve as directors
will receive director fees at a rate that can be controlled by CSBI, which,
pursuant to the merger agreement, will equal $400 per month for combined service
on both the surviving corporation's and Haywood Savings' board of directors.
Currently, Haywood directors do not receive separate fees for their services on
Haywood's board of directors or its committees. However, they do receive fees
of $475 for each meeting of Haywood Savings' board of directors attended.
Except for directors serving on Haywood Savings' appraisal committee (who
receive $50 for visiting properties being appraised by the committee and $30 for
inspecting construction projects financed by Haywood Savings), directors do not
receive fees for committee meetings attended.
Insurance. CSBI has generally agreed to provide directors' and officers'
insurance coverage at the effective time of the merger for Haywood's directors
and officers either, at CSBI's election, (i) by purchasing continuation coverage
under Haywood's current policy for directors and officers for a period of not
less than three years after the effective time of the merger, or (ii) by
obtaining coverage under CSBI's current directors' and officers' policy to
provide coverage for Haywood's directors and officers on a prior acts basis for
a period of not less than three years prior to the effective time of the merger.
Grantor Trust. In connection with the merger, Haywood is establishing
a grantor trust in the amount of $_____ to fund the benefits that individual
directors and executive officers have earned under benefit plans which are to be
terminated as a condition to the merger. Under the merger agreement, Haywood is
required to take all steps necessary to terminate certain benefit plans (or to
obtain waivers of claims against Haywood from the beneficiaries under the plans
as approved by CSBI). The plans to be terminated include the following plans
and arrangements:
Retirement Payment Agreements. Each of Haywood's directors have
previously entered into retirement payment agreements with Haywood Savings
providing for specified payments over a ten-year period beginning at age 65
in return for their agreement to defer payment of their director fees for a
period of five years.
30
<PAGE>
Supplemental Income Agreements. Various officers, including Messrs.
Ammons and Nichols, have previously entered into supplemental income
agreements with Haywood Savings providing for monthly payments for a period
of 15 years following their attainment of age 65.
Non-Employee Director Retirement Plans. Under the Haywood Savings non-
employee director retirement plan, non-employee directors are entitled to
receive a payment equal to up to ten years of board fees following their
retirement at age 65.
In order to terminate these plans, Haywood is establishing a grantor trust
which will be funded with sufficient assets to pay the benefits which directors
and officers have accrued under the plans. The grantor trust will also include
funds for the change in control payments to which Mr. Nichols is entitled under
his employment agreement. Haywood is amending its individual agreements with
each of the beneficiaries to terminate their arrangements and to require the
beneficiaries to look solely to the grantor trust for payment of their benefits.
Conditions to Consummation
The obligations of Haywood and CSBI to consummate the merger are subject to
the satisfaction or waiver (to the extent permitted) of several conditions,
including:
. Haywood shareholders must have approved the merger agreement and the
consummation of the merger as and to the extent required by law,
Haywood's governing corporate instruments and the American Stock
Exchange;
. the required regulatory approvals described under "Regulatory
Approvals" must have been received, generally without any conditions
or requirements which would, in the reasonable judgment of CSBI's
board of directors, 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;
. each party must have received all consents (other than those described
in the preceding paragraph) required for consummation of the merger
and for the prevention of a default under any contract of such party
which, if not obtained or made, would reasonably likely have,
individually or in the aggregate, a material adverse effect on such
party, generally without any conditions or requirements which would,
in the reasonable judgment of CSBI's board of directors, 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;
. no court or regulatory authority may have taken any action which
prohibits, restricts or makes illegal the consummation of the
transactions contemplated by the merger agreement;
. the registration statement registering the shares of CSBI common stock
to be received by Haywood shareholders, of which this proxy
statement/prospectus is a part, must have been declared effective by
the SEC, no stop order suspending the effectiveness of the
registration statement may have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness of
the Registration Statement may have been initiated and be continuing
and all necessary approvals under federal and state securities laws
relating to the issuance or trading of the shares of CSBI common stock
issuable pursuant to the merger must have been received;
. each party must have received an opinion of Troutman Sanders LLP as to
the matters set forth above under "Important Federal Income Tax
Consequences;"
. the other party's representations and warranties must remain accurate,
and the other party must have performed all of the agreements and
covenants to be performed by it pursuant to the merger agreement, and
must have delivered certificates confirming satisfaction of the
foregoing requirements and certain other matters;
31
<PAGE>
. each party must have received an opinion of the other party's counsel,
dated the closing date as to certain matters;
. CSBI must have received letters from KPMG LLP with respect to certain
financial information regarding Haywood;
. CSBI must have received from each "affiliate" of Haywood an agreement
stating, among other things, that he or she will comply with federal
securities laws when transferring any shares of CSBI common stock
received in the merger (see " Resales of CSBI Common Stock");
. CSBI must have received from certain of the directors and executive
officers of Haywood an agreement stating, among other things, that he
or she will support the merger and not compete against CSBI under
certain conditions;
. Haywood must have received from Trident a letter, dated not more than
three days prior to the date of this proxy statement/prospectus, that
in Trident's opinion, the merger consideration to be received by
Haywood shareholders is fair from a financial point of view;
. the shares of CSBI common stock issuable pursuant to the merger must
have been approved for listing on the Nasdaq National Market; and
. Haywood must have received a certificate from the exchange agent
certifying its receipt of the required number of shares of CSBI common
stock and cash to be received by Haywood shareholders pursuant to the
merger.
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 Haywood
shareholders.
Conversion of Haywood Savings
On August 5, 1999, Haywood and CSBI entered into a letter agreement
whereby Haywood agreed to convert its wholly-owned subsidiary, Haywood Savings
Bank, Inc., SSB, a North Carolina savings bank, to a federally chartered stock
savings bank. CSBI believes that a federally chartered stock savings bank, also
known as a "thrift," offers competitive advantages not available to state
savings banks. The parties agreed that the conversion will be accomplished on
an expedited and best efforts basis and prior to the effective time of the
merger. In the event the merger does not close, CSBI has agreed to pay the
documented fees and expenses reasonably and directly incurred by Haywood and
Haywood Savings in connection with the conversion, including converting back to
a state savings bank.
Regulatory Matters
Conversion of Haywood Savings from a North Carolina savings bank to a
federally chartered stock savings bank is subject to the prior approval of the
Office of Thrift Supervision (the "OTS") and the notification of the
Administrator of the Savings Institutions Division of the State of North
Carolina (the "North Carolina Savings Institutions Division"). Because a
federal thrift is not considered to be a "bank" under the Bank Holding Company
Act, once the conversion of Haywood Savings is completed, Haywood will no longer
meet the definition of a "bank holding company" under the act. It will,
however, meet the definition of a "thrift holding company" under the Home
Owners' Loan Act and, therefore, must receive the prior approval of the OTS -
the primary federal regulator of thrift holding companies - to act as such
before the conversion of Haywood Savings is completed. Similarly, CSBI's
wholly-owned subsidiary, as the surviving corporation in the merger and the sole
shareholder of Haywood Savings after the merger, will also be required to
receive the prior approval of the OTS before acquiring control of Haywood
Savings. In approving the conversion of Haywood Savings and the holding company
applications of
32
<PAGE>
Haywood and CSBI's subsidiary, the OTS will consider such factors as the
financial and managerial resources (including the competence, experience and
integrity of the officers, directors and principal shareholders) and future
prospects of the existing and proposed institutions and the convenience and
needs of the communities to be served. In considering the financial resources
and future prospects of the existing and proposed institutions, the OTS will,
among other things, evaluate the adequacy of the capital level of the parties to
the proposed transactions. If, after reviewing these and other factors, the OTS
approves the transactions, Haywood (until it is merged out of existence), and
Haywood Savings will be subject to OTS regulatory oversight.
The actual acquisition of Haywood by CSBI, which is being accomplished by
the merger of Haywood with and into CSBI's subsidiary, is subject to the prior
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve"). Under the Bank Holding Company Act, CSBI may only acquire shares in
non-bank companies, like savings associations, if the Federal Reserve determines
that the activities of those non-bank companies are closely related to banking.
The Federal Reserve must further consider whether the proposed acquisition can
reasonably be expected to produce benefits to the public (such as greater
convenience, increased competition, and gains in efficiency) that outweigh
possible adverse effects (such as undue concentration of resources, decreased or
unfair competition, conflicts of interest and unsound banking practices). In
making this determination, the Federal Reserve will evaluate the financial and
managerial resources of CSBI, including its subsidiaries and Haywood, the effect
of the merger on those resources and the management expertise, internal control
and risk management systems and capital of Haywood. By regulation, the Federal
Reserve has determined that the business of owning and operating a savings
association is permissible for bank holding companies if the savings association
engages only in deposit-taking, lending and other activities that are otherwise
permissible for bank holding companies under Federal Reserve regulations. Under
the Federal Reserve's regulations, CSBI is required to file a notice with the
Federal Reserve alerting the Federal Reserve of its intention to acquire
Haywood. Assuming the OTS approves Haywood Savings' conversion and the holding
company applications of Haywood and CSBI's subsidiary, the Federal Reserve will
be required, pursuant to the Economic Growth and Regulatory Paperwork Act of
1996, to forward a copy of CSBI's acquisition notice to the OTS for the OTS'
review and comment. However, because the Economic Growth and Regulatory
Paperwork Act exempts bank holding companies from the requirement under the Home
Owners' Loan Act that the OTS approve thrift acquisitions, bank holding
companies are not required to file separate applications with the OTS before
they acquire thrifts. As a result of this exemption, CSBI will not file an
acquisition application with the OTS in connection with its acquisition of
Haywood and Haywood Savings. There can be no assurance, however, that the OTS
will not comment on the acquisition notice CSBI files with the Federal Reserve,
or if the OTS comments on the notice, that the comments will not delay the
Federal Reserve's approval.
Where a transaction results in the acquisition by a bank holding company of
a bank (or a thrift in the case of Haywood Savings assuming its conversion is
approved) located in a state other than the home state of the bank holding
company (in this case, Georgia), the Bank Holding Company Act authorizes the
Federal Reserve to approve the transaction without regard to whether the
transaction is prohibited under the laws of any state so long as the bank
holding company is adequately capitalized and adequately managed and certain
other limitations are not exceeded. CSBI is considered well-capitalized and
well-managed under Federal Reserve regulations and the transaction does not
exceed the other limitations.
Federal regulations provide for the publication of notices and the
administrative hearings relating to the federal filings noted above and permit
interested parties to intervene in the proceedings. If interested parties
intervene, administrative and judicial proceedings relating to both federal
filings could substantially delay the regulatory approvals required for
consummation of the acquisition.
CSBI and Haywood have filed or will file all applications and notices
and have taken (or will take) other appropriate action with respect to any
requisite approvals or other action of any governmental authority.
The merger agreement provides that the obligation of each of CSBI and
Haywood to consummate the acquisition is conditioned upon the receipt of all
requisite regulatory approvals, including the approval of the Federal Reserve.
There can be no assurance that any governmental agency will approve or take any
other required action with respect to the acquisition, and, if approvals are
received or action is taken, there can be no assurance as to the date of such
approvals or action, that such approvals or action will not be conditioned upon
matters that would cause the parties to abandon the acquisition, or that no
action will be brought challenging such approvals or action, including a
challenge by the United States Department of Justice or, if such a challenge is
made, its result.
33
<PAGE>
Other than as summarized above, we are not aware of any governmental
approvals or actions that may be required for consummation of the acquisition or
any related transactions. Should any other approval or action be required, we
currently contemplate that we would seek such approval or action. To the extent
that the above summary describes statutes and regulations, it is qualified in
its entirety by reference to those particular statutes and regulations.
The acquisition of Haywood cannot proceed in the absence of the requisite
regulatory approvals. There can be no assurance that any regulatory approvals
will be obtained or as to the dates of any such approvals. There can also be no
assurance that our regulatory approvals will not contain a condition or
requirement which causes them to fail to satisfy the conditions set forth in the
merger agreement.
See "-- Effective Time of the Merger," "-- Conditions to Consummation" and
"-- Amendment, Waiver and Termination."
In addition to the approvals and notifications of the regulatory
authorities summarized above, we are subject to ongoing supervision, regulation
and periodic examination by various federal and state regulatory agencies.
Detailed discussions of such ongoing regulatory oversight and the laws and
regulations under which it is carried out can be found in our Annual Reports on
Form 10-K incorporated by reference herein. See "Where You Can Find More
Information" on page 58. Those discussions are qualified in their entirety by
the actual language of the laws and regulations, which are subject to change
based on possible future legislation and regulatory action.
Amendment, Waiver and Termination
To the extent permitted by law, Haywood 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 Haywood shareholders. However,
after the approval of the merger by Haywood shareholders, no amendment may
decrease the consideration to be received without the approval of Haywood
shareholders.
Prior to or at the effective time of the merger, either CSBI or Haywood
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.
The merger agreement may be terminated, and the merger abandoned, at any
time prior to its effective time, by mutual consent of CSBI's and Haywood's
boards of directors. In addition, the merger agreement may be terminated, and
the merger abandoned, prior to the effective time of the merger by either CSBI
or Haywood if:
. the other party breaches and does not timely cure any representation
or warranty contained in the merger agreement;
. any consent of any regulatory authority required for consummation of
the merger is denied by final nonappealable action of the regulatory
authority or if any action taken by the regulatory authority is not
appealed within the time limit for appeal, or Haywood shareholders
fail to approve the merger agreement at the special meeting;
. the merger has not been consummated by March 31, 2000 and the failure
to consummate the merger by that date is not caused by a breach of the
terminating party; or
. any of the conditions precedent to the obligation of the terminating
party to consummate the merger cannot be satisfied by March 31, 2000.
The merger agreement may also be terminated by CSBI in the event that
Haywood's board of directors fails to reaffirm, following a written request by
CSBI for such reaffirmation, after Haywood has received an inquiry or proposal
with respect to an "acquisition proposal" (generally a tender offer or proposal
for a merger, asset acquisition or other business combination), its approval of
the merger and the transactions contemplated by the merger agreement (to the
exclusion of any other acquisition proposal), or determines not to reaffirm the
merger.
34
<PAGE>
Conduct of Business Pending the Merger
Under the merger agreement, Haywood has agreed, except as otherwise
contemplated by the merger agreement or with the prior written consent of CSBI,
to:
. operate its business only in the usual, regular and ordinary course;
. preserve intact its business organizations and assets and maintain its
rights and franchises;
. use its reasonable efforts to cause its representations and warranties
to be correct at all times,
. use its reasonable efforts to ensure, to the extent consistent with
its board of directors' fiduciary duties, that its merger-related
expenses are reasonable;
. to take all steps necessary to terminate its employee benefit plans;
and
. take no action which would (i) adversely affect the ability of any
party to obtain any consents required for the transactions
contemplated by the merger agreement without imposition of a condition
or restriction which, in the reasonable judgment of CSBI's board of
directors, would so materially adversely impact the economic or
business benefits of the transactions contemplated by the merger
agreement as to render inadvisable the consummation of the merger, or
(ii) adversely affect in any material respect the ability of either
party to perform its covenants and agreements under the merger
agreement.
In addition, Haywood has agreed in the merger agreement not to take certain
actions relating to the operation of its businesses pending consummation of the
merger without the prior consent of the Chief Executive Officer of CSBI (which
consent will not be unreasonably withheld). Such actions include, without
limitation:
. amending the articles of incorporation, bylaws or other governing
corporate instruments of Haywood;
. becoming responsible for any obligation for borrowed money in excess
of an aggregate of $50,000, except in the ordinary course of business
of Haywood consistent with past practices or allowing the imposition
of a lien on any asset of Haywood;
. acquiring or exchanging (other than exchanges in the ordinary course
under employee benefit plans) any shares (or securities convertible
into any shares) of capital stock of Haywood or paying any dividend on
Haywood common stock, except that Haywood may pay quarterly cash
dividends at a rate not to exceed $0.16 per share consistent with past
practices;
. subject to certain exceptions, issuing, selling or pledging additional
shares of Haywood common stock, any rights to acquire any such stock
or any security convertible into such stock;
. adjusting or reclassifying any capital stock of Haywood or issuing or
authorizing the issuance of any other securities in respect of or in
substitution for shares of Haywood common stock or its subsidiaries'
common stock, or otherwise disposing of any asset(s) having a book
value in excess of $10,000 or that exceed $100,000 in the aggregate,
other than in the ordinary course for reasonable and adequate
consideration;
. acquiring control over any real property, subject to certain
exceptions such as foreclosures and acquisitions made in a fiduciary
capacity;
. purchasing any securities or making any material investments in any
person or otherwise acquiring direct or indirect control over any
person subject to certain exceptions;
35
<PAGE>
. granting any increase in compensation or benefits to the employees or
officers of Haywood (except in accordance with past practice and as
previously disclosed to CSBI, or as required by law), paying any
bonus, entering into or amending any severance agreements with
officers of Haywood, granting any increase in compensation or other
benefits to directors of Haywood (except as previously disclosed to
CSBI);
. entering into or amending (unless required by law) any employment
contract that Haywood does not have the unconditional right to
terminate without certain liability;
. subject to certain exceptions, adopting any new employee benefit plan
of Haywood or materially changing any existing plan or program;
. making any significant change in tax or accounting methods, except for
any change required by law or generally accepted accounting
principles;
. commencing any litigation other than in accordance with past practice
or settling any litigation for money damages in excess of $25,000 or
which places material restrictions on the operations of Haywood or any
of its subsidiaries;
. except in the ordinary course of business, modifying, amending or
terminating any material contracts or waiving, releasing or assigning
any material rights or claims; or
. extending credit to any borrower which requires the approval of
Haywood's board of directors.
In addition, Haywood has agreed that neither it, nor its affiliates or
representatives, will solicit an acquisition proposal (generally, a tender offer
or proposal for a merger, asset acquisition or other business combination),
other than the transactions contemplated by the merger agreement. Pursuant to
the merger agreement, except to the extent necessary to comply with the
fiduciary duties of Haywood's board of directors as determined by it after
consulting with and considering the advice of counsel, neither Haywood, nor any
affiliate or representative of Haywood, will furnish any non-public information
that it is not legally obligated to furnish, or negotiate with respect to, or
enter into any contract with respect to, any acquisition proposal. However,
Haywood may communicate information about an acquisition proposal to its
shareholders if and to the extent that it is required to do so in order to
comply with its legal obligations as advised by counsel. In the merger
agreement, Haywood also agreed to terminate any negotiations conducted prior to
the date of the merger agreement with any parties other than CSBI with respect
to any of the foregoing and agreed to use its reasonable efforts to cause its
representatives to comply with any of the foregoing. Haywood has further agreed
to promptly advise CSBI following the receipt of any acquisition proposal and
its material details.
The Option Agreement
Haywood has granted to CSBI an irrevocable option to purchase up to 249,946
shares of Haywood common stock (approximately 19.9% of Haywood's issued and
outstanding common stock), at a price of $16.30 per share. The option was
granted by Haywood as a condition of, and in consideration for, CSBI's entering
into the merger agreement. The purchase of any shares of Haywood common stock
pursuant to the option is subject to compliance with applicable law, including
the receipt of necessary approvals under the Bank Holding Company Act. A copy
of the option agreement is attached to this proxy statement/prospectus as
Appendix C and is incorporated by reference herein.
Subject to several conditions, the option may be exercised in whole or in
part if an "initial triggering event" and a "subsequent triggering event" (both
as defined below) occur prior to the termination of the option. Under the
option agreement, an "initial triggering event" will occur if:
. Haywood or any of its subsidiaries, without having received CSBI's
prior written consent, shall have entered into an agreement to engage
in an "acquisition transaction" (as defined below) with a third party
other than CSBI or any of its subsidiaries or the board of directors
of Haywood shall have recommended that the shareholders of Haywood
approve or accept any such acquisition transaction. For purposes of
the Haywood option agreement, "acquisition transaction" means (w) a
merger or
36
<PAGE>
consolidation or similar transaction involving Haywood or any of its
significant subsidiaries, (x) a purchase, lease or other acquisition
or assumption of all or a substantial portion of the assets or
deposits of Haywood or any of its significant subsidiaries, (y) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of Haywood, or (z) any substantially
similar transaction;
. Haywood or any of its subsidiaries, without having received CSBI's
prior written consent, shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose,
to engage in an acquisition transaction, or the board of directors of
Haywood shall have publicly withdrawn or modified, or publicly
announced its intention to withdraw or modify, in any manner adverse
to CSBI, its recommendation that the shareholders of Haywood approve
the merger in anticipation of engaging in an acquisition transaction;
. any person, other than CSBI or its subsidiaries, shall have acquired
beneficial ownership or the right to acquire beneficial ownership of
10% or more of the outstanding shares of Haywood common stock;
. any person, other than CSBI or its subsidiaries, shall have made a
bona fide proposal to Haywood or its shareholders by public
announcement or written communication that is, or becomes the subject
of, public disclosure to engage in an acquisition transaction;
. after an overture is made by a third party to Haywood or its
shareholders to engage in an acquisition transaction, Haywood shall
have breached any covenant or obligation contained in the merger
agreement which would entitle CSBI to terminate the merger agreement
and the breach shall not have been cured prior to the date in which
the holder of the option gives notice of its exercise of the option;
or
. other than in connection with a transaction to which CSBI has given
its prior written consent, any person, other than CSBI or its
subsidiaries, shall have filed an application or notice with any
federal or state bank regulatory authority for approval to engage in
an acquisition transaction.
To our knowledge, no initial triggering event has occurred as of the date
of this proxy statement/prospectus.
The term "subsequent triggering event" under the option agreement is
defined as either (i) the acquisition by any person of beneficial ownership of
25% or more of the then outstanding shares of Haywood common stock, or (ii) the
occurrence of the initial triggering event described in the first paragraph
outlined above, except that the percentage referred to in clause (y) above shall
be 25%.
After a subsequent triggering event and prior to the termination of the
option, the holder of the option may demand that the option and the related
shares to be issued under the option be registered under federal law.
The option agreement provides for adjustments in the option in the event of
any change in Haywood's common stock by reason of a stock dividend, stock split,
splitup, recapitalization, combination, exchange of shares or similar
transaction or in the event any additional shares of Haywood common stock are
issued before the termination of the option.
If, before the termination of the option agreement, Haywood enters into an
agreement:
. to consolidate with or merge into any third party and will not be the
continuing or surviving corporation of the consolidation or merger;
. to permit any third party to merge into Haywood with Haywood as the
continuing or surviving corporation, but, in connection therewith, the
then outstanding shares of Haywood common stock are changed into or
exchanged for stock or other securities of Haywood or any other person
or cash or any other property, or the outstanding shares of Haywood
common stock after the merger represent less than 50% of the
outstanding shares and share equivalents of the merged company;
37
<PAGE>
. to permit any third party to acquire all of the outstanding shares of
Haywood common stock pursuant to a statutory share exchange; or
. to sell or otherwise transfer all or substantially all of its assets
or deposits to any third party.
then the agreement must provide that the option will be converted or exchanged
for an option to purchase shares of common stock of, at the holder's option,
either (x) the continuing or surviving corporation of a merger or consolidation
or the transferee of all or substantially all of Haywood's assets or (y) any
person controlling the continuing or surviving corporation or transferee. The
number of shares subject to the substitute option and the exercise price per
share will be determined in accordance with a formula in the option agreement.
To the extent possible, the substitute option will contain terms and conditions
that are the same as those in the option agreement.
CSBI's ability to exercise the option will terminate upon:
. the effective time of the merger;
. termination of the merger agreement in accordance with its terms prior
to the occurrence of an initial triggering event; or
. 12 months after termination of the merger agreement following the
occurrence of an initial triggering event or CSBI terminates the
merger agreement because of a breach by Haywood of any of its
representations, warranties, covenants or agreements in the merger
agreement and the breach has a material adverse effect on Haywood
(subject to several extensions stated in the option agreement).
We believe the option is customary and typical for transactions such as the
proposed merger. The option agreement is intended, among other things, to
increase the likelihood that the merger will be completed on the terms set forth
in the merger agreement and, if the merger is not completed under certain
circumstances involving an acquisition or potential acquisition of Haywood by a
third party, to compensate CSBI for its efforts undertaken, expenses incurred
and business opportunities lost in connection with the proposed merger. The
option may have the effect of discouraging offers by third parties to acquire
Haywood prior to the merger, even if these persons or entities were prepared to
pay consideration to Haywood shareholders that has a higher current market price
than the consideration to be received by the holders of Haywood common stock
from CSBI under the merger agreement.
Expenses and Fees
The merger agreement provides that each party will be responsible for
its own direct costs and expenses incurred in connection with the negotiation
and consummation of the transactions contemplated by the merger agreement,
except that CSBI will pay the filing fee in connection with the registration
statement and this proxy statement/prospectus and one-half of the printing costs
incurred in connection with printing the registration statement and this proxy
statement/prospectus. If the merger agreement is terminated by either party as
a result of the other party's breach of its representations, warranties or
agreements set forth in the merger agreement, breaching party will pay to the
terminating party, as its sole remedy, the reasonable direct costs and expenses
incurred by the terminating party in connection with the merger, plus $100,000.
Accounting Treatment
The merger will be accounted for by CSBI as a purchase in accordance with
generally accepted accounting principles. The reported results of operations of
CSBI will include the results of Haywood from and after the closing date of the
merger. The assets, including intangible assets, and liabilities of Haywood will
be recorded at their fair values as of the closing date of the merger. Any
excess of the purchase consideration over the fair values of the assets and
liabilities of Haywood will be recorded as goodwill and amortized over time.
Resales of CSBI Common Stock
The shares of CSBI common stock to be issued to Haywood shareholders in
the merger have been registered under the Securities Act of 1933, as amended
(the "Securities Act"). Such shares may be traded freely and without
restriction by those shareholders not deemed to be "affiliates" of Haywood or
CSBI as that term is
38
<PAGE>
defined under the Securities Act. Any subsequent transfer of such shares,
however, by any person who is an affiliate of Haywood at the time the merger is
submitted for a vote or consent of the shareholders of Haywood will, under
existing law, require either:
. the further registration under the Securities Act of the shares of
CSBI common stock to be transferred;
. compliance with Rule 145 promulgated under the Securities Act
(permitting limited sales under certain circumstances); or
. the availability of another exemption from registration.
An "affiliate" of Haywood, as defined by the rules promulgated pursuant to
the Securities Act, is a person who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Haywood. The foregoing restrictions are expected to apply to the directors,
certain officers, and the beneficial holders of 10% or more of Haywood common
stock (and to certain relatives or the spouse of any such person and any trust,
estates, corporations, or other entities in which any such person has a 10% or
greater beneficial or equity interest).
In addition, Haywood has agreed that it will use its reasonable efforts
to cause each person or entity that is an "affiliate" for purposes of complying
with Rule 145 to enter into a written agreement relating to such restrictions on
sale or other transfer.
No Appraisal or Dissenters' Rights
Under North Carolina law, Haywood shareholders will not be entitled to
any appraisal or dissenters' rights in connection with the merger.
39
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND HAYWOOD
BANCSHARES, INC. AND SUBSIDIARIES Pro Forma Condensed
Combined Balance Sheet
December 31, 1998
(Unaudited)
The following unaudited pro forma condensed combined balance sheet of CSBI
and subsidiaries as of December 31, 1998 gives effect, using the purchase method
of accounting, to the proposed acquisition by CSBI of 100% of Haywood (see note
(a)) as if Haywood had been acquired by CSBI on January 1, 1998. This pro forma
condensed balance sheet as of December 31, 1998 also gives effect, using the
pooling of interest method of accounting, to the proposed acquisition by CSBI of
100% of Lanier Bankshares, Inc. and its subsidiaries (see note (n)). This pro
forma condensed combined balance sheet should be read in conjunction with the
notes to the pro forma financial statements and the separate financial
statements and related notes of the respective entities.
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma
CSBI Haywood Adjustments Consolidated Lanier Adjustments Consolidated
---- ------- ----------- ------------ ----- ----------- ------------
(Amounts in thousands, except percentages and ratios)
Assets
- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and due from banks $ 51,420 $ 1,525 $ 52,945 $ 4,788 $ 57,733
Federal funds sold 30,550 1,714 32,264 2,600 34,864
Interest bearing deposits 4,949 805 5,754 42 5,796
Investment securities 166,884 29,769 $ 30(d) 196,683 25,612 222,295
Net loans 833,853 110,793 944,646 76,100 1,020,746
Premises and equipment 25,300 1,565 1,750(f) 28,615 3,508 32,123
Goodwill and intangibles 4,637 675 3,856(h) 9,168 9,168
FHLB stock 4,682 1,427 6,109 6,109
Investment in mortgage
servicing rights -- 978 978 978
Foreclosed assets 4,773 7 4,780 4,780
Other assets 19,672 1,698 21,370 3,101 24,471
---------------------------------------------------------------------------------------------------
Total Assets $1,146,720 $ 150,956 $ 5,636 $ 1,303,312 $ 115,751 $1,419,063
===================================================================================================
Liabilities
- -----------
Deposits:
Noninterest bearing $ 143,008 $ 242 $ 143,250 $ 17,033 $ 160,283
Other interest bearing 850,300 116,520 966,820 84,714 1,051,534
---------------------------------------------------------------------------------------------------
Total Deposits $ 993,308 $ 116,762 $ 1,110,070 $ 101,747 $1,211,817
Federal funds purchased $ -- $ -- $ -- $ --
FHLB advances 16,280 10,500 26,780 26,780
Long term debt 35 -- 35 $ 51 86
Other borrowed funds -- -- $ 13,311(b) 13,311 1,505 14,816
Other liabilities 11,045 2,147 856(g) 14,048 1,819 15,867
---------------------------------------------------------------------------------------------------
Total Liabilities $1,020,668 $ 129,409 $ 14,167 $ 1,164,244 $ 105,122 $1,269,366
Shareholders' Equity
- --------------------
Common stock $ 11,787 $ 1,250 $ (695)(b)(e) $ 12,342 $ 1,238 $ 312 $ 13,892
Surplus 36,106 3,522 9,234(b)(c) 48,862 5,230 (731) 53,361
Retained earnings 78,219 16,937 (17,232)(e) 77,924 4,491 82,415
Treasury stock (1,051) -- (1,051) (419) 419 (1,051)
Unearned compensation-restricted
awards stock --
Accumulated other comprehensive
income (loss) 991 (162) 162(e) 991 89 1,080
---------------------------------------------------------------------------------------------------
Total Shareholders' Equity $ 126,052 $ 21,547 $ (8,531) $ 139,068 $ 10,629 $ -- $ 149,697
---------------------------------------------------------------------------------------------------
Total Shareholders' Equity
and Liabilities $1,146,720 $ 150,956 $ 5,636(e) $ 1,303,312 $ 115,751 $ -- $1,419,063
===================================================================================================
Tier 1 Capital to Assets 10.54% 14.33% 9.96% 9.11% 9.89%
Long-Term Debt to Equity Ratio 0.03% 0.00% 9.60% 14.64% 9.95%
</TABLE>
40
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
HAYWOOD BANCSHARES, INC. AND SUBSIDIARIES
Pro Forma Condensed Combined Balance Sheet
June 30, 1999
(Unaudited)
The following unaudited pro forma condensed combined balance sheet of CSBI
and subsidiaries as of June 30, 1999 gives effect, using the purchase method of
accounting, to the proposed acquisition by CSBI of 100% of Haywood (see note
(a)) as if Haywood had been acquired by CSBI on January 1, 1998. This pro forma
condensed balance sheet as of June 30, 1999 also gives effect using the pooling
of interests method of accounting to the proposed acquisition by CSBI of 100% of
Lanier Bankshares, Inc. and its subsidiaries (see note (n)). This pro forma
condensed combined balance sheet should be read in conjunction with the notes to
the pro forma financial statements and the separate financial statements and
related notes of the respective entities.
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma
CSBI Haywood Adjustments Consolidated Lanier Adjustments Consolidated
---- ------- ----------- ------------ ------ ----------- ------------
(Amounts in thousands, except percentages and ratios)
Assets
- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and due from banks $ 42,838 $ 1,957 $ 44,795 $ 4,398 $ 49,193
Federal funds sold 25,710 1,349 27,059 1,400 28,459
Interest bearing deposits 3,040 267 3,307 42 3,349
Investment securities 194,005 30,920 $ (219)(d) 224,706 29,415 254,121
Net loans 879,875 108,885 988,760 72,482 1,061,242
Premises and equipment 26,593 1,510 1,704(f) 29,807 3,500 33,307
Goodwill and intangibles 4,384 649 3,755(h) 8,788 8,788
FHLB stock 3,762 1,108 4,870 4,870
Investment in mortgage servicing
rights -- 1,208 1,208 1,208
Foreclosed assets 4,352 7 4,359 4,359
Other assets 21,860 1,364 23,224 3,404 26,628
-----------------------------------------------------------------------------------------------
Total Assets $1,206,419 $149,224 $ 5,240 $1,360,883 $114,641 $1,475,524
===============================================================================================
Liabilities
- -----------
Deposits:
Noninterest bearing $ 136,980 $ 257 $ 137,237 $ 16,023 $ 153,260
Other interest bearing 903,755 118,018 1,021,773 84,620 1,106,393
-----------------------------------------------------------------------------------------------
Total Deposits $1,040,735 $118,275 $1,159,010 $100,643 $1,259,653
Federal funds purchased $ 11,500 $ -- $ 11,500 $ 11,500
FHLB advances 14,230 7,000 21,230 21,230
Long term debt 33 -- 33 $ 31 64
Other borrowed funds -- -- $13,311(b) 13,311 1,495 14,806
Other liabilities 11,401 2,071 771(g) 14,243 1,361 15,604
-----------------------------------------------------------------------------------------------
Total Liabilities $1,077,899 $127,346 $14,082 $1,219,327 $103,530 $1,322,857
Shareholders' Equity
- --------------------
Common stock $ 11,754 $ 1,250 $ (695)(b)(e) $ 12,309 $ 1,238 $ 312 $ 13,859
Surplus 35,922 3,522 9,234 (b)(e) 48,678 5,230 (731) 53,177
Retained earnings 83,119 17,345 (17,380)(e) 83,084 5,212 88,296
Treasury stock -- -- -- (419) 419
Unearned compensation -
restricted stock awards (869) -- (869) (869)
Accumulated other comprehensive
income (1,406) (239) (1)(e) (1,646) (150) (1,796)
-----------------------------------------------------------------------------------------------
Total Shareholders' Equity $ 128,520 $ 21,878 $(8,842) $ 141,556 $ 11,111 $ -- $ 152,667
-----------------------------------------------------------------------------------------------
Total Shareholders' Equity and
Liabilities $1,206,419 $149,224 $ 5,240 $1,360,883 $114,641 $ -- $1,475,524
===============================================================================================
Tier 1 Capital to Assets 10.44% 14.39% 9.93% 9.82% 9.93%
Long-Term Debt to Equity Ratio 0.03% 0.00% 9.41% 13.73% 9.74%
</TABLE>
41
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
HAYWOOD BANCSHARES, INC. AND SUBSIDIARIES
Pro Forma Financial Information
Pro Forma Condensed Combined Statements of Income
For the six months ended June 30, 1999
(Unaudited)
The following unaudited pro forma condensed combined statements of income
of CSBI and subsidiaries for the six months ended June 30, 1999 gives effect to
the proposed acquisition of all of the issued and outstanding shares of Haywood
(see note (a)) using the purchase method of accounting. The pro forma condensed
combined statement of income reflects the pro forma results of operations of
CSBI and Haywood together with applicable adjustments, as if Haywood had been
acquired by CSBI on January 1, 1999. This pro forma condensed combined statement
of income for the six months ended June 30, 1999 also gives effect, using the
pooling of interest method of accounting, to the proposed acquisition by CSBI of
all issued and outstanding shares of Lanier Bankshares, Inc. and its
subsidiaries (see note (n)). This pro forma combined statement of income should
be read in conjunction with the notes to the pro forma financial statements and
the separate financial statements and related notes of the respective entities.
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma
CSBI Haywood Adjustments Consolidated Lanier Adjustments Consolidated
---- ------- ----------- ----------- ------ ----------- ------------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $48,676 $5,284 $ 4(i) $53,964 $4,645 $58,609
Interest expense 19,946 2,741 466(j) 23,153 2,136 25,289
---------------------------------------------------------------------------------------
Net interest income 28,730 2,543 (462) 30,811 2,509 33,320
Provision for loan
losses 1,179 20 1,199 90 1,289
---------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 27,551 2,523 (462) 29,612 2,419 32,031
Noninterest income 6,299 416 6,715 350 7,065
Noninterest expense 22,258 1,646 145(k)(l) 24,049 1,461 25,510
---------------------------------------------------------------------------------------
Income before income taxes 11,592 1,293 (607) 12,278 1,308 13,586
Income tax expense (benefit) 3,895 485 (173)(m) 4,207 383 4,590
---------------------------------------------------------------------------------------
Net Income $ 7,697 $ 808 $(434) $ 8,071 $ 925 $ 8,996
=======================================================================================
Earnings per share:
Basic $ 0.66 $ 0.65 $ 0.66 $ 0.77 $ 0.65
Diluted $ 0.65 $ 0.65 $ 0.65 $ 0.75 $ 0.64
Weighted average shares
outstanding:
Basic 11,735 1,250 555(c) 12,290 1,200 1,550 13,840
Diluted 11,856 1,250 555(c) 12,411 1,234 1,594 14,005
</TABLE>
42
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
HAYWOOD BANCSHARES, INC. AND SUBSIDIARIES
Pro Forma Financial Information
Pro Forma Condensed Combined Statements of Income
For the year ended December 31, 1998
(Unaudited)
The following unaudited pro forma condensed combined statements of income
of CSBI and subsidiaries for the year ended December 31, 1998 gives effect to
the proposed acquisition of all of the issued and outstanding shares of Haywood
(see note (a)) using the purchase method of accounting. The pro forma condensed
combined statement of income reflects the pro forma results of operations of
CSBI and Haywood together with applicable adjustments, as if Haywood had been
acquired by CSBI on January 1, 1998. This pro forma condensed combined statement
of income for the year ended December 31, 1998 also gives effect, using the
pooling of interests method of accounting, to the proposed acquisition by CSBI
of all issued and outstanding shares of Lanier Bankshares, Inc. and its
subsidiaries (see note (n)). This pro forma combined statement of income should
be read in conjunction with the notes to the pro forma financial statements and
the separate financial statements and related notes of the respective entities.
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma
CSBI Haywood Adjustments Consolidated Lanier Adjustments Consolidated
---- ------ ----------- ------------ ------ ----------- ------------
Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $99,478 $11,086 $ 4(i) $110,568 $ 9,131 $119,699
Interest expense 42,611 6,061 979(j) 49,651 4,281 53,932
-------------------------------------------------------------------------------------------
Net interest income 56,867 5,025 (975) 60,917 4,850 65,767
Provision for loan
losses 3,135 20 3,155 290 3,445
-------------------------------------------------------------------------------------------
Net interest
income after
provision for
loan losses 53,732 5,005 (975) 57,762 4,560 62,322
Noninterest income 15,824 (1,345) 14,479 724 15,203
Noninterest expense 46,766 3,247 295(k)(l) 50,308 2,711 53,019
-------------------------------------------------------------------------------------------
Income before income
taxes 22,790 413 (1,270) 21,933 2,573 24,506
Income tax expense
(benefit) 7,412 155 (363)(m) 7,204 756 7,960
-------------------------------------------------------------------------------------------
Net Income $15,378 $ 258 $(907) $ 14,729 $ 1,817 $ 16,546
===========================================================================================
Earnings per share:
Basic $ 1.32 $ 0.21 $ 1.21 $ 1.51 $ 1.20
Diluted $ 1.30 $ 0.21 $ 1.19 $ 1.48 $ 1.18
Weighted average
shares outstanding:
Basic 11,664 1,248 555(c) 12,219 1,200 1,550 13,769
Diluted 11,861 1,248 555(c) 12,416 1,230 1,594 14,010
</TABLE>
43
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES AND
HAYWOOD BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Financial Statements
The following notes describe the pro forma adjustments necessary to
reflect the acquisition of Haywood, as described in note (a), and to reflect the
proposed acquisition of Lanier Bankshares, Inc., as described in note (n), by
CSBI as of June 30, 1999 and December 31, 1998.
(a) On August 5, 1999, CSBI entered into a merger agreement whereby CSBI
will acquire 1,250,356 outstanding shares of Haywood common stock in
exchange for shares of CSBI common stock and cash. In addition, the
merger agreement provides that 50% of the total merger consideration
paid by CSBI must be paid in CSBI common stock and 50% must be paid in
cash. If CSBI's market value is between $24.00 and $27.00 per share,
the exchange ratio will be 0.8874. However, if CSBI's market value is
greater than $27.00 per share, the exchange ratio will be decreased so
that Haywood's common stock will be valued at approximately $23.95 per
share. If CSBI's market value is lower than $24.00 per share, the
exchange ratio will be increased so that Haywood's common stock will
be valued at approximately $21.30 per share.
(b) Reflects the issuance of approximately 555,000 shares of CSBI common
stock and a draw on CSBI's line of credit of approximately $13,311,000
based on an exchange ratio of 0.8874 and a CSBI stock price of $24.00
per share.
(c) Pro forma weighted average number of shares of common stock and share
equivalents includes the historical amounts for CSBI increased by the
additional shares that would have been outstanding had the acquisition
of Haywood taken place as of the beginning of the respective periods.
(d) Reflects the write-up/write down of investment securities of Haywood
to approximate fair values as of June 30, 1999 and December 31, 1998.
(e) Reflects the elimination of the equity accounts of Haywood.
(f) Reflects the write-up of the land and buildings of Haywood to
approximate fair value.
(g) Reflects the accrual to fund all of Haywood's existing benefit plans
necessary for their termination as provided in the merger agreement,
net of taxes. The related expense charge for such funding is not
reflected on the pro forma income statement since it is a non-
recurring item.
(h) Reflects the excess of Haywood's purchase price over the net assets
acquired by CSBI after reflecting the adjustments to the purchase
price and to the approximate fair values described in notes (d), (f)
and (g). The excess of the purchase price over net assets acquired has
been recorded as goodwill. Goodwill is being amortized using the
straight-line method over 20 years.
(i) Reflects the accretion and amortization of the discount applied to
Haywood's investment securities in connection with their write down to
approximate fair value over the estimated terms of such securities.
(j) Reflects interest expense on the assumed borrowings at the rate of
prime minus 1% based on an average prime rate of 8% for the period
ended June 30, 1999 and 8.355% for the year ended December 31, 1998.
(k) Reflects the amortization of the excess of Haywood's purchase price
over the net assets acquired by CSBI using the straight-line method
over 20 years.
(l) Reflects the depreciation of the adjustment to write-up Haywood's
premises to approximate fair value using the straight-line method over
20 years.
(m) Reflects the income tax adjustments necessary to effectuate the
adjustments discussed in notes (i), (j), (k), and (l) using a tax rate
of 34%. Amortization of goodwill is treated as a non-deductible
expense in computing the income tax effect.
(n) On October 20, 1999, CSBI entered into a definitive agreement to
acquire all of the outstanding shares of common stock of Lanier
Bankshares, Inc. in exchange for shares of CSBI common stock in an
acquisition to be accounted for under the pooling of interests method
of accounting. If CSBI's market value is $21.50 or lower, the exchange
ratio will be 1.44186. If CSBI's market value is $26.50 or higher the
price of exchange ratio will be 1.16981. At an assumed CSBI stock
price of $24.00 per share, consistent with the assumption noted in
(a), the exchange ratio will be 1.29167 and 1,550,000 shares of CSBI
will be issued in the exchange.
44
<PAGE>
INFORMATION ABOUT CSBI
General
CSBI is a multi-bank holding company headquartered in Dahlonega and Macon,
Georgia. CSBI conducts operations in Georgia, Tennessee and Alabama through its
11 commercial banking subsidiaries. The principal assets of CSBI are all of the
issued and outstanding shares of common stock of its bank subsidiaries. CSBI's
bank subsidiaries do not currently operate under a single brand name.
In August of 1999, CSBI announced plans to consolidate its two Georgia
headquarters into one office located in Alpharetta, Georgia, a suburb of
Atlanta. CSBI also announced plans to build a single identity from its 11
different bank brands. When CSBI's single bank brand initiative is completed,
all of CSBI's banks will operate under the "Century South Bank" name with a
geographic identifier attached. For example, after the merger, Haywood Savings
is expected to operate under the name "Century South Bank of the Carolinas."
Each of CSBI's banks will continue to foster and promote CSBI's community bank
philosophy of autonomous decision-making and responsive, personal service.
As of June 30, 1999, on a consolidated basis, CSBI had approximately $1.2
billion in assets, $1.04 billion in deposits, 30 offices and 650 employees.
Subsidiaries
CSBI's business strategy has been to focus primarily on providing quality,
community-based financial services to the communities its banking subsidiaries
serve. It has sought to achieve economies of scale by centralizing the credit
analyses, loan reviews, and investment, audit and data processing needs of its
subsidiary banks.
CSBI's subsidiary banks provide a wide range of banking services in their
local markets for individuals and commercial customers, including small and mid-
size businesses, public agencies and local governments. The lending policy of
its subsidiary banks is to minimize credit losses by following uniform credit
approval standards, maintain a diversified loan portfolio, maintain a relatively
modest average loan size and conduct ongoing review and management of the loan
portfolio. CSBI's subsidiary banks are active residential mortgage lenders and
their commercial loans are generally made to established local businesses. The
banks neither have a significant amount of construction loans, highly leveraged
transaction loans nor loans to foreign countries. No material portion of the
banks' deposits has been obtained from a single or small group of customers and
the loss of any customer's deposits, or a small group of customers' deposits,
would not have a material adverse effect on the business of CSBI.
Acquisitions
CSBI's profitability and market share have increased largely through
CSBI's acquisitions of other financial institutions. Listed below are
acquisitions completed in the last several years:
. On April 14, 1995, CSBI completed the acquisition of Gwinnett Bancorp,
Inc., a bank holding company for Gwinnett National Bank and First
Community Bank of Dawsonville, in transactions accounted for as a
pooling of interests.
. On December 14, 1995, CSBI completed the acquisition of Peoples Bank
in a transaction accounted for as a pooling of interests.
. On December 27, 1995, CSBI completed the acquisition of Bank of
Danielsville in a transaction accounted for as a pooling of interests.
. On December 16, 1997, CSBI merged with Bank Corporation of Georgia, a
bank holding company for First South Bank, N.A. and AmeriBank, N.A.,
in a transaction accounted for as a pooling of interests.
. On April 13, 1999, CSBI acquired Independent Bancorp, Inc., a bank
holding company for Independent Bank of Oxford, in a transaction
accounted for as a pooling of interests.
45
<PAGE>
In addition, on October 20, 1999, CSBI entered into a definitive agreement
to acquire Lanier Bankshares, Inc., a bank holding company headquartered in
Gainesville, Georgia with consolidated assets, as of June 30, 1999, of
approximately $115 million. It is expected that the acquisition, which is
subject to shareholder and regulatory approvals, will be accounted for as a
pooling of interests and will be valued at approximately $40 million.
As CSBI's recent and pending acquisitions indicate, CSBI regularly
evaluates the potential acquisition of, and holds discussions with, various
financial institutions and other businesses of a type eligible for bank holding
company investment. CSBI expects to continue to develop its franchise through
acquisitions which may, among other things and depending on the terms of these
transactions, have a dilutive effect on the per share earnings or book value of
CSBI common stock. Moreover, these acquisitions sometimes result in significant
front-end charges against earnings, although cost savings, especially incident
to in-market acquisitions, also frequently occur.
Additional Information
More information about CSBI can be found in its Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q incorporated by reference herein. See "Where
You Can Find More Information" on page 58.
46
<PAGE>
INFORMATION ABOUT HAYWOOD
General
Haywood is a registered bank holding company incorporated in North Carolina
in 1995. Haywood was formed for the purpose of serving as the holding company
for its banking subsidiary, Haywood Savings Bank, Inc., SSB, a North Carolina
savings bank. Haywood's primary activities consist of holding the stock of
Haywood Savings and operating its banking business. The principal executive
offices of Haywood are located at 370 North Main Street, Waynesville, North
Carolina and its main telephone number is (828) 456-9092.
Haywood Savings
Haywood Savings began operations as a North Carolina-chartered savings and
loan association in 1919 and converted from mutual to stock form on December 18,
1987. Haywood Savings is a member of the Federal Home Loan Bank System and its
deposits have been federally insured since 1948.
Haywood Savings is generally engaged in the business of accepting deposits
from the general public and investing such funds primarily in loans secured by
residential real estate and, to a lesser extent, in investment securities.
Haywood Savings also makes second mortgage, home improvement and commercial real
estate loans, and home equity lines of credit.
Haywood Savings' primary market area consists of Haywood, Cherokee and
Jackson Counties and adjacent counties in western North Carolina near the Great
Smoky Mountains, where its offices are located. Haywood estimates that
approximately 80% of Haywood Savings' savings deposits are derived from
residents of Haywood, Cherokee and Jackson Counties and approximately 95% of its
loans are secured by properties in that area.
Haywood Savings' principal lending activities have historically consisted
of the origination of conventional first mortgage loans (i.e., loans that have
neither been insured nor partially guaranteed by a government agency) for the
construction or purchase of single-family properties. Haywood Savings has also
originated loans secured by commercial real estate. In addition, Haywood
Savings makes mobile home loans if the mobile home meets strict construction
standards and is affixed to real property which can be included in a mortgage so
that Haywood Savings has both a real estate mortgage and a lien on the title to
the mobile home. Although Haywood Savings is authorized to make or purchase
loans on a nationwide basis, Haywood Savings' lending has generally been
confined to loans secured by properties within its primary market areas in
western North Carolina with most loans secured by properties in Haywood,
Cherokee and Jackson Counties.
Historically, Haywood Savings has experienced a relatively low level of
losses on its loans, which is largely due to a sound economy and stable work
force in its market area. In addition, the values of real estate have remained
stable or have been increasing, which has minimized losses on foreclosed loans.
Recent increases in interest rates and changes in broader-based economic indices
could have a negative impact on Haywood Savings' market area and customer base.
Haywood Savings' management has recently learned of reductions in employees by
several large companies with operations in Haywood Savings' market areas. These
events may increase the risk that historical levels of loan losses will not
continue, and that a trend of increased delinquencies and losses on foreclosures
will begin. Haywood Savings' management may determine that it is necessary to
increase its allowance for loan losses in the third and, possibly, the fourth
quarters of 1999 to account for these recent developments.
Prior to the effective time of the merger, Haywood Savings is expected to
convert from a North Carolina savings bank to a federally-chartered stock
savings bank. See "THE MERGER -- Conversion of Haywood Savings."
47
<PAGE>
Subsidiaries of Haywood Savings
In 1984, Haywood Savings formed Great Smokies Financial Corporation, a
wholly-owned subsidiary service corporation organized under North Carolina law.
Great Smokies' primary activity has been to build houses on properties which
Haywood Savings had acquired through foreclosure. Great Smokies also holds
second mortgage loans on properties on which Haywood Savings has foreclosed in
order to facilitate the sale of the property.
In 1988, Haywood Savings purchased a small insurance agency now named Great
Smokies Insurance Agency, Inc. The agency acts as an insurance broker for
property and casualty insurance.
Additional Information
More information about Haywood can be found in its Quarterly Report on Form
10-Q for the quarter ended June 30, 1999 and its Annual Report on Form 10-K for
the fiscal year ended December 31, 1998, which accompany this proxy
statement/prospectus and are incorporated by reference herein. See also "Where
You Can Find More Information" on Page 58.
48
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of ____________, 1999,
regarding shares of Haywood common stock beneficially owned by (i) each of
Haywood's directors, including Haywood's President; (ii) all of Haywood's
directors and executive officers as a group; and (iii) each person known by
Haywood to be the beneficial owner of more than 5% of Haywood common stock.
Except as otherwise noted below, the information in the table is based on
information furnished by each owner to Haywood.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner Ownership/(1)/ of Class/(2)/
- ------------------------ ------------- -------------
<S> <C> <C>
Larry R. Ammons............................................................ 79,902/(3)/ 6.4
Glenn W. Brown............................................................. 7,800 *
G. D. Stovall, Jr.......................................................... 24,180/(4)/ 1.9
William P. Burgin.......................................................... 30,300/(5)/ 2.4
R. Neal Ensley............................................................. 12,500/(6)/ 1.0
Joseph E. Taylor, Jr....................................................... 42,258/(7)/ 3.4
C. Leon Taylor............................................................. 360/(8)/ *
Philip S. Dooly............................................................ 10,100/(9)/ *
C. Jeff Reece, Jr.......................................................... 37,056/(10)/ 3.0
R. Bruce Norman............................................................ 16,300/(11)/ 1.3
Haywood Savings Bank, Inc., SSB - Employee Stock Ownership Plan............ 127,847/(12)/ 10.2
Century South Banks, Inc................................................... 249,946/(13)/ 16.7
Directors and executive officers as a group (11 persons)................... 283,431/(14)/ 22.7
</TABLE>
_________________
* Represents holdings of less than 1%.
/(1)/ For purposes of this table, a person is deemed to be the beneficial
owner of any shares of Haywood common stock (i) over which he or she
has or shares voting power or investment power, or (ii) of which he or
she has the right to acquire beneficial ownership at any time within
60 days of ____________. As used herein, "voting power" is the power
to vote or direct the voting of shares and "investment power" is the
power to dispose or direct the disposition of shares. Unless otherwise
noted, all shares are owned directly by the named individual or by
their spouses and minor children, over which shares the named
individual(s) exercise shared voting and investment power.
/(2)/ In calculating percentage ownership for a given individual or group of
individuals, the number of shares of the common stock outstanding
includes unissued shares subject to options exercisable within 60 days
of _________ held by that individual or group.
/(3)/ Includes 33,300 shares held jointly with spouse, 10,000 shares held by
spouse, 2,270 shares held in Mr. Ammons' Individual Retirement Account
("IRA"), and 3,630 shares held in spouse's IRA, over which shares Mr.
Ammons has shared voting power. Includes 19,552 shares allocated to
Mr. Ammons' account in the Haywood Savings Bank, Inc., SSB Employee
Stock Ownership Plan (the "ESOP"), as to which shares Mr. Ammons has
the power to direct the voting, and 150 shares held by Mr. Ammons'
children. Mr. Ammons' address is 370 North Main Street, Waynesville,
North Carolina 28786.
/(4)/ Includes 23,580 shares held jointly with spouse and 600 shares held in
spouse's name.
/(5)/ Includes 28,400 shares held jointly with spouse and 1,900 shares held
in spouse's name.
/(6)/ Includes 1,400 shares held by spouse.
/(7)/ Includes 40,635 shares held jointly with spouse and 1,623 shares held
in spouse's IRA.
/(8)/ Includes 360 shares held in spouse's IRA.
/(9)/ Includes 1,400 shares held in spouse's IRA.
/(10)/ Includes 21,040 shares held jointly with spouse, 12,000 shares held
individually, 3,966 shares held in a retirement plan and 50 shares
held in spouse's retirement plan
/(11)/ Includes 1,390 shares held jointly with spouse.
/(12)/ The ESOP has purchased 175,000 shares for the exclusive benefit of
participating employees with borrowed funds of which all shares have
been allocated to the accounts of participants. The trustee votes all
such shares in accordance with the instructions of the participating
employees. The ESOP's address is 370 North Main Street, Waynesville,
North Carolina 28786.
/(13)/ Consists of shares which CSBI may have the right to acquire under an
option agreement if certain events occur. For more information, see
"THE MERGER - The Option Agreement." The address of CSBI is 60 Main
Street West, Dahlonega, Georgia 30533.
49
<PAGE>
/(14)/ Includes certain shares owned by spouses, or as custodian or trustee
for minor children, over which shares all directors and executive
officers as a group effectively exercise sole or shared voting and
investment power, unless otherwise indicated. Includes 32,227 shares
allocated to the accounts of certain executive officers in the ESOP,
over which they have sole voting power.
50
<PAGE>
COMPARATIVE RIGHTS OF HAYWOOD SHAREHOLDERS
AND CSBI SHAREHOLDERS
The following is a comparison of certain rights of Haywood shareholders and
those of CSBI shareholders. Because Haywood is organized under the laws of the
State of North Carolina and CSBI is organized under the laws of the State of
Georgia, differences in the rights of holders of Haywood common stock and those
of holders of CSBI common stock arise from differing provisions of North
Carolina law and Georgia law, in addition to differing provisions of Haywood's
and CSBI's respective governing corporate instruments.
The following summary does not purport to be a complete statement of the
provisions affecting, and differences between, the rights of holders of Haywood
common stock and those of holders of CSBI common stock. The identification of
specific provisions or differences is not meant to indicate that other equally
or more significant differences do not exist. This summary is qualified in its
entirety by reference to North Carolina law and Georgia law and by the
respective governing corporate instruments of Haywood and CSBI, to which
shareholders are referred.
Authorized Capital Stock
Haywood. Haywood is authorized to issue 10,000,000 shares of common stock,
$1.00 par value per share, of which 1,250,356 shares are currently issued and
outstanding. Haywood is also authorized to issue 5,000,000 shares of preferred
stock, $1.00 par value per share, of which no shares are currently issued and
outstanding.
CSBI. CSBI is authorized to issue 30,000,000 shares of common stock, $1.00
par value per share, of which 11,767,356 shares were issued and outstanding as
of September 15, 1999. CSBI has no authorized shares of preferred stock. As of
_________________, 500,000 shares of CSBI common stock were reserved for
issuance upon the exercise of outstanding stock options and purchases under
CSBI's 1994 Incentive Stock Option Plan; 500,000 shares were reserved for
issuance under CSBI's 1998 Executive Stock Plan; 500,000 shares were reserved
pursuant to CSBI's Dividend Reinvestment Plan, 500,000 shares were reserved
pursuant to CSBI's Employee Stock Ownership Plan; and 227,403 shares were
reserved pursuant to options granted to certain executive officers outside of
CSBI's stock-based plans.
Directors
Haywood. Under Haywood's articles of incorporation, the number of
directors, as stated in the corporation's bylaws, shall not be less than five or
more than 15. Haywood's bylaws currently provide that the board of directors
shall consist of ten members. The directors shall be elected annually by
shareholders at their annual meeting, or at any meeting of shareholders held
pursuant to the laws of North Carolina, and shall hold office at the pleasure of
the shareholders and until respective successors are elected. Any person
between the age of 25 and 75 may be elected or appointed to the board of
directors.
At such time as the board of directors shall consist of nine or more
members, the directors shall be divided into three classes as nearly equal in
number as possible. Directors serve for three year terms.
The number of directors may be increased or decreased from time to time by
the board of directors, except that the number may not be reduced to less than
five or above 15 and no decrease shall result in any director being forced to
resign or otherwise be removed. At a meeting of shareholders called expressly
for that purpose, any director may be removed only for cause (as defined in
Haywood's articles of incorporation) and only by the affirmative vote of a
majority of the outstanding shares of Haywood capital stock entitled to vote.
If any vacancy occurs in the membership of the board of directors, it may
be filled by the affirmative vote of the majority of the directors then in
office, although less than a quorum. A director elected to fill a vacancy shall
be elected for a term of office continuing until the next election of directors
by shareholders.
51
<PAGE>
CSBI. CSBI's bylaws provide for a board of directors having not less than
five nor more than 25 members, the precise number to be fixed by resolution of
the shareholders or the board of directors. CSBI's board of directors currently
has 11 members. Each director, except in the case of death, resignation or
retirement, disqualification or removal, shall serve until his successor shall
have been elected and qualified. Directors shall be elected by the shareholders
at CSBI's annual meeting of shareholders for a one year term. Each director of
CSBI must be a United States citizen, and at least 60% of the directors shall
reside in the State of Georgia and in the county in which the registered office
of CSBI is located, or within 40 miles of any office of a subsidiary bank
authorized to offer a complete line of banking services. Each director shall
own in his name 500 shares of CSBI's common stock unhypothecated. No director
may be re-elected after the age 70 unless such director is elected to the board
of directors for his initial term having then attained the age of 70. In such
case, the director may serve no more than five successive one-year terms.
When a vacancy occurs among the directors, the remaining members of the
board of directors may appoint a director to fill such vacancy at any regular
meeting of the board of directors, or at a special meeting called for that
purpose. Pursuant to 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 of a
director may be taken at any meeting of shareholders 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.
Voting Requirements Generally
Haywood. Under Haywood's bylaws, each shareholder is entitled to one vote
for each share of stock held as of the record date. A majority of the
corporation's outstanding shares entitled to vote, represented in person or by
proxy, constitutes a quorum. A majority of the shares voted at a meeting of
shareholders is sufficient to take action on a matter, unless otherwise provided
by applicable law, the articles of incorporation or bylaws. Nominees nominated
for election must receive the highest number of votes in order to be elected.
Under North Carolina law, any action required or permitted to be taken at a
shareholders' meeting may be taken without a meeting if action is taken by all
shareholders entitled to vote on the action.
CSBI. CSBI common stock is not divided into classes, and CSBI has no
classes or series of capital stock issued or outstanding other than CSBI common
stock. The holders of a majority of the stock issued and outstanding and
entitled to vote, present in person or represented by proxy, shall constitute a
quorum for the transaction of business at all meetings of the shareholders
except as otherwise provided by statute or by CSBI's articles of incorporation
or bylaws. In deciding on questions at meetings, except in the election of
directors, each shareholder shall be entitled to one vote for each share of
stock held and the majority of votes so cast shall prevail. In elections of
directors, each shareholder shall have the right to vote the number of shares
held for each of the persons nominated.
Under Georgia law, action required or permitted to be taken at a
shareholders' meeting may be taken without a meeting if the action is taken by
all of the shareholders entitled to vote by means of one or more written
consents signed by all of the shareholders entitled to take the action.
Dividends
Haywood. North Carolina law prohibits a North Carolina corporation from
making any distributions to shareholders, including the payment of cash
dividends, that would render it unable to meet its debts as they become due in
the usual course of business or if its total assets would be less than the sum
of its liabilities plus the amount that would be needed if the corporation were
to dissolve to satisfy the liquidation preferences of those shareholders whose
liquidation rights are superior to those receiving the distribution. Haywood is
not subject to other express regulatory restrictions on payments of dividends
and other distributions. The ability of Haywood to pay distributions to Haywood
shareholders depends, however, to a large extent upon the amount of dividends
its bank subsidiary, which is subject to restrictions imposed by regulatory
authorities, pay to Haywood. In addition, the Federal Reserve could oppose a
distribution by Haywood if it determined that such a distribution would harm
Haywood's ability to support its bank subsidiary.
52
<PAGE>
CSBI. Under Georgia law, CSBI's board of directors may declare dividends
on CSBI common stock unless doing so would cause CSBI to be unable to pay its
debts as they come due in the usual course of business, or CSBI's total assets
to be less than the sum of its total liabilities plus the amount needed to
satisfy any dissolution preferences. Like Haywood, since CSBI is a bank holding
company, the ability of CSBI to pay distributions to CSBI shareholders depends
to a large extent upon the amount of dividends its bank subsidiaries may provide
to it under their regulatory guidelines and the Federal Reserve will permit.
Amendments to Articles of Incorporation and Bylaws
Haywood. North Carolina law provides generally that a North Carolina
corporation's articles of incorporation may be amended if the amendment is
approved by a majority of the votes cast within each voting group entitled to
vote. Haywood's articles of incorporation also require the affirmative vote of
at least 75% of the outstanding shares entitled to vote to approve an amendment
to Haywood's articles of incorporation amending, altering or repealing the
portions of such articles of incorporation relating to limiting the personal
liability of directors, indemnification, removal of directors, approval of
business combinations or any requirement for a super majority vote on such an
amendment. Under North Carolina law, a corporation's bylaws may be amended or
repealed by the board of directors except to the extent otherwise provided in
the articles of incorporation or a bylaw adopted by the shareholders and except
that a bylaw adopted by the shareholders may not be amended or repealed by the
board of directors if neither the articles of incorporation nor a bylaw adopted
by the shareholders authorized the board of directors to amend or repeal that
particular bylaw or the bylaws generally. Haywood's bylaws provide that the
bylaws may be amended by either the shareholders or the board of directors.
CSBI. Under Georgia law, amendment of a corporation's articles of
incorporation generally requires approval by a majority of the votes entitled to
be cast on the amendment by each voting group entitled to vote on the amendment.
CSBI's board of directors has the power to alter, amend, or repeal CSBI's bylaws
or adopt new bylaws, but any bylaws adopted by the board of directors may be
altered, amended or repealed, and new bylaws adopted, by shareholders.
Shareholders may prescribe that any bylaw or bylaws adopted by them shall not be
altered, amended or repealed by the board of directors.
Special Meetings of Shareholders
Haywood. Haywood's bylaws provide that, except to the extent otherwise
provided by law, special meetings of shareholders, for any purpose or purposes,
may be called by the chairman of the board of directors, the president, or a
majority of the board of directors.
CSBI. CSBI's bylaws provide that a special meeting of shareholders, unless
otherwise prescribed by law, may be called for any purpose at any time by the
board of directors or by any three or more shareholders owning, in the
aggregate, not less than one-third (1/3) of the stock of CSBI.
Advance Notice Provisions for Shareholder Proposals
Haywood. Under Haywood's bylaws, any new business proposed to be discussed
at an annual meeting by any shareholder shall be stated in writing and filed
with the secretary of the corporation at least 20 days before the date of the
annual meeting. Any shareholder may make any other proposal at the annual
meeting and the same may be discussed and considered, but unless stated in
writing and filed with the secretary at least 20 days before the meeting, such
proposal shall be laid over for action at an adjourned, special, or annual
meeting of the stockholders taking place 30 days or more thereafter.
CSBI. Neither CSBI's articles of incorporation nor its bylaws have
provisions for advance shareholder notice of shareholder proposals or director
nominations.
Liability of Directors
Haywood. Under Haywood's articles of incorporation, a director shall not
be personally liable to the corporation or its shareholders for monetary damages
for breach of any fiduciary duty as a director. However, this limitation of
liability shall not be effective with respect to: (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation; (ii) certain types of
53
<PAGE>
liability enumerated under North Carolina law; (iii) any transaction from which
the director derived an improper personal benefit; or (iv) acts or omissions
occurring prior to the effective date of the articles of incorporation.
CSBI. Georgia law permits a corporation to include a provision in its
articles of incorporation eliminating or limiting the personal liability of a
director to the corporation or its shareholders for damages for breach of the
director's duty of care or other duty as a director, subject to certain
limitations. The CSBI articles of incorporation include such a provision which,
as set forth below, limits such liability to the fullest extent permitted under
applicable law.
CSBI's articles of incorporation provide that a director will not be
personally liable to CSBI or its shareholders for monetary damages for breach of
the duty of care or other duty as a director resulting from any act or omission
other than personal liability of a director for: (i) any appropriation, in
violation of his duties, of any business opportunity of the corporation; (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law; (iii) certain types of liability enumerated under
Georgia law, dealing with unlawful distributions to shareholders; and (iv) any
transactions from which the director derived an improper personal benefit.
While these provisions provide directors with protection from awards of
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions described above apply to an
officer of CSBI only if he or she is a director of CSBI and is acting in his or
her capacity as director, and do not apply to officers of CSBI who are not
directors.
Indemnification of Directors and Officers
Haywood. North Carolina law requires that a director of a North Carolina
corporation discharge his or her duties as a director (i) in good faith, (ii)
with the care an ordinarily prudent person in a like position would exercise
under similar circumstances and (iii) in a manner the director reasonably
believes to be in the best interests of the corporation. North Carolina law
expressly provides that a director facing a change of control situation shall
not be subject to any different duties or a higher standard of care. Haywood's
articles of incorporation provide that, to the fullest extent permitted by
applicable law, no director of Haywood will have any personal liability for
monetary damage for breach of a duty as a director. Haywood's articles of
incorporation require Haywood to indemnify its directors and officers against
liabilities arising out of such person's status as such, excluding any liability
relating to activities that were at the time taken, known or believed by such
person to be clearly in conflict with the best interests of Haywood.
CSBI. Georgia law similarly provides for the indemnification of directors
and officers of Georgia corporations against expenses, judgments, fines and
settlements in connection with litigation. Under these provisions,
indemnification is available if it is determined that the proposed indemnitee
acted in good faith and reasonably believed (i) in the case of conduct in his or
her official capacity, that such conduct was in the best interests of the
corporation, (ii) in all other cases, that such conduct was at least not opposed
to the best interests of the corporation, and (iii) with respect to any criminal
action or proceeding, that the individual had no reasonable cause to believe
his or her conduct was unlawful. To the extent that a proposed indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding (or any claim, issue or matter therein), he or she must be
indemnified against expenses (including attorney fees) actually and reasonably
incurred by him or her in connection therewith.
Under Georgia law, indemnification permitted in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding. A corporation may not
indemnify a director or officer in connection with a proceeding in which he or
she was adjudged liable on the basis that a personal benefit was improperly
received.
CSBI's bylaws provide that CSBI may indemnify any person who is involved in
any actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was
a director, officer, employee or agent of CSBI, or is or was serving at the
request of CSBI as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines, and amounts paid in settlement,
in accordance with Georgia law. In the case of a claim, issue, or matter as to
which a person has been adjudged to be liable to CSBI, Business
54
<PAGE>
Combinations and CSBI's bylaws only permit indemnification to the extent that
the Superior Court or the court in which such action or suit was brought
determines upon application that such person is fairly and reasonably entitled
to indemnity for such expenses as the court deems proper. CSBI's bylaws also
provide for mandatory indemnification of directors, officers, employees, or
agents of CSBI in the circumstances required by Georgia law.
Mergers, Share Exchanges and Sales of Assets
Haywood. North Carolina law generally requires that any merger, share
exchange or sale of all or substantially all the assets of a corporation not in
the ordinary course of business be approved by the affirmative vote of a
majority of all of the votes entitled to be cast on the plan. Approval of a
merger by the shareholders of the surviving corporation is not required in
certain instances, however, including a merger in which the number of voting
shares outstanding immediately after the merger, plus the number of voting
shares issuable as a result of the merger, does not exceed by more than 20% the
number of voting shares outstanding immediately before the merger.
The North Carolina Control Share Acquisition Act may make an unsolicited
attempt to gain control of a North Carolina corporation more difficult by
restricting the right of certain shareholders to vote newly acquired large
blocks of stock. The act applies to Haywood and is designed to protect
shareholders of publicly-owned North Carolina corporations based within the
state against certain changes in control and to provide shareholders with the
opportunity to vote on whether to afford voting rights to certain shareholders.
The act is triggered upon the acquisition by a person of shares of voting stock
of a covered corporation that, when added to all other shares beneficially owned
by the person, would result in that person holding one-fifth (1/5), one-third
(1/3) or a majority of the voting power in the election of directors. Under the
act, the shares acquired that result in the crossing of any of these thresholds
("Control Shares") have no voting rights until such rights are conferred by the
affirmative vote of the holders of a majority of all outstanding voting shares,
excluding those shares held by any person involved or proposing to be involved
in the acquisition of Control Shares, any officer of the corporation and any
employee of such corporation who is also a director of such corporation. If
voting rights are conferred on Control Shares, all shareholders of such
corporation have the right to require that their shares be redeemed at the
highest price paid per share by the acquirer for any Control Shares.
In addition, the North Carolina Shareholder Protection Act, which is
applicable to Haywood, is designed to prevent the abuses that sometimes occur
during hostile takeovers. The act generally requires that, unless certain "fair
price" and procedural requirements are satisfied, the affirmative vote of the
holders of 95% of the outstanding shares of the corporation's voting shares
(excluding shares owned by an "interested shareholder") is required to approve
certain business combination transactions with another entity that is the
beneficial owner of more than 20% of the corporation's voting shares or which is
an affiliate of the corporation and previously has been a 20% beneficial owner.
In order to satisfy the "fair price" provisions, the price paid for any
shares in the second phase of an acquisition must be at least equal to the
highest of: (i) the highest per share price ever paid by anyone who is a part
of the acquirer; (ii) a price that exceeds the market price when the second
phase of the acquisition is announced by the same percentage as the highest
price paid by the acquirer exceeds the market price immediately before the
acquisition began; or (iii) a price computed by multiplying the corporation's
annual earnings per share by the price/earnings multiple, if any, of the
acquirer.
In addition, the procedural provision requires that: (i) the corporation's
board of directors must maintain representation by continuing directors
proportionate to shares held by persons unaffiliated with the acquirer; (ii)
there must be no reduction in dividends except as approved by a unanimous vote
of directors; (iii) the acquirer must not acquire any additional shares of the
corporation after the transaction in which it acquired its 20% interest; (iv)
the acquirer must not receive the benefit, directly or indirectly, except
proportionately with other shareholders, of any loans, advances, guarantees, or
financial assistance from the corporation prior to consumption of the business
transaction; (v) the acquirer must not, prior to consummation of the business
transaction, make a major change in the corporation's business or equity capital
structure unless by unanimous vote of the directors; and (vi) the acquirer must
distribute to the shareholders a proxy statement responsive to the requirements
of applicable federal securities laws, which must contain any recommendations by
the continuing directors and can include a fairness opinion from an independent
investment banking firm regarding the transaction.
55
<PAGE>
Haywood's articles of incorporation contain further provisions that may
discourage certain takeover offers or other attempts to change the control of
the corporation. Under Haywood's articles of incorporation, a "business
combination" (generally, a merger or purchase of 10% or more of the
corporation's securities or a sale of a significant amount of assets) with a
"related person" (generally, a person who owns 10% or more of the corporation's
voting stock) must be approved by 75% or more of the shares entitled to vote
generally in the election of directors unless: at least two-thirds (2/3) of the
entire board of directors approved the business combination; and if the business
combination was proposed by a related person, at least two-thirds (2/3) of the
directors who are unaffiliated with the related person and were members of the
board of directors prior to the time the person became related approved the
combination.
In addition, under Haywood's articles of incorporation, the board of
directors may review not only the consideration being offered in any business
combination in relation to the then-current market price of the corporation's
stock, but also to consider the consideration in relation to the then-current
value of the corporation in a freely negotiated transaction and in relation to
the board of directors' then-estimate of the future value of the corporation as
an independent entity. In addition, the board of directors may consider such
other factors as it determines to be relevant, including the social and economic
effects on its employees, customers, suppliers and other constituents and on the
communities in which the corporation does business and the desirability of
maintaining independence from any other business.
CSBI. Georgia law provides for certain voting rules and fair price
requirements concerning business combinations with "interested shareholders."
This provision is designed to protect shareholders of Georgia corporations
against the inequities of certain tactics which have been utilized in hostile
takeover attempts. Under the fair price provisions, business combinations with
interested shareholders (generally, a person who beneficially owns 10% or more
of the corporation's voting shares) must meet one of three criteria designed to
protect minority shareholders: (i) the transaction must be unanimously approved
by the "continuing directors" of the corporation (generally, directors who
served prior to the time the interested shareholder acquired 10% ownership and
who are unaffiliated with the interested shareholder); (ii) the transaction must
be approved by two-thirds (2/3) of the continuing directors and a majority of
shares held by shareholders other than the interested shareholders; or (iii) the
terms of the transaction must meet specified fair pricing criteria and certain
other tests which are intended to assure that all shareholders receive a fair
price and equivalent consideration for their shares regardless at which point in
time they sell to the acquiring party.
Fair price requirements are not applicable to any corporation unless they
are specifically incorporated in the bylaws of the corporation. CSBI's bylaws
do not contain these requirements. However, certain provisions of CSBI's bylaws
still may have the effect of preventing, discouraging, or delaying any change of
control of CSBI. The board of directors of CSBI may, if it deems it advisable,
oppose a tender or other offer for CSBI's securities, whether the offer is in
cash or in the securities of a corporation or otherwise. When considering
whether to oppose an offer, the board of directors may, but is not legally
obligated to, consider any pertinent issues; including, but not limited to: (i)
whether the offer price is acceptable based on the historical and present
operating results or financial condition of the corporation; (ii) whether a more
favorable price could be obtained for CSBI's securities in the future; (iii) the
impact which an acquisition of CSBI would have on the employees, depositors and
customers of CSBI and its subsidiaries and the communities which they serve;
(iv) the reputation and business practices of the offeror and its management and
affiliates; (v) the value of the securities, if any, that the offeror is
offering in exchange for CSBI's securities, based on an analysis of the worth of
CSBI as compared to the offeror or any other entity whose securities are being
offered; and (vi) any antitrust or other legal or regulatory issues that are
raised by the offer.
If the board of directors determines that an offer should be rejected, it
may take any lawful action to accomplish its purpose including, but not limited
to, any or all of the following: (i) advising shareholders not to accept the
offer; (ii) litigation against the offeror; (iii) filing complaints with
governmental and regulatory authorities; (iv) acquiring CSBI's securities; (v)
selling or otherwise issuing authorized but unissued securities of CSBI or
treasury stock or granting options or rights with respect thereto; (vi)
acquiring a company to create an antitrust or other regulatory problem for the
offeror; and (vii) soliciting a more favorable offer from another individual
entity.
56
<PAGE>
EXPERTS
The consolidated financial statements of CSBI as of December 31, 1998 and
1997, and for each of the years in the three-year period ended December 31, 1998
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG 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 Haywood as of December 31, 1998
and 1997, and for each of the years in the three-year period ended December 31,
1998 accompanying this proxy statement/prospectus have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by reference
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, counsel
for CSBI. Troutman Sanders LLP will also opine as to certain federal income tax
consequences of the merger. See "THE MERGER -- Important Federal Income Tax
Consequences." As of the date of this proxy statement/prospectus, certain
members of Troutman Sanders LLP owned approximately 17,646 shares of CSBI common
stock. Certain additional legal matters relating to the merger are being passed
upon for CSBI by Troutman Sanders LLP and for Haywood by Housley Kantarian &
Bronstein, P.C., Washington, D.C.
SHAREHOLDER PROPOSALS AND OTHER MATTERS
In order to be eligible for inclusion in Haywood's proxy materials for next
year's annual meeting of Haywood shareholders, if the merger is not consummated,
any shareholder proposal to take action at that meeting must be received at
Haywood's main office at 370 North Main Street, Waynesville, North Carolina
28786, no later than November 26, 1999.
In the event that Haywood receives notice of a shareholder proposal to take
action at next year's annual meeting of Haywood shareholders, if the merger is
not consummated before the time of such meeting, that is not submitted for
inclusion in Haywood's proxy material, or is submitted for inclusion but is
properly excluded from its proxy material, the persons named in the proxy sent
by Haywood to its shareholders intend to exercise their discretion to vote on
the shareholder proposal in accordance with their best judgment if notice of the
proposal is not received at Haywood's main office by _______________. The
bylaws of Haywood provide that if notice of a shareholder proposal to take
action at next year's annual meeting is not received at Haywood's main office
within 20 days of that meeting, the proposal will not be eligible for
presentation at that meeting.
Haywood's board of directors is not aware of any business to come before
the special meeting other than those matters described in this proxy
statement/prospectus. However, if any other matters should properly come before
the special meeting or any adjournment or postponement of the special meeting,
it is intended that proxies will be voted in accordance with the judgment of the
persons named on the proxy. If Haywood did not have notice of a matter on or
before ___________, 1999, it is expected that the persons named on the
accompanying proxy card will exercise discretionary authority when voting on
that matter; provided, however, that no proxy that is voted against the proposal
to approve the merger agreement will be voted in favor of any adjournment or
postponement.
Any shareholder proposal intended for inclusion in CSBI's proxy statement
for next year's annual meeting of shareholders must be received at the principal
offices of CSBI not later than November 29, 1999. In addition, the proxy
solicited by CSBI's board of directors for that meeting will confer
discretionary authority to vote on any shareholder proposal presented at that
meeting unless CSBI is provided with notice of such proposal by February 11,
2000.
57
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
CSBI and Haywood file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information filed by CSBI at the SEC's public
reference room in Washington, D.C., at 450 Fifth Street, N.W., Washington, D.C.
20549. The SEC also maintains public reference rooms in New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on its public reference rooms. CSBI's and Haywood's SEC filings are
also available to the public from commercial document retrieval services and at
the Internet web site maintained by the SEC at "http://www.sec.gov." Reports,
proxy statements and other information filed by Haywood should also be available
for inspection at the Amex at 86 Trinity Place, New York, New York 10006.
CSBI has filed a Registration Statement on Form S-4 to register with the
SEC CSBI common stock to be issued to Haywood shareholders in the merger. This
proxy statement/prospectus is a part of that Registration Statement and
constitutes a prospectus of CSBI in addition to a proxy statement of Haywood for
Haywood's Special Meeting. As allowed by SEC rules, this proxy
statement/prospectus does not contain all of the information you can find in the
Registration Statement or the exhibits to the Registration Statement.
The SEC allows CSBI and Haywood to "incorporate by reference" information
into this proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC by either CSBI or Haywood. The information incorporated by reference is
deemed to be part of this proxy statement/prospectus, except for any information
superseded by information in the proxy statement/prospectus. This proxy
statement/prospectus incorporates by reference the documents set forth below
that CSBI and Haywood have previously filed with the SEC. These documents
contain important information about CSBI and Haywood and their respective
businesses.
<TABLE>
<CAPTION>
CSBI Filings (SEC File No. 0-26254) Period
- ------------------------------------ ------
<S> <C>
. CSBI's Annual Report on Form 10-K For the fiscal year ended December 31, 1998 as filed on
March 31, 1999.
. CSBI's Amended Annual Report on Form 10-K. For the fiscal year ended December 31, 1998 as filed on
April 21, 1999.
. CSBI's Amended Annual Report on Form 10-K. For the fiscal year ended December 31, 1998 as filed on
June 4, 1999.
. CSBI's Quarterly Report on Form 10-Q. For the fiscal quarter ended March 31, 1999 as filed on
May 14, 1999.
. CSBI's Quarterly Report on Form 10-Q. For the fiscal quarter ended June 30, 1999 as filed on
August 14, 1999.
. The description of CSBI common stock contained
in CSBI's Registration Statement on Form 8-A,
as filed on April 28, 1989, and any amendment
or report filed for the purpose of updating
such description.
</TABLE>
<TABLE>
<CAPTION>
Haywood Filings (SEC File No. 1-11819) Period
- -------------------------------------- ------
<S> <C>
. Haywood's Annual Report on Form 10-K. For the fiscal year ended December 31, 1998 as filed on
March 29, 1999.
. Haywood's Quarterly Report on Form 10-Q. For the fiscal quarter ended March 31, 1999 as filed on
May 17, 1999
. Haywood's Quarterly Report on Form 10-Q. For the fiscal quarter ended June 30, 1999 as filed on
August 13, 1999.
</TABLE>
58
<PAGE>
CSBI further incorporates by reference additional documents that it files
with the SEC between the date of this proxy statement/prospectus and the
consummation of the merger or the termination of the merger agreement. These
documents include periodic reports, such as its Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
CSBI has supplied all of the information contained or incorporated by
reference in this proxy statement/prospectus relating to CSBI and Haywood has
supplied all of the information contained in this proxy statement/prospectus
relating to Haywood.
If you are a Haywood shareholder, you can obtain any of the documents
incorporated by reference in this proxy statement/prospectus from CSBI or
Haywood (as the case may be), the SEC or the SEC's Internet web site as
described above. Documents incorporated by reference are available from CSBI or
Haywood without charge, excluding all exhibits, except those that CSBI or
Haywood has specifically incorporated by reference in this proxy
statement/prospectus. Haywood shareholders may obtain documents incorporated by
referenced in this proxy statement/prospectus by requesting them in writing or
by telephone from CSBI or Haywood. See "REFERENCE TO ADDITIONAL INFORMATION"
located on the inside front cover of this proxy statement/prospectus for further
details on how to request documents incorporated by reference.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the merger. We have not
authorized anyone to provide you with information that is different from what is
contained in this proxy statement/prospectus. This proxy statement/prospectus
is dated _________, 1999. You should not assume that the information contained
in this proxy statement/prospectus is accurate as of any date other than such
date, and neither the mailing of this proxy statement/prospectus to Haywood
shareholders nor the issuance of CSBI common stock in the merger may create any
implication to the contrary. This proxy statement/prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction to or from any
person to whom it is not lawful to make any such offer or solicitation in such
jurisdiction. Neither the delivery of this proxy statement/prospectus nor any
distribution of securities made hereunder may, under any circumstances, create
an implication that there has been no change in the affairs of CSBI or Haywood
since the date hereof or that the information herein is correct as of any time
subsequent to its date.
59
<PAGE>
APPENDIX A
----------
AGREEMENT AND PLAN OF MERGER,
AS AMENDED
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement")
is made and entered into as of August 5, 1999 by and among Haywood Bancshares,
Inc. ("Haywood"), a corporation organized and existing under the Laws of the
State of North Carolina, with its principal office located in Waynesville, North
Carolina, Century South Banks, Inc. ("CSBI"), a corporation organized and
existing under the Laws of the State of Georgia, with its principal office
located in Dahlonega, Georgia and to be joined in by HBI Acquisition Corp.
("HAC"), a corporation to be chartered under the Laws of the State of North
Carolina and to become a wholly-owned subsidiary of CSBI.
Preamble
The Boards of Directors of Haywood 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 Haywood
by CSBI pursuant to the merger of Haywood with and into HAC (the "Merger"). At
the Effective Time of the Merger, the outstanding shares of the capital stock of
Haywood shall be converted into the right to receive shares of the common stock
of CSBI (except as provided herein). As a result, shareholders of Haywood shall
become shareholders of CSBI. The transaction described in this Agreement is
subject to the approvals of the shareholders of Haywood and HAC, applicable
Regulatory Authorities and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the Merger for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code. In connection with the execution of this Agreement, Haywood and CSBI will
enter into a stock option agreement (the "Stock Option Agreement") in the form
attached hereto as Exhibit A.
Immediately following the Closing, Haywood Savings Bank, Inc., SSB
("Bank"), a North Carolina chartered savings bank with its principal office
located in Waynesville, North Carolina and a wholly-owned subsidiary of Haywood,
will remain in existence under its Articles of Incorporation and Bylaws, as in
effect prior to the Effective Time, as a wholly-owned subsidiary of HAC. Great
Smokies Financial Corporation and Great Smokies Insurance Agency, Inc., each a
corporation organized and existing under the Laws of the State of North Carolina
with its principal office located in Waynesville, North Carolina and a wholly-
owned subsidiary of Bank, will remain in existence under their respective
Articles of Incorporation and Bylaws, as in effect prior to the Effective Time,
as wholly-owned subsidiaries of Bank.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE 1
TRANSACTION AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Haywood shall be merged with and into HAC in accordance with the
provisions of Section 55-11-05 of the NCBCA and with the effect provided in
Section 55-11-06 of the NCBCA. HAC shall be the Surviving Corporation resulting
from the Merger and the separate existence of Haywood 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 Haywood and CSBI
and, upon its formation, the Board of Directors of HAC.
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
A-1
<PAGE>
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
North Carolina. 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 Haywood approve this Agreement, or (iii) such later date as may be mutually
agreed upon in writing by the Chief Executive Officers of each Party.
1.4 Execution of Support and Non Competition Agreements. Immediately
prior to the execution of this Agreement and as a condition hereto, each of the
executive officers and directors of Haywood and Bank listed in Exhibit E is
executing and delivering to CSBI a Support Agreement and Non Competition
Agreement in substantially the form as attached hereto as Exhibit B.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of HAC 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 HAC in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 Directors and Officers of Haywood and Bank. The directors of Haywood
and Bank in office prior to the Effective Time may continue, at their
discretion, to serve as directors of the Surviving Corporation and Bank for a
period of the later of their attaining age 70 or five years after the Closing
but in no event later than any individual's 75th birthday. The directors will
receive directors' fees in the amount of $400 per month for their combined
service to Surviving Corporation and Bank. The officers of Haywood immediately
prior to the Effective Time shall become officers of the Surviving Corporation.
2.4 Directors and Officers of CSBI and HAC. The directors and officers of
CSBI in office immediately prior to the Effective Time shall serve as the
officers and directors of CSBI from and after the Effective Time in accordance
with the Bylaws of CSBI. The directors of HAC in office immediately prior to
the Effective Time shall continue to serve as directors of the Surviving
Corporation from and after the Effective Time until their successors shall have
been duly elected and qualified or until their earlier death, resignation or
removal in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES AND OPTIONS
3.1 Conversion of Shares. Subject to the provisions of this Agreement, 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.
(b) Subject to adjustment as outlined below and as set forth in
Section 3.4 of this Agreement, the election rights set forth in Section 3.2 of
this Agreement, the allocation provisions set forth in Section 3.3 of this
Agreement and the conditions set forth herein, each share of Haywood Common
Stock issued and outstanding at the Effective Time shall be converted into .8874
shares (the "Exchange Ratio") of CSBI Common Stock (the "Per Share Stock
Consideration"), provided, however, that if (i) the Valuation Period Market
-------- -------
Value of CSBI Common Stock is
A-2
<PAGE>
less than $24.00 per share, then the Exchange Ratio shall be increased by an
amount equal to the product of (A) the Exchange Ratio multiplied by (B) the
quotient of the difference between $24.00 less the Valuation Period Market Value
divided by the Valuation Period Market Value or (ii) the Valuation Period Market
Value of CSBI Common Stock is greater than $27.00 per share, then the Exchange
Ratio shall be decreased by an amount equal to the product of (A) the Exchange
Ratio multiplied by (B) the quotient of the difference between the Valuation
Period Market Value less $27.00, divided by the Valuation Period Market Value.
(c) Subject to adjustment as outlined above and as set forth in
Section 3.4 of this Agreement, the election rights set forth in Section 3.2 of
this Agreement, the allocation provisions set forth in Section 3.3 of this
Agreement and the conditions set forth herein, each share of Haywood Common
Stock (excluding shares held by CSBI or any of its Subsidiaries or by Haywood,
in each case other than in a fiduciary capacity or as a result of debts
previously contracted) issued and outstanding at the Effective Time shall cease
to be outstanding and shall be converted into and exchanged for the right to
receive the Per Share Stock Consideration.
3.2 Cash Election. Notwithstanding the foregoing, Holders of Haywood
Common Stock who beneficially own less than 100 shares shall receive cash
consideration in lieu of receiving CSBI Common Stock in the Merger. In
addition, all other holders of Haywood Common Stock may elect to receive cash
consideration in lieu of receiving CSBI Common Stock in accordance with the
election procedures set forth below in this Section 3.2. Holders who are to
receive cash in lieu of exchanging their shares of Haywood Common Stock for CSBI
Common Stock as specified below shall receive an amount in cash (the "Per Share
Cash Consideration") in respect of each share of Haywood Common Stock that is so
converted equal to the Exchange Ratio (subject to adjustment of the Exchange
Ratio as set forth in Section 3.1(b) of this Agreement) and the product of the
Valuation Period Market Value. For purposes of this Agreement:
(i) "Valuation Period Market Value" shall mean the average of the
closing sales prices for CSBI Common Stock as reported on the NASDAQ (as
reported in The Wall Street Journal or, in the absence thereof, by another
authoritative source) during the Valuation Period; and
(ii) "Valuation Period" shall mean the 20 consecutive trading day
period during which the shares of CSBI Common Stock are traded on the NASDAQ
ending on the 10th calendar day immediately prior to the anticipated Effective
Time.
An election form and other appropriate and customary transmittal materials
("Election Form") (which shall specify that delivery shall be effected, and risk
of loss and title to the certificates theretofore representing Haywood Common
Stock ("Old Certificates")) shall pass, only upon proper delivery of such Old
Certificates to an exchange agent designated by CSBI (the "Exchange Agent")
shall be mailed together with the Proxy Statement on such date as Haywood and
CSBI shall mutually agree ("Mailing Date") to each holder of record of Haywood
Common Stock as of the record date for eligibility to vote at the Special
Meeting.
Each Election Form shall permit a holder (or the beneficial owner through
appropriate and customary documentation and instructions) of Haywood Common
Stock to elect to receive cash with respect to all or a portion of such holder's
Haywood Common Stock (shares as to which the election is made being "Cash
Election Shares"). The "Cash Election Amount" shall be equal to the Per Share
Cash Consideration multiplied by the total number of Cash Election Shares.
Shares as to which the holder (or beneficial owner elects to receive the Per
Share Stock Consideration (if eligible to so elect) are referred to herein as
"Stock Election Shares."
Any share of Haywood Common Stock with respect to which the holder (or the
beneficial owner, as the case may be) shall not have submitted to the Exchange
Agent an effective, properly completed Election Form on or before 5:00 p.m. on
the 20th day following the Mailing Date (the "Election Deadline") shall be
converted either into the Per Share Stock consideration or the Per Share Cash
Consideration at the election of CSBI (such shares being "No Election Shares")
with the exception that shares held by a holder of less than 100 shares shall be
deemed to be Cash Election Shares.
CSBI shall make available one or more Election Forms as may be reasonably
requested by all persons who become holders (or beneficial owners) of Haywood
Common Stock between the Mailing Date and the close of business on the business
day prior to the Election Deadline, and Haywood shall provide to the Exchange
Agent all
A-3
<PAGE>
information reasonably necessary for it to perform as specified herein.
Any such election shall have been properly made only if the Exchange Agent
shall have actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of Haywood
Common Stock covered by such Election Form, together with duly executed
transmittal materials included in the Election Form. Any Election Form may be
revoked or changed by the person submitting such Election Form at or prior to
the Election Deadline. In the event an Election Form is revoked prior to the
Election Deadline, the shares of Haywood Common Stock represented by such
Election Form shall become No Election Shares and CSBI shall cause the
certificates representing Haywood Common Stock to be promptly returned without
charge to the person submitting the Election Form upon written request to that
effect from the person who submitted the Election Form. Subject to the terms of
this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of the Exchange Agent regarding
such matters shall be binding and conclusive. Neither CSBI nor the Exchange
Agent shall be under any obligation to notify any person of any defect in an
Election Form.
3.3 Allocation. Within five business days after the Election Deadline,
unless the Effective Time has not yet occurred, in which case as soon thereafter
as practicable, CSBI shall cause the Exchange Agent to effect the allocation
among the holders of Haywood Common Stock so that 50% of the aggregate
consideration paid in exchange for shares of Haywood Common Stock in the Merger
(the "Total Merger Consideration") shall be paid in CSBI Common Stock (the
"Stock Amount") and 50% of the Total Merger Consideration shall be paid in cash
(the "Cash Amount"). The allocation shall be effected by the Exchange Agent as
follows:
(i) If the Cash Amount is greater than the Cash Election Amount,
then:
(a) each Cash Election Share shall be converted into the right to
receive an amount of cash equal to the Per Share Cash Consideration;
(b) the Exchange Agent will select, on a pro rata basis, first
from among the holders of No Election Shares and then, if necessary, from among
the holders of Stock Election Shares, a sufficient number of such shares ("Cash
Designee Shares") such that the sum of Cash Designee Shares and Cash Election
Shares multiplied by the Per Share Cash Consideration equals as closely as
practicable the Cash Amount (each Cash Designee Share shall be converted into
the right to receive an amount of cash equal to the Per Share Cash
Consideration); and
(c) any Stock Election Shares and any No Election Shares, in each
case, not so selected as Cash Designee Shares shall be converted into the right
to receive the Per Share Stock Consideration.
(ii) If the Cash Amount is less than the Cash Election Amount, then:
(a) each Stock Election Share and each No Election Share shall be
converted into the right to receive the Per Share Stock Consideration;
(b) the Exchange Agent will select, on a pro rata basis from
among the holders of Cash Election Shares, a sufficient number of such shares
("Stock Designee Shares") such that the number of Stock Designee Shares
multiplied by the Per Share Cash Consideration equals as closely as practicable
the difference between the Cash Election Amount and the Cash Amount (the Stock
Designee Shares shall be converted into the right to receive the Per Share Stock
Consideration); and
(c) any Cash Election Shares not so selected as Stock Designee
Shares shall be converted into the right to receive an amount of cash equal to
the Per Share Cash Consideration.
A-4
<PAGE>
In the event that the Exchange Agent is required pursuant to this Section
3.3 to designate from among all Stock Election Shares the Cash Designee Shares
to receive cash, each holder of Stock Election Shares shall be allocated a pro
rata portion of the remainder of the total Cash Designee Share less the number
of No Election Shares which are Cash Designee Shares. Such proration shall
reflect the proportion that the number of Stock Election Shares of each holder
of Stock Election Shares bears to the total number of Stock Election Shares. In
the event the Exchange Agent is required pursuant to this Section 3.3 to
designate from among all holders of Cash Election Shares the Stock Designee
Shares to receive the Per Share Stock Consideration, each holder of Cash
Election Shares shall be allocated a pro rata portion of the total Stock
Designee Shares. Such proration shall reflect the proportion that the number of
Cash Election Shares of each holder of Cash Election Shares bears to the total
number of Cash Election Shares.
Notwithstanding anything to the contrary contained in this Section 3.3,
CSBI may, at CSBI's sole discretion, waive the maintenance of the Cash Amount,
but only in order to reduce the Cash Amount, and only if the difference between
the Cash Amount and the aggregate amount of cash elected by holders of Haywood
Common Stock, including cash paid for fractional shares, is less than 10% of the
Cash Amount. Under no circumstances, however, shall CSBI increase the Cash
Amount.
3.4 Adjustment to Exchange Ratio. In the event that Haywood's consolidated
shareholders' equity (as determined below) is less than $21,000,000, there shall
be an adjustment to the Exchange Ratio. In such event, the Exchange Ratio shall
be adjusted by multiplying it by a fraction the numerator of which is Haywood's
consolidated shareholders' equity (as determined below) and the denominator of
which is $21,000,000. The determination of Haywood's consolidated shareholders'
equity, as adjusted, shall be based on Haywood's consolidated balance sheet
prepared in accordance with GAAP dated as of the end of the month immediately
preceding the Effective Time, including (i) all normal and recurring adjustments
necessary in accordance with GAAP; (ii) all adjustments necessary to record
obligations with respect to benefit obligations of Haywood or any of its
subsidiaries under its employment agreements, deferred compensation agreements,
directors' retirement plan, severance plan, and retention bonus plan assuming a
change in control triggering event; (iii) all adjustments necessary to record
estimated obligations payable by Haywood or any of its subsidiaries upon the
termination of its defined benefit pension plan; and (iv) all accruals and
liabilities for fees and expenses of consultants, attorneys, accountants and the
like in connection with the Merger and the due diligence conducted by Haywood in
regard to the Merger other than (x) the fees to be paid to Trident, (y) the
direct costs associated with printing and mailing of the Proxy Statement, and
(z) any costs, fees and expenses reasonably and directly incurred by Haywood and
Bank in connection with any charter conversion by Bank.
3.5 Anti-Dilution Provisions. In the event Haywood or CSBI changes the
number of shares of Haywood 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 Total Merger Consideration shall be
proportionately adjusted.
3.6 Shares Held by Haywood or CSBI. Each of the shares of Haywood Common
Stock held by Haywood 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.
3.7 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Haywood 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 Old 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 Haywood
Common Stock multiplied by the market value of one share of CSBI Common Stock at
the Effective Time. The market value of one share of CSBI Common Stock at the
Effective Time shall be the last sales price of the CSBI Common Stock on NASDAQ
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.
A-5
<PAGE>
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. (a) Immediately prior to the Effective Time,
CSBI shall deposit, or shall cause to be deposited, with the Exchange Agent, for
the benefit of the holders of Old Certificates for exchange in accordance with
Section 3.2 of this Agreement or this Article 4, certificates representing the
shares of CSBI Common Stock ("New Certificates") and an estimated amount of cash
(such cash and New Certificates, together with any dividends or distributions
with respect thereto (without any interest thereon), being hereinafter referred
to as the "Exchange Fund") to be paid pursuant to Section 3.2 of this Agreement
or this Article 4 in exchange for outstanding shares of Haywood Common Stock.
(b) Promptly after the Effective Time, the Exchange Agent shall
transmit to former holders of record shares of Haywood Common Stock who have
properly made (and not revoked) elections pursuant to Section 3.2 of this
Agreement New Certificates in respect of the Per Share Stock Consideration
and/or checks in respect of the Per Share Cash Consideration and any fractional
share interests or dividends or distributions which such persons shall be
entitled to receive pursuant to this Agreement. Within 20 days after the
Effective Time, CSBI shall send or cause to be sent to each other former holder
of record of shares (other than Treasury Shares) of Haywood Common Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such shareholder's Old Certificates for the consideration set forth
in Article 3 of this Agreement. CSBI shall cause the New Certificates into which
shares of a shareholder's Haywood Common Stock are converted at the Effective
Time and/or any check in respect of the Per Share Cash Consideration and any
fractional share interests or dividends or distributions which such person shall
be entitled to receive to be delivered to such shareholders upon delivery to the
Exchange Agent of Old Certificates representing such shares of Haywood Common
Stock (or indemnity reasonably satisfactory to CSBI and the Exchange Agent, if
any of such certificates are lost, stolen or destroyed) owned by such
shareholder. No interest will be paid on any such cash to be paid pursuant to
Article 3 upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor
any party hereto shall be liable to any former holder of Haywood Common Stock
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(d) No dividends or other distributions with respect to CSBI
Common Stock with a record date occurring after the Effective Time shall be paid
to the holder of any unsurrendered Old Certificate representing shares of
Haywood Common Stock converted in the Merger into shares of such CSBI Common
Stock until the holder thereof shall have surrendered such Old Certificate in
accordance with Section 3.2 of this Agreement or this Article 4. After the
surrender of an Old Certificate in accordance with Section 3.2 of this Agreement
or this Article 4, the record holder thereof shall be entitled to receive any
such dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of CSBI Common Stock
represented by such Old Certificates.
(e) Any portion of the Exchange Fund that remains unclaimed by
the shareholders of Haywood for 12 months after the Effective Time shall be paid
to CSBI. Any shareholders of Haywood who have not theretofore complied with
Section 3.2 of this Agreement or this Article 4 shall thereafter look only to
CSBI for payment of the shares of CSBI Common Stock, cash in lieu of any
fractional shares and unpaid dividends and distributions on the CSBI Common
Stock deliverable in respect of each share of Haywood Common Stock such
shareholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
4.2 Rights of Former Shareholders. At the Effective Time, the stock
transfer books of Haywood shall be closed as to holders of Haywood Common Stock
immediately prior to the Effective Time, and no transfer of Haywood Common Stock
by any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 3.2 or Section 4.1 of this
Agreement, each certificate theretofore representing shares of Haywood Common
Stock (other than shares to be canceled pursuant to Section 3.6 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 3.2 of
this Agreement in exchange therefor. To the extent permitted by Law, former
shareholders of record of Haywood shall be entitled to vote after the Effective
Time at any meeting of CSBI shareholders the number of whole shares of CSBI
Common Stock into which their respective shares of Haywood Common Stock are
converted, regardless of whether such holders have exchanged their
A-6
<PAGE>
certificates representing Haywood 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
Haywood Common Stock issued and outstanding at the Effective Time until such
holder surrenders such certificate for exchange as provided in Section 3.2 or
Section 4.1 of this Agreement. However, upon surrender of such Haywood 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 HAYWOOD
Haywood hereby represents and warrants to CSBI and HAC as follows:
5.1 Organization, Standing and Power. Haywood is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina and is duly registered as a bank holding company under the BHC
Act. Haywood has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. Neither Haywood nor any
Subsidiary owns any property or conducts any business outside of the State of
North Carolina which would require any of them to be qualified as a foreign
corporation in any jurisdiction except for such jurisdictions in which the
failure to be so qualified is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Haywood.
5.2 Authority; No Breach By Agreement.
(a) Haywood has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and, subject
to approval by its stockholders, to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Merger, have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of Haywood, subject to the approval of this Agreement by the
holders of at least a majority of the outstanding shares of Haywood Common
Stock, which is the only shareholder vote required for approval of this
Agreement and consummation of the Merger by Haywood. Subject to such requisite
shareholder approval and Consents of applicable Regulatory Authorities, this
Agreement represents a legal, valid and binding obligation of Haywood,
enforceable against Haywood 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) Except as Previously Disclosed, neither the execution and
delivery of this Agreement by Haywood nor the consummation by Haywood of the
transactions contemplated hereby, nor compliance by Haywood with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of Haywood'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 either Haywood or any Subsidiary or all of them under,
any Contract or Permit of either Haywood or any Subsidiary or all of them, 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
Haywood, or (iii) subject to receipt of the requisite approvals referred to in
Section 9.1(a) and (b) of this Agreement, violate any Law or Order applicable to
either Haywood or Bank or both or any of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate , banking and securities Laws
and rules of the AMEX, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the IRS or the Pension
Benefit Guaranty Corporation with respect to any employee benefit plans, and
other than Consents, filings or notifications which, if not obtained or made,
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect
A-7
<PAGE>
on Haywood no notice to, filing with or Consent of, any public body or authority
is necessary for the consummation by Haywood of the Merger and the other
transactions contemplated in this Agreement.
5.3 Capital Stock and Other Securities.
(a) The authorized capital stock of Haywood consists of 5,000,000
shares of Haywood Preferred Stock and 10,000,000 shares of Haywood Common Stock.
As of the date of this Agreement, there are no shares of Haywood Preferred Stock
outstanding and 1,250,356 shares of Haywood Common Stock issued and outstanding.
No more than 1,250,356 shares of Haywood Common Stock will be issued and
outstanding at the Effective Time. All of the issued and outstanding shares of
capital stock of Haywood are duly and validly issued and outstanding and are
fully paid and nonassessable under the NCBCA. None of the outstanding shares of
capital stock of Haywood has been issued in violation of any preemptive rights
of the current or past shareholders of Haywood. There are no outstanding Haywood
Options that have been granted and are unexercised.
(b) Except as set forth in Section 5.3(a) of this Agreement or there
are no shares of capital stock or other equity securities of Haywood 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 Haywood or
contracts, commitments, understandings or arrangements by which Haywood 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 Haywood's Subsidiaries. Haywood has the following subsidiaries:
(i) Bank; (ii) Great Smokies Financial Corporation; and (iii) Great Smokies
Insurance Agency, Inc.
5.5 SEC Filings; Financial Statements.
(a) Haywood has filed and made available to CSBI all forms,
reports and documents required to be filed by Haywood with the SEC since
December 31, 1995 (collectively, the "Haywood SEC Reports"). The Haywood SEC
Reports (i) at the time filed, complied in all Material respects with the
applicable requirements of the 1933 Act and the 1934 Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a Material fact or omit to state a Material fact
required to be stated in such Haywood SEC Reports or necessary in order to make
the statements in such Haywood SEC Reports, in light of the circumstances under
which they were made, not misleading. Except for Haywood Subsidiaries that are
registered as a broker, dealer or investment advisor or filings due to fiduciary
holdings of the Haywood Subsidiaries, none of the Haywood Subsidiaries is
required to file any forms, reports or other documents with the SEC;
(b) Haywood has Previously Disclosed, and delivered to CSBI prior
to the execution of this Agreement, copies of all Haywood Financial Statements
for periods ended prior to the date hereof and will deliver to CSBI copies of
all Haywood Financial Statements prepared subsequent to the date hereof. The
Haywood Financial Statements (as of the dates thereof and for the periods
covered thereby) (i) are or will be, if dated after the date of this Agreement,
in accordance with the books and records of Haywood, which are or will be,
materially 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 financial position of Haywood as of the dates indicated and the
results of operations, changes in shareholders' equity and cash flows of Haywood
for the periods indicated, in accordance with GAAP (subject to any exceptions as
to consistency specified therein or as may be indicated in the notes thereto or,
in the case of interim financial statements, to normal recurring year-end
adjustments that are not Material).
5.6 Absence of Undisclosed Liabilities. Neither Haywood nor any
Subsidiary has any Liabilities that are reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Haywood, except Liabilities
which are accrued or reserved against in the consolidated balance sheets of
Haywood as of December 31, 1998 and June 30, 1999 included in the Haywood
Financial Statements or reflected in the notes thereto. Neither Haywood nor any
Subsidiary has incurred or paid any Liability since June 30, 1999, except for
(i) 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 Haywood, or
(ii) in connection with the transaction contemplated by this Agreement.
A-8
<PAGE>
5.7 Absence of Certain Changes or Events. Since June 30, 1999, (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 Haywood, (ii) neither Haywood nor any Subsidiary 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
Haywood provided in Article 7 of this Agreement, and (iii) Haywood and each
Subsidiary have conducted their respective businesses in the ordinary and usual
course (excluding the incurrence of expenses in connection with this Agreement
and the transactions contemplated hereby).
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of Haywood
or any Subsidiary 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, 1998, 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 Haywood, and all Tax Returns filed are complete and accurate
in all Material respects to the Knowledge of Haywood. All Taxes shown on filed
returns have been paid as of the date of this Agreement, and 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 Haywood, except as reserved
against in the Haywood 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) Neither Haywood nor any Subsidiary 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 Haywood or any Subsidiary, which
deficiency is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Haywood.
(c) Adequate provision for any Taxes due or to become due by Haywood
or Bank for the period or periods through and including the date of the
respective Haywood Financial Statements has been made and is reflected on such
Haywood Financial Statements.
(d) Deferred Taxes of Haywood and its Subsidiaries have been provided
for in accordance with GAAP. Effective January 1, 1994, Haywood adopted
Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes."
(e) Haywood and its Subsidiaries are in compliance with, and their
respective records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under federal,
state and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code, except for such instances of noncompliance and such omissions as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Haywood and its Subsidiaries.
(f) Except as set forth in Schedule 5.8(f) attached hereto, neither
Haywood nor any Subsidiary has made any payments, is obligated to make any
payments or is a party to any contract, agreement or other arrangement that
could obligate it to make any payments that would be disallowed as a deduction
under Section 280G or 162(m) of the Internal Revenue Code.
(g) There are no Material Liens with respect to Taxes upon any of the
Assets of either Haywood or any of its Subsidiaries except for liens for Taxes
not yet due or being contested in good faith and for which adequate provision
thereof has been made.
A-9
<PAGE>
(h) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of either Haywood or any of its Subsidiaries that
occurred during or after any Taxable Period in which either Haywood or any of it
Subsidiaries incurred a net operating loss that carries over to any Taxable
Period ending after December 31, 1996.
(i) Neither Haywood nor any of its Subsidiaries has filed any consent
under Section 341(f) of the Internal Revenue Code concerning collapsible
corporations.
(j) After the date of this Agreement, no Material election with
respect to Taxes will be made by Haywood or any of its Subsidiaries without the
prior consent of CSBI, which consent will not be unreasonably withheld.
(k) Neither Haywood nor any of its Subsidiaries has or has had a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
5.9 Allowance. The Allowance shown on the consolidated balance sheets of
Haywood included in the most recent Haywood Financial Statements dated prior to
the date of this Agreement was, and the Allowance shown on the consolidated
balance sheets of Haywood included in the Haywood Financial Statements as of
dates subsequent to the execution of this Agreement will be, as of the dates
thereof, adequate (within the meaning of GAAP and applicable regulatory
requirements or guidelines) to provide for losses relating to or inherent in the
loan and lease portfolios (including accrued interest receivables) of any
Subsidiary and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by any Subsidiary as of the dates
thereof, except where the failure of such Allowance to be so adequate is not
reasonably likely to have a Material Adverse Effect on Haywood.
5.10 Assets. Except as Previously Disclosed or as disclosed or reserved
against in the Haywood Financial Statements, Haywood and its Subsidiaries each
has good and marketable title, free and clear of all Liens, to all of their
respective Assets. Except as set forth in Schedule 5.10 attached hereto, all
Material tangible properties used in the business of Haywood and its
Subsidiaries are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with Haywood's and each
Subsidiaries' past practices. All Assets which are Material to Haywood's and
its Subsidiaries' respective businesses held under leases or subleases by either
Haywood or its 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 either Haywood or its Subsidiaries provide
adequate coverage under current industry practices against loss or Liability,
and the fidelity and blanket bonds in effect as to which any Subsidiary is a
named insured are reasonably sufficient. Neither Haywood nor any Subsidiary has
received notice from any insurance carrier that (i) such insurance will be
canceled or that coverage thereunder will be reduced or eliminated or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. The Assets of each Subsidiary include all assets required to operate
the business of such Subsidiary as presently conducted.
5.11 Environmental Matters.
(a) To the Knowledge of Haywood, Haywood, and its Subsidiaries,
their respective Participation Facilities and Loan Properties are, and have
been, in full 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 Haywood.
(b) There is no Litigation pending or, to the Knowledge of Haywood,
threatened before any court, governmental agency, board, authority or other
forum in which either Haywood or any Subsidiary or any of their respective
Participation Facilities and Loan Properties 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
A-10
<PAGE>
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under or
involving a site owned, leased or operated by either Haywood or any Subsidiary
or any of their respective Participation Facilities and Loan Properties, except
for such Litigation pending or threatened which is not likely to have,
individually or in the aggregate, a Material Adverse Effect on Haywood.
(c) To the Knowledge of Haywood, there is no reasonable basis for any
Litigation of a type described in subsection (b), except such as is not likely
to have, individually or in the aggregate, a Material Adverse Effect on Haywood.
(d) To the Knowledge of Haywood, there have been no releases, spills
or discharges of Hazardous Material or other conditions involving Hazardous
Materials in, on, under or affecting any Participation Facility or Loan
Property, except such as are not likely to have, individually or in the
aggregate, a Material Adverse Effect on Haywood.
5.12 Compliance with Laws. Haywood is duly registered as a bank holding
company under the BHC Act. Bank is duly chartered as a state savings bank under
applicable Laws and is an "insured depository institution" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder, and its
deposits are insured up to applicable limits by the Savings Association
Insurance Fund. Bank and its Subsidiaries have in effect all Permits necessary
for them to own, lease or operate their respective Assets and to carry on their
respective businesses as now conducted, except for those Permits the absence of
which are not likely to have, individually or in the aggregate, a Material
Adverse Effect on Haywood or its Subsidiaries, 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 Haywood or
its Subsidiaries. Neither Haywood nor any Subsidiary:
(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 likely to have, individually or in the aggregate, a Material Adverse Effect
on Haywood; and
(b) except as set forth on Schedule 5.12(b) attached hereto, 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 Haywood or Bank is not in compliance with any
of the Laws or Orders which such governmental authority or Regulatory Authority
enforces, where such noncompliance is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on either Haywood or any Subsidiary,
(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 Haywood or any Subsidiary, or (iii) requiring Haywood or any Subsidiary
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 businesses, or in any manner relates to their respective capital
adequacy, credit or reserve policies, management or the payment of dividends.
5.13 Labor Relations. Neither Haywood nor its Subsidiaries is the subject
of any Litigation asserting that either of them has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel Haywood or its Subsidiaries to bargain with any
labor organization as to wages or conditions of employment, nor is Haywood or
its Subsidiaries a party to or bound by any collective bargaining agreement,
Contract or other agreement or understanding with a labor union or labor
organization, nor is there any strike or other labor dispute involving either of
them, pending or threatened, nor to their respective Knowledge, is there any
activity involving Haywood's or its Subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.14 Employee Benefit Plans.
(a) Schedule 5.14(a) attached hereto sets forth correct and complete
copies in each case of all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus or other incentive plans, all other written employee programs,
arrangements or agreements, all medical, vision, dental or other health plans,
all life insurance plans and all other employee benefit plans or fringe
A-11
<PAGE>
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 Haywood 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 "Haywood Benefit Plans"). Any of the
Haywood Benefit Plans which is an "employee welfare benefit plan," as that term
is defined in Section 3(l) of ERISA, or an "employee pension benefit plan," as
that term is defined in Section 3(2) of ERISA, is referred to herein as a
"Haywood ERISA Plan." Each Haywood ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code or Section
3(35) of ERISA) is referred to herein as a "Haywood Pension Plan." No Haywood
Pension Plan is or has been a "multi-employer plan" within the meaning of
Section 3(37) of ERISA. Except as set forth on Schedule 5.14(a) attached hereto,
Haywood does not, and may not ever, participate in either a multi-employer plan
or a multiple employer plan.
(b) Haywood has delivered or made available to CSBI prior to the
execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such
Haywood Benefit Plans (including insurance contracts), and all amendments
thereto, (ii) with respect to any such Haywood Benefit Plans or amendments, all
determination letters, Material rulings, Material opinion letters, Material
information letters or Material advisory opinions issued by the IRS, the United
States Department of Labor or the Pension Benefit Guaranty Corporation after
December 31, 1994, (iii) annual reports or returns, audited or unaudited
financial statements, actuarial valuations and reports and summary annual
reports prepared for any Haywood Benefit Plan with respect to the most recent
plan year, and (iv) the most recent summary plan descriptions and any Material
modifications thereto.
(c) All Haywood Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws, the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Haywood. Each Haywood 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 Haywood is
not aware of any circumstances which will or could reasonably result in
revocation of any such favorable determination letter or failure of an Haywood
ERISA Plan intended to satisfy Internal Revenue Code Section 401 to satisfy the
Tax qualification provisions of the Internal Revenue Code applicable thereto.
Neither Haywood nor Bank has engaged in a transaction with respect to any
Haywood Benefit Plan that, assuming the Taxable Period of such transaction
expired as of the date hereof, would subject Haywood or Bank to a Material Tax
or penalty imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Haywood.
(d) Except as set forth on Schedule 5.14(d) attached hereto, no
Haywood Pension Plan has any "unfunded current liability," as that term is
defined in Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set
forth for such 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 or
funded status of any Haywood Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Haywood Pension Plan, and (iii) no increase in
benefits under any Haywood Pension Plan as a result of plan amendments or
changes in applicable Law, any of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Haywood or
materially affect the funding status of any such plan. Neither any Haywood
Pension Plan nor any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by Haywood, or the
single-employer plan of any entity which is considered one employer with Haywood
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 Haywood. Haywood has not provided, and is not
required to provide, security to a Haywood Pension Plan or to any single-
employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Internal Revenue Code. All premiums required to be paid under ERISA Section 4006
have been timely paid by Haywood, except to the extent any failure to do so
would not have a Material Adverse Effect on Haywood.
A-12
<PAGE>
(e) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by Haywood 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 Haywood.
Except as Previously Disclosed, Haywood has not incurred any withdrawal
Liability with respect to a multi-employer plan under Subtitle B of Title IV of
ERISA (regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have a Material Adverse Effect on
Haywood. 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 Haywood Pension Plan or by any ERISA Affiliate
within the 12-month period ending on the date hereof.
(f) Except as set forth on Schedule 5.14(f) attached hereto or as
required under Title I, Part 6 of ERISA and Internal Revenue Code Section 4980B,
neither Haywood nor Bank has any obligations to provide health and life benefits
under any of the Haywood Benefit Plans to former employees, and there are no
restrictions on the rights of Haywood to amend or terminate any such plan
without incurring any Liability thereunder, which Liability is reasonably likely
to have a Material Adverse Effect on Haywood.
(g) Except as set forth on Schedule 5.14(g) attached hereto, 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 Haywood from
Haywood or its Subsidiaries under any Haywood Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Haywood Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(h) Except as set forth on Schedule 5.14(h) attached hereto, 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 Haywood 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 Haywood Financial Statements to the extent required by and in
accordance with GAAP.
5.15 Material Contracts. Except as set forth on Schedule 5.15 attached
hereto or otherwise reflected in the Haywood Financial Statements, neither
Haywood, its 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 $50,000, (ii) any Contract relating to the borrowing of money by
Haywood or any Subsidiary or the guarantee by Haywood or any Subsidiary of any
such obligation (other than Contracts evidencing deposit liabilities, purchases
of federal funds, fully-secured repurchase agreements, trade payables, Federal
Home Loan Bank advances and Contracts relating to borrowings or guarantees made
in the ordinary course of business), and (iii) any other Contract or amendment
thereto would be required to be filed as an exhibit to a Form 10-K filed by
Haywood with the SEC as of the date of this Agreement that has not been filed by
Haywood with the SEC or incorporated by reference as an exhibit to Haywood's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (together
with all Contracts referred to in Sections 5.10 and 5.14(a) of this Agreement,
the "Haywood Contracts"). With respect to each Haywood Contract, (i) the
Contract is in full force and effect, (ii) neither Haywood nor Bank is in
Default thereunder, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Haywood, (iii)
neither Haywood nor its Subsidiaries has repudiated or waived any material
provision of any such Contract, and (iv) no other party to any such Contract is,
to the knowledge of Haywood, in Default in any respect, other than Defaults
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Haywood, or has repudiated or waived any Material
provision thereunder. Except as set forth on Schedule 5.15 attached hereto, all
of the indebtedness of Haywood or any Subsidiary for money borrowed is
prepayable at any time by Haywood or any Subsidiary without penalty or premium.
5.16 Legal Proceedings. There is no Litigation pending, or, to the
Knowledge of Haywood, threatened against either Haywood or any Subsidiary, or
against any of their Assets, employee benefit plans, interests or rights that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Haywood, nor are there any Orders of any Regulatory Authorities, other
governmental authorities or arbitrators outstanding against
A-13
<PAGE>
either Haywood or any Subsidiary, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Haywood.
5.17 Reports. Except as set forth on Schedule 5.17 attached hereto, since
December 31, 1994, Haywood and its Subsidiaries have timely filed all reports
and statements, together with any amendments required to be made with respect
thereto, that they were required to file with Regulatory Authorities and any
applicable state securities or banking authorities, except failures to file
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Haywood or its Subsidiaries. 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 contain any untrue statement of a Material fact or omit to state a Material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
5.18 Statements True and Correct. No statement, certificate, instrument
or other writing furnished or to be furnished by Haywood or any Subsidiary 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
Haywood or any Subsidiary 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 Haywood or any Subsidiary or any Affiliate thereof for inclusion in
the Proxy Statement to be mailed to Haywood's shareholders in connection with
the Haywood Meeting, and any other documents to be filed by Haywood 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 Haywood, 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 Haywood 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 Haywood Meeting. All documents that Haywood
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.
5.19 Tax and Regulatory Matters. Neither Haywood, nor any Subsidiary nor
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
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 or result in the
imposition of a condition or restriction of the type referred to in the second
sentence of such Section. To the Knowledge of Haywood, 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) other than with respect to anti-trust or competitive effects
issues.
5.20 State Takeover Laws. Haywood has taken all necessary action to
exempt the transactions contemplated by this Agreement from any applicable
"moratorium," "control share," "fair price," "business combination" or other
state takeover Law.
5.21 Articles of Incorporation Provisions. Haywood has taken all actions
so that the entering into of this Agreement and the consummation of the Merger
contemplated hereby do not and will not result in the grant of any rights to any
Person under the Articles of Incorporation, Bylaws or other governing
instruments of Haywood (other than voting, dissenters' rights of appraisal or
other similar rights) or restrict or impair the ability of CSBI or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of Haywood Common Stock that may be acquired or controlled by
it.
A-14
<PAGE>
5.22 Derivatives. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts and other similar risk management
arrangements, whether entered into for Haywood's own account, or for the account
of Bank or its customers, were entered into (i) in accordance with prudent
business practices and all applicable Laws, and (ii) with counterparties
believed to be financially responsible.
5.23 Year 2000. To the Knowledge of Haywood, all computer software and
hardware necessary for the conduct of business by Haywood (the "Haywood
Software") is designed to be used before, on, and after January 1, 2000 and the
Haywood Software will operate during each such time period without error
relating to the year 2000, specifically including any error relating to, or the
product of, any date data representing or referring to any particular date. As
used in this Section 5.23, "operate" further includes, but is not limited to,
accepting input of dates without ambiguity, outputting all dates without
ambiguity, and performing calculations, comparisons, extractions, sorting and
any other processing or taking actions or making decisions using dates or time
periods without suffering any abends, aborts, invalid or incorrect results or
other interruptions, whether before, on, or after January 1, 2000. Haywood has
received all year 2000 examinations and certifications as required by applicable
Law and will, within ten business days of this Agreement, make available for
CSBI's review all (i) such examinations and certifications, (ii) contingency
plans in the event the Software fails to operate, and (iii) costs associated
with or related to the Haywood Software.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CSBI AND HAC
CSBI hereby represents and warrants to Haywood, and HAC, when formed, will
represent and warrant to Haywood 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.
HAC, when formed, will be a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina. 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, and, upon its formation, HAC shall have, the corporate
power and authority necessary to execute, deliver and perform their respective
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Merger, have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of CSBI, and shall be duly and validly authorized by all
necessary corporate action in respect thereof on the part of HAC upon its
formation. Subject to the Consents of Regulatory Authorities, this Agreement
represents a legal, valid, and binding obligation of CSBI, and shall become such
an obligation of HAC upon its formation, enforceable against CSBI and to become
enforceable against HAC upon its formation, 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 either
CSBI or, upon its formation, HAC, nor the consummation by CSBI or, upon its
formation, HAC of the transactions contemplated hereby, nor compliance by either
CSBI or, upon its formation, HAC with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of CSBI's or, upon its
formation, HAC'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,
A-15
<PAGE>
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 Material Assets.
(c) No notice to, filing with or Consent of any public body or
authority is necessary for the consummation by either CSBI or HAC 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 and rules of the NASD, (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 30,000,000 shares
of CSBI Common Stock. As of June 30, 1999, there were 11,754,156 shares of CSBI
Common Stock issued and outstanding. CSBI is not authorized to issue any series
of preferred stock. As of June 30, 1999, 500,000 shares of CSBI Common Stock
were reserved for issuance pursuant to the CSBI Incentive Stock Option Plan;
500,000 shares of CSBI Common Stock were reserved for issuance pursuant to the
CSBI Employee Stock Ownership Plan (collectively, the two aforementioned stock
plans being referred to as the "CSBI Option Plans"); 143,617 shares of CSBI
Common Stock were reserved for issuance pursuant to stock options granted to
certain executive officers of CSBI outside of the CSBI Option Plans; 3.5% of the
outstanding shares of CSBI Common Stock were reserved for issuance pursuant to
the CSBI 1998 Executive Stock Plan; and 500,000 shares of CSBI Common Stock were
reserved for issuance pursuant to CSBI's dividend reinvestment 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 Haywood 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 Haywood 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 Plans, 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.
(c) At the record date fixed to determine the shareholders entitled to
receive notice of and to vote at the Haywood Meeting, the CSBI Common Stock
shall either be listed on a national securities exchange or held of record by at
least 2,000 shareholders.
6.4 SEC Filings; Financial Statements.
(a) CSBI has filed and made available to Haywood all forms, reports
and documents required to be filed by CSBI with the SEC since December 31, 1994
(collectively, the "CSBI SEC Reports"). The CSBI SEC Reports (i) at the time
filed, complied in all Material respects with the applicable requirements of the
1933 Act and the 1934 Act, as the case may be, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated in such
CSBI SEC Reports or necessary in order to make the statements in such CSBI SEC
Reports, in light of the circumstances under which they were made, not
misleading. Except for CSBI Subsidiaries that are registered as a broker, dealer
or investment advisor or filings due to fiduciary holdings of the CSBI
Subsidiaries, none of the CSBI Subsidiaries is required to file any forms,
reports or other documents with the SEC;
A-16
<PAGE>
(b) CSBI has Previously Disclosed and delivered to Haywood 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 Haywood 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,
materially complete and correct and which have been or will have been,
maintained in accordance with good business practices, and (ii) present or will
present fairly the consolidated financial position of the CSBI Companies as of
the dates indicated and the consolidated results of operations, changes in
shareholders' equity and cash flows of the CSBI Companies for the periods
indicated, in accordance with GAAP (subject to exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments that are
not Material).
6.5 Absence of Undisclosed Liabilities. None of the 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, 1998 and June 30, 1999 included in the CSBI Financial Statements or
reflected in the notes thereto. No CSBI Company has incurred or paid any
Liability since March 31, 1999, except for (i) 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, or (ii) in connection with the transactions
contemplated by this Agreement.
6.6 Absence of Certain Changes or Events. Since June 30, 1999, except as
Previously Disclosed, (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 Compliance with Laws. CSBI is duly registered as a bank holding
company under the BHC Act. Except for HAC, each of the CSBI Companies has in
effect, and, after its formation and prior to the Effective Time, HAC shall have
in effect, all Permits necessary for it to own, lease or operate its Assets and
to carry on its business as now conducted, except for those Permits the absence
of which is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CSBI, and there has occurred no Default under any
such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CSBI. None of
the CSBI Companies:
(a) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CSBI; and
(b) except as Previously Disclosed, has received any notification or
communication from any agency or department of federal, state or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any of the CSBI Companies are not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CSBI, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI, or (iii) requiring any CSBI
Companies to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management or the payment of dividends.
6.8 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.
A-17
<PAGE>
6.9 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 Haywood 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 Haywood shareholders in connection with the Haywood 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 Haywood, 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 Haywood 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 Haywood Meeting. All documents that any CSBI
Companies or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply as
to form in all Material respects with the provisions of applicable Law.
6.10 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 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 or result in the imposition of a
condition or restriction of the type referred to in the second sentence of such
Section 9.1(b). 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) other than with respect to anti-trust or competitive effects
issues.
6.11 Reports. Except as Previously Disclosed, since December 31, 1994,
CSBI and its Subsidiaries have timely filed all reports and statements, together
with any amendments required to be made with respect thereto (or have obtained
written waivers from the applicable Regulatory Authority waiving all
consequences from the failure to timely file), that they were required to file
with Regulatory Authorities and any applicable state securities or banking
authorities, except failure to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CSBI or its
Subsidiaries. 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 contain any untrue statement of 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.
6.12 Year 2000. To the Knowledge of CSBI, all computer software and
hardware necessary for the conduct of business by CSBI (the "CSBI Software") is
designed to be used before, on, and after January 1, 2000 and the CSBI Software
will operate during each such time period without error relating to the Year
2000, specifically including any error relating to, or the product of, any date
data representing or referring to any particular date. As used in this Section
6.12, "operate" further includes, but is not limited to, accepting input of
dates without ambiguity, outputting all dates without ambiguity, and performing
calculations, comparisons, extractions, sorting and any other processing or
taking actions or making decisions using dates or time periods without suffering
any abends, aborts, invalid or incorrect results or other interruptions, whether
before, on, or after January 1, 2000. CSBI has received all Year 2000
examinations and certifications as required by applicable Law and will, within
ten business days of this Agreement, make available for Haywood's review all (i)
such examinations and certifications, (ii) contingency plans in the event the
software fails to operate, and (iii) costs associated with or related to the
CSBI Software.
A-18
<PAGE>
6.13 Merger Consideration. CSBI has unissued shares of CSBI Common
Stock that are not reserved for any other purposes and are sufficient to provide
the aggregate number of shares of CSBI Common Stock to be issued in the Merger
and has available to it sources of funds sufficient to provide the aggregate Per
Share Cash Consideration. The shares of CSBI Common Stock to be issued in the
Merger have been duly authorized and when issued pursuant to the Merger will be
validly issued, fully paid and non-assessable with the same rights as each other
outstanding shares of CSBI Common Stock.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Haywood. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement unless
the prior written consent of CSBI shall have been obtained, and except as
otherwise contemplated herein, Haywood agrees: (i) to operate its business and
cause each Subsidiary to operate its business in the usual, regular and ordinary
course; (ii) to preserve intact its business organizations and Assets and
maintain its rights and franchises; (iii) to use its reasonable efforts to cause
its representations and warranties to be correct at all times; (iv) to use its
reasonable efforts to ensure, to the extent consistent with the Board of
Directors' exercise of its fiduciary duties, that the aggregate Merger-related
expenses it incurs are reasonable; (v) to take all steps necessary to terminate
the Haywood Benefit Plans (or obtain waivers of claims against Haywood from the
beneficiaries thereunder as approved by CSBI in its sole discretion) as of the
Effective Time; and (vi) to take no action which would (a) 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 (b)
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 Haywood. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, Haywood
covenants and agrees that it and each Subsidiary 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, Bylaws or other governing
instruments of Haywood or the Charter, Bylaws or other governing instruments of
each Subsidiary; or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $50,000 except in the ordinary
course of the business of Haywood and each Subsidiary consistent with past
practices (which shall include creation of deposit liabilities, purchases of
federal funds, advances from the Federal Home Loan Bank and entry into
repurchase agreements fully secured by U.S. government or agency securities), or
impose, or suffer the imposition, on any share of stock of each Subsidiary held
by Haywood of any Lien or permit any such Lien to exist (other than in
connection with deposits, repurchase agreements, bankers' acceptances,
"treasury, tax and loan" accounts established in the ordinary course of business
and Liens in effect as of the date hereof that are Previously Disclosed); or
(c) repurchase, redeem or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of Haywood, or declare or pay any dividend or make any other
distribution in respect of Haywood capital stock provided that Haywood may, in
its sole discretion (to the extent legally and contractually permitted to do
so), but shall not be obligated to, declare and pay quarterly cash dividends at
a rate not to exceed sixteen cents ($0.16) per share consistent with past
practices to its shareholders; or
(d) except for this Agreement or in connection with the exercise of
any option pursuant to the Stock Option Agreement, 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 Haywood Common Stock, or any stock
appreciation rights, or any option, warrant, conversion or other right to
acquire any such stock; or
A-19
<PAGE>
(e) adjust, split, combine or reclassify any capital stock of Haywood
or issue or authorize the issuance of any other securities in respect of or in
substitution for shares of either Haywood Common Stock or each Subsidiary's
common stock or buy, sell, lease, mortgage or otherwise dispose of or otherwise
encumber any Asset having a book value in excess of $10,000 or that exceed in
the aggregate the sum of $100,000 during the term of this Agreement (other than
in the ordinary course of business for reasonable and adequate consideration);
or
(f) acquire direct or indirect control over any real property, other
than in connection with (i) foreclosures in the ordinary course of business, or
(ii) acquisitions of control by Haywood in its fiduciary capacity; or
(g) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, and purchases of investment grade bonds issued by municipalities
located within the State of North Carolina with a maturity of five years or
less, purchase any bonds or securities or make any Material investment, either
by purchase of stock, bonds or securities, contributions to capital, Asset
transfers or purchase of any Assets, in any Person other than Bank, or otherwise
acquire direct or indirect control over any Person, other than in connection
with (i) foreclosures in the ordinary course of business, (ii) acquisitions of
control by a depository institution Subsidiary in its fiduciary capacity, or
(iii) the creation of new, wholly-owned Subsidiaries organized to conduct or
continue activities otherwise permitted by this Agreement; or
(h) grant any increase in compensation or benefits to the employees or
officers of Haywood or any Subsidiary (including such discretionary increases as
may be contemplated by existing employment agreements), except in accordance
with past practice Previously Disclosed or as required by Law, pay any bonus,
enter into or amend any severance agreements with officers of either Haywood or
any Subsidiary, grant any increase in fees or other increases in compensation or
other benefits to directors of either Haywood or any Subsidiary except in
accordance with past practice Previously Disclosed; or
(i) enter into or amend any employment Contract between Haywood or any
Subsidiary and any Person (unless such amendment is required by Law) that
Haywood or any Subsidiary, as the case may be, 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
(j) adopt any new employee benefit plan of Haywood or any Subsidiary
or make any Material change in or to any existing employee benefit plans of
Haywood or any Subsidiary 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
(k) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in regulatory accounting requirements or GAAP; or
(l) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of Haywood or any
Subsidiary for money damages in excess of $25,000 or Material restrictions upon
the operations of Haywood or Subsidiary; or
(m) except in the ordinary course of business, modify, amend or
terminate any Material Contract or waive, release, compromise or assign any
Material rights or claims; or
(n) extend credit to any borrower which requires the approval of
Haywood's Board of Directors.
7.3 Covenants of CSBI and HAC.
(a) From the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, unless the prior written consent of
Haywood shall have been obtained, CSBI and HAC, jointly and severally, covenant
and agree that each of them shall (i) continue to conduct their respective
businesses and the business of its Subsidiaries in a manner designed in their
respective reasonable judgment to enhance the long-term
A-20
<PAGE>
value of the CSBI Common Stock and the business prospects of the CSBI Companies,
(ii) to the extent consistent therewith, use all reasonable efforts to preserve
intact the CSBI Companies' core businesses and goodwill with their respective
employees and the communities they serve, (iii) use their respective reasonable
efforts to cause their respective representations and warranties to be correct
at all times, and (iv) take no action which would (a) adversely affect the
ability of any Party to obtain any Consents required for the transaction
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 (b)
adversely affect in any Material respect the ability of any Party to perform its
covenants and agreements under this Agreement.
(b) CSBI shall take all action necessary to approve, in accordance
with Rule 16b-3 of the 1934 Act, the acquisition of shares of the common stock
of CSBI and CSBI stock options by Haywood shareholders who will become Section
16 insiders of CSBI upon consummation of the Merger.
7.4 Adverse Changes in Condition. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) is reasonably likely to cause
or constitute a Material breach of any of its representations, warranties or
covenants contained herein and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not Material). As of their
respective dates, such reports filed with the SEC will comply in all Material
respects with the Securities Laws and will not contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Shareholder Approval. Haywood shall take, in accordance with
applicable Law and its Articles of Incorporation and Bylaws, all action
necessary to convene the Haywood Meeting to consider and vote upon the approval
of this Agreement and any other matters required to be approved by Haywood
shareholders for consummation of the Merger (including any adjournment or
postponement thereof), as promptly as practicable after the Registration
Statement is declared effective. The Board of Directors of Haywood shall
(subject to compliance with its fiduciary duties as advised by counsel and the
receipt from Trident of a letter dated not more than three days prior to the
date of the mailing of the Proxy Statement to the effect that the consideration
to be received in the merger by the holders of Haywood Common Stock is fair,
from a financial point of view, to such holders) recommend such approval, and
Haywood (subject to the direction of the Haywood Board acting in compliance with
its fiduciary duties as advised by counsel) shall take all reasonable lawful
action to solicit such approval by its shareholders. CSBI, as sole shareholder
of HAC, will vote its HAC Common Stock in favor of the Merger.
8.2 Registration Statement.
(a) Each of CSBI and Haywood agrees to cooperate in the preparation of
a Registration Statement to be filed by CSBI with the SEC in connection with the
issuance of CSBI Common Stock in the Merger (including the Proxy Statement and
all related documents). Provided Haywood has cooperated as required above, CSBI
agrees to file the Registration Statement with the SEC as promptly as
practicable, but in no event later than 90 days after the date of this
Agreement. Each of Haywood and CSBI agrees to use all reasonable efforts to
cause the Registration Statement to be declared effective under the 1933 Act as
promptly as reasonably practicable after
A-21
<PAGE>
filing thereof. CSBI also agrees to use all reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. Haywood agrees to
furnish CSBI all information concerning Haywood, Bank and their respective
officers, directors and shareholders as may be reasonably requested in
connection with the foregoing.
(b) Each of Haywood and CSBI agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the 1933 Act, contain any untrue statement of a
Material fact or omit to state any Material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to Haywood shareholders and at the time of the Haywood Meeting, contain any
untrue statement of a Material fact or omit to state any Material fact required
to be stated therein or necessary to make the statements therein not misleading
with respect to any Material fact, or which will omit to state any Material fact
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier statement in the Proxy
Statement or any amendment or supplement thereto. Each of Haywood and CSBI
further agrees that if it shall become aware prior to the Effective Time of any
information that would cause any of the statements in the Proxy Statement to be
false or misleading with respect to any Material fact, or to omit to state any
Material fact necessary to make the statements therein not false or misleading,
to promptly inform the other Party thereof and to take the necessary steps to
correct the Proxy Statement.
(c) In the case of CSBI, CSBI will advise Haywood, promptly after CSBI
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, or of the issuance of
any stop order or the suspension of the qualification of the CSBI Common Stock
for offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
(d) Nothing in this Section 8.2 or elsewhere in this Agreement shall
prohibit accurate disclosure by Haywood of information that is required to be
disclosed in the Registration Statement of the Proxy Statement or in any other
document required to be filed with the SEC (including, without limitation, a
Solicitation/Recommendation Statement on Schedule 14D-9) or otherwise required
to be publicly disclosed by applicable Law or the regulations and rules of the
AMEX.
8.3 Applications. CSBI shall promptly prepare and file, Haywood and each
Subsidiary 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 Haywood to review (and approve with respect to information relating
to Haywood) such applications prior to filing same.
8.4 Filings with Regulatory Authorities. Upon the terms and subject to
the conditions of this Agreement, HAC shall execute and file the Articles of
Merger with the Secretary of State of the State of North Carolina and any other
documents required by any Regulatory Authority in connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use 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
provided CSBI agrees to pay all direct expenses associated with any such
resolicitation), 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; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
A-22
<PAGE>
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party will keep the other Party
advised of all Material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transaction contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
any other Party concerning its and its Subsidiaries' businesses, operations and
financial condition except in furtherance of the transactions contemplated by
this Agreement. In the event that a Party is required by applicable Law or
valid court process to disclose any such confidential information, then such
Party shall provide the other Party with prompt written notice of any such
requirement so that the other Party may seek a protective order or other
appropriate remedy and/or waive compliance with this Section 8.6. If in the
absence of a protective order or other remedy or the receipt of a waiver by the
other Party, a Party is nonetheless, in the written opinion of counsel, legally
compelled to disclose any such confidential information to any tribunal or else
stand liable for contempt or suffer other censure or penalty, a Party may,
without liability hereunder, disclose to such tribunal only that portion of the
confidential information which such counsel advises such Party is legally
required to be disclosed; provided that such disclosing Party use its best
efforts to preserve the confidentiality of such confidential information,
including without limitation, by cooperating with the other Party to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded such confidential information by such tribunal. 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.
(d) Neither Party nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client or similar privilege with respect to such information or
contravene any Law, rule, regulation, Order, judgment, decree, fiduciary duty or
agreement entered into prior to the date of this Agreement. The Parties will
use their reasonable efforts to make appropriate substitute disclosure
arrangements, to the extent practicable, in circumstances in which the
restrictions of the preceding sentence apply.
8.7 Press Releases. Prior to the Effective Time, Haywood 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
--------- -------
8.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, neither Haywood nor any Affiliate thereof nor
any investment banker, attorney, accountant or other representative
(collectively, the "Representatives") retained by Haywood or Bank shall directly
or indirectly solicit any Acquisition Proposal by any Person. Except to the
extent necessary to comply with the fiduciary duties of Haywood Board of
Directors as determined by the Haywood Board of Directors after consulting with
and considering the advice of counsel, neither Haywood nor any Affiliate or
Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but Haywood may communicate
information about such an Acquisition Proposal to its shareholders if and to the
extent that it is required to do so in order to comply with its legal
obligations as advised by counsel; provided that Haywood shall promptly advise
--------
CSBI verbally and in writing following the receipt of any
A-23
<PAGE>
Acquisition Proposal and the Material details thereof. Haywood 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) subject to its fiduciary duties, direct and use
its reasonable efforts to cause all of its Representatives not to engage in any
of the foregoing.
8.9 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 treatment as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Haywood and each Subsidiary shall take all
reasonable steps to exempt the transactions contemplated by this Agreement from,
or if necessary challenge the validity or applicability of, any applicable state
takeover Law.
8.11 Articles of Incorporation Provisions. Haywood and each Subsidiary
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, Bylaws or other governing
instruments of Haywood or any Subsidiary (other than voting, dissenters' rights
of appraisal or other similar rights) or restrict or impair the ability of CSBI
or any of its Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of Haywood or any Subsidiary that may be
acquired or controlled by it.
8.12 Agreement of Affiliates. Haywood has Previously Disclosed all Persons
whom it reasonably believes is an "affiliate" of Haywood for purposes of Rule
145 under the 1933 Act. Haywood 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 C,
providing that such Person will not sell, pledge, transfer or otherwise dispose
of the shares of Haywood Common Stock held by such Person except as contemplated
by such agreement or by this Agreement and will not sell, pledge, transfer or
otherwise dispose of the shares of CSBI Common Stock to be received by such
Person upon consummation of the Merger except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder. 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.
8.13 Employee Benefits and Contract. Following the Effective Time, CSBI
shall provide generally to officers and employees of Haywood, who at or after
the Effective Time become employees of a CSBI Company, employee benefits under
employee benefit plans including severance plans set forth herein 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. CSBI shall waive any pre-existing condition exclusion under any
employee health plan for which any employees and/or officers and dependents
covered by Haywood Benefit Plans as of Closing shall become eligible by virtue
of the preceding sentence, to the extent (i) such pre-existing condition was
covered under the Haywood Benefit Plans and (ii) the individual affected by the
pre-existing condition was covered by the Haywood Entity's corresponding plan on
the date which immediately precedes the Effective Time. For purposes of
participation, vesting and benefit accrual under all qualified benefit plans,
the service of the employees of Haywood or Bank prior to the Effective Time
shall be treated as service with the CSBI Companies participating in all
qualified benefit plans. Bank will enter into an employment contract acceptable
to CSBI with Larry R. Ammons as of the date of Closing to the extent he is
available and agrees to such employment.
8.14 Exchange Listing. CSBI shall use its reasonable efforts to list,
prior to the Effective Time, on the NASDAQ, subject to official notice of
issuance, the shares of CSBI Common Stock to be issued to the holders of Haywood
Common Stock pursuant to the Merger.
8.15 D&O Coverage. At the Effective Time, CSBI will provide directors and
officers insurance coverage for Haywood's directors and officers either, at
CSBI's election, (i) by purchasing continuation coverage under Haywood's current
policy for directors and officers for a period not less than three years after
the Effective Time, or (ii) obtain coverage under CSBI's current directors' and
officers' policy to provide coverage for Haywood's directors and officers on a
prior acts basis for a period not less than three years prior to the Effective
Time.
A-24
<PAGE>
8.16 Indemnification. CSBI shall cause Haywood to continue to, indemnify,
defend and hold harmless the present and former directors, officers, employees
and agents of the Haywood Companies (each, an "Indemnified Party") against all
Liabilities arising out of actions or omissions arising out of the Indemnified
Party's service or services as directors, officers, employees or agents of
Haywood or, at Haywood's request, of another corporation, partnership, joint
venture, trust or other enterprise occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement) to the extent
currently provided by Haywood's Articles of Incorporation and bylaws as in
effect as of the date hereof, including any provisions relating to advances of
expenses incurred in the defense of any Litigation.
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 to 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 Haywood 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 and by
the rules of the AMEX.
(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 or deposits) which in the
reasonable judgment of the Board of Directors of CSBI 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. No Consent obtained which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
which in the reasonable judgment of the Board of Directors of CSBI 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.
(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.
(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) Tax Matters. Haywood 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"), substantially 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 Haywood Common Stock solely for CSBI Common Stock will not give rise
to gain or loss to the shareholders of Haywood with respect to such exchange
(except to the extent of any cash received), and (iii) neither of Haywood nor
CSBI will recognize gain or loss as a consequence of the Merger except for
income and deferred gain recognized pursuant to Treasury
A-25
<PAGE>
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 Haywood, CSBI and HAC reasonably satisfactory in
form and substance to such counsel.
(g) Employment Agreement. Haywood and Bank shall have offered Larry
--------------------
R. Ammons the employment agreement in substantially the form set forth in
Exhibit D to this Agreement.
9.2 Conditions to Obligations of CSBI. The obligations of CSBI to perform
this Agreement and to 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 Haywood 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 (other than the
representations and warranties set forth in Section 5.3 of this Agreement, which
shall be true and correct in all Material respects) the inaccuracies of which
relate to matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Haywood.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Haywood 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. Haywood 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 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 the Haywood 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 a written opinion
------------------
from Housley Kantarian & Bronstein, P.C., counsel to Haywood, dated as of the
Closing, in form reasonably satisfactory to CSBI, as to the matters set forth in
Exhibit F hereto.
(e) Accountant's Letters. CSBI shall have received from KPMG 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 Haywood and Bank, in form and substance reasonably
satisfactory to CSBI, which letters shall be based upon customary specified
procedures undertaken by such firm.
(f) Affiliate Agreements. CSBI shall have received from each
--------------------
affiliate of Haywood the affiliate agreement referred to in Section 8.12 hereof,
in substantially the form attached hereto as Exhibit C.
(g) Support Agreements. Each of the executive officers and directors
------------------
of Haywood listed in Exhibit E shall have executed and delivered to CSBI a
Support Agreement in substantially the form attached hereto as Exhibit B.
9.3 Conditions to Obligations of Haywood. The obligations of Haywood 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 Haywood 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
A-26
<PAGE>
as of the Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date), except (i) as
expressly contemplated by this Agreement, or (ii) for representations and
warranties (other than the representations and warranties set forth in Section
6.3 of this Agreement, which shall be true and correct in all Material respects)
the inaccuracies of which relate to matters that are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on 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 Haywood (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's Board of Directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as Haywood and its counsel shall request.
(d) Opinion of Counsel. Haywood shall have received an opinion of
------------------
Troutman Sanders LLP, counsel to CSBI, dated as of the Effective Time, in form
reasonably satisfactory to Haywood, as to matters set forth in Exhibit G hereto.
(e) Share Listing. The shares of CSBI Common Stock issuable pursuant
-------------
to the Merger shall have been approved for listing on NASDAQ.
(f) Fairness Opinion. Haywood shall have received from Trident a
----------------
letter dated not more than three days prior to the mailing of the Proxy
Statement to the effect that, in the opinion of such firm, the consideration to
be received by Haywood Shareholders in connection with the Merger is fair from a
financial point of view to such shareholders.
(g) Exchange Agent Certificate. The Exchange Agent shall have
--------------------------
delivered to Haywood a certificate, dated as of the Effective Time, to the
effect that the Exchange Agent has received from CSBI certificates for the
required number of whole shares of CSBI Common Stock to be issued in the Merger
and cash to cover fractional shares and the Cash Amount.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of
Haywood, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) By mutual consent of the respective Boards of Directors of CSBI
and Haywood; 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 Parties of any representation or warranty contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach and which breach
would provide the non-breaching party the ability to refuse to consummate the
Merger under the standard set forth in Section 9.2(a) of this Agreement in the
case of CSBI and Section 9.3(a) of this Agreement in the case of Haywood; 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
A-27
<PAGE>
time limit for appeal, or (ii) the shareholders of Haywood fail to vote their
approval of this Agreement and the transaction contemplated hereby at the
Haywood 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 March 31, 2000, 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 Haywood shall
have failed to reaffirm, following a written request by CSBI for such
reaffirmation after Haywood 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 8.6(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; provided that
such Liability shall be determined solely in accordance with the effect of
Section 11.2(b) of this Agreement.
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 8.12 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:
"AMEX" shall mean the American Stock Exchange.
"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, (ii) any officer, director, partner,
employer or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"Allowance" shall mean the allowance for possible loan or credit losses for
the periods set forth in Section 5.9 of this Agreement.
A-28
<PAGE>
"Articles of Merger" shall mean the Articles of Merger to be executed by
CSBI, HAC and Haywood and filed with the Secretary of State of the State of
North Carolina relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and records
of such Person, and whether or not owned in the name of such Person or any
Affiliate of such Person and wherever located.
"Bank" shall have the meaning set forth in the Preamble of this Agreement.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Cash Amount" shall have the meaning set forth in Section 3.3 of this
Agreement.
"Cash Election Shares" shall have the meaning set forth in Section 3.2 of
this Agreement.
"Closing" shall mean the closing of the transaction contemplated hereby, as
described in Section 1.2 of this Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver or similar affirmation by any Person pursuant to any Contract,
Law, Order or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character or other document to which any Person is a party or that is binding on
any Person or its capital stock, Assets or business.
"CSBI Common Stock" shall mean the One Dollar ($1.00) par value per share
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 June 30,
1999, and as of December 31, 1998, 1997, 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 June 30, 1999,
and for each of the four years ended December 31, 1998, 1997, 1996 and 1995, 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 December 31, 1998.
"CSBI Option Plans" shall have the meaning set forth in Section 6.3 of this
Agreement.
"CSBI Subsidiaries" shall mean the subsidiaries of CSBI including HAC.
"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 control 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 North Carolina.
"Election Deadline" shall have the meaning set forth in Section 3.2 of this
Agreement.
A-29
<PAGE>
"Election Form" shall have the meaning set forth in Section 3.2 of this
Agreement.
"Environmental Laws" shall mean all federal, state, municipal and local
laws, statutes, orders, regulations, decrees, resolutions, proclamations,
permits, licenses, approvals, authorizations, consents, judgments, judicial
decisions and other governmental requirements, limitations and standards
relating to the environment, health and safety issues, including, without
limitation, the manufacture, generation, use, processing, treatment, recycling,
storage, handling, "Release" (as hereinafter defined), investigation, removal,
remediation and cleanup of or other corrective action for "Hazardous Materials"
(as hereinafter defined), exposure to Hazardous Materials and personal injury,
natural resource damage, property damage and interference with the use of
property caused by or resulting from Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning provided in Section 5.14 of this
Agreement.
"ERISA Plan" shall have the meaning provided in Section 5.14 of this
Agreement.
"Exchange Agent" shall have the meaning set forth in Section 3.2 of this
Agreement.
"Exchange Ratio" shall mean the ratio formed by the number of shares of
CSBI Common Stock Haywood shareholders will receive for each share of Haywood
Common Stock as set forth herein to one.
"Exhibits" A through G, 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.
"FICG" shall mean the Financial Institutions Code of Georgia.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Haywood Benefit Plans" shall have the meaning set forth in Section 5.14 of
this Agreement.
"Haywood Common Stock" shall mean the One Dollar ($1.00) par value per
share common stock of Haywood.
"Haywood Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Haywood as of June 30,
1999, and as of December 31, 1998, 1997, 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 and six months ended June 30,
1999, and for each of the four fiscal years ended December 31, 1998, 1997, 1996
and 1995, and (ii) the consolidated balance sheets of Haywood (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) with respect to periods ended subsequent to June 30, 1999, with related
prior year comparable financial statements.
"Haywood Meeting" shall mean the special meeting of the shareholders of
Haywood or any adjournment or postponement thereof to vote on the matters set
forth in the Proxy Statement.
"Haywood Preferred Stock" shall mean the One Dollar ($1.00) par value per
share serial preferred stock of Haywood.
A-30
<PAGE>
"Hazardous Materials" shall mean all hazardous, toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic and
volatile substances, materials, compounds, chemicals and waste, and all other
industrial waste, sanitary waste, pollutants and contaminants, and all
constituents thereof, including, without limitation, petroleum hydrocarbons,
asbestos-containing materials, lead-based paints and all substances, materials,
wastes, chemicals, compounds, contaminants and pollutants regulated or addressed
by Environmental Laws.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" as used with respect to a Person shall mean the knowledge,
after all appropriate due inquiry, of the Chairman, President, Chief Executive
Officer, Chief Financial Officer, Chief Accounting Officer, Chief Credit
Officer, General Counsel, or any Senior or Executive Vice President or Manager
of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule or statute and all Environmental Laws applicable to
a Person or its Assets, Liabilities or business, including, without limitation,
those promulgated, interpreted or enforced by any of the Regulatory Authorities.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than endorsements
of notes, bills, checks and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge or claim
of any nature whatsoever of, on or with respect to any property or property
interest, other than (i) Liens for current property Taxes not yet due and
payable, (ii) for depository institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the ordinary course of the banking
business, (iii) Liens which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on a Party; and (iv) Liens which
have been Previously Disclosed.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, request for information, 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, leased or operated by the
Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security or other interest (including an interest in a
fiduciary capacity), and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"Mailing Date" shall have the meaning set forth in Section 3.2 of this
Agreement.
"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, condition
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 Effect" shall not be deemed to
include the impact of (x) changes in banking and similar Laws of general
A-31
<PAGE>
applicability or interpretations thereof by courts or governmental authorities,
(y) changes in GAAP or regulatory accounting principles generally applicable to
banks and their holding companies, and (z) actions and omissions of a Party (or
any of its Subsidiaries) taken with the prior written consent of the other
Parties to the Agreement and the direct effects of compliance with this
Agreement on the operating performance of the Party, including expenses incurred
by such Party in consummating the transactions contemplated by this Agreement.
"Merger" shall mean the merger of Haywood with and into CSBI referred to in
the Preamble of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
"NCBCA" shall mean the North Carolina Business Corporation Act.
"No Election Shares" shall have the meaning set forth in Section 3.2 of
this Agreement.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling or writ of
any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including, but not limited to, 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 Haywood, HAC or CSBI, and "Parties" shall mean
Haywood, HAC and CSBI.
"Per Share Cash Consideration" shall have the same meaning set forth in
Section 3.2 of this Agreement.
"Per Share Stock Consideration" shall have the same meaning set forth in
Section 3.1(b) of this Agreement.
"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 specified in Section 10.1(h) 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 Haywood 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 Haywood and other proxy
solicitation materials of Haywood consisting of a part thereof.
A-32
<PAGE>
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, 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 United States
Department of Justice, the Board of the Governors of the Federal Reserve System,
the Office of Thrift Supervision, the FDIC, the NASD and the SEC, all state
regulatory agencies having jurisdiction over the Parties and their respective
Subsidiaries.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, abandonment or
disposing into or migration within the environment.
"Representatives" shall have the meaning set forth in Section 8.8 of this
Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, reports,
registration statements, schedules and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Stock Designees" shall have the meaning set forth in Section 3.2 of this
Agreement.
"Stock Option Agreement" shall have the meaning set forth in the Preamble
of this Agreement.
"Subsidiaries" shall mean all those corporations, banks, association, or
other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 5% or more of the outstanding equity securities
is owned directly or indirectly by its parent; provided, however, there shall
-------- -------
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.
"Surviving Corporation" shall mean Haywood as the surviving corporation
resulting from the Merger.
"Tax" or "Taxes" shall mean all federal, state, county, local and foreign
taxes, charges, fees, levies, imposts, duties or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, local, or foreign government or subdivision or
agency thereof, including interest and penalties thereon or additions with
respect thereto.
"Taxable Period" shall mean any period prescribed by any governmental
authority, including the United States or any state, local or foreign government
or subdivision or agency thereof for which a Tax Return required to be filed or
Tax is required to be paid.
"Tax Return" shall mean any report, return or other information required to
be supplied to a taxing authority in connection with Taxes, including any return
of an affiliated or combined or unitary group that includes a Party or its
Subsidiaries.
"Total Merger Consideration" shall have the meaning set forth in Section
3.3 of this Agreement.
A-33
<PAGE>
"Trident" shall mean Trident Securities, a division of McDonald Investments
Inc., Haywood's investment banker.
"Valuation Period" shall have the meaning set forth in Section 3.2 of this
Agreement.
"Valuation Period Market Value" shall have the meaning set forth in Section
3.2 of this Agreement.
11.2 Expenses.
(a) General. Except as otherwise provided in this Section 11.2
-------
of this Agreement, each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees,
printing fees and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel except that CSBI shall bear and pay
the filing fees payable in connection with the Registration Statement and the
Proxy Statement and one-half of the printing costs incurred in connection with
the printing of the Registration Statement and the Proxy Statement.
(b) Breach by either Party. In addition to the foregoing, if
----------------------
prior to the Effective Time, this Agreement is terminated by either Party as a
result of the other Party's breach of such Party's representations, warranties
or agreements set forth herein of this Agreement, such Party shall pay to the
non-breaching Party as its sole and exclusive remedy resulting from such
termination, an amount in cash equal to the sum of:
(i) the reasonable direct costs and expenses incurred by or
on behalf of the non-breaching Party in connection with the transactions
contemplated by this Agreement, plus
----
(ii) the sum of $100,000,
which sum represents compensation for the non-breaching Party's loss as the
result of the transactions contemplated by this Agreement not being consummated.
11.3 Brokers and Finders. Haywood represents and warrants that neither
it nor any of its officers, directors, employees or Affiliates has employed any
broker or finder or incurred any Liability for any financial advisory fees,
investment bankers' fees, brokerage fees, commissions or finders' fees in
connection with this Agreement or the transactions contemplated hereby except
Haywood has engaged Trident to render financial advisory services. 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 Haywood, Haywood
shall indemnify and hold CSBI harmless of and from any Liability in respect of
any such claim and reduce the Total Merger Consideration by an amount equal to
such claim as determined by CSBI.
11.4 Entire Agreement. Except as otherwise expressly provided herein
or as set forth in that certain letter agreement between the parties of even
date herewith, 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; whether before or after
shareholder approval of the Merger has been obtained provided, however, that
-------- -------
after any such approval by the holders of Haywood Common Stock, there shall be
made no amendment decreasing the consideration to be received by Haywood
shareholders without the further approval of such shareholders.
A-34
<PAGE>
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 Haywood, to waive or extend the time for the compliance or
fulfillment by Haywood 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, Haywood, 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 Haywood 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 Haywood.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
CSBI and HAC: Century South Banks, Inc.
60 Main Street West - Third Floor
Dahlonega, Georgia 30533
706/864-7966 - FAX
Attn: James A. Faulkner, Vice Chairman and
Chief Executive Officer
Copy to Counsel: Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308-2218
404/962-6658 - FAX
Attn: Thomas O. Powell, Esquire
Haywood and Bank: Haywood Bancshares, Inc.
370 North Main Street
Waynesville, North Carolina 28786
Attn: Larry R. Ammons, President and Chief
Executive Officer
A-35
<PAGE>
Copy to Counsel: Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
202/822-0140 - FAX
Attn: James C. Stewart, Esquire
11.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 Enforcement of Agreement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at Law or in equity.
11.13 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
11.14 Interpretation of Agreement. The Parties hereto acknowledge and
agree that each Party has participated in the drafting of this Agreement and
that this document has been reviewed, negotiated and accepted by all parties and
their respective counsel, 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.
A-36
<PAGE>
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.
"HAYWOOD"
ATTEST: HAYWOOD BANCSHARES, INC.
/s/ Paul W. Trantham /s/ Larry R. Ammons
- -------------------------------- ----------------------------------------
Paul W. Trantham, Secretary Larry R. Ammons, President and Chief
Executive Officer
(CORPORATE SEAL)
"CSBI"
ATTEST: CENTURY SOUTH BANKS, INC.
/s/ Susan J. Anderson /s/ James A. Faulkner
- -------------------------------- ----------------------------------------
Susan J. Anderson, Secretary James A. Faulkner, Vice-Chairman and
Chief Executive Officer
(CORPORATE SEAL)
"HAC"
ATTEST: HBI ACQUISITION CORP.
/s/ Susan J. Anderson /s/ James A. Faulkner
- -------------------------------- ----------------------------------------
Susan J. Anderson, Secretary James A. Faulkner, Vice-Chairman and
Chief Executive Officer
(CORPORATE SEAL)
A-37
<PAGE>
APPENDIX B
----------
[FORM OF FAIRNESS OPINION]
Board of Directors
Haywood Bancshares, Inc.
505 North Main Street
Waynesville, North Carolina 28786
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, of the consideration to be paid by Century South Banks, Inc.
("CSBI") to the holders of the issued and outstanding shares of common stock,
$1.00 par value (the "Haywood Common Stock") of Haywood Bancshares, Inc.
("Haywood") pursuant to the Agreement and Plan of Merger dated as of August 5,
1999 (the "Agreement") by and among Haywood and CSBI. Unless otherwise noted,
all terms used herein will have the same meaning as defined in the Agreement.
Under the terms of the Agreement, Haywood will merge with and into
CSBI and each share of Haywood Common Stock shall be converted into the right to
receive 0.8847 shares (the "Exchange Ratio") of CSBI Common Stock (the "Merger
Consideration") subject to certain adjustments, the election rights and the
allocation provisions as described below and in the Agreement:
(i) if the Valuation Period Market Value is less than $24.00 per share,
the Exchange Ratio shall be increased by an amount equal to the
product of (A) the Exchange Ratio multiplied by (B) the quotient of
the difference between $24.00 less the Valuation Period Market Value,
divided by the Valuation Period Market Value or;
(ii) if the Valuation Period Market Value is greater than $27.00 per share,
the Exchange Ratio shall be decreased by an amount equal to the
product of (A) the Exchange Ratio multiplied by (B) the quotient of
the difference between the Valuation Period Market Value less $27.00,
divided by the Valuation Period Market Value.
(iii) Any shareholder of less than 100 shares of Haywood Common Stock shall
receive cash in lieu of CSBI Common Stock. The amount of cash received
shall be equal to the product of the Exchange Ratio and the Valuation
Period Market Value for each share of Haywood Common Stock held.
(iv) Any shareholder of 100 or greater shares of Haywood Common Stock may
elect to receive cash with respect to all or a portion of such
holder's Haywood Common Stock. The amount of cash received shall be
equal to the product of the Exchange Ratio and the Valuation Period
Market Value for each share of Haywood Common Stock held. The amount
of CSBI Common Stock paid to holders of 100 shares or greater of
Haywood Common Stock shall be allocated on a pro-rata basis so that
50% of the aggregate consideration paid in exchange for shares of
Haywood Common Stock in the Merger (the "Total Merger Consideration")
shall be paid in CSBI Common Stock and 50% of the Total Merger
Consideration shall be paid in cash (the "Cash Amount").
Trident Securities ("Trident"), a division of McDonald Investments,
Inc., as part of its investment banking business, is customarily engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
In connection with rendering our opinion, we have reviewed and
analyzed, among other things, the following: (i) the Agreement, including the
exhibits and schedules thereto; (ii) certain publicly available information
concerning Haywood, including the Annual Reports on Form 10-K of Haywood for
each of the years in the three year period ended December 31, 1998 and the
Quarterly Report on Form 10-Q of Haywood for the quarter ended March 31, 1999;
(iii) certain publicly available information concerning CSBI, including the
Annual Reports on
B-1
<PAGE>
Board of Directors
Page 2
Form 10-K of CSBI for each of the years in the three year period ended December
31, 1999 and the Quarterly Report on Form 10-Q of CSBI for the quarter ended
March 31, 1999; (iv) certain other internal information, primarily financial in
nature, concerning the business and operations of Haywood and CSBI furnished to
us by their respective managements for purposes of our analysis; (v) information
with respect to the trading market for Haywood Common Stock and CSBI Common
Stock; (vi) certain publicly available information with respect to other
companies that we believe to be comparable to Haywood and CSBI and the trading
markets for such other companies' securities; and (vii) certain publicly
available information concerning the nature and terms of certain other
transactions that we consider relevant to our inquiry. We have also met with
certain officers and employees of Haywood and CSBI to discuss the business and
prospects of Haywood and CSBI, as well as other matters we believe relevant to
our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available, and we have assumed and relied
upon the representations and warranties of Haywood and CSBI contained in the
Agreement. We have not been engaged to, and have not independently attempted to,
verify any of such information. We have not conducted a physical inspection or
appraisal of any of the assets, properties or facilities of Haywood nor have we
been furnished with any such evaluation or appraisal. We have also assumed that
the conditions to the Merger as set forth in the Agreement would be satisfied
and that he Merger would be consummated on a timely basis in the manner
contemplated by the Agreement.
It should be noted that this opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date hereof and does not address any matters subsequent to such date.
In addition, our opinion is, in any event, limited to the fairness, as of the
date hereof, from a financial point of view, of the consideration to be received
and does not address Haywood's underlying business decision to effect the Merger
or any other terms of the Merger.
We have acted as financial advisor to Haywood in connection with the Merger
and will receive from Haywood a fee for our services, a significant portion of
which is contingent upon the consummation of the Merger, as well as Haywood's
agreement to indemnify us under certain circumstances.
In the ordinary course of business, we may actively trade securities of
both Haywood and CSBI for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this opinion was prepared solely for the confidential
use of the Board of Directors and senior management of Haywood and may not be
disclosed, summarized, excerpted from or otherwise publicly referred to without
our prior written consent. Our opinion does not constitute a recommendation to
any stockholder of Haywood as to how such stockholder should vote at the
stockholders' meeting held in connection with the Merger.
Based upon and subject to the foregoing and such other matters, as we
consider relevant, it is our opinion that as of the date hereof, the Merger
Consideration is fair, from a financial point of view, to the stockholders of
Haywood.
Very truly yours,
TRIDENT SECURITIES,
a division of McDonald Investments, Inc.
B-2
<PAGE>
APPENDIX C
- --------------------------------------------------------------------------------
STOCK OPTION AGREEMENT
Dated as of August 5, 1999
Between
Haywood Bancshares, Inc., as Issuer,
and Century South Banks, Inc., as Grantee
- --------------------------------------------------------------------------------
C-1
<PAGE>
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of August 5, 1999, between Haywood
Bancshares, Inc., a North Carolina corporation ("Issuer") and Century South
Banks, Inc., a Georgia corporation ("Grantee"),
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase, subject to the terms hereof, up to 249,946 fully paid and
non-assessable shares of Issuer's Common Stock, $1.00 par value ("Common
Stock"), at a price of $16.30 per share (the "Option Price"); provided, however,
that in no event shall the number of shares of Common Stock for which this
Option is exercisable exceed 19.99% of the Issuer's issued and outstanding
shares of Common Stock without giving effect to any shares subject to or issued
pursuant to the Option. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of the Agreement, the number of
shares of Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance, such number equals 19.99% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
C-2
<PAGE>
2. Provided that (i) Grantee shall not have materially breached its
representations or warranties and cure rights thereto expired as contained in
this Agreement or in the Merger Agreement, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction shall then be in effect, (a) The
Holder (as hereinafter defined) may exercise the Option, in whole or part, and
from time to time, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
90 days following such Subsequent Triggering Event. Each of the following shall
be an "Exercise Termination Event": (i) the Effective Time (as defined in the
Merger Agreement) of the Merger; (ii) termination of the Merger Agreement in
accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event except a termination by Grantee
pursuant to Section 10.1(b) of the Merger Agreement; or (iii) the passage of 12
months after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 10.1(b) of the Merger Agreement (provided that if an Initial
Triggering Event continues or occurs beyond such termination and prior to the
passage of such 12-month period, the Exercise Termination Event shall be 12
months from the expiration of the Last Triggering Event but in no event more
than 18 months after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall
have recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the assets or
deposits of Issuer or any Significant Subsidiary of Issuer, (y) a purchase
or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any such transaction
is not entered into in violation of the terms of the Merger Agreement;
C-3
<PAGE>
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly withdrawn or modified, or publicly announced its intention to
withdraw or modify, in any manner adverse to Grantee, its recommendation
that the stockholders of Issuer approve the transactions contemplated by
the Merger Agreement in anticipation of engaging in an Acquisition
Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder) other than any person who
has the beneficial ownership of 10% or more of the outstanding common stock
on the date hereof;
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board or other federal or state regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 25% or
more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 25%.
C-4
<PAGE>
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 45 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933,
as amended. A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy
C-5
<PAGE>
of a letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend is
not required for purposes of the 1933 Act; (ii) the reference to the provisions
of this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer: (ii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. (S) 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; (iii) that if both an Initial Triggering
Event and a Subsequent Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event, the Issuer shall use its best
efforts to obtain additional authorized but unissued shares which are free of
preemptive rights so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock and
(iv) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may
C-6
<PAGE>
be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in, or distributions
in respect of, the Common Stock by reason of stock dividends, splitups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares,
distributions on or in respect of the Common Stock that would be prohibited
under the terms of the Merger Agreement, or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and the Option Price
shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. Notwithstanding the foregoing, if, at
the time of any request by the Holder for registration of Option Shares as
provided above, Issuer is in registration with respect to an underwritten public
offering of shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if none, the sole underwriter
or underwriters, of such offering the inclusion of the Holder's Option or Option
Shares would interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced; provided further,
however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical and no reduction
shall thereafter occur. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any
C-7
<PAGE>
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing surviving person,
and (iii) the transferee of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the price per share
of Common Stock at which a tender offer or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement With Issuer, (iii) the highest closing price
for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of
this Option or the owner of the Option Shares (the "Owner") gives notice of
the required repurchase of Option Shares, as the case may be, or (iv) in
the event of a sale of all or a substantial portion of Issuer's assets, the
sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined
C-8
<PAGE>
by a nationally recognized investment banking firm selected by the Holder
or the Owner, as the case may be, and reasonably acceptable to the Issuer,
divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Assigned Value, the value of
consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as
the case may be, and reasonably acceptable to the Issuer.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event lower than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.99% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than
19.99% of the shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to Holder equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute Option after giving effect
to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
C-9
<PAGE>
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 7 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
8. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously reimbursed), and
at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's reasonable Out-of-
Pocket Expenses (to the extent not previously reimbursed). The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Stock within the six-month period immediately preceding the date the Substitute
Option Holder gives notice of the required repurchase of the Substitute Option
or the Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 8 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 8. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 8 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the
C-10
<PAGE>
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 8 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as practicable
in order to accomplish such repurchase), the Substitute Option Holder or
Substitute Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering, and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
9. The 60-day period for exercise of certain rights under Sections 2, 6,
and 12 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Subject to Section 3, Issuer has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all times from the
date hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly issued fully
paid, nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
C-11
<PAGE>
11. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 60
days following such Subsequent Triggering Event (or such later period as
provided in Section 9); provided, however, that until the date 15 days following
the date on which the Federal Reserve Board approves an application by Grantee
under the BHCA to acquire the shares of Common Stock subject to the Option,
Grantee may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares of Issuer,
(iii) an assignment to a single party (e.g., a broker or investment banker) for
the purpose of conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board or any
other regulatory authority having appropriate jurisdiction.
13. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation applying to the Federal Reserve
Board under the BHCA or any other governmental authority for approval to acquire
the shares issuable hereunder, but Grantee shall not be obligated to apply to
state banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do so.
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid void or unenforceable, the remainder of the
terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not
C-12
<PAGE>
permitted to acquire the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is
the express intention of Issuer to allow the Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
21. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
C-13
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
CENTURY SOUTH BANKS, INC.
ATTEST:
/s/ Susan F. Anderson /s/ James A. Faulkner
- ------------------------------------ ------------------------------------
Susan F. Anderson Secretary James A. Faulkner, Vice-Chairman and
Chief Executive Officer
(CORPORATE SEAL)
HAYWOOD BANCSHARES, INC.
ATTEST:
/s/ Paul W. Trantham /s/ Larry R. Ammons
- ------------------------------------ ------------------------------------
Paul W. Trantham, Secretary Larry R. Ammons, President and Chief
Executive Officer
(CORPORATE SEAL)
C-14
<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 may indemnify any of its directors
or 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. No indemnification shall
be made in respect of any claim, issue, or matters as to which such person shall
have been adjudged liable to the Registrant unless and only to the extent that
the Superior Court or court in which such action or suit was brought shall
determine upon application that, despite the adjudication of the liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Superior Court or
such other court shall deem proper. 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'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.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits.
Exhibit
Number Description of Exhibits
- --------------------------------------------------------------------------------
2(a) Agreement and Plan of Merger, dated as of August 5, 1999, and amended
as of October 15, 1999, by and among Haywood Bancshares, Inc., Century
South Banks, Inc. and HBI Acquisition Corp. (included as 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
Registration Statement No. 333-72579 on Form S-4 of Century South
Banks, Inc., previously filed with the Commission on March 8, 1999 and
incorporated by reference herein)
3(b) Bylaws, as amended (included as Exhibit 3(b) to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 of Century South
Banks, Inc., previously filed with the Commission on March 31, 1997 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* Securities Opinion of Troutman Sanders LLP
8* Tax 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 LLP as to Century South Banks, Inc.
23(c) Consent of KPMG LLP as to Haywood Bancshares, Inc.
23(d) Consent of Trident Securities, a division of McDonald Investments Inc.
24 Power of Attorney (included in the signature page to this Registration
Statement)
99.1 Form of Proxy Card
99.2* Form of Election Form/Letter of Transmittal
99.3 Stock Option Agreement between Haywood Bancshares, Inc. and Century
South Banks, Inc., dated as of August 5, 1999 (included as Appendix C
to the proxy statement/prospectus and incorporated by reference herein)
________________________________
*To be filed by amendment.
(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.
II-2
<PAGE>
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, as amended (the "Securities Act");
(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;
and
(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.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) 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 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 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 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 this 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.
(f) (1) The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration
II-3
<PAGE>
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, 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 bide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dahlonega,
State of Georgia, on October 21, 1999.
CENTURY SOUTH BANKS, INC.
By:/s/ James A. Faulkner
----------------------------------
James A. Faulkner, Vice-Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints jointly and severally, James A.
Faulkner and Joseph W. Evans, and each of them acting individually, 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, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William H. Anderson, II Chairman of the Board of Directors and October 21, 1999
- ---------------------------------------------- Director
William H. Anderson, II
______________________________________________ Vice-Chairman of the Board of Directors October __, 1999
J. Russell Ivie and Director
/s/ James A. Faulkner Vice-Chairman of the Board of Directors, October 21, 1999
- ---------------------------------------------- Director, Chief Executive Officer
James A. Faulkner (Principal Executive Officer)
/s/ Joseph W. Evans President, Chief Operating Officer, Chief October 22, 1999
- ---------------------------------------------- Financial Officer and Director (Principal
Joseph W. Evans Financial Officer)
/s/ James R. Balkcom, Jr. Director October 21, 1999
- ----------------------------------------------
James R. Balkcom, Jr.
______________________________________________ Director October __, 1999
William L. Chandler
/s/ Thomas T. Folger, Jr. Director October 21, 1999
- ----------------------------------------------
Thomas T. Folger, Jr.
/s/ Quill O. Healey Director October 22, 1999
- ----------------------------------------------
Quill O. Healey
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Frank C. Jones Director October 22, 1999
- ----------------------------------------------
Frank C. Jones
______________________________________________ Director October __, 1999
John B. McKibbon, III
/s/ E. Paul Stringer Director October 22, 1999
- ----------------------------------------------
E. Paul Stringer
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- --------------------------------------------------------------------------------
2(a) Agreement and Plan of Merger, dated as of August 5, 1999, and amended
as of October 15, 1999, by and among Haywood Bancshares, Inc., Century
South Banks, Inc. and HBI Acquisition Corp. (included as 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
Registration Statement No. 333-72579 on Form S-4 of Century South
Banks, Inc., previously filed with the Commission on March 8, 1999 and
incorporated by reference herein)
3(b) Bylaws, as amended (included as Exhibit 3(b) to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 of Century South
Banks, Inc., previously filed with the Commission on March 31, 1997 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* Securities Opinion of Troutman Sanders LLP
8* Tax 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 LLP as to Century South Banks, Inc.
23(c) Consent of KPMG LLP as to Haywood Bancshares, Inc.
23(d) Consent of Trident Securities, a division of McDonald Investments Inc.
24 Power of Attorney (included in the signature page to this Registration
Statement)
99.1 Form of Proxy Card
99.2* Form of Election Form/Letter of Transmittal
99.3 Stock Option Agreement between Maywood Bancshares, Inc. and Century
South Banks, Inc., dated as of August 5, 1999 (included as Appendix C
to the proxy statement/prospectus and incorporated by reference herein)
________________________________
*To be filed by amendment.
<PAGE>
EXHIBIT 23(b)
INDEPENDENT AUDITORS' 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 heading "Experts" in the Proxy
Statement/Prospectus.
Atlanta, Georgia
October 27, 1999
<PAGE>
EXHIBIT 23(c)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Haywood Bancshares, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
Greenville, South Carolina
October 27, 1999
<PAGE>
EXHIBIT 23(d)
CONSENT OF TRIDENT SECURITIES, A DIVISION OF MCDONALD INVESTMENTS INC.
October 25, 1999
We hereby consent to the use of our name and to the description of our opinion
letter, to be signed and dated the date of the Proxy Statement/Prospectus (the
"Proxy Statement/Prospectus") forming a part of this Registration Statement on
Form S-4 of Century South Banks, Inc., under the caption "Opinion of Trident,"
and to the inclusion of such opinion letter as Appendix B to the Proxy
Statement/Prospectus. In giving such consent we do not hereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended or the rules and regulations of the
Securities and Exchange Commission thereunder.
/s/ TRIDENT SECURITIES,
A DIVISION OF MCDONALD INVESTMENTS INC.
<PAGE>
EXHIBIT 99.1
REVOCABLE PROXY
HAYWOOD BANCSHARES, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints C. Jeff Reece, Jr. and Philip S. Dooly
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 of
the shares of common stock of Haywood Bancshares, Inc. ("Haywood"), par value
$1.00 per share, held of record by the undersigned on ________ __, 1999, at the
special meeting of Haywood shareholders to be held at 7:30 p.m., local time, on
________ __, 1999, at the main office of Haywood located at 370 North Main
Street, Waynesville, North Carolina.
1. PROPOSAL TO: Approve the Agreement and Plan of Merger, dated as
of August 5, 1999, and amended as of October 15, 1999 (the "Merger Agreement"),
by and among Haywood, Century South Banks, Inc. ("CSBI"), and HBI Acquisition
Corp. ("HBI") pursuant to which, among other matters, (a) Haywood will merge
with and into HBI, becoming a wholly-owned subsidiary of CSBI; and (b) shares of
Haywood common stock will be converted into the right to receive either shares
of CSBI common stock, cash or a combination of stock and cash as described in
the Proxy Statement/Prospectus dated _______ __, 1999.
FOR AGAINST ABSTAIN
2. In their discretion, to vote upon such other business as may
properly come before the special meeting including, among other things, a motion
to adjourn or postpone the Haywood special meeting to another time for the
purpose of soliciting additional proxies or otherwise. However, no proxy with
instructions to vote against the Merger Agreement will be voted in favor of any
adjournment or postponement of the special meeting.
HIS 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 the name appears below. When shares are held by joint
tenants, all joint tenants should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
If shares are held by a corporation, an authorized corporate officer should sign
in full corporate name. If shares are held by a partnership, an authorized
person should sign in partnership name.
DATED:______________________________, 1999
__________________________________________
Signature
__________________________________________
Signature if held jointly
