<PAGE>
As Filed With the Securities And Exchange Commission on October 22, 1997;
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________________________
CITIZENS BANCSHARES CORPORATION
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Georgia 6022 58-1631302
------- ---- ----------
(State of other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classi- Identification No.)
incorporation) fication Code No.)
</TABLE>
175 John Wesley Dobbs Avenue, N.E.
Atlanta, Georgia 30303
(404) 659-5959
-------------------------------------------------------------
(Address, including ZIP Code, and telephone number, including
area code, of registrant's principal executive offices)
Kathryn L. Knudson, Esq. Copy to:
Powell, Goldstein, Frazer & Murphy LLP Robert C. Schwartz, Esq.
Sixteenth Floor, 191 Peachtree Street, N.E. Smith, Gambrell & Russell, LLP
Atlanta, Georgia 30303 Suite 3100, Promenade II
(404) 572-6952 1230 Peachtree Street, N.E.
- ---------------------------------------------- Atlanta, Georgia 30309-3592
(Name, address, including ZIP Code, and (404) 815-3758
telephone number, including area code, of
agent for service)
Approximate date of commencement of the proposed sale of the securities to the
public: Upon the effective date of the merger (the "Merger") of First Southern
Bancshares, Inc. ("FSB") with and into the Registrant.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G check the following box. [ ]
[Cover Page Continued]
Exhibit Index on page _____.
Doc. 159933
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================
CALCULATION OF REGISTRATION FEE
==============================================================================================================
Proposed Proposed
Title of each class maximum maximum Amount of
of securities Amount to be offering aggregate Registration
to be registered Registered price per unit offering price Fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 842,374/(1)/ shares /(2)/ $6,192,142/(3)/ $1,877
par value
==============================================================================================================
</TABLE>
(1) Based upon (a) the maximum number of shares of the common stock of the
Registrant that is expected to be issued in connection with the Merger, and (b)
the maximum number of shares of common stock of the Registrant reserved for
issuance under options of FSB, the obligations under which will be assumed by
the Registrant upon consummation of the Merger. The Registrant will deregister
the indicated shares if the Registrant's shareholders fail to approve the matter
described above.
(2) Not applicable.
(3) Estimated solely for the purpose of calculating the registration fee and,
pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended, based
upon the book value of the maximum number of securities to be received by the
Registrant (558,603 shares of common stock of FSB, par value $5.00) in exchange
for the securities registered hereby.
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>
[FSB LETTERHEAD]
To the Holders of First Southern Common Stock:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Meeting") of First Southern Bancshares, Inc. ("FSB"), to be held at Big Miller
Grove Baptist Church, 3800 Big Miller Grove Way, Lithonia, Georgia on
_______________ 1997, at 4:00 p.m. local time, notice of which is enclosed.
At the Meeting, you will be asked to consider and vote on a proposal to
approve an Agreement and Plan of Merger (the "Agreement") entered into with
Citizens Bancshares Corporation ("CBC") pursuant to which FSB will merge (the
"Merger") with CBC. As a result of the Merger, each share of FSB common stock
("FSB Common Stock") issued and outstanding will be converted into and exchanged
for the right to receive 1.508 shares of CBC common stock ("CBC Common Stock").
The accompanying Proxy Statement/Prospectus includes a description of the
proposed Merger and also provides other specific information concerning the
Meeting and CBC Common Stock.
The Merger has been approved unanimously by your Board of Directors and is
recommended by the Board to you for approval. Each member of the Board of
Directors has agreed to vote all FSB shares beneficially owned by such member in
favor of the Merger. Consummation of the Merger is subject to certain
conditions, including shareholder approval of FSB and regulatory approvals.
APPROVAL OF THE AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE SHARES OF FSB COMMON STOCK ENTITLED TO VOTE AT THE MEETING. CONSEQUENTLY, A
FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE AGREEMENT.
Accordingly, whether or not you plan to attend the Meeting, you are urged
to complete, sign, and return promptly the enclosed proxy card. If you attend
the Meeting, you may vote in person if you wish, even if you previously have
returned your proxy card. The proposed Merger is a significant transaction for
FSB, and your vote on this matter is of great importance. ON BEHALF OF THE
BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF THE MERGER BY MARKING THE
ENCLOSED PROXY CARD "FOR" THE MERGER.
Sincerely,
James E. Young
President and Chief Executive Officer
<PAGE>
FIRST SOUTHERN BANCSHARES, INC.
2727 PANOLA ROAD
LITHONIA, GEORGIA 30058
(770) 987-3511
_____________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ________________, 1997
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of First Southern Bancshares, Inc. ("FSB") will be held at Big Miller
Grove Baptist Church, 3800 Big Miller Grove Way, Lithonia, Georgia on
_______________, 1997 at 4:00 p.m., local time, for the following purposes:
1. Approve Merger. To consider and vote on the Agreement and Plan of
Merger, dated as of October 1, 1997 (the "Agreement"), by and between CBC
Bancshares Corporation ("CBC") and FSB pursuant to which (i) FSB will merge (the
"Merger") with CBC, and (ii) each share of the issued and outstanding common
stock of FSB ("FSB Common Stock") will be converted into 1.508 shares of CBC
common stock, as described more fully in the accompanying Proxy
Statement/Prospectus.
2. Other Business. To transact such other business as may properly come
before the Meeting, including adjourning or postponing the Meeting to permit, if
necessary, further solicitation of proxies.
Approval of the Agreement requires the affirmative vote of a majority of
the shares of FSB Common Stock entitled to vote at the Meeting. Only
shareholders of record at the close of business on _______________, 1997 are
entitled to receive notice of and to vote at the Meeting or any adjournment or
postponement thereof.
HOLDERS OF FSB COMMON STOCK HAVE THE RIGHT TO DISSENT FROM APPROVAL OF THE
AGREEMENT AND OBTAIN PAYMENT FOR THE FAIR VALUE OF THEIR SHARES OF FSB COMMON
STOCK BY FOLLOWING THE PROCEDURES DESCRIBED IN THE DISSENTERS' PROVISIONS OF THE
GEORGIA BUSINESS CORPORATION CODE. SEE APPENDIX C HERETO AND "THE MERGER -
DISSENTERS RIGHTS."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF FSB COMMON
STOCK VOTE "FOR" THE MERGER AS DESCRIBED ABOVE.
By Order of the Board of Directors
__________________________
Willard C. Lewis, Secretary
Lithonia, Georgia
____________, 1997
WE URGE YOU TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN
IT AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. YOUR PROXY MAY BE REVOKED IN THE
MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME
BEFORE IT IS VOTED AT THE SPECIAL MEETING.
<PAGE>
PROXY STATEMENT
OF
FIRST SOUTHERN BANCSHARES, INC.
2727 PANOLA ROAD
LITHONIA, GEORGIA 30058
(770) 987-3511
FOR
THE SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON _________, 1997
_____________________________
PROSPECTUS
OF
CITIZENS BANCSHARES CORPORATION
175 JOHN WESLEY DOBBS AVENUE, N.E.
ATLANTA, GEORGIA 30303
(404) 659-5959
FOR
842,374 SHARES OF COMMON STOCK
_____________________________
This Proxy Statement/Prospectus (this "Proxy Statement/Prospectus") is
being furnished to holders of common stock, par value $5.00 per share ("FSB
Common Stock"), of First Southern Bancshares, Inc., a Georgia corporation
("FSB"), in connection with the solicitation of proxies by the Board of
Directors of FSB for use at a special meeting of such holders to be held on
________, _________, 1997, commencing at 4:00 p.m., local time, and at any
adjournment or postponement thereof (the "FSB Meeting"). At the FSB Meeting,
holders of FSB Common Stock will be asked to consider and vote upon a proposal
to approve the Agreement and Plan of Merger, dated as of October 1, 1997, by and
between Citizens Bancshares Corporation, a Georgia corporation ("CBC") and FSB
(the "Agreement"), and the transactions contemplated thereby, pursuant to which,
among other things, FSB will merge with CBC (the "Merger"). A copy of the
Agreement is attached hereto as Appendix A and is incorporated herein by
reference.
Pursuant to the Agreement, upon consummation of the Merger, except as
described herein, each issued and outstanding share of FSB Common Stock will be
converted into 1.508 shares (the "Exchange Ratio") of common stock, par value
$1.00 per share, of CBC ("CBC Common Stock"). See "The Merger." Any options to
purchase FSB Common Stock pursuant to stock options (the "FSB Options")
remaining unexercised upon consummation of the Merger will become options to
purchase an adjusted number of shares of CBC Common Stock at an adjusted
exercise price, both of which are computed in accordance with the Exchange
Ratio. See "The Merger -- Conversion of FSB Options." Each holder of FSB Common
Stock or FSB Options who would otherwise be entitled to receive a fraction of a
share of CBC Common Stock (after taking into account all of a shareholder's
certificates) will receive, in lieu thereof, the equivalent cash value of such
fraction of a share, without interest. See "The Merger -- Description of the
Merger." In addition, the Merger Agreement permits FSB to declare and pay its
regular annual cash dividend to its shareholders in an amount up to $.05 per
share.
<PAGE>
Consummation of the Merger is subject to several conditions, including,
among others, the affirmative vote to approve the Agreement by the holders of a
majority of the outstanding shares of FSB Common Stock entitled to vote at the
FSB Meeting and the approval of appropriate regulatory authorities. See "The
Merger -- Conditions Precedent to the Merger."
T. Stephen Johnson & Associates, Inc. has rendered an opinion to FSB that
the consideration as provided in the Agreement is fair, from a financial point
of view, to the holders of FSB Common Stock. See "The Merger -- Fairness
Opinion."
THE FSB BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF
FSB VOTE TO APPROVE THE AGREEMENT. FAILURE TO VOTE IS EQUIVALENT TO VOTING
AGAINST THE MERGER AGREEMENT.
FSB shareholders should note that employees, certain members of management
and directors of FSB have certain interests in, and may derive certain benefits
as a result of, the Merger that are in addition to their interests, if any, as
shareholders of FSB generally. See "The Merger -- Interests of Certain Persons
in the Merger."
This Proxy Statement/Prospectus also constitutes a prospectus of CBC with
respect to the shares of CBC Common Stock issuable to shareholders of FSB upon
consummation of the Merger. CBC has supplied all information contained in this
Proxy Statement/Prospectus relating to CBC and its subsidiary, and FSB has
supplied all information contained in this Proxy Statement/Prospectus relating
to FSB and its subsidiaries.
This Proxy Statement/Prospectus is included as part of a Registration
Statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "SEC") by CBC relating to the registration under
the Securities Act of 1933, as amended (the "Securities Act"), of up to 842,374
shares of CBC Common Stock to be issued in connection with the Merger.
This Proxy Statement/Prospectus, Notice of Special Meeting, and the
accompanying proxy card for the FSB Meeting are first being sent to the
shareholders of FSB on or about __________, 1997.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is _______________, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION...................................................... 1
DOCUMENTS INCORPORATED BY REFERENCE........................................ 2
SUMMARY.................................................................... 4
The Parties............................................................. 4
Special Meeting of FSB Shareholders..................................... 5
The Merger; Exchange Ratio.............................................. 5
Reasons for the Merger.................................................. 5
Fairness Opinion........................................................ 6
Effective Time.......................................................... 6
Exchange of Stock Certificates.......................................... 6
Regulatory Approvals and Other Conditions............................... 6
Waiver, Amendment, and Termination of the Agreement..................... 7
Interests of Certain Persons in the Merger.............................. 7
Certain Federal Income Tax Consequences of the Merger................... 8
Accounting Treatment.................................................... 8
Certain Differences in Shareholders' Rights............................. 9
Resales by Affiliates................................................... 9
Dissenters' Rights...................................................... 9
Comparative Market Prices of Common Stock............................... 9
Comparative Per Share Data..............................................10
THE FSB MEETING............................................................12
General.................................................................12
Record Date; Vote Required..............................................13
THE MERGER.................................................................13
General.................................................................14
Effect of Merger on Stock Rights........................................14
Background of and Reasons for the Merger................................14
Fairness Opinion........................................................16
Effective Time of the Merger............................................18
Distribution of Stock Certificates After the Merger.....................19
Conditions to Consummation of the Merger................................19
Regulatory Approvals....................................................20
Waiver, Amendment, and Termination of the Agreement.....................21
Conduct of Business Pending the Merger..................................22
Management and Operations Following the Merger..........................23
Interests of Certain Persons in the Merger..............................23
Dissenters' Rights......................................................24
Certain Federal Income Tax Consequences of the Merger...................25
Accounting Treatment....................................................26
Expenses and Fees.......................................................26
Resales of CBC Common Stock by Affiliates...............................27
</TABLE>
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS....................................28
Market Prices...........................................................28
Shareholders of Record..................................................29
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION.........................29
Pro forma Combined Condensed Balance Sheet..............................29
Pro Forma Condensed Combined Statements of Income.......................31
Notes to Pro Forma Condensed Combined Financial Statements..............37
INFORMATION ABOUT CBC......................................................37
INFORMATION ABOUT FSB......................................................38
DESCRIPTION OF CBC COMMON STOCK............................................39
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS.............................39
Authorized Capital Stock................................................39
Actions by Shareholders Without a Meeting...............................39
Special Meeting of Shareholders.........................................40
Number of Directors.....................................................40
EXPERTS....................................................................40
OPINIONS...................................................................41
ADJOURNMENT OF SPECIAL MEETING.............................................41
SHAREHOLDER PROPOSALS......................................................41
OTHER MATTERS..............................................................41
Appendix A - Agreement and Plan of Merger.................................A-1
Appendix B - T. Stephen Johnson & Associates, Inc. Fairness Opinion.......B-1
Appendix C - Dissenters' Rights...........................................C-1
<PAGE>
AVAILABLE INFORMATION
CBC and FSB are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, file reports, proxy statements, and other information with the
Securities and Exchange Commission (the "SEC"). Copies of such reports, proxy
statements, and other information can be obtained, at prescribed rates, from the
SEC by addressing written requests for such copies to the Public Reference
Section at the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
In addition, such reports, proxy statements, and other information can be
inspected at the public reference facilities referred to above and at the
regional offices of the SEC at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The SEC maintains a website that contains reports,
proxy and information statements, and other information pertaining to
registrants that file electronically with the SEC, including CBC and FSB. The
SEC's website address is: http://www.sec.gov.
This Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of CBC (including any exhibits and amendments thereto, the
"Registration Statement") filed with the SEC under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the securities offered hereby.
This Proxy Statement/Prospectus does not include all of the information in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. For further information about CBC and the
securities offered hereby, reference is made to the Registration Statement. The
Registration Statement may be inspected and copied, at prescribed rates, at the
SEC's public reference facilities at the addresses set forth above.
Certain financial and other information relating to CBC and FSB is contained
in the documents indicated below under "Documents Incorporated by Reference."
All information included in this Proxy Statement/Prospectus or incorporated
by reference herein with respect to CBC was supplied by CBC, and all information
included herein or incorporated by reference herein with respect to FSB was
supplied by FSB. Although neither CBC nor FSB has actual knowledge that would
indicate that any statements or information (including financial statements)
relating to the other party contained or incorporated herein by reference are
inaccurate or incomplete, neither CBC nor FSB warrants the accuracy or
completeness of such statements or information as they relate to the other
party.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by CBC (SEC File No.
0-14535) pursuant to the Exchange Act are hereby incorporated by reference
herein:
(a) CBC's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996 as amended; and
(b) CBC's Quarterly Reports on Form 10-QSB for the three-month periods ended
March 31, 1997 and June 30, 1997.
The following documents previously filed with the SEC by FSB (SEC File No.
0-28916) pursuant to the Exchange Act are hereby incorporated by reference
herein:
(a) FSB's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996, as amended;
(b) FSB's Quarterly Reports on Form 10-QSB for the three-month periods ended
March 31, 1997 and June 30, 1997; and
(c) FSB's Current Report on Form 8-K dated October 10, 1997.
All documents filed by CBC and FSB pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus
and prior to the date of the Special Meetings shall be deemed to be incorporated
by reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
2
<PAGE>
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS RELATING TO CBC
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST FROM Annette G. Petty, Secretary, CITIZENS BANCSHARES CORPORATION, 175
JOHN WESLEY DOBBS AVENUE, N.E., ATLANTA, GEORGIA 30303, TELEPHONE
(404) 659-5959.
THE DOCUMENTS RELATING TO FSB (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH
EXHIBITS ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE
ALSO AVAILABLE WITHOUT CHARGE UPON REQUEST FROM WILLARD C. LEWIS, CHIEF
FINANCIAL OFFICER, FIRST SOUTHERN BANCSHARES, INC., 2727 PANOLA ROAD, LITHONIA,
GEORGIA 30058, TELEPHONE (770) 987-3511.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE
MADE BY ____________, 1997. PERSONS REQUESTING COPIES OF EXHIBITS TO SUCH
DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS
WILL BE CHARGED THE COSTS OF REPRODUCTION AND MAILING.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY CBC OR FSB.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH
AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION
OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CBC OR FSB SINCE THE DATE HEREOF
OR THAT THE INFORMATION HEREIN OR INCORPORATED HEREIN BY REFERENCE IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/ PROSPECTUS SPEAKS AS OF
THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY INDICATED.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT COVER ANY RESALES OF SHARES
OFFERED HEREBY TO BE RECEIVED BY SHAREHOLDERS OF FSB DEEMED TO BE "AFFILIATES"
OF FSB OR CBC UPON THE CONSUMMATION OF THE MERGER. NO PERSON IS AUTHORIZED TO
MAKE USE OF THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH ANY SUCH RESALES.
3
<PAGE>
SUMMARY
The following is a summary of certain information relating to the FSB
Meeting, the proposed Merger, and the shares of CBC Common Stock to be issued
upon consummation of the Merger. This summary does not purport to be complete
and is qualified in its entirety by the more detailed information appearing
elsewhere or incorporated by reference in this Proxy Statement/Prospectus.
Shareholders are urged to read carefully the entire Proxy Statement/Prospectus,
including the Appendices. As used in this Proxy Statement/Prospectus, the terms
"CBC" and "FSB" refer to those entities, respectively, and, where the context
requires, to those entities and their respective subsidiaries.
Certain statements contained or incorporated by reference in this Proxy
Statement/Prospectus are "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, such as statements relating to
financial results, plans for future business development activities, capital
spending or financing sources, capital structure and the effects of regulation
and competition and are thus prospective. Such forward looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from future results expressed or implied by such
forward looking statements. Potential risks and uncertainties include, but are
not limited to, economic conditions, competition and other uncertainties
detailed from time to time in CBC's and FSB's filings with the SEC.
THE PARTIES
CBC. CBC is a bank holding company registered under the Federal Bank
Holding Company Act of 1956, as amended (the "BHC Act") and is headquartered in
Atlanta, Georgia. CBC has one banking subsidiary, Citizens Trust Bank. CBC
engages in retail and commercial banking and related services with eight offices
in the Atlanta metropolitan area. As of June 30, 1997, CBC had total
consolidated assets of approximately $128.4 million, total deposits of
approximately $116.3 million and total shareholders' equity of approximately $10
million.
CBC was incorporated in 1972 under the laws of Georgia and is regulated by
the Board of Governors of the Federal Reserve Board (the "Federal Reserve") and
the Georgia Department of Banking and Finance (the "Georgia Department"). CBC's
principal executive offices are located at 175 John Wesley Dobbs Avenue, N.E.
and its telephone number at such address is (404) 659-5959.
FSB. FSB is a bank holding company registered under the BHC Act and is
headquartered in Lithonia, Georgia. FSB has one banking subsidiary, First
Southern Bank, and one nonbank subsidiary, FSB Mortgage Services, Inc. FSB
engages in retail and commercial banking and related services with three offices
in the Atlanta Metropolitan Area. As of June 30, 1997, FSB had total
consolidated assets of approximately $58.6 million, total deposits of
approximately $47.7 million and total shareholders' equity of approximately $6.1
million.
FSB was incorporated in 1995 under the laws of Georgia and is regulated by
the Federal Reserve and the Georgia Department. FSB's principal executive
offices are located at 2727 Panola Road, Lithonia, Georgia, and its telephone
number at such address is (770) 987-3511.
4
<PAGE>
SPECIAL MEETING OF FSB SHAREHOLDERS
The FSB Meeting will be held at 4:00 p.m., local time, on ____________,
1997, at Big Miller Grove Baptist Church, 3800 Big Miller Grove Way, Lithonia,
Georgia, for the purpose of considering and voting on approval of the Agreement
and transacting such other business as may properly come before the meeting or
any adjournment thereof. See "The FSB Meeting."
Only holders of record of FSB Common Stock at the close of business on
____________, 1997 (the "Record Date"), will be entitled to vote at the FSB
Meeting. Approval of the Agreement requires the affirmative vote of a majority
of the shares of FSB Common Stock entitled to vote at the FSB Meeting. As of
the Record Date, there were 553,603 shares of FSB Common Stock outstanding and
entitled to vote.
As of the Record Date, the directors and executive officers of FSB
beneficially owned 111,757 shares (or approximately 21.12% of the outstanding
shares) of FSB Common Stock. Each member of the Board of Directors of FSB has
agreed to vote those shares of FSB Common Stock beneficially owned by such
member in favor of the Merger.
As of the Record Date, the directors and executive officers of CBC
beneficially owned [NO] shares of FSB Common Stock.
THE MERGER; EXCHANGE RATIO
The Agreement provides for FSB to merge with CBC, with CBC being the
surviving corporation of the Merger. At the Effective Time, each share of FSB
Common Stock then issued and outstanding will be converted into 1.508 shares of
CBC Common Stock (the "Exchange Ratio"), with cash to be paid in lieu of any
resulting fractional shares of CBC Common Stock. Each share of CBC Common Stock
outstanding prior to the Merger will continue to be outstanding after the
Effective Time. See "The Merger - General."
REASONS FOR THE MERGER
FSB's Board of Directors has unanimously approved the Merger and the
Agreement and has determined that the Merger is fair to, and in the best
interests of, FSB and its shareholders. Accordingly, FSB's Board of Directors
unanimously recommends that FSB's shareholders vote FOR approval of the
Agreement. Each member of the FSB Board of Directors has agreed to vote such
member's shares of FSB Common Stock in favor of the Agreement. The FSB Board of
Directors believes that the Merger will enable holders of FSB Common Stock to
realize increased value over time as part of the combination with CBC. The FSB
Board further believes the combined company will have greater earnings and
expansion potential than either FSB or CBC would have individually. The Merger
may also enable FSB shareholders to participate in opportunities for
appreciation of CBC Common Stock as a result of being part of a larger banking
franchise. See "The Merger - Background of and Reasons for the Merger."
5
<PAGE>
FAIRNESS OPINION
T. Stephen Johnson & Associates, Inc. has rendered an opinion to FSB that,
based on and subject to the procedures, matters and limitations described in its
opinion and such other matters as it considered relevant, as of the date of its
opinion, the terms of the Merger are fair, from a financial point of view, to
the shareholders of FSB. Such opinion is attached as Appendix B to this Proxy
Statement/Prospectus. Shareholders are urged to read the opinion in its
entirety for a description of the procedures followed, matters considered, and
limitations on the reviews undertaken in connection with such opinion. See "The
Merger - Fairness Opinion."
EFFECTIVE TIME
Subject to the conditions to the obligations of the parties to effect the
Merger, the Merger will become effective upon the filing of the Certificate of
Merger with the Georgia Secretary of State. Unless otherwise agreed upon by CBC
and FSB, and subject to the conditions to the obligations of the parties to
effect the Merger, the parties will use their reasonable efforts to cause the
Effective Time to occur on the fifth business day following the last to occur:
(i) the effective date (including the expiration of any applicable waiting
period) of the last federal or state regulatory approval required for the
Merger; or (ii) the date on which the Agreement is approved by the requisite
vote of FSB shareholders. See "The Merger - Effective Time of the Merger",
"-Conditions to Consummation of the Merger, " and "- Waiver, Amendment, and
Termination of the Agreement."
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Time, CBC will cause SunTrust Bank, Atlanta,
acting in its capacity as exchange agent for CBC (the "Exchange Agent"), to mail
to the former shareholders of FSB a letter of transmittal, together with
instructions for the exchange of such shareholders' certificates representing
shares of FSB Common Stock for certificates representing shares of CBC Common
Stock. Former shareholders of FSB will not be entitled to receive dividends on
their shares of CBC Common Stock until CBC has received their FSB stock
certificates. FSB SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES
UNTIL THEY RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. See "The
Merger - Distribution of Stock Certificates After the Merger."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Federal Reserve and the Georgia
Department. Applications for the requisite approvals have been filed with these
agencies, each of which has yet to issue its approval of the Merger. While the
parties do not foresee any difficulty in securing such approvals, there can be
no assurance that the approvals of these agencies will be given or as to the
timing or conditions of such approvals.
Consummation of the Merger is subject to various other conditions, including
receipt of the required approval of the Agreement by the FSB shareholders,
receipt of an opinion of counsel to CBC as to the tax-free nature of certain
aspects of the Merger, receipt of a letter regarding accounting treatment of the
Merger from the independent public accountants of CBC, and certain other
customary conditions. See "The Merger - Conditions to Consummation of the
Merger."
6
<PAGE>
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement provides that it may be amended by a subsequent writing
signed by each party upon the approval of each of their respective Board of
Directors. However, no amendment that reduces or modifies in any material
respect the consideration to be received by the holders of FSB Common Stock in
connection with the Merger may be made after the FSB Meeting without the further
approval of such shareholders. The Agreement provides that each party may waive
any of the conditions precedent to its obligations to consummate the Merger, to
the extent legally permitted.
The Agreement may be terminated by mutual agreement of the CBC Board of
Directors and the FSB Board of Directors. The Agreement may also be terminated
by either the CBC Board of Directors or the FSB Board of Directors (a) in the
event of breach of the Agreement by the other party that cannot or has not been
cured within 30 days of notice of such breach, (b) if the required approval of
the FSB shareholders or any applicable regulatory authority is not obtained, (c)
if the Merger is not consummated by March 31, 1998, or (d) if any of the
conditions precedent to the obligations of such party to consummate the Merger
cannot be satisfied or fulfilled by March 31, 1998. In addition, the Agreement
may be terminated, and the Merger abandoned, at any time prior to the Effective
Time by mutual action of the Boards of Directors of both CBC and FSB, or by
action of the Board of Directors of either company under certain circumstances,
including if the Merger is not consummated by March 31, 1998 unless the failure
to consummate by such time is due to a breach of the Agreement by the party
seeking to terminate. If for any reason the Merger is not consummated, FSB will
continue to operate as a bank holding company under its present management.
See "The Merger - Waiver, Amendment, and Termination of the Agreement."
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
After the merger, the CBC Board of Directors will consist of three current
CBC directors (Herman J. Russell, Johnnie L. Clark and Thomas E. Boland) and
three current FSB directors (Gregory T. Baranco, James E. Young and Bernard H.
Bronner). Mr. Russell will serve as the chairman of the CBC Board of Directors
and Mr. Baranco will serve as vice chairman of the board. The current president
and chief executive officer of FSB, James E. Young, will become president and
chief executive officer of CBC after the merger and shall have the authority to
select his management team. CBC will continue to serve all of the communities
currently served by both FSB and CBC.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
FSB employees, certain members of management and directors of FSB have
certain interests in, and may derive certain benefits as a result of, the Merger
that are in addition to their interests, if any, as shareholders of FSB
generally.
The Agreement provides that CBC will indemnify the present and former
directors, officers, employees and agents of FSB and the subsidiaries of FSB
against all liabilities arising out of actions or omissions at or prior to the
Effective Time to the full extent permitted under Georgia law and by FSB's
Articles of Incorporation or Bylaws, as currently in effect, including
provisions relating to advancement of expenses incurred in the defense of any
litigation. In any case in which approval by CBC is required to effect any
indemnification, at the election of the indemnified party, the determination of
any such approval will be made by independent counsel mutually agreed upon
between CBC and the indemnified party.
The Agreement also provides that CBC will honor all employment, severance,
consulting and other compensation contracts previously disclosed to CBC between
FSB or its subsidiaries and any current or former director, officer or employee,
and all provisions for vested amounts earned or accrued through the Effective
Time under FSB's benefit plans.
The Agreement further provides that all rights with respect to FSB Common
Stock pursuant to stock options granted by FSB under its stock option plans or
agreements that are outstanding at the
7
<PAGE>
Effective Time, whether or not then exercisable, will be converted into and will
become rights with respect to CBC Common Stock, and CBC will assume each of such
options in accordance with its terms. All such options will become exercisable
upon consummation of the proposed Merger. FSB's President and Chief Executive
Officer holds options to purchase an aggregate of 4,000 shares of FSB Common
Stock and, pursuant to his employment agreement, an additional option to
purchase 1,000 shares of FSB Common Stock will be granted and will become
exercisable upon consummation of the proposed Merger. The number of shares of
CBC stock subject to such FSB Option will equal the number of shares of FSB
Common Stock subject to the FSB Option immediately prior to the Effective Time
(i.e., 5,000 shares) multiplied by the Exchange Ratio. The per share exercise
price under each such FSB Option shall be adjusted by dividing the per share
exercise price (i.e., $10.00) under each FSB Option by the Exchange Ratio and
rounding down to the nearest cent, resulting in a new exercise price of $6.63.
Assuming all such options were exercised as of the Effective Time, and assuming
that the market price of the CBC Common Stock that would be issued upon exercise
of such options as a result of the Merger were $9.88 per share (the per share
value ascribed to CBC Common Stock in determining the Exchange Ratio) (see "--
Fairness Opinion"), the profit realized by the President and Chief Executive
Officer would be $3.25 per share ($9.88 less $6.63) or a total of approximately
$24,505.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger is intended to qualify as a reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"). Smith, Gambrell &
Russell, LLP, as counsel to CBC, has delivered an opinion, based upon certain
customary assumptions and representations, to the effect that, for federal
income tax purposes, no gain or loss will be recognized by FSB shareholders as a
result of the Merger to the extent that they receive CBC Common Stock solely in
exchange for their FSB Common Stock. For a more complete description of the
federal income tax consequences of the Merger, see "The Merger -- Certain
Federal Income Tax Consequences of the Merger."
DUE TO THE INDIVIDUAL NATURE OF THE INCOME TAX CONSEQUENCES OF THE MERGER,
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND FOREIGN
TAX LAWS.
ACCOUNTING TREATMENT
It is a condition of the Agreement that the Merger will be accounted for as
a pooling-of-interests. Under the pooling-of-interests method of accounting,
the recorded amounts of the assets and liabilities of FSB will be carried
forward and recorded on the financial statements of CBC at their previously
recorded amounts.
8
<PAGE>
The Agreement provides that FSB and CBC will receive a letter from Porter
Keadle Moore, LLP, dated as of the Effective Time, stating that the Merger will
qualify for pooling-of-interests accounting treatment under Accounting
Principles Board Opinion No. 16. If the Merger does not qualify for pooling-of-
interests accounting treatment, it is expected to be abandoned. Neither CBC's
management nor FSB's management currently has any reason to believe that the
Merger will not qualify for pooling-of-interests accounting treatment.
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
At the Effective Time, FSB shareholders, whose rights are governed by FSB's
Articles of Incorporation and Bylaws, will automatically become CBC
shareholders, and their rights as CBC shareholders will be governed by CBC's
Articles of Incorporation and Bylaws. Upon consummation of the Merger, the
rights of CBC shareholders will differ slightly from the rights of FSB
shareholders in certain respects. See "Effect of the Merger on the Rights of
Shareholders."
RESALES BY AFFILIATES
FSB has agreed to use its reasonable efforts to obtain from each of those
individuals identified by it as an affiliate an appropriate agreement that such
individual will not transfer any shares of CBC Common Stock received by it as a
result of the Merger, except in compliance with the applicable provisions of the
Securities Act and as required by pooling-of-interests accounting treatment. See
"The Merger -- Restrictions on Resales by Affiliates."
DISSENTERS' RIGHTS
Holders of FSB Common Stock who dissent from the Merger are entitled to the
rights and remedies of dissenting shareholders set forth in Section 14-2-1301 et
seq. of the Georgia Business Corporation Code (the "Dissenters' Provisions"),
subject to compliance with the procedures set forth therein. Among other
things, a dissenting shareholder is entitled to receive cash in an amount equal
to the "fair value" of such holder's shares. A copy of the Dissenters'
Provisions of the Georgia Code is set forth in Appendix C to this Proxy
Statement/Prospectus and a summary thereof is included under "The Merger -
Dissenters' Rights." TO PERFECT DISSENTERS' RIGHTS, A SHAREHOLDER MUST GIVE
WRITTEN NOTICE OF SUCH HOLDER'S INTENT TO DISSENT FROM APPROVAL OF THE AGREEMENT
PRIOR TO THE VOTE OF THE SHAREHOLDERS AT THE FSB SHAREHOLDERS MEETING AND SUCH
SHAREHOLDER MUST NOT VOTE HIS OR HER SHARES IN FAVOR OF THE AGREEMENT. ANY
SHAREHOLDER WHO RETURNS A SIGNED PROXY BUT FAILS TO PROVIDE INSTRUCTIONS AS TO
THE MANNER IN WHICH SUCH HOLDER'S SHARES ARE TO BE VOTED WILL BE DEEMED TO HAVE
VOTED IN FAVOR OF THE AGREEMENT AND THUS WILL NOT BE ENTITLED TO ASSERT
DISSENTERS' RIGHTS.
COMPARATIVE MARKET PRICES OF COMMON STOCK
There is no established public trading market for CBC Common Stock or FSB
Common Stock, nor are there uniformly quoted prices for such shares. There are,
however, occasional transactions in CBC Common Stock and FSB Common Stock as a
result of private negotiations.
9
<PAGE>
Neither the management of CBC nor the management of FSB maintains a record
of the sales prices of the trades of their respective Common Stock. The last
known sale of CBC Common Stock was on July 29, 1997, one day preceding the
announcement of the Merger, at a price of $5.00 per share. The last known sale
of FSB Common Stock was on ___________, 1997, at a price of $_______ per share.
There can be no assurance as to the market price of CBC Common Stock or
whether a public market will develop for CBC Common Stock if and when the Merger
is consummated. While CBC intends to explore listing CBC Common Stock on a
national securities exchange or qualifying CBC Common Stock for quotation on the
Nasdaq Stock Market, no assurances can be given that CBC Common Stock will ever
be listed on the Nasdaq Stock Market or any securities exchange, or that any
organized public market for CBC Common Stock will develop or that there will be
any private demand for CBC Common Stock.
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (a) an historical basis for CBC
and FSB, (b) a pro forma combined basis per share of CBC Common Stock, giving
effect to the Merger, and (c) an equivalent pro forma basis per share of FSB
Common Stock, giving effect to the Merger. The CBC and FSB pro forma combined
information gives effect to the Merger on a pooling-of-interests accounting
basis and assumes an Exchange Ratio of 1.508 shares of CBC Common Stock for each
share of FSB Common Stock. See "The Merger - Accounting Treatment." The
unaudited pro forma data is presented for informational purposes only and is not
necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger been consummated at the dates
or during the periods indicated, nor is it necessarily indicative of future
results of operations or combined financial position.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of CBC and
FSB, including the respective notes thereto, and the pro forma financial
information included herein and incorporated herein by reference. See
"Documents Incorporated by Reference" and "Pro Forma Condensed Combined
Financial Information."
10
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended June 30 Year Ended December 31
--------------------- ------------------------------
1997 1996 1996 1995 1994
INCOME (LOSS) PER SHARE
<S> <C> <C> <C> <C> <C>
CBC historical .03 .38 .48 .94 .53
FSB historical .34 .23 .57 .59 .65
CBC and FSB pro forma .10 .30 .45 .74 .49
combined (1)
FSB pro forma Merger .16 .45 .67 1.11 .74
equivalent (2)
DIVIDENDS DECLARED PER
COMMON SHARE
CBC historical .00 .05 .10 .10 n/a
FSB historical .05 .00 .05 n/a n/a
CBC and FSB pro forma .01 .03 .07 .06 n/a
combined (1)
FSB pro forma Merger .02 .05 .11 .09 n/a
equivalent (2)
BOOK VALUE PER SHARE
(PERIOD END)
CBC historical 7.52 7.49 7.49 7.20 6.23
FSB historical 10.97 10.66 10.68 10.16 9.44
CBC and FSB pro forma 7.27 7.05 7.05 6.73 5.99
combined (1)
FSB pro forma Merger 11.20 11.06 11.06 10.60 9.41
equivalent (2)
</TABLE>
____________________
(1) Represents the combined results of CBC and FSB as if the Merger were
consummated at the beginning of the period and was accounted for as a
pooling-of-interests transaction.
(2) Represents pro forma combined information multiplied by the Exchange Ratio
of 1.508 shares of CBC Common Stock for each share of FSB Common Stock.
11
<PAGE>
THE FSB MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of FSB
Common Stock in connection with the solicitation by the FSB Board of Directors
of proxies for use at the FSB Meeting, at which such FSB shareholders will be
asked to vote upon a proposal to approve the Agreement. The FSB Meeting will be
held at 4:00 p.m., local time, on ___________, 1997, at Big Miller Grove Baptist
Church, 3800 Big Miller Grove Way, Lithonia, Georgia.
FSB shareholders are requested promptly to sign, date, and return the
accompanying proxy card to FSB in the enclosed postage-paid, addressed envelope.
Any FSB shareholder who has delivered a proxy may revoke it at any time
before it is voted by giving notice of revocation in writing or by submitting to
FSB a signed proxy card bearing a later date, provided that such notice or proxy
card is actually received by FSB before the vote of shareholders or in open
meeting prior to the taking of the shareholder vote at the FSB Meeting. Any
notice of revocation should be sent to First Southern Bancshares, Inc., 2727
Panola Road, Lithonia, Georgia 30358, Attention: Willard C. Lewis, Secretary. A
proxy will not be revoked by death or supervening incapacity of the stockholder
executing the proxy unless, before the vote, notice of such death or incapacity
is filed with the Secretary.
The shares represented by properly executed proxies received at or prior to
the FSB Meeting and not subsequently revoked will be voted as directed in such
proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED
WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND IN THE DISCRETION OF THE PROXY
HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME BEFORE THE FSB MEETING.
IF NECESSARY, AND UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY HOLDER ALSO
MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL MEETING TO PERMIT FURTHER
SOLICITATION OF PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES TO APPROVE THE
AGREEMENT. PROXIES MARKED TO BE VOTED AGAINST THE MERGER WILL NOT BE VOTED IN
FAVOR OF SUCH A PROPOSAL TO ADJOURN. As of the date of this Proxy
Statement/Prospectus, FSB is unaware of any other matter to be presented at the
FSB Meeting.
The cost of soliciting proxies will be borne by FSB. Solicitation of
proxies will be made by mail but also may be made by telephone or telegram or in
person by the directors, officers, and employees of FSB, who will receive no
additional compensation for such solicitation but may be reimbursed for out-of-
pocket expenses. Brokerage houses, nominees, fiduciaries, and other custodians
will be requested to forward solicitation materials to beneficial owners and
will be reimbursed for their reasonable out-of-pocket expenses.
FSB SHAREHOLDERS SHOULD NOT FORWARD ANY FSB COMMON STOCK CERTIFICATES WITH
THEIR PROXY CARDS. IF THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD BE
DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL
WHICH WILL BE SENT TO FSB SHAREHOLDERS BY CBC PROMPTLY AFTER CONSUMMATION OF THE
MERGER.
12
<PAGE>
RECORD DATE; VOTE REQUIRED
FSB's Board of Directors has established the close of business on
_____________, 1997, as the record date (the "Record Date") for determining the
shareholders entitled to notice of and to vote at the FSB Meeting. Only record
holders of FSB Common Stock as of the Record Date will be entitled to vote at
the FSB Meeting. Approval of the Agreement requires the affirmative vote of a
majority of the shares of FSB Common Stock entitled to vote at the FSB Meeting.
Approval of any other matter presented requires the affirmative vote of a
majority of the shares present in person or by proxy and entitled to vote. An
abstention or failure to return a properly executed proxy card will have the
same effect as a vote against the Agreement, but will not affect the outcome of
any other matter presented. Abstentions and broker non-votes will be included
in the calculation of the number of shares represented at the FSB Meeting for
purposes of determining whether a quorum has been achieved. A broker non-vote
generally occurs 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 the
customer has not provided any voting instructions with respect to the matter.
BECAUSE APPROVAL OF THE AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF ALL THE VOTES ENTITLED TO BE CAST AT THE FSB MEETING, ABSTENTIONS
AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST THE AGREEMENT.
ACCORDINGLY, THE BOARD OF DIRECTORS OF FSB URGES ITS SHAREHOLDERS TO COMPLETE,
DATE, AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE.
The presence, in person or by proxy, of a majority of the outstanding shares
of FSB Common Stock is necessary to constitute a quorum of the shareholders in
order to take action at the FSB Meeting. For these purposes, shares of FSB
Common Stock that are present, or represented by proxy, at the FSB Meeting will
be counted for quorum purposes regardless of whether the holder of the shares or
proxy fails to vote on the Agreement.
As of the Record Date, there were approximately __________ holders of
553,603 shares of FSB Common Stock outstanding and entitled to vote at the FSB
Meeting, with each share entitled to one vote. As of such date, the directors
and executive officers of FSB and their affiliates beneficially owned 111,757
shares (or approximately 21.12% of the outstanding shares) of FSB Common Stock.
Each member of the Board of Directors of FSB has agreed to vote those shares of
FSB Common Stock beneficially owned by such member in favor of the Merger.
THE MERGER
The following material describes certain terms and aspects of the Agreement
and the Merger. This description does not purport to be complete and is
qualified in its entirety by reference to the Appendices hereto, including the
Agreement, which is attached as Appendix A to this Proxy Statement/Prospectus
and incorporated herein by reference. All shareholders are urged to read the
Appendices in their entirety.
13
<PAGE>
GENERAL
The Agreement provides for the Merger of FSB and CBC. At the effective time
(the "Effective Time"), each share of FSB Common Stock issued and outstanding
will be converted into 1.508 shares of CBC Common Stock (the "Exchange Ratio"),
subject to adjustment in the event of a stock dividend, stock split or similar
stock reclassification. Each share of CBC Common Stock outstanding immediately
prior to the Effective Time will remain outstanding and unchanged as a result of
the Merger.
No fractional shares of CBC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any FSB shareholder would be entitled upon consummation of the Merger, in
an amount equal to such fractional share of CBC Common Stock multiplied by the
"Market Value" of one share of CBC Common Stock at the Effective Time. The
"Market Value" of one share of CBC Common Stock at the Effective Time shall be
established by the Board of Directors of CBC at the Effective Time of the
Merger.
EFFECT OF MERGER ON STOCK RIGHTS
The Agreement provides that, at the Effective Time, all rights with respect
to FSB Common Stock pursuant to stock options ("FSB Options") granted by FSB
under the existing stock option agreements (the "FSB Stock Plans") which are
outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to CBC Common Stock. CBC will
assume each FSB Option, in accordance with the terms of the FSB Stock Plan by
which it is evidenced. From and after the Effective Time, (a) each FSB Option
assumed by CBC may be exercised solely for shares of CBC Common Stock, (b) the
number of shares of CBC Common Stock subject to such FSB Option will be equal to
the number of shares of FSB Common Stock subject to such FSB Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, and (c) the per
share exercise price under each such FSB Option shall be adjusted by dividing
the per share exercise price under each FSB Option by the Exchange Ratio and
rounding down to the nearest cent. CBC will not issue any fraction of a share
of CBC Common Stock upon exercise of a FSB Option, and any fraction of a share
of CBC Common Stock that would otherwise be subject to a converted FSB Option
will represent the right to receive a cash payment equal to the product of such
fraction and the difference between the "Market Value" of one share of CBC
Common Stock and the per share exercise price of such Option. The "Market
Value" of one share of CBC Common Stock shall be the last sales price of such
common stock on the Nasdaq Stock Market, or such other exchange or market system
on which CBC Common Stock is then traded (as reported by The Wall Street
Journal, or if not reported thereby, any other authoritative source selected by
CBC) on the last trading day preceding the date of exercise or, if the CBC
Common Stock is not then traded on Nasdaq or an exchange, the "Market Value" of
one share of CBC Common Stock shall be established by the Board of Directors of
CBC.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. In July, 1997, representatives of CBC contacted
FSB regarding a possible merger transaction. The principals of the parties were
relatively familiar with each other, and the informal discussions which occurred
following that contact developed fairly rapidly. Over the next several weeks,
the parties (a) performed detailed due diligence investigations of each other
and (b) established a joint merger committee, consisting of four directors from
each institution, to
14
<PAGE>
negotiate the terms of the Merger and to make recommendations to the parties'
respective Boards of Directors regarding the Merger. Thereafter, at a meeting
held on September 29, 1997, the FSB Board of Directors unanimously approved the
Agreement and the Merger provided for therein. See "-- Fairness Opinion."
RECOMMENDATION OF THE FSB BOARD OF DIRECTORS AND REASONS FOR THE MERGER.
The FSB Board of Directors has approved the Agreement and has determined that
the Merger is fair to, and in the best interests of, FSB and its shareholders.
THE FSB BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF FSB COMMON STOCK VOTE TO
APPROVE AND ADOPT THE AGREEMENT AND THE MERGER PROVIDED FOR THEREIN. The FSB
Board of Directors believes that the Merger will enable holders of FSB Common
Stock to realize increased value over time as part of the combination with CBC.
The FSB Board of Directors believes the combined company will have a greater
earnings and expansion potential than either CBC or FSB would have individually.
In that regard, the FSB Board of Directors believes that the Merger may enable
FSB shareholders to participate in opportunities for appreciation of CBC Common
Stock as a result of being part of a larger banking franchise. In reaching its
decision to approve the Agreement, the FSB Board of Directors consulted with its
outside counsel regarding the legal terms of the Merger and its fiduciary
obligations in considering of the proposed Merger, as well as with management of
FSB and, without assigning any relative or specific weight, considered the
following, which are all of the material factors considered, both from a short-
term and long-term perspective:
(a) The proposed composition of the CBC Board of Directors following
consummation of the Merger which will include three former FSB
directors and the designation of James E. Young as President and Chief
Executive Officer of CBC following consummation of the Merger with Mr.
Young having the authority to select his management team;
(b) The value of the consideration to be received by FSB shareholders
relative to the book value and earnings per share of FSB Common Stock;
(c) The advice rendered by T. Stephens Johnson & Associates, Inc. as to
the fairness, from a financial point of view, of the Exchange Ratio to
the holders of FSB Common Stock;
(d) Certain information concerning the financial condition, results of
operations and business prospects of CBC on an historical, prospective
and pro forma basis;
(e) The results of FSB's due diligence review of CBC and a variety of
factors affecting and relating to the overall strategic focus of FSB,
including FSB's desire to expand into markets which complement its
core markets;
(f) The likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
(g) The compatibility of the community bank orientation of CBC to that of
FSB;
(h) The enhanced marketability and liquidity of FSB Common Stock following
the Merger;
15
<PAGE>
(i) The competitive and regulatory environment for financial institutions
generally; and
(j) The fact that the Merger will enable FSB shareholders to exchange
their shares of FSB Common Stock, in a tax-free transaction, for
shares of CBC Common Stock, the stock of which will become more widely
held and, as a result, possibly more actively traded.
On the basis of these considerations, the Agreement was unanimously
approved, and the FSB Board of Directors unanimously recommends that the
shareholders vote for the approval of the Agreement and the Merger provided for
therein.
Each member of the FSB Board of Directors has agreed to vote such member's
shares of FSB Common Stock in favor of the Agreement.
FSB'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FSB SHAREHOLDERS VOTE
FOR APPROVAL OF THE AGREEMENT.
FAIRNESS OPINION
T. Stephen Johnson & Associates, Inc. ("TSJ&A") is an investment banking
and financial services firm located in Atlanta, Georgia. As part of its
investment banking business, TSJ&A engages in the review of the fairness of bank
merger transactions from a financial perspective and in the valuation of banks
and other businesses and their securities in connection with mergers,
acquisitions and other transactions. Neither TSJ&A nor any of its affiliates
has a material financial interest in FSB or CBC. TSJ&A was selected to advise
FSB's Board of Directors based upon its familiarity with FSB, the regional
community banking industry and its knowledge of the banking industry as a whole.
TSJ&A was engaged to assist a joint merger committee of the two
institutions in arriving at an exchange ratio based on a merger of equals.
TSJ&A presented its analysis and preliminary exchange ratio to the committee on
July 27, 1997 and the committee adopted that exchange ratio as the Exchange
Ratio for the merger. Due diligence examinations performed on behalf of the
banks concluded that no material changes were required. TSJ&A based its opinion
on the Exchange Ratio and the analyses performed by TSJ&A in arriving at the
Exchange Ratio.
TSJ&A has rendered its opinion (the "Fairness Opinion") to the FSB Board of
Directors that the consideration to be paid the holders of FSB Common Stock
under the Agreement is fair to such shareholders from a financial point of view.
A copy of the Fairness Opinion is attached as Appendix B to this Proxy
Statement/Prospectus and should be read in its entirety. The summary of the
Fairness Opinion set forth herein is qualified in its entirety by reference to
the text of the Fairness Opinion.
In arriving at its Fairness Opinion, TSJ&A reviewed analyses performed in
arriving at the Exchange Ratio as well the due diligence reports and publicly
available business and financial information relating to FSB and CBC. TSJ&A
also considered certain financial and stock market data of FSB and CBC, and
compared that data with similar data for certain other publicly held
16
<PAGE>
banks and bank holding companies in the Southeastern United States. TSJ&A also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant. In connection with its review, TSJ&A did not independently verify the
foregoing information and relied on such information as being complete and
accurate in all material respects. Financial forecasts prepared by FSB and CBC
management and submitted to TSJ&A were based on assumptions believed by TSJ&A to
be reasonable and to reflect currently available information, but TSJ&A did not
independently verify such information. TSJ&A did not make an independent
evaluation or appraisal of the assets of FSB or CBC.
In connection with rendering the Fairness Opinion and Exchange Ratio, TSJ&A
performed a variety of financial analyses, including those summarized below.
The summary set forth below does not purport to be a complete description of the
analyses performed by TSJ&A in this regard. The preparation of a fairness
opinion/exchange ratio involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, notwithstanding
the separate factors summarized below, TSJ&A believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. In
performing its analyses, TSJ&A made numerous assumptions with respect to
industry performance, business and economic conditions and other matters, many
of which are beyond FSB's or CBC's control. The analyses performed by TSJ&A are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. The
analyses do not purport to be appraisals or reflect the process by which or the
prices at which businesses actually may be sold or the prices at which any
securities may trade at the present time or at any time in the future.
TSJ&A performed three separate analyses, weighted the results, and arrived
at an analysis valuation summary which was used to determine the Exchange Ratio.
The goal of the merger committee was to create a merger of equals. Therefore,
TSJ&A placed more weight on the analyses that considered the companies as a
going concern, with less weight given to the acquisition value of the companies,
which considers consolidation savings and recent peer group acquisitions. The
following is a description of the three analyses used in arriving at the
Exchange Ratio and the basis for rendering the Fairness Opinion.
ADJUSTED BOOK VALUE. This analysis attempts to adjust the equity of each
institution taking into account the market value of assets, deduction for
intangibles and exercise of outstanding options. The Adjusted Book Value was
weighted 45 percent.
The adjusted book values per share for FSB and CBC at June 30, 1997 were
$10.94 and $7.45 respectively. Due diligence examinations did not warrant any
change to these figures.
INVESTMENT VALUE. This analysis attempts to calculate the purchase price
one would pay for a non-control position given a required rate of return and an
investment period of five years. Performance projections for the five-year
period are based on current market growth rates and historical performance of
the two institutions. The Investment Value was weighted 45 percent.
17
<PAGE>
TSJ&A assumed a range of required rates of return from 8 percent to 12
percent, with an average per share Investment Value for FSB and CBC of $13.50
and $6.47, respectively. Again, due diligence examinations did not warrant any
change to these figures.
ACQUISITION VALUE. This analysis attempts to determine what a larger bank
holding company would pay for a control position based on 1997 projected
earnings and given no dilution to the holding company shareholders. Calculated
efficiencies and consolidation savings are included in the analysis. This
analysis does not project an actual acquisition based on future earnings growth.
The Acquisition Value was weighted 10 percent.
Both FSB and CBC are located in the Atlanta metropolitan area. It was
assumed that should either institution be acquired by a large bank holding
company, substantial consolidation savings could be realized. The acquisition
value for FSB and CBC considered acquisitions by Colonial BancGroup, Montgomery,
Alabama (CNB); First Union Corporation, Charlotte, North Carolina (FTU);
NationsBank, Charlotte, North Carolina (NB); Regions Financial Corporation,
Montgomery, Alabama (RGBK); SouthTrust Corporation, Birmingham, Alabama (SOTR);
SunTrust Bank, Inc., Atlanta, Georgia (STI); Wachovia Corporation, Winston-
Salem, North Carolina (WB); AmSouth Bancorporation, Birmingham, Alabama (ASO);
each assuming 40 percent consolidation savings. The Acquisition Values
calculated for FSB and CBC were $39.05 per share and $36.19 per share,
respectively.
The valuation summary of the weighted analyses for FSB and CBC resulted in
a value of $14.90 and $9.88 per share, respectively. It was determined that CBC
will be the resulting institution and that FSB will merge into CBC. The
Exchange Ratio was determined by dividing the per share value of FSB by the per
share value of CBC.
Based upon its original Exchange Ratio calculation and assuming the
accuracy and completeness of all the information, reports and data provided,
TSJ&A has been able to conclude that the consideration to be paid to the holders
of FSB common stock under the Merger Agreement is fair to such shareholders from
a financial point of view.
TSJ&A's services as an independent financial analyst, working with both
institutions to develop the Exchange Ratio as part of a merger of equals and
providing a Fairness Opinion to the FSB Board of Directors, have been performed
for a fee of $20,000 plus reimbursement of out-of-pocket expenses. This fee is
not contingent upon consummation of the transaction.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Merger will become effective upon the filing of Articles of Merger
filed by CBC with the Georgia Secretary of State. Unless otherwise agreed upon
by CBC and FSB, and subject to the conditions to the obligations of the parties
to effect the Merger, the parties will use their reasonable efforts to cause the
Effective Time to occur by the fifth business day after the last of the
following events occurs: (a) the effective date (including the expiration of
any applicable waiting period) of the last federal or state regulatory approval
required for the Merger; or (b) the date on which the Agreement is approved by
the requisite vote of FSB shareholders.
18
<PAGE>
No assurance can be provided that the necessary shareholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. CBC and FSB anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the last quarter of 1997 or the first quarter of 1998.
However, delays in the consummation of the Merger could occur.
The Board of Directors of either CBC or FSB generally may terminate the
Agreement if the Merger is not consummated by March 31, 1998, unless the failure
to consummate by that date is the result of a breach of the Agreement by the
party seeking termination. See "-- Conditions to Consummation of the Merger"
and "-- Waiver, Amendment, and Termination of the Agreement."
DISTRIBUTION OF STOCK CERTIFICATES AFTER THE MERGER
Promptly after the Effective Time, CBC will cause Sun Trust Bank, Atlanta
(the "Exchange Agent") to mail to the former shareholders of FSB a letter of
transmittal, together with instructions for the exchange of such shareholders'
certificates representing shares of FSB Common Stock for certificates
representing shares of CBC Common Stock.
FSB SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender to the
Exchange Agent of certificates for FSB Common Stock together with a properly
completed letter of transmittal, there will be issued and mailed to each holder
of FSB Common Stock surrendering such items a certificate or certificates
representing the number of shares of CBC Common Stock to which such holder is
entitled as a result of the Merger. After the Effective Time, to the extent
permitted by law, holders of record of FSB Common Stock as of the Effective Time
will be entitled to vote at any meeting of CBC shareholders the number of shares
of CBC Common Stock into which their FSB Common Stock has been converted,
regardless of whether such shareholders have surrendered their FSB stock
certificates. NO DIVIDEND OR OTHER DISTRIBUTION PAYABLE AFTER THE EFFECTIVE
TIME WITH RESPECT TO CBC COMMON STOCK, HOWEVER, WILL BE PAID TO THE HOLDER OF
ANY UNSURRENDERED FSB STOCK CERTIFICATE UNTIL THE HOLDER DULY SURRENDERS SUCH
CERTIFICATE. Upon such surrender, all undelivered dividends and other
distributions will be delivered to such shareholder, in each case without
interest.
After the Effective Time, there will be no transfers of shares of FSB
Common Stock on FSB's stock transfer books. If certificates representing shares
of FSB Common Stock are presented for transfer after the Effective Time, they
will be canceled and exchanged for the shares of CBC Common Stock deliverable in
respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) approval from the Federal Reserve and the Georgia Department without
any conditions or restrictions that would, in the reasonable judgment of either
party, so materially adversely impact the economic benefits of the transactions
contemplated by the Agreement as to render inadvisable the consummation of the
Merger, and the expiration of applicable waiting periods under the BHC Act;
19
<PAGE>
(b) Approval by the holders of a majority of the shares of FSB Common Stock
entitled to vote on the Agreement;
(c) The absence of any action by any court or governmental authority
restraining or prohibiting the Merger;
(d) The receipt of an opinion of counsel to the effect that, among other
things: (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
(ii) the exchange in the Merger of FSB Common Stock for CBC Common Stock will
not give rise to gain or loss to FSB shareholders, except to the extent of any
cash received; and (iii) neither CBC nor FSB will recognize gain or loss as a
consequence of the Merger, except for deferred gain or loss recognized pursuant
to Treasury Regulations issued under Section 1502 of the Code;
(e) Receipt of a letter from Porter Keadle Moore, LLP, dated as of the
Effective Time, confirming that the Merger will qualify for pooling-of-interests
accounting treatment.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement, including, among others:
(a) the delivery by CBC and FSB of certificates executed by their respective
Chief Executive Officers and Chief Financial Officers as to compliance with the
Agreement; and (b) as of the Effective Time, the accuracy of certain
representations and warranties and the compliance in all material respects with
the agreements and covenants of each party.
No assurance 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 party
permitted to do so. In the event the Merger is not effected on or before March
31, 1998, the Agreement may be terminated and the Merger abandoned by a vote of
a majority of the Board of Directors of either CBC or FSB. See " - Waiver,
Amendment, and Termination of the Agreement."
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the approvals described below have
been submitted to the appropriate regulatory agencies.
CBC and FSB are not aware of any material governmental approvals or actions
that are required for consummation of the Merger, except as described below.
Should any other approval or action be required, it presently is contemplated
that such approval or action would be sought.
The Merger requires the prior approval of the Federal Reserve. In granting
its approval, the Federal Reserve must take into consideration, among other
factors, the financial and managerial resources and future prospects of the
institutions and whether the Merger can reasonably be expected to produce
benefits to the public, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources,
20
<PAGE>
decreased or unfair competition, conflicts of interest, or unsound banking
practices. Under the BHC Act, the Merger may not be consummated until the 30th
day following the date of Federal Reserve approval, which may be shortened by
the Federal Reserve to the 15th day, during which time the United States
Department of Justice may challenge the transaction on antitrust grounds. The
commencement of any antitrust action would stay the effectiveness of the Federal
Reserve's approval, unless a court specifically orders otherwise.
The Merger also is subject to the approval of the Georgia Department. In
its evaluation, the Georgia Department will take into account considerations
similar to those applied by the Federal Reserve.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Effective Time, and to the extent permitted by law, any
provision of the Agreement generally may be (a) waived by the party benefited by
the provision or (b) amended by a written agreement between CBC and FSB approved
by their respective Boards of Directors; provided, however, that after approval
by the FSB shareholders, no amendment that would require further approval by
such shareholders under the Georgia Business Corporation Code ("Georgia Code")
may be made without the approval of such shareholders.
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Time, either before or after approval by the FSB
shareholders, under certain circumstances, including:
(a) By mutual agreement of the Boards of Directors of CBC and FSB;
(b) By the Board of Directors of either party, in the event of the other
party's breach or failure to comply with any provision of the Agreement which
meets certain standards specified in the Agreement;
(c) By the Board of Directors of either party, upon final nonappealable
denial of any required regulatory approval;
(d) By the Board of Directors of either party, if the shareholders of FSB
have not approved the Agreement in accordance with the provisions of the Georgia
Code;
(e) By the Board of Directors of either party, if the Merger shall not have
been consummated by March 31, 1998, but only if the failure to consummate the
Merger by such date has not been caused by the terminating party's breach of the
Agreement; or
(f) By the Board of Directors of either party, in connection with entering
into a competing definitive agreement in accordance with the terms of the
Agreement.
If the Agreement is terminated as described above, the Agreement will
become void and have no effect, except that certain provisions of the Agreement,
including those related to the obligations to share expenses, maintain
confidentiality of certain information and return all documents obtained from
the other party under the Agreement will survive. See "--Expenses and Fees" for
additional information concerning the payment of expenses.
21
<PAGE>
CONDUCT OF BUSINESS PENDING THE MERGER
Each of CBC and FSB generally has agreed, unless the prior consent of the
other party is obtained, and except as otherwise contemplated by the Agreement,
to operate its business only in the ordinary course, preserve intact its
business organization and assets, maintain its rights and franchises, and take
no action that would affect, adversely and materially, the ability of either
party to perform its covenants and agreements under the Agreement or that would
adversely affect either party's ability to obtain any consent or approval
required for the consummation of the transactions contemplated by the Agreement.
In addition, the Agreement contains certain other restrictions applicable to the
conduct of the business of both CBC and FSB prior to consummation of the Merger,
as described below.
Each party has agreed not to take certain actions relating to the operation
of its business pending consummation of the Merger without the prior approval of
the other party. Those actions generally include, without limitation: (a)
amending its Articles of Incorporation or Bylaws; (b) becoming responsible for
any obligation for borrowed money in excess of certain limits; (c) acquiring or
exchanging any shares of its capital stock or paying any dividend or other
distribution in respect of its capital stock, except that FSB is permitted to
declare and pay its regular annual cash dividend of up to $.05 per share on the
FSB Common Stock and CBC is permitted to declare and pay its regular annual cash
dividend of up to $.10 per share on the CBC Common Stock; (d) issuing or selling
any additional shares of its capital stock, any rights to acquire any such
stock, or any security convertible into such stock (except as set forth in the
Agreement, as previously disclosed to the other party, or pursuant to the
exercise of outstanding stock options); (e) adjusting or reclassifying any of
its capital stock, disposing of or encumbering any shares of capital stock of
any subsidiary (excluding inter-company transfers) or disposing of or
encumbering any asset with a book value in excess of certain limits other than
in the ordinary course of business; (f) purchase any securities or make any
material investment in any person, other than a wholly-owned subsidiary, other
than in connection with foreclosures in the ordinary course of business or
acquisition of control by a depository institution subsidiary in its fiduciary
capacity; (g) granting any increase in compensation or benefits to employees or
officers (except in accordance with past practice or prior obligation, in each
case as previously disclosed to the other party or as required by law), paying
any bonus (except as previously disclosed or in accordance with any existing
program or plan), entering into or amending any severance agreements with
officers, or granting any increase in compensation or other benefits to
directors of CBC or FSB or any of their subsidiaries; (h) entering into or
amending any employment contract that it does not have the unconditional right
to terminate without liability other than for services already rendered; (i)
adopting any new employee benefit plan or program, or materially changing any
existing plan or program except for any change required by law or advisable to
maintain the tax qualified status of any such plan; (j) making any significant
change in any tax or accounting methods or systems of internal accounting
controls (except in conformity to changes in tax laws, regulatory accounting
requirements or generally accepted accounting principles); (k) settling any
litigation involving liability of CBC or FSB or any of their subsidiaries for
damages in excess of certain limits or material restrictions upon its
operations; or (l) modifying or terminating any material contract except in the
ordinary course of business.
In addition, each party has agreed not to solicit, directly or indirectly,
any acquisition proposal from any other person or entity. Each party also has
agreed not to negotiate with respect to any such proposal, provide nonpublic
information to any party making such a proposal, or enter into
22
<PAGE>
any agreement with respect to any such proposal, except in compliance with the
fiduciary obligations of its Board of Directors. In addition, each party has
agreed to use its reasonable efforts to prevent its advisors and other
representatives from engaging in any of the foregoing activities.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
After the Merger, the CBC Board of Directors will consist of three current
CBC directors (Herman J. Russell, Johnnie L. Clark and Thomas E. Boland) and
three current FSB directors (Gregory T. Baranco, James E. Young and Bernard H.
Bronner). Mr. Russell will serve as CBC's Chairman of the Board and Mr. Baranco
will serve as CBC's Vice Chairman of the Board. The current President and Chief
Executive Officer of FSB, James E. Young, will become President and Chief
Executive Officer of CBC after the Merger and shall have the authority to select
his management team. CBC will continue to serve all of the communities currently
served by both FSB and CBC.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement provides that CBC will indemnify the present and former
directors, officers, employees and agents of FSB and the subsidiaries of FSB
against all liabilities arising out of actions or omissions at or prior to the
Effective Time to the full extent permitted under Georgia law and by FSB's
Articles of Incorporation or Bylaws, as currently in effect, including
provisions relating to advancement of expenses incurred in the defense of any
litigation. In any case in which approval by CBC is required to effect any
indemnification, at the election of the indemnified party, the determination of
any such approval will be made by independent counsel mutually agreed upon
between CBC and the indemnified party.
The Agreement also provides that CBC will honor all employment, severance,
consulting and other compensation contracts previously disclosed to CBC between
FSB or its subsidiaries and any current or former director, officer or employee,
and all provisions for vested amounts earned or accrued through the Effective
Time under FSB's benefit plans.
The Agreement further provides that all rights with respect to FSB Common
Stock pursuant to stock options granted by FSB under its stock option plans or
agreements that are outstanding at the Effective Time, whether or not then
exercisable, will be converted into and will become rights with respect to CBC
Common Stock, and CBC will assume each of such options in accordance with its
terms. All such options will become exercisable upon consummation of the
proposed Merger. FSB's President and Chief Executive Officer holds options to
purchase an aggregate of 4,000 shares of FSB Common Stock and, pursuant to his
employment agreement, an additional option to purchase 1,000 shares of FSB
Common Stock will be granted and will become exercisable upon consummation of
the proposed Merger. The number of shares of CBC stock subject to such FSB
Option will equal the number of shares of FSB Common Stock subject to the FSB
Option immediately prior to the Effective Time (i.e., 5,000 shares) multiplied
by the Exchange Ratio. The per share exercise price under each such FSB Option
shall be adjusted by dividing the per share exercise price (i.e., $10.00) under
each FSB Option by the Exchange Ratio and rounding down to the nearest cent,
resulting in a new exercise price of $6.63. Assuming all such options were
exercised as of the Effective Time, and assuming that the market price of the
CBC Common Stock that would be issued upon exercise of such options as a result
of the Merger were $9.88 per share (the per share value ascribed to CBC Common
Stock in determining the Exchange Ratio) (see "- Fairness
23
<PAGE>
Opinion"), the profit realized by the President and Chief Executive Officer
would be $3.25 per share ($9.88 less $6.63) or a total of approximately $24,505.
DISSENTERS' RIGHTS
Pursuant to Section 14-2-1301, et seq. of the Georgia Code (the
"Dissenters' Provisions"), any holder of record of FSB Common Stock who objects
to the Merger, and who fully complies with all of the Dissenters' Provisions
(but not otherwise) shall be entitled to demand and receive payment for all (but
not less than all) of his or her shares of FSB Common Stock if the proposed
Merger is consummated.
A shareholder of FSB who objects to the Merger and desires to receive
payment of the "fair value" of his or her stock:
(a) Must file a written objection to the Merger with FSB either prior to
the meeting or at the meeting but before the vote is taken, and the written
objection must contain a statement that the shareholder intends to demand
payment for his or her shares if the Merger is approved; AND
(b) Must either abstain from voting or vote against approval of the Merger;
AND
(c) Must demand payment and deposit his or her certificate(s) in accordance
with the terms of the dissenters' notice sent to the dissenting shareholder
following approval of the Merger.
A vote against the Merger alone will not constitute the separate written
notice and demand for payment referred to in (a) and (c) above; dissenting
shareholders must separately comply with all three conditions. Any notice
required to be given to FSB must be forwarded to First Southern Bancshares,
Inc., 2727 Panola Road, Lithonia, Georgia 30058, Attention: Willard C. Lewis.
If the Merger is approved, FSB will mail no later than 10 days after the
approval by certified mail to each shareholder who has complied with conditions
(a) and (b) above, written notice of such approval, addressed to the shareholder
at such address as the shareholder has furnished to FSB in writing, or if none,
at the shareholder's address as it appears on the records of FSB. FSB will set a
date by which it must receive the payment demand, which date may not be fewer
than 30 nor more than 60 days after the date the dissenters' notice is
delivered. The shareholder must make the written election to dissent and demand
for payment described in condition (c) above by the payment demand date as set
by FSB.
If all three of the above conditions are satisfied in full, CBC is required
to make a written offer within 10 days of receiving the payment demand, or
within 10 days after the consummation of the Merger, whichever is later, to each
dissenting shareholder to purchase all of such shareholder's shares of FSB
Common Stock at a specific price. If CBC and any dissenting shareholder are
unable to agree on the fair value of the shares within 60 days, CBC will
commence a proceeding in the Superior Court of Fulton County to determine the
rights of the dissenting shareholder and the fair value of his or her shares.
The court may appoint appraisers to receive evidence and to recommend a decision
on fair value. If CBC does not commence the proceeding within the 60-day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
24
<PAGE>
Upon compliance with the statutory procedures, dissenting shareholders will
not have any rights as shareholders of either FSB or CBC, including, among other
things, the right to receive dividends and the right to vote on matters
submitted for shareholder consideration.
The foregoing does not purport to be a complete statement of the
Dissenters' Provisions and it is qualified in its entirety by reference to said
provisions, which are reproduced in full as Appendix C to this Proxy
Statement/Prospectus. However, the foregoing does describe all of the material
provisions of Georgia law with which dissenting shareholders must comply in
order to preserve their dissenters' rights.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX
LAWS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-EXEMPT
ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, OR CORPORATIONS, AMONG
OTHERS OR WITH RESPECT TO SHAREHOLDERS WHO ACQUIRED THEIR SHARES OF FSB COMMON
STOCK PURSUANT TO THE EXERCISE OF FSB OPTIONS OR OTHERWISE AS COMPENSATION).
NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER UNDER ANY STATE,
LOCAL, ESTATE, OR FOREIGN TAX LAWS. SHAREHOLDERS, THEREFORE, ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND
EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS, AND THE
IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, based on certain
customary assumptions and representations, Smith, Gambrell & Russell, LLP,
counsel to CBC, has rendered an opinion to CBC and FSB concerning certain
federal income tax consequences of the proposed Merger under federal income tax
law. It is such firm's opinion that:
(a) Provided the Merger qualifies as a statutory merger under the Georgia
Code, the Merger will be a reorganization within the meaning of Section 368(a)
of the Code.
(b) The shareholders of FSB will recognize no gain or loss upon the
exchange of their FSB Common Stock solely for shares of CBC Common Stock. Each
FSB shareholder's basis in the CBC Common Stock received in the exchange will be
equal to such shareholder's basis in the FSB Common Stock surrendered in
exchange for CBC Common Stock in the Merger (reduced by the basis allocable to
any fractional interest in any share of CBC Common Stock for which cash is
received). Each FSB shareholder's holding period for the CBC Common Stock will
include the period that such shareholder held his or her FSB Common Stock
surrendered in exchange for CBC Common Stock in the Merger, provided that the
FSB Common Stock was a capital asset in the hands of such shareholder.
25
<PAGE>
(c) The receipt of cash in lieu of fractional shares of CBC Common Stock
will be treated as if the fractional shares were distributed as part of the
exchange and then redeemed by CBC. These cash payments will be treated as
having been received as distributions in full payment in exchange for the
fractional shares of CBC Common Stock redeemed as provided under Section 302(a)
of the Code. Any gain or loss recognized will be capital gain or loss, provided
the fractional share constitutes a capital asset in the hands of the exchanging
shareholder and the requirements of Section 302(b)(1) are met. FSB shareholders
receiving cash in lieu of fractional shares should consult their own tax
advisors as to the tax treatment in their particular circumstances (i.e.,
exchange treatment or dividend).
(d) Neither FSB nor CBC will recognize gain or loss for federal income tax
purposes as a consequence of the Merger.
ACCOUNTING TREATMENT
It is the intention of the parties that the Merger be treated for financial
reporting purposes as a pooling-of-interests. Under the pooling-of-interests
method of accounting, the recorded amounts of the assets and liabilities of FSB
will be carried forward and recorded on the financial statements of CBC at their
previously recorded amounts.
The Agreement provides that CBC and FSB will receive a letter from Porter
Keadle Moore, LLP, dated as of the Effective Time, stating that the Merger will
qualify for pooling-of-interests for financial reporting purposes. If the
Merger does not qualify for pooling-of-interests accounting treatment, it will
be abandoned. Neither CBC's management nor FSB's management currently has any
reason to believe that the Merger will not qualify for pooling-of-interests
accounting treatment.
For information concerning certain conditions to be imposed on the exchange
of FSB Common Stock for CBC Common Stock in the Merger by affiliates of FSB and
certain restrictions to be imposed on the transferability of the CBC Common
Stock received by those affiliates in the Merger in order, among other things,
to ensure the availability of pooling-of-interests accounting treatment, see
"--Resales of CBC Common Stock by Affiliates."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own consultants, investment
bankers, accountants, and counsel, except that FSB and CBC will each bear and
pay one-half of the filing fees and printing or copying costs associated with
the Registration Statement and this Proxy Statement/Prospectus and one-half of
the filing fees associated with any regulatory application.
The Agreement also provides that if it is terminated by CBC because (a) FSB
has breached its representations, warranties or covenants, (b) FSB has failed to
satisfy the conditions to CBC's obligation to consummate the Merger, (c) FSB
shareholders fail to approve the Agreement, but only if FSB has received a
competing proposal, or (d) FSB has entered into a definitive agreement with a
competing party, then FSB will pay CBC $250,000 plus CBC's out-of-pocket
expenses up to but not exceeding $250,000. Similarly, if the Agreement is
terminated by FSB as a result of the foregoing
26
<PAGE>
reasons, excluding failure to receive shareholder approval which is not
applicable, then CBC will pay FSB $250,000 plus FSB's out-of-pocket expenses up
to but not exceeding $250,000
RESALES OF CBC COMMON STOCK BY AFFILIATES
The shares of CBC Common Stock to be issued to FSB shareholders in the
Merger have been registered under the Securities Act, but that registration does
not cover resales of those shares by persons who control, are controlled by, or
are under common control with, FSB (such persons are referred to hereinafter as
"affiliates" and generally include executive officers, directors and other
controlling shareholders) at the time of the FSB Meeting. Affiliates may not
sell shares of CBC Common Stock acquired in connection with the Merger, except
pursuant to an effective registration statement under the Securities Act or in
compliance with SEC Rule 145 or another applicable exemption from the Securities
Act registration requirements and until such time as financial results covering
at least 30 days of combined operations of CBC and FSB after the consummation of
the Merger have been published. Similarly, affiliates of CBC generally may not
sell their shares of CBC Common Stock until such time as financial results
covering at least 30 days of combined operations of CBC and FSB after
consummation of the Merger have been published.
Each person who FSB reasonably believes to be an affiliate of FSB has
delivered to CBC a written agreement providing that such person generally will
not sell, pledge, transfer, or otherwise dispose of any CBC Common Stock to be
received by such person upon consummation of the Merger, except in compliance
with the Securities Act, the rules and regulations of the SEC promulgated
thereunder and applicable restrictions regarding pooling-of-interests accounting
treatment. Additionally, each person who CBC reasonably believes to be an
affiliate of CBC has delivered to FSB a written agreement providing that such
person generally will not sell, pledge, transfer or otherwise dispose of any CBC
Common Stock except in compliance with the applicable restrictions regarding
pooling-of-interests accounting treatment.
27
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
MARKET PRICES
There is no established public trading market for CBC Common Stock or FSB
Common Stock, nor are there uniformly quoted prices for such shares. There are,
however, occasional transactions in CBC Common Stock and FSB Common Stock as a
result of private negotiations. The following table sets forth, for the
indicated periods, the high and low sale prices for CBC Common Stock and FSB
Common Stock known to management and the cash dividends declared per share of
CBC Common Stock and FSB Common Stock for the indicated periods.
<TABLE>
<CAPTION>
CBC FSB
---------------------------- ------------------------------
CASH CASH
PRICE RANGE DIVIDENDS PRICE RANGE DIVIDENDS
DECLARED DECLARED
PER SHARE PER SHARE
------------ -------------- -------------- --------------
HIGH LOW HIGH LOW
----- ----- ------ ------
1995
<S> <C> <C> <C> <C>
First Quarter....................... $4.00 $4.00 - $10.00 $ 8.00 -
Second Quarter...................... 5.00 4.25 - 10.00 9.61 -
Third Quarter....................... - - - 10.00 5.00 -
Fourth Quarter...................... 4.25 4.25 $ .10 10.00 8.00 -
1996
First Quarter....................... 4.50 4.50 - 10.00 10.00 $ .05
Second Quarter...................... 5.00 5.00 .05 10.00 10.00 -
Third Quarter....................... 5.00 5.00 - 10.00 10.00 -
Fourth Quarter...................... 4.50 4.00 .05 10.00 10.00 -
1997
First Quarter....................... 4.50 4.50 - 8.00 7.50 .05
Second Quarter...................... 5.00 5.00 - - - -
Third Quarter....................... - - - 10.00 10.00 -
Fourth Quarter through
_______________, 1997............ - - - - - -
</TABLE>
Neither the management of CBC nor the management of FSB maintains a record
of the sales prices of the trades of their respective Common Stock. The last
known sale of CBC Common Stock was on July 29, 1997, one day preceding the
announcement of the Merger, at a price of $5.00 per share. The last known sale
of FSB Common Stock was on ___________, 1997, at a price of $_______ per share.
The holders of CBC Common Stock are entitled to receive dividends when
declared by the Board of Directors out of funds legally available therefor. CBC
has paid cash dividends since 1985. Although CBC currently intends to continue
to pay cash dividends on the CBC Common Stock, there can be no assurance that
CBC's dividend policy will remain unchanged after completion of the Merger. The
declaration and payment of dividends thereafter will depend upon business
conditions, operating results, capital and reserve requirements, and the Board
of Directors' consideration of other relevant factors. For information with
respect to provisions limiting dividends payable by CBC and FSB while the Merger
is pending see "Description of Merger - Conduct of the Business Pending the
Merger."
28
<PAGE>
CBC and FSB are legal entities separate and distinct from their respective
subsidiaries and their respective revenues depend in significant part on the
payment of dividends from their respective subsidiary depository institutions.
Such subsidiary depository institutions are subject to certain legal
restrictions on the amount of dividends they are permitted to pay
SHAREHOLDERS OF RECORD
As of September 30, 1997, there were 894 holders of record of CBC Common
Stock and [956] holders of record of FSB Common Stock.
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED BALANCE SHEETS
The following unaudited pro forma condensed combined balance sheet presents
the historical consolidated balance sheets of CBC and FSB at June 30, 1997. The
unaudited pro forma condensed combined balance sheets should be read in
conjunction with the historical consolidated financial statements of CBC and
FSB, including the respective notes thereto, which are incorporated by reference
in this Proxy Statement/Prospectus, and the unaudited pro forma financial
information appearing elsewhere in this Proxy Statement/Prospectus. The pro
forma condensed combined balance sheet is not necessarily indicative of the
condensed combined financial position that actually would have occurred if the
Merger had been consummated at the date indicated or which may be obtained in
the future.
29
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
CITIZENS SOUTHERN ADJUSTMENTS
BANCSHARES BANCSHARES, DEBIT PRO FORMA
CORP. INC. (CREDIT)(1) COMBINED
------------------ ------------------ --------------------- ------------------
<S> <C> <C> <C> <C>
Assets
Cash and due from banks $ 8,905 $ 6,298 $ 15,203
Federal Funds sold 2,200 2,200
Securities available for sale, at fair
value 8,822 5,525 14,347
Securities held to maturity 20,392 6,356 26,748
Loans, net 80,392 35,580 115,972
Less Allowance for loan losses (1,290) (374) (1,664)
------- ------ ------ -------
Loans, net 79,102 35,206 114,308
Premises and equipment, net 3,364 2,907 6,271
Foreclosed real estate, net 803 297 1,100
Other assets 4,789 2,002 6,791
------- ------ ------ -------
Total Assets 128,377 58,591 186,968
======= ====== ====== =======
DEPOSITS
Noninterest bearing 35,454 9,754 45,208
Interest bearing 80,891 37,942 118,833
------- ------ ------ -------
Total deposits 116,345 47,696 164,041
Long-term debt 675 200 875
Advances and Federal Funds Purchased 3,800
Accrued expense and other liabilities 1,354 820 2,174
------- ------ ------ -------
Total liabilities $118,374 $52,516 $170,890
------- ------ ------ -------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
FIRST PRO FORMA
CITIZENS SOUTHERN ADJUSTMENTS
BANCSHARES BANCSHARES, DEBIT PRO FORMA
CORP. INC. (CREDIT)(1) COMBINED
------------------ ------------------ --------------------- ------------------
<S> <C> <C> <C> <C>
Common stock $ 1,330 $ 2,775 $(1,938)(2) $ 2,167
Additional paid-in capital 1,470 2,777 1,938 6,185
Retained earnings 7,229 521 7,750
Unrealized gains (losses) on securities
available for sale, net of tax (26) 13 (13)
------- ------ --------- -------
10,003 6,086 16,089
Treasury shares (11) (11)
------- ------ --------- -------
Total stockholders' equity 10,003 6,075 16,078
------- ------ --------- -------
Total stockholders' equity and liabilities $128,377 $58,591 $186,968
======= ====== ========= =======
</TABLE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
The following unaudited pro forma condensed combined statements of income
have been prepared for the six-month periods ended June 30, 1997 and 1996, and
for each of the three years in the period ended December 31, 1996, and give
effect to the Merger, assuming the Merger is accounted for as a pooling-of-
interests. The unaudited pro forma condensed combined statements of income
should be read in conjunction with the historical consolidated financial
statements of CBC and FSB, including the respective notes thereto, which are
incorporated by reference in this Proxy Statement/Prospectus and the unaudited
consolidated historical and other pro forma financial information, including the
notes thereto, appearing elsewhere in this Proxy Statement/Prospectus. The pro
forma condensed combined statements of income are not necessarily indicative of
the results that actually would have occurred if the Merger had been consummated
on the dates indicated or which may be obtained in the future.
31
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
CITIZENS SOUTHERN ADJUSTMENTS
BANCSHARES BANCSHARES, DEBIT PRO FORMA
CORP. INC. (CREDIT) COMBINED
------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Interest income $4,996 $2,071 $7,067
Interest expense 1,638 978 2,616
----- ----- -------- -----
Net interest income 3,358 1,093 4,451
Provisions for loan losses (90) (90)
----- ----- -------- -----
Net interest income after provision for loan
losses 3,358 1,003 4,361
----- ----- -------- -----
Noninterest income
Service charges on deposits 1,621 433 2,054
Mortgage servicing fees 536 536
Other operating income 250 346 596
----- ----- -------- -----
Total noninterest income 1,871 1,315 3,186
----- ----- -------- -----
Noninterest expense
Salaries and employee benefits 2,835 1,082 3,917
Net occupancy and equipment expenses 828 323 1,151
Other operating expenses 1,517 653 2,170
----- ----- -------- -----
Total noninterest expense 5,180 2,058 7,238
----- ----- -------- -----
Income before income taxes 49 260 309
Income tax expenses 13 71 84
----- ----- -------- -----
Net Income $ 36 $ 189 $ 225
===== ===== ======== =====
Net Income per common share outstanding $ 0.03 $ 0.34 $ 0.10
===== ===== ======== =====
Weighted average outstanding shares 1,330 545 2,152
===== ===== ======== =====
</TABLE>
32
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
CITIZENS SOUTHERN ADJUSTMENTS
BANCSHARES BANCSHARES, DEBIT PRO FORMA
CORP. INC. (CREDIT) COMBINED
------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Interest income $4,944 $1,871 $6,815
Interest expense 1,435 818 2,253
----- ----- -------- -----
Net interest income 3,509 1,053 4,562
Provisions for loan losses (60) (60)
----- ----- -------- -----
Net interest income after provision for loan
losses 3,509 993 4,502
----- ----- -------- -----
Noninterest income
Service charges on deposits 1,869 505 2,374
Other operating income 186 40 226
----- ----- -------- -----
Total noninterest income 2,055 545 2,600
----- ----- -------- -----
Noninterest expense
Salaries and employee benefits 2,594 635 3,229
Net occupancy and equipment expenses 857 275 1,132
Other operating expenses 1,462 470 1,932
----- ----- -------- -----
Total noninterest expense 4,913 1,380 6,293
----- ----- -------- -----
Income before income taxes 651 158 809
Income tax expenses 142 36 178
----- ----- -------- -----
Net Income $ 509 $ 122 $ 631
===== ===== ======== =====
Net Income per common share outstanding $ 0.38 $ 0.23 $ 0.30
===== ===== ======== =====
Weighted average outstanding shares 1,330 522 2,117
===== ===== ======== =====
</TABLE>
33
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
CITIZENS SOUTHERN ADJUSTMENTS
BANCSHARES BANCSHARES, DEBIT PRO FORMA
CORP. INC. (CREDIT) COMBINED
---------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Interest income $10,359 $4,012 $14,371
Interest expense 3,085 1,771 4,856
------ ----- -------- ------
Net interest income 7,274 2,241 9,515
Provisions for loan losses (65) (140) (205)
------ ----- -------- ------
Net interest income after provision for loan
losses 7,209 2,101 9,310
------ ----- -------- ------
Noninterest income
Service charges on deposits 3,746 823 4,569
Mortgage servicing fees 358 358
Net realized gains on the sale of assets 19 14 33
Other operating income 295 312 607
------ ----- -------- ------
Total noninterest income 4,060 1,507 5,567
------ ----- -------- ------
Noninterest expense
Salaries and employee benefits 5,287 1,577 6,864
Net occupancy and equipment expenses 1,826 593 2,419
Other operating expenses 3,134 1,059 4,193
------ ----- -------- ------
Total noninterest expense 10,247 3,229 13,476
------ ----- -------- ------
Income before income taxes 1,022 379 1,401
Income tax expenses 379 77 456
------ ----- -------- ------
Net Income $ 643 $ 302 $ 945
====== ===== ======== ======
Net Income per common share outstanding $ 0.48 $ 0.57 $ 0.45
====== ===== ======== ======
Weighted average outstanding shares 1,330 524 2,120
====== ===== ======== ======
</TABLE>
34
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
CITIZENS SOUTHERN ADJUSTMENTS
BANCSHARES BANCSHARES, DEBIT PRO FORMA
CORP. INC. (CREDIT) COMBINED
------------------ ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Interest income $9,808 $3,169 $12,977
Interest expense 2,982 1,273 4,255
----- ----- -------- ------
Net interest income 6,826 1,896 8,722
Provisions for loan losses (417) (95) (512)
----- ----- -------- ------
Net interest income after provision for loan
losses 6,409 1,801 8,210
----- ----- -------- ------
Noninterest income
Service charges on deposits 3,771 765 4,536
Net realized gains on the sale of assets 96 96
Other operating income 269 220 489
----- ----- -------- ------
Total noninterest income 4,136 985 5,121
----- ----- -------- ------
Noninterest expense
Salaries and employee benefits 4,784 1,069 5,853
Net occupancy and equipment expenses 1,763 473 2,236
Other operating expenses 2,670 808 3,478
----- ----- -------- ------
Total noninterest expense 9,217 2,350 11,567
----- ----- -------- ------
Income before income taxes 1,328 436 1,764
Income tax expenses 75 126 201
----- ----- -------- ------
Net Income $1,253 $ 310 $ 1,563
===== ===== ======== ======
Net Income per common share outstanding $ 0.94 $ 0.59 $ 0.74
===== ===== ======== ======
Weighted average outstanding shares 1,330 524 2,120
===== ===== ======== ======
</TABLE>
35
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA
CITIZENS SOUTHERN ADJUSTMENTS
BANCSHARES BANCSHARES, DEBIT PRO FORMA
CORP. INC. (CREDIT) COMBINED
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Interest income $8,400 $2,397 $10,797
Interest expense 2,465 816 3,281
----- ----- -------- ------
Net interest income 5,935 1,581 7,516
Provisions for loan losses (735) (113) (848)
----- ----- -------- ------
Net interest income after provision for loan
losses 5,200 1,468 6,668
----- ----- -------- ------
Noninterest income
Service charges on deposits 4,060 724 4,784
Net realized gains on the sale of assets 114 114
Other operating income 459 169 628
----- ----- -------- ------
Total noninterest income 4,633 893 5,526
----- ----- -------- ------
Noninterest expense
Salaries and employee benefits 4,463 1,020 5,483
Net occupancy and equipment expenses 1,687 359 2,046
Other operating expenses 2,956 636 3,592
----- ----- -------- ------
Total noninterest expense 9,106 2,015 11,121
----- ----- -------- ------
Income before income taxes 727 346 1,073
Income tax expenses 26 6 32
----- ----- -------- ------
Net Income $ 701 $ 340 $ 1,041
===== ===== ======== ======
Net Income per common share outstanding $ 0.53 $ 0.65 $ 0.49
===== ===== ======== ======
Weighted average outstanding shares 1,330 526 2,123
===== ===== ======== ======
</TABLE>
36
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The unaudited pro forma condensed combined balance sheet as of June 30,
1997 and condensed combined statements of income for the six months ended
June 30, 1997 and 1996 and for the years ended December 31, 1996, 1995 and
1994 have been prepared based upon the historical consolidated balance
sheets and statements of income, which give effect to the Merger accounted
for as a pooling-of-interests, based on the Exchange Ratio. The pro forma
financial statements include all adjustments necessary to reflect the
acquisition on a pooling-of-interests basis. The pro forma condensed
combined financial statements should be read in conjunction with the
accompanying historical consolidated financial statements of CBC and FSB
and notes thereto incorporated by reference in this Proxy
Statement/Prospectus.
(2) Provided below is the pro forma adjustment necessary to reflect the
business combination of CBC and FSB accounted for as a pooling-of-
interests. Each outstanding share of FSB Common Stock will be exchanged for
1.508 shares of CBC Common Stock.
Issuance of CBC shares (836,877 at $1.00 par value) $ 836,877
Retirement of FSB shares (554,958 at $5.00 par value) (2,774,790)
-----------
Net effect on CBC Common Stock $(1,937,913)
===========
INFORMATION ABOUT CBC
CBC is a registered bank holding company under the BHC Act and owns 100% of
the outstanding capital stock of Citizens Trust Bank ("Citzens Trust"). CBC was
incorporated under the laws of the State of Georgia in 1972 to enhance Citizens
Trust's ability to serve its customers' requirements for financial services. The
holding company structure provides flexibility for expansion of CBC's banking
business through acquisition of other financial institutions and the provision
of additional banking-related services which the traditional commercial bank may
not provide under present laws.
Citizens Trust was organized under the laws of the State of Georgia in 1921
and is a member of the Federal Reserve System. Citizens Trust's main office is
located in 30,000 square feet of leased office space on the ground floor of a
12-story building located at 175 John Wesley Dobbs Avenue in downtown Atlanta,
Georgia. Citizens Trust has eight full service branches, two of which are
located in supermarkets, located in Fulton and DeKalb Counties, Georgia.
Citizens Trust owns the land and buildings of three free-standing branches, one
near the Atlanta University Center, one in the Adamsville section of the City of
Atlanta, and one in the City of East Point. Citizens Trust leases space for its
supermarket branches under license agreements, and leases a free-standing
facility in the Midtown section of the City of Atlanta.
Citizens Trust operates a full service banking business providing customary
banking services such as consumer and commercial checking accounts, negotiable
order of withdrawal ("NOW") accounts, savings accounts, various types of time
deposits, safe deposit facilities, money transfers, commercial loans, real
estate loans, home equity loans and consumer/installment loans. Citizens Trust
conducts limited trust activities, which primarily include serving as trustee
for bond issues for three colleges and for local governments.
37
<PAGE>
The primary service area for Citizens Trust is Fulton and DeKalb Counties,
Georgia, which includes the Atlanta metropolitan area.
For further information concerning CBC, reference is made to the CBC Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996 and the CBC
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997, copies of
which are being delivered to the FSB shareholders with this Proxy
Statement/Prospectus and are incorporated herein by reference. See "Documents
Incorporated by Reference."
INFORMATION ABOUT FSB
FSB was incorporated as a Georgia business corporation on February 16, 1995
and became a bank holding company by acquiring all of the common stock of First
Southern Bank ("First Southern") on July 3, 1995. FSB presently has two
operating subsidiaries, First Southern and FSB Mortgage Services, Inc.
("Mortgage Services"), a mortgage company. FSB was organized to facilitate
First Southern's ability to serve its customers' requirements for financial
services.
First Southern was incorporated on March 16, 1987, and opened for business
on April 26, 1989. Its home office is located at 2727 Panola Road, Lithonia,
Georgia 30058. In 1994, First Southern opened a branch office in the South
DeKalb Mall, Decatur, Georgia and in 1996 opened an additional branch in the
Rockbridge Place Shopping Center, Stone Mountain, Georgia in order to provide
more convenient services for the residents of its service area. First Southern
conducts a general commercial banking business that serves South DeKalb County.
First Southern's primary service area is South DeKalb County, along with
certain portions of Rockdale County. The primary focuses of First Southern are
the small business and commercial/service firms in the area plus individuals and
households who reside in or commute to the area.
FSB acquired the assets of and employed the personnel of American Financial
Mortgage Corp. on September 9, 1996. The resulting company, Mortgage Services,
is a mortgage company licensed by the State of Georgia and has received lender
approval from the Department of Housing and Urban Development, Farmers Home
Administration, Federal National Mortgage Association and the Veterans
Administration.
For further information concerning FSB, reference is made to the FSB Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996, as amended,
and the FSB Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997,
copies of which are being delivered to the FSB shareholders with this Proxy
Statement/Prospectus and are incorporated herein by reference. See "Documents
Incorporated by Reference."
38
<PAGE>
DESCRIPTION OF CBC COMMON STOCK
CBC is currently authorized to issue 5,000,000 shares of CBC Common Stock,
of which 1,329,684 shares were issued and outstanding at September 30, 1997.
Holders of CBC Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor. The
ability of CBC to pay dividends is affected by the ability of the subsidiaries
of CBC to pay dividends, which for the bank subsidiary is limited by applicable
regulatory requirements and capital guidelines. At September 30, 1997, under
such requirements and guidelines, the subsidiary had $320,000 of undivided
profits legally available for the payment of dividends without regulatory
approval.
For a further description of CBC Common Stock, see "Effect of the Merger on
Rights of Stockholders."
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
At the Effective Time, FSB shareholders will become shareholders of CBC,
and their rights as shareholders will be determined by CBC's Articles of
Incorporation and Bylaws. Because CBC and FSB are Georgia corporations governed
by the Georgia Code, there are no material differences between the rights of CBC
shareholders and the rights of FSB shareholders under the Georgia Code.
Accordingly, the following is a summary of the material differences in the
rights of shareholders of CBC and FSB based on a comparison of CBC's Articles of
Incorporation and Bylaws with FSB's Articles of Incorporation and Bylaws. This
summary does not purport to be a complete discussion of, and is qualified in its
entirety by reference to, the Georgia Code and Articles of Incorporation and
Bylaws of each corporation.
AUTHORIZED CAPITAL STOCK
CBC. CBC is currently authorized to issue 5,000,000 shares of common
stock, $1.00 par value, of which 1,329,684 shares were outstanding as of
September 30, 1997.
FSB. FSB is authorized to issue 10,000,000 shares of FSB Common Stock,
$5.00 par value, of which 553,603 shares were issued and outstanding as of
September 30, 1997.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
CBC. CBC's Bylaws state that any action required or permitted to be taken
by CBC shareholders may be taken without a meeting by consent of all CBC
shareholders, if the action is set forth in writing and such writing is
delivered to CBC for inclusion in CBC's minute book or filing with CBC's
corporate records.
FSB. FSB's Bylaws provide that any action required or permitted to be
taken by FSB shareholders may be taken without a meeting by consent in writing
setting forth the action to be taken and signed by those persons who would be
entitled to vote at a meeting those shares having voting power to cast not less
than the minimum number of votes that would be necessary to
39
<PAGE>
authorize or take such action at a meeting at which all shares entitled to vote
were present and voted.
SPECIAL MEETING OF SHAREHOLDERS
CBC. CBC's Bylaws provide that special meetings of shareholders may be
called at any time by the Chairman of the CBC Board of Directors, by the CBC
Board of Directors, by the President of CBC, or by CBC upon the written request
of shareholders owning an aggregate of at least 50% of the issued and
outstanding capital stock entitled to vote.
FSB. FSB's Bylaws state that special meetings of shareholders may be
called at any time by the FSB Board of Directors, by the President of FSB, or by
FSB, upon the written request of shareholders owning an aggregate of not less
than 25% of the outstanding shares of capital stock entitled to vote.
NUMBER OF DIRECTORS
CBC. CBC's Bylaws state that the CBC Board of Directors shall consist of
eight directors, provided, that the number of directors may be increased or
decreased from time to time by the CBC Board of Directors or the CBC
shareholders.
FSB. FSB's Articles of Incorporation state that the Board of Directors
shall consist of not less than five nor more than twenty-five directors. The
FSB Bylaws provide that the number of directors within this range may be fixed
from time to time by the FSB Board of Directors or by the FSB shareholders. The
FSB Board of Directors presently consists of eleven members.
EXPERTS
The consolidated financial statements of CBC as of December 31, 1996 and
for the year then ended, incorporated by reference herein and in the
Registration Statement by reference to CBC's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, have been incorporated by reference in
reliance upon the report of Porter Keadle Moore, 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 CBC as of December 31, 1995 and
for the year then ended, incorporated by reference herein and in the
Registration Statement by reference to CBC's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1995, have been incorporated by reference in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of FSB as of December 31, 1996, and
for each of the years in the two-year period ended December 31, 1996,
incorporated by reference herein and in the Registration Statement by reference
to FSB's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1996, have been incorporated by reference in reliance upon the report of
40
<PAGE>
Banks, Finley, White & Company, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
OPINIONS
The legality of the shares of the CBC Common Stock to be issued in the
Merger will be passed upon by Smith, Gambrell & Russell, LLP, Atlanta, Georgia.
Certain income tax consequences of the Merger will also be passed upon by Smith,
Gambrell & Russell, LLP, Atlanta, Georgia. Certain matters relating to the
Merger will be passed upon by Powell, Goldstein, Frazer & Murphy LLP, Atlanta,
Georgia and Smith, Gambrell & Russell, LLP for FSB and CBC, respectively.
ADJOURNMENT OF SPECIAL MEETING
The holders of FSB Common Stock will be asked to approve, if necessary, the
adjournment of the FSB Meeting to solicit further votes in favor of the
Agreement. The proxies of shareholders voting against the Agreement may not be
used by management to vote in favor of an adjournment pursuant to its
discretionary authority.
SHAREHOLDER PROPOSALS
If the Agreement is approved and adopted and the Merger is consummated,
there will be an Annual Meeting of CBC's shareholders, but not of FSB's
shareholders, in 1998. If the Merger is not consummated, however, FSB
anticipates that its 1998 Annual Meeting will be held in April 1998. Any
proposal intended to be presented by FSB shareholders for inclusion in FSB's
proxy statement for its 1998 Annual Meeting must be received by FSB at its
principal executive offices no later than December 31, 1997.
OTHER MATTERS
It is not expected that any matters other than those described in this
Proxy Statement/ Prospectus will be brought before the FSB Meeting. If any
other matters are presented, however, it is the intention of the persons named
in the proxy to vote such proxy in accordance with the determination of a
majority of the Board of Directors of FSB, including, without limitation, a
motion to adjourn or postpone the FSB Meetings to another time and/or place for
the purpose of soliciting additional proxies in order to approve the Agreement.
41
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
CITIZENS BANCSHARES CORPORATION
AND
FIRST SOUTHERN BANCSHARES, INC.
Execution Copy
10/1/97
A-1
<PAGE>
TABLE OF CONTENTS
Page
Preamble ................................................................A-6
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER................................A-6
1.1 Merger......................................................... A-7
1.2 Time and Place of Closing...................................... A-7
1.3 Effective Time................................................. A-7
ARTICLE 2 TERMS OF MERGER................................................ A-7
2.1 Articles of Incorporation...................................... A-7
2.2 Bylaws......................................................... A-7
2.3 Directors and Officers......................................... A-7
2.4 Name........................................................... A-8
2.5 Subsidiary Bank................................................ A-8
ARTICLE 3 MANNER OF CONVERTING SHARES.................................... A-8
3.1 Conversion of Shares........................................... A-8
3.2 Anti-Dilution Provisions....................................... A-9
3.3 Shares Held by FSB or CBC...................................... A-9
3.4 Conversion of Stock Options; Restricted Stock.................. A-9
3.5 Fractional Shares.............................................. A-10
3.6 Dissenting Shareholders........................................ A-10
ARTICLE 4 EXCHANGE OF SHARES............................................. A-10
4.1 Exchange Procedures............................................ A-10
4.2 Rights of Former FSB Shareholders.............................. A-11
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF FSB.......................... A-12
5.1 Organization, Standing, and Power.............................. A-12
5.2 Authority; No Breach By Agreement.............................. A-12
5.3 Capital Stock.................................................. A-13
5.4 FSB Subsidiaries............................................... A-13
5.5 Financial Statements........................................... A-14
5.6 Absence of Undisclosed Liabilities............................. A-14
5.7 Absence of Certain Changes or Events........................... A-14
5.8 Tax Matters.................................................... A-14
5.9 Allowance for Possible Loan Losses............................. A-15
5.10 Assets......................................................... A-15
5.11 Environmental Matters.......................................... A-16
5.12 Compliance with Laws........................................... A-16
A-2
<PAGE>
5.13 Labor Relations................................................ A-17
5.14 Employee Benefit Plans......................................... A-17
5.15 Material Contracts............................................. A-19
5.16 Legal Proceedings.............................................. A-20
5.17 Reports........................................................ A-20
5.18 Statements True and Correct.................................... A-20
5.19 Accounting, Tax and Regulatory Matters......................... A-21
5.20 Charter Provisions............................................. A-21
5.21 Derivatives Contracts.......................................... A-21
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF CBC.......................... A-21
6.1 Organization, Standing, and Power.............................. A-21
6.2 Authority; No Breach By Agreement.............................. A-22
6.3 Capital Stock.................................................. A-22
6.4 CBC Subsidiaries............................................... A-23
6.5 Financial Statements........................................... A-24
6.6 Absence of Undisclosed Liabilities............................. A-24
6.7 Absence of Certain Changes or Events........................... A-24
6.8 Tax Matters.................................................... A-24
6.9 Allowance for Possible Loan Losses............................. A-25
6.10 Assets......................................................... A-25
6.11 Environmental Matters.......................................... A-26
6.12 Compliance with Laws........................................... A-26
6.13 Labor Relations................................................ A-27
6.14 Employee Benefit Plans......................................... A-27
6.15 Material Contracts............................................. A-29
6.16 Legal Proceedings.............................................. A-30
6.17 Reports........................................................ A-30
6.18 Statements True and Correct.................................... A-30
6.19 Accounting, Tax and Regulatory Matters......................... A-31
6.20 Charter Provisions............................................. A-31
6.21 Derivatives Contracts.......................................... A-31
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION....................... A-31
7.1 Affirmative Covenants of FSB................................... A-31
7.2 Negative Covenants of FSB...................................... A-31
7.3 Affirmative Covenants of CBC................................... A-33
7.4 Negative Covenants of CBC...................................... A-34
7.5 Adverse Changes in Condition................................... A-35
7.6 Reports........................................................ A-36
ARTICLE 8 ADDITIONAL AGREEMENTS.......................................... A-36
8.1 Registration Statement; Proxy Statement; Shareholder Approval.. A-36
8.2 Applications................................................... A-36
A-3
<PAGE>
8.3 Filings with State Offices..................................... A-36
8.4 Agreement as to Efforts to Consummate.......................... A-36
8.5 Investigation and Confidentiality.............................. A-37
8.6 Press Releases................................................. A-37
8.7 Acquisition Proposals.......................................... A-38
8.8 Accounting and Tax Treatment................................... A-39
8.9 Agreement of Affiliates........................................ A-39
8.10 Indemnification................................................ A-39
8.11 Certain Modifications.......................................... A-40
8.12 Employee Benefits and Contracts................................ A-40
8.13 Delivery to Exchange Agent..................................... A-40
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.............. A-40
9.1 Conditions to Obligations of Each Party........................ A-40
9.2 Conditions to Obligations of CBC............................... A-42
9.3 Conditions to Obligations of FSB............................... A-43
ARTICLE 10 TERMINATION.................................................... A-44
10.1 Termination.................................................... A-44
10.2 Effect of Termination.......................................... A-45
10.3 Non-Survival of Representations and Covenants.................. A-45
ARTICLE 11 MISCELLANEOUS.................................................. A-46
11.1 Definitions.................................................... A-46
11.2 Expenses....................................................... A-53
11.3 Brokers and Finders............................................ A-54
11.4 Entire Agreement............................................... A-54
11.5 Amendments..................................................... A-54
11.6 Waivers........................................................ A-54
11.7 Assignment..................................................... A-55
11.8 Notices........................................................ A-55
11.9 Governing Law.................................................. A-56
11.10 Counterparts................................................... A-56
11.11 Captions....................................................... A-56
11.12 Enforcement of Agreement....................................... A-56
11.13 Severability................................................... A-56
A-4
<PAGE>
LIST OF EXHIBITS
----------------
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1. Form of Agreement of Affiliates of FSB. ((S) 8.10).
2. Form of Agreement of Affiliates of CBC ((S) 8.10).
3. Form of Claims/Indemnification Letter ((S) 9.2(d)).
4. Form of Opinion of FSB Counsel ((S) 9.2(f)).
5. Form of Opinion of CBC Counsel ((S) 9.3(e)).
A-5
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into
as of October 1, 1997 by and between CITIZENS BANCSHARES CORPORATION, INC.
("CBC") a corporation organized and existing under the laws of the State of
Georgia, with its principal office located in atlanta, georgia, and FIRST
SOUTHERN BANCSHARES, INC. ("FSB"), a corporation organized and existing under
the laws of the State of Georgia, with its principal office located in Lithonia,
Georgia.
PREAMBLE
--------
The Boards of Directors of FSB and CBC are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective shareholders. This Agreement provides for the merger of FSB with
CBC, with CBC being the surviving corporation of the merger. The transactions
described in this Agreement are subject to the approvals by the shareholders of
FSB, the Board of Governors of the Federal Reserve System, the Georgia
Department of Banking and Finance and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the parties to
this Agreement that the merger (a) for federal income tax purposes shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code and (b) for accounting purposes shall be treated as a "pooling of
interests."
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
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
------
Effective Time, FSB will be merged with and into CBC in accordance with the
provisions of Section 14-2-1101 of the GBCC and with the effect provided for in
Section 14-2-1106 of the GBCC (the "Merger"). CBC shall be the Surviving
Corporation resulting from the Merger. 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 FSB and CBC.
A-6
<PAGE>
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 10:00 a.m.
-------------------------
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 10:00 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 Powell, Goldstein, Frazer & Murphy
LLP in Atlanta, Georgia, or such other place as may be mutually agreed upon by
the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by this
--------------
Agreement shall become effective on the date and at the time the Certificate of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Georgia (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the chief
executive officer of each Party, the Effective Time shall occur on the fifth
business day following the last to occur of (a) 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, (b) the date on which the shareholders of CBC approve this Agreement to
the extent such approval is required by applicable Law, (c) the date on which
the shareholders of FSB approve this Agreement to the extent such approval is
required by applicable Law; or such other date as may be mutually agreed upon in
writing by the chief executive officer of each Party.
ARTICLE 2
TERMS OF MERGER
---------------
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of CBC 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 CBC 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.
----------------------
(a) The directors of the Surviving Corporation immediately following the
Effective Time shall consist of Herman J. Russell, Johnnie L. Clark,
Thomas E. Boland, James E. Young, Gregory T. Baranco and Bernard H.
Bronner, all of whom shall serve in accordance with the Bylaws of
the Surviving Corporation. Herman J. Russell and Gregory T. Baranco
shall serve as Chairman and Vice Chairman of the Board,
respectively, of the Surviving Corporation.
(b) The officers of the Surviving Corporation immediately following the
Effective Time shall consist of James E. Young, who shall serve as
the President and Chief Executive Officer and who shall have the
authority to select his management team, together with such
additional persons as may thereafter be elected, all of whom shall
serve in accordance with the Bylaws of the Surviving Corporation.
A-7
<PAGE>
2.4 NAME. At the Effective Time of the Merger, the Surviving Corporation
----
will operate under the name "Citizens Bancshares Corporation."
2.5 SUBSIDIARY BANK.
---------------
(a) As soon as practicable following the Effective Time of the Merger,
the Surviving Corporation intends to merge the Parties' subsidiary
banks, First Southern Bank and Citizens Trust Bank, Citizens Trust
Bank, with the resulting institution (the "Resulting Bank") being
known as "Citizens Trust Bank.
(b) The directors of the Resulting Bank shall consist of Herman J.
Russell, H. Jerome Russell, Johnnie L. Clark, Thomas E. Boland, Odie
C. Donald, R. K. Sehgal, James E. Young, Gregory T. Baranco, C.
David Moody, William H. Cleveland, Thom Peters and Lynn Pattillo,
all of whom shall serve in accordance with the Bylaws of the
Resulting Bank. Herman J. Russell and Gregory T. Baranco shall serve
as Chairman and Vice Chairman of the Board, respectively, of the
Resulting Bank.
(c) The officers of the Resulting Bank shall consist of James E. Young,
who shall serve as the President and Chief Executive Officer and who
shall have the authority to select his management team, together
with such additional persons as may thereafter be elected, all of
whom shall serve in accordance with the Bylaws of the Resulting
Bank.
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
--------------------
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof the shares of the constituent corporations shall be
converted as follows:
(a) Each share of CBC Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
(b) Each share of FSB Common Stock (other than Dissenting Shares (defined
at Section 3.6 below) or shares canceled pursuant to Section 3.3
below) shall be converted into 1.508 shares (subject to Section 3.5
hereof) of CBC Common Stock (the "Exchange Ratio"), subject to
adjustment as hereinafter provided.
A-8
<PAGE>
3.2 ANTI-DILUTION PROVISIONS. In the event FSB or CBC changes the number
------------------------
of shares of FSB Common Stock or CBC 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 Exchange Ratio shall be proportionately adjusted.
3.3 SHARES HELD BY FSB OR CBC. Each of the shares of FSB Common Stock held
-------------------------
by any FSB Company or by any CBC Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.4 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
---------------------------------------------
(a) At the Effective Time, all rights with respect to FSB Common Stock
pursuant to stock options ("FSB Options") granted by FSB under the FSB Stock
Plans, which are outstanding at the Effective Time, whether or not exercisable,
shall be converted into and become rights with respect to Surviving Corporation
Common Stock, and the Surviving Corporation shall assume each FSB Option, in
accordance with the terms of the FSB Stock Plan and stock option agreement by
which it is evidenced. From and after the Effective Time, (i) each FSB Option
assumed by the Surviving Corporation may be exercised solely for shares of
Surviving Corporation Common Stock, (ii) the number of shares of Surviving
Corporation Common Stock subject to such FSB Option shall be equal to the number
of shares of FSB Common Stock subject to such FSB Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, and (iii) the per share
exercise price under each such FSB Option shall be adjusted by dividing the per
share exercise price under each such FSB Option by the Exchange Ratio and
rounding down to the nearest cent. Notwithstanding the provisions of clause (ii)
of the preceding sentence, the Surviving Corporation shall not be obligated to
issue any fraction of a share of Surviving Corporation Common Stock upon
exercise of a FSB Option, and any fraction of a share of Surviving Corporation
Common Stock that would otherwise be subject to a converted FSB Option shall
represent the right to receive a cash payment equal to the product of such
fraction and the difference between the "Market Value" of one share of Surviving
Corporation Common Stock and the per share exercise price of such Option. The
"Market Value" of one share of Surviving Corporation Common Stock shall be the
last sales price of such common stock on Nasdaq, or such other exchange or
market system on which Surviving Corporation Common Stock is then traded, (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by the Surviving Corporation) on the last trading
day preceding the date of exercise or, if the Surviving Corporation Common Stock
is not then traded on Nasdaq or an exchange, the "Market Value" of one share of
Surviving Corporation Common Stock shall be established by the Board of
Directors of the Surviving Corporation. It is intended that the foregoing
assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 424 of the Internal Revenue Code, as to any
stock option which is an "incentive stock option." FSB and CBC agree to take all
necessary steps to effect the provisions of this Section 3.4.
(b) All restrictions or limitations on transfer with respect to FSB
Common Stock awarded under the FSB Stock Plans or any other plan, program or
arrangement of any FSB
A-9
<PAGE>
Company, to the extent that such restrictions or limitations shall not have
already lapsed, and except as otherwise expressly provided in such plan, program
or arrangement, shall remain in full force and effect with respect to shares of
Surviving Corporation Common Stock into which such restricted stock is converted
pursuant to Section 3.1 of this Agreement.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
-----------------
Agreement, each holder of shares of FSB Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of Surviving Corporation Common Stock (after taking into account all
certificates delivered by such holder) shall receive in lieu thereof cash
(without interest) in an amount equal to such fractional part of a share of
Surviving Corporation Common Stock multiplied by $9.88. No such holder will be
entitled to dividends, voting rights, or any other rights as a shareholder in
respect of any fractional shares.
3.6 DISSENTING SHAREHOLDERS. Any holder of shares of FSB Common Stock
-----------------------
("Dissenting Shares") who perfects such holder's dissenters' rights of appraisal
in accordance with and as contemplated by Article 13 of the GBCC shall be
entitled to receive the value of such shares in cash as determined pursuant to
such provisions of Law; provided, that no such payment shall be made to any
dissenting shareholder unless and until such dissenting shareholder has complied
with the applicable provisions of the GBCC and surrendered to the Surviving
Corporation the certificate or certificates representing the shares for which
payment is being made. In the event that after the Effective Time a dissenting
shareholder of FSB fails to perfect, or effectively withdraws or loses, such
holder's right to appraisal and of payment for such holder's shares, the
Surviving Corporation shall issue and deliver the consideration to which such
holder of shares of FSB Common Stock is entitled under this Article 3 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of FSB Common Stock held by such holder.
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 EXCHANGE PROCEDURES. Unless the parties otherwise agree, within three
-------------------
business days after the Effective Time, the Surviving Corporation shall cause a
qualified exchange agent (the "Exchange Agent") to mail to the former holders of
FSB Common Stock appropriate transmittal materials which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of FSB Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent. After the Effective Time,
each holder of shares of FSB Common Stock (other than shares to be canceled
pursuant to Section 3.3 of this Agreement or as to which dissenters' rights have
been perfected as provided in Section 3.6 of this Agreement) issued and
outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1 of this Agreement, together with all undelivered dividends or
distributions in respect of such shares (without interest thereon) pursuant to
Section 4.2 of this Agreement. To the extent required by Section 3.5 of this
Agreement, each holder of shares of FSB Common Stock issued and outstanding at
the Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
Surviving Corporation Common Stock to which such holder may otherwise be
entitled (without interest). The
A-10
<PAGE>
Exchange Agent shall not be obligated to deliver the consideration to which any
former holder of FSB Common Stock is entitled as a result of the Merger until
such holder surrenders his or her certificate or certificates representing the
shares of FSB Common Stock for exchange as provided in this Section 4.1. The
certificate or certificates of FSB Common Stock so surrendered shall be duly
endorsed as the Exchange Agent may require. Any other provision of this
Agreement notwithstanding, the Surviving Corporation shall not be liable to a
holder of FSB Common Stock for any amounts paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property Law.
4.2 RIGHTS OF FORMER FSB SHAREHOLDERS. At the Effective Time, the stock
---------------------------------
transfer books of FSB shall be closed as to holders of FSB Common Stock
immediately prior to the Effective Time and no transfer of FSB Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of FSB Common Stock (other than
shares to be canceled pursuant to Section 3.3 or as to which dissenters' rights
have been perfected as provided in 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 3.5 of this Agreement in exchange
therefor. To the extent permitted by Law, former holders of record of FSB Common
Stock shall be entitled to vote after the Effective Time at any meeting of
Surviving Corporation shareholders the number of whole shares of Surviving
Corporation Common Stock into which their respective shares of FSB Common Stock
are converted, regardless of whether such holders have exchanged their
certificates representing FSB Common Stock for certificates representing
Surviving Corporation Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by the
Surviving Corporation on Surviving Corporation 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 Surviving
Corporation Common Stock as of any time subsequent to the Effective Time shall
be delivered to the holder of any certificate representing shares of FSB Common
Stock issued and outstanding at the Effective Time until such holder surrenders
such certificate for exchange as provided in Section 4.1 of this Agreement.
However, upon surrender of such FSB Common Stock certificate, both Surviving
Corporation Common Stock certificate (together with all such undelivered
dividends or other distributions without interest) and any undelivered dividends
and 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. Any portion of the consideration (including the proceeds of any
investments thereof) which had been made payable to the Exchange Agent pursuant
to Section 4.1 of this Agreement that remain unclaimed by shareholders of FSB
for six months after the Effective Time shall be paid to the Surviving
Corporation. Any shareholders of FSB who have not theretofore complied with
this Article 4 shall thereafter look only to the Surviving Corporation for
payment of their shares of Surviving Corporation Common Stock and unpaid
dividends and distributions on the Surviving Corporation Common Stock
deliverable in respect of each share of FSB Common Stock such shareholder holds
as determined pursuant to this Agreement, in each case, without any interest
thereon.
A-11
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FSB
-------------------------------------
FSB hereby represents and warrants to CBC as follows:
5.1 ORGANIZATION, STANDING, AND POWER. FSB 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. FSB
has the corporate power and authority to carry on its business as now conducted
and to own, lease and operate its Assets. FSB 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 FSB.
5.2 AUTHORITY; NO BREACH BY AGREEMENT .
---------------------------------
(a) FSB has the corporate power and authority necessary to execute,
deliver and perform its 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 FSB, subject to the approval
of this Agreement and the transactions contemplated hereby by the holders of a
majority of the outstanding shares of FSB Common Stock, which is the only
shareholder vote required for approval of this Agreement and consummation of the
Merger by FSB. Subject to such requisite shareholder approval and any approvals
required of Regulatory Authorities, this Agreement represents a legal, valid and
binding obligation of FSB, enforceable against FSB 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 FSB, nor the
consummation by FSB of the transactions contemplated hereby, nor compliance by
FSB with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of FSB'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 FSB Company under, any
Contract or Permit of any FSB Company, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FSB, 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 FSB Company or any of their respective
Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, and applicable state corporate and securities Laws, and other
than Consents required from
A-12
<PAGE>
Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, and other than Consents, filings or
notifications which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FSB, no notice
to, filing with, or Consent of any public body or authority is necessary for the
consummation by FSB of the Merger and the other transactions contemplated in
this Agreement.
5.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of FSB consists of 10,000,000 shares of
FSB Common Stock, of which 553,603 shares are issued and outstanding as of the
date of this Agreement. All of the issued and outstanding shares of Capital
Stock of FSB are duly and validly issued and outstanding and are fully paid and
nonassessable under the GBCC. None of the outstanding shares of Capital Stock of
FSB has been issued in violation of any preemptive rights of the current or past
shareholders of FSB. FSB has reserved 5,000 shares of FSB Common Stock for
issuance under the FSB Stock Plans, pursuant to which options to purchase not
more than 4,000 shares of FSB Common Stock are outstanding as of the date of
this Agreement and pursuant to which options to purchase not more than 5,000
shares of FSB Common Stock will be outstanding at the Effective Time.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
disclosed in Section 5.3 of the FSB Disclosure Memorandum, there are no shares
---------------------
of capital stock or other equity securities of FSB outstanding and no
outstanding Rights relating to the capital stock of FSB.
5.4 FSB SUBSIDIARIES. FSB has disclosed in Section 5.4 of the FSB
----------------
Disclosure Memorandum all of the FSB Subsidiaries as of the date of this
- ---------------------
Agreement. Except as disclosed in Section 5.4 of the FSB Disclosure Memorandum,
---------------------
FSB or one of its Subsidiaries owns all of the issued and outstanding shares of
capital stock of each FSB Subsidiary. No equity securities of any FSB
Subsidiary are or may become required to be issued (other than to another FSB
Company) by reason of any Rights, and there are no Contracts by which any FSB
Subsidiary is bound to issue (other than to another FSB Company) additional
shares of its capital stock or Rights, or by which any FSB Company is or may be
bound to transfer any shares of the capital stock of any FSB Subsidiary (other
than to another FSB Company), and there are no Contracts by which any FSB
Company is bound to issue (other than to another FSB Company) additional shares
of its capital stock. There are no Contracts relating to the rights of any FSB
Company to vote or to dispose of any shares of the capital stock of any FSB
Subsidiary. All of the shares of capital stock of each FSB Subsidiary held by a
FSB Company are fully paid and nonassessable under the applicable Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the FSB Company free and clear of any Lien. Each FSB Subsidiary is either a
bank, a trust company, a savings association or a corporation and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is organized and has the corporate power
and authority necessary for it to own, lease and operate its Assets and to carry
on its business as now conducted. Each FSB Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have,
A-13
<PAGE>
individually or in the aggregate, a Material Adverse Effect on FSB. Each FSB
Subsidiary that is a depository institution is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits in which are insured to applicable limits by the
Bank Insurance Fund or the Savings Association Insurance Fund, as appropriate.
5.5 FINANCIAL STATEMENTS. FSB has included in Section 5.5 of the FSB
--------------------
Disclosure Memorandum copies of all FSB Financial Statements for the periods
- ---------------------
ended on or before December 31, 1996 and will deliver to CBC copies of all FSB
Financial Statements prepared subsequent to the date hereof. The FSB Financial
Statements (as of the dates thereof and for the periods covered thereby) (a)
are, or if dated after the date of this Agreement will be, in accordance with
the books and records of the FSB Companies, which are or will be, as the case
may be, complete and correct and which have been or will have been, as the case
may be, maintained in accordance with good business practices, and (b) present
or will present, as the case may be, fairly the consolidated financial position
of the FSB Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the FSB Companies
for the periods indicated, in accordance with GAAP (subject to any exceptions as
to consistency specified therein or as may be indicated in the notes thereto or,
in the case of interim financial statements, to normal recurring year-end
adjustments that are not material in amount or effect).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No FSB Company has any Liabilities
----------------------------------
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FSB except Liabilities which are reflected or otherwise
accrued or reserved against in the consolidated balance sheets of FSB as of
December 31, 1996, included in the FSB Financial Statements or reflected in the
notes thereto. No FSB Company has incurred or paid any Liability since December
31, 1996, except for such Liabilities reflected or otherwise accrued or reserved
against in the FSB Financial Statements, or as may have been 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 FSB.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996, except
------------------------------------
as in Section 5.7 of the FSB Disclosure Memorandum, (a) there have been no
---------------------
events, changes or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FSB, and (b) the
FSB 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 FSB provided in Article 7 of this
Agreement.
5.8 TAX MATTERS.
-----------
(a) All Tax returns required to be filed by or on behalf of any of the
FSB Companies have been timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1996, except to the extent that all such failures to file, taken together, are
not reasonably likely to have a Material Adverse Effect on FSB and all returns
filed are complete and accurate in all material respects to the Knowledge of
FSB. All
A-14
<PAGE>
Taxes shown as due on filed returns have been paid. 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 FSB, except as reserved against
in the FSB Financial Statements delivered prior to the date of this Agreement or
as disclosed in Section 5.8(a) of the FSB Disclosure Memorandum. All material
---------------------
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
(b) Except as disclosed in Section 5.8(b) of the FSB Disclosure
----------
Memorandum, none of the FSB Companies has executed an extension or waiver of any
- ----------
statute of limitations on the assessment or collection of any Tax due that is
currently in effect, and no unpaid tax deficiency has been asserted in writing
against or with respect to any FSB Company, which deficiency is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
FSB.
(c) Adequate provision for any Taxes due or to become due for any of the
FSB Companies for the period or periods through and including the date of the
respective FSB Financial Statements has been made and is reflected on such FSB
Financial Statements.
(d) Deferred Taxes of the FSB Companies have been provided for in
accordance with GAAP.
(e) Each of the FSB Companies is in compliance in all material respects
with, and its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to comply in all
material respects 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 FSB.
5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan or
----------------------------------
credit losses (the "Allowance") shown on the consolidated balance sheets of FSB
included in the most recent FSB Financial Statements dated prior to the date of
this Agreement was, and the Allowance shown on the consolidated balance sheets
of FSB included in the FSB 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 the FSB Companies and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by the FSB Companies 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 FSB.
5.10 ASSETS. Except as disclosed in Section 5.10 of the FSB Disclosure
------ ----------
Memorandum or as disclosed or reserved against in the FSB Financial Statements,
- ----------
the FSB Companies have good and marketable title, free and clear of all Liens,
to all of their respective Assets. All material tangible properties used in the
businesses of the FSB Companies are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
FSB's past practices. All Assets which are material to FSB's business on a
consolidated basis, held under leases or
A-15
<PAGE>
subleases by any of the FSB Companies, are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and effect.
FSB currently maintains insurance in amounts, scope, and coverage as disclosed
in Section 5.10 of the FSB Disclosure Memorandum. FSB has not received written
---------------------
notice from any insurance carrier that (a) such insurance will be cancelled or
that coverage thereunder will be reduced or eliminated, or (b) premium costs
with respect to such policies of insurance will be substantially increased.
Except as disclosed in Section 5.10 of the FSB Disclosure Memorandum, to the
---------------------
Knowledge of FSB, there are presently no claims pending under such policies of
insurance and no notices have been given by FSB under such policies. The Assets
of the FSB Companies include all assets required to operate the business of the
FSB Companies as presently conducted.
5.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Except as disclosed in Section 5.11(a) of the FSB Disclosure
----------
Memorandum, to the Knowledge of FSB, each FSB Company, its Participation
- ----------
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FSB.
(b) To the Knowledge of FSB, there is no Litigation pending or threatened
before any court, governmental agency or authority or other forum in which any
FSB Company or any of its Loan Properties or Participation Facilities has been
or, with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material (as defined below) or oil, whether or not
occurring at, on, under or involving a site owned, leased or operated by any FSB
Company or any of its Loan Properties or Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FSB and to the
Knowledge of FSB, there is no reasonable basis for any such Litigation.
(c) To the Knowledge of FSB, there have been no releases of Hazardous
Material or oil in, on, under or affecting any Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FSB.
5.12 COMPLIANCE WITH LAWS. Each FSB Company has in effect all Permits
--------------------
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FSB, 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 FSB. Except as disclosed in Section
5.12 of the FSB Disclosure Memorandum, no FSB Company:
---------------------
A-16
<PAGE>
(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 FSB; and
(b) 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 FSB Company is not in compliance with
any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FSB, (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 FSB, or
(iii) requiring any FSB Company to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
5.13 LABOR RELATIONS. No FSB Company is the subject of any Litigation
---------------
asserting that it or any other FSB Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other FSB Company to bargain with any
labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any FSB Company, pending or, to its
Knowledge, threatened, nor, to its Knowledge, is there any activity involving
any FSB Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) FSB has disclosed in Section 5.14 of the FSB Disclosure Memorandum
---------------------
and delivered or made available to CBC prior to the execution of this Agreement
copies in each case of all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus, or other incentive plans, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including, 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 any FSB Company or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "FSB Benefit
Plans"). Any of the FSB Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "FSB ERISA Plan."
(b) Except as to those plans disclosed in Section 5.14(b) of the FSB
Disclosure Memorandum as tax-qualified FSB ERISA Plans (the "FSB Qualified
- ---------------------
Plans"), no FSB Company maintains or previously maintained during the six years
preceding the date of this Agreement a FSB Plan which meets or was intended to
meet the requirements of Code Section 401(a). The Internal Revenue Service has
issued favorable determination letters to the effect that each FSB Qualified
Plan
A-17
<PAGE>
qualifies under Code Section 401(a) and that any related trust is exempt
from taxation under Code Section 501(a), and such determination letters remain
in effect and have not been revoked. Copies of the most recent determination
letters and any outstanding requests for a determination letter with respect to
each FSB Qualified Plan have been delivered or made available to CBC. Except as
disclosed in Section 5.14(b) of the FSB Disclosure Memorandum, no FSB Qualified
---------------------
Plan has been amended since the issuance of each respective determination
letter. The FSB Qualified Plans currently comply in form with the requirements
under Code Section 401(a), other than changes required by statutes, regulations
and rulings for which amendments are not yet required. No issue concerning
qualification of the FSB Qualified Plans is pending before or is threatened by
the Internal Revenue Service. The FSB Qualified Plans have been administered
according to their terms (except for those terms which are inconsistent with the
changes required by statutes, regulations, and rulings for which changes are not
yet required to be made, in which case the FSB Qualified Plans have been
administered in accordance with the provisions of those statutes, regulations
and rulings) and in accordance with the requirements of Code Section 401(a). No
FSB Company, any ERISA Affiliate or any fiduciary of any FSB Qualified Plan has
done anything that would adversely affect the qualified status of the FSB
Qualified Plans or the related trusts. Any FSB Qualified Plan which is required
to satisfy Code Section 401(k)(3) and 401(m)(2) has been tested for compliance
with, and has satisfied the requirements of, Code Section 401(k)(3) and
401(m)(2) for each plan year ending prior to the date of this Agreement.
(c) All FSB Benefit Plans are in compliance in all material respects with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FSB. To the
Knowledge of FSB, no FSB Company nor any other party has engaged in a
transaction with respect to any FSB Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any FSB
Company to a tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on FSB.
(d) Neither FSB nor any ERISA Affiliate of FSB maintains or has during
the six years preceding the date of this Agreement maintained an "employee
benefit pension plan," within the meaning of Section 3(2) of ERISA that is or
was subject to Title IV of ERISA.
(e) Neither FSB nor any ERISA Affiliate of FSB has any past, present or
future obligation or liability to contribute to any multi-employer plan, as
defined in Section 3(37) of ERISA.
(f) Except as disclosed in Section 5.14(f) of the FSB Disclosure
----------
Memorandum, (i) no FSB Company has any obligations for retiree health and life
- ----------
benefits under any of the FSB Benefit Plans and (ii) there are no restrictions
on the rights of such FSB Company to amend or terminate any such Plan without
incurring any Liability thereunder, which Liability is reasonably likely to have
a Material Adverse Effect on FSB, other than for benefits accrued before the
date of such termination or amendment.
(g) Except as disclosed in Section 5.14(g) of the FSB Disclosure
----------
Memorandum, neither the execution and delivery of this Agreement nor the
- ----------
consummation of the transactions
A-18
<PAGE>
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute or otherwise)
becoming due to any director or any employee of any FSB Company from any FSB
Company under any FSB Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any FSB Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(h) 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 any FSB Company and their 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 reflected on the FSB Financial Statements to the extent required by
and in accordance with GAAP.
(i) FSB and each ERISA Affiliate of FSB has complied in all material
respects with applicable continuation of coverage requirements of Section 1001
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and
ERISA Sections 601 through 608.
(j) Except as disclosed in Section 5.14(j) of the FSB Disclosure
----------
Memorandum, neither FSB nor any ERISA Affiliate of FSB is obligated,
- ----------
contingently or otherwise, under any agreement to pay any amount which would be
treated as a "parachute payment," as defined in Section 280G(b) of the Internal
Revenue Code (determined without regard to Section 280G(b)(2)(A)(ii) of the
Internal Revenue Code).
(k) Other than routine claims for benefits, there are no actions, audits,
investigations, suits or claims pending, or threatened against any FSB Benefit
Plan, any trust or other funding agency created thereunder, or against any
fiduciary of any FSB Benefit Plan or against the assets of any FSB Benefit Plan.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the FSB
------------------
Disclosure Memorandum or otherwise reflected in the FSB Financial Statements,
- ---------------------
none of the FSB Companies, nor any of their respective Assets, businesses or
operations, is a party to, or is bound or affected by, or receives benefits
under, (a) any employment, severance, termination, consulting or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $25,000, excluding "at will" employment arrangements, (b) any Contract
relating to the borrowing of money by any FSB Company or the guarantee by any
FSB Company of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, Federal Home Loan Bank advances, fully-
secured repurchase agreements, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (c) any
Contracts between or among FSB Companies, and (d) any other Contract (excluding
this Agreement) or amendment thereto that would be required to be filed as an
exhibit to a Form 10-KSB filed by FSB with the SEC as of the date of this
Agreement that has not been filed as an exhibit to FSB's Form 10-KSB for the
fiscal year ended December 31, 1996 and identified to CBC (together with all
Contracts referred to in Sections 5.10 and 5.14(a) of this Agreement, the "FSB
Contracts"). None of the FSB Companies is in Default under any FSB Contract,
other than Defaults which are not reasonably likely to have, individually or
A-19
<PAGE>
in the aggregate, a Material Adverse Effect on FSB. Except as to FHLB advances,
all of the indebtedness of any FSB Company for money borrowed is prepayable at
any time by such FSB Company without penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of the FSB
-----------------
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
- ---------------------
Knowledge of FSB, threatened (or unasserted but considered probable of assertion
and which if asserted would have at least a reasonable probability of an
unfavorable outcome) against any FSB Company, or against any Asset, interest, or
right of any of them, that is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FSB, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any FSB Company, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FSB.
5.17 REPORTS. Since January 1, 1994, each FSB Company has timely filed all
-------
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with (a) the SEC, including but
not limited to Form 10-KSB, Forms 10-QSB, Forms 8-K, and proxy statements, (b)
the Regulatory Authorities, and (c) any applicable state securities or banking
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on FSB). 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 its respective date, each such report and document to FSB's Knowledge did
not, in any material respects, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by any FSB Company to CBC pursuant to
this Agreement 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 FSB Company for inclusion in
the Registration Statement to be filed by CBC 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 FSB Company for inclusion in the Proxy Statement to be mailed to
FSB's shareholders in connection with the FSB Shareholders' Meeting, and any
other documents to be filed by any FSB Company 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 FSB, 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 FSB
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the FSB
Shareholders' Meeting. All documents that any FSB Company
A-20
<PAGE>
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 ACCOUNTING, TAX AND REGULATORY MATTERS. No FSB Company or, to the
--------------------------------------
Knowledge of FSB, any Affiliate thereof has taken any action, or agreed to take
any action, or has any Knowledge of any fact or circumstance that is reasonably
likely to (a) prevent the transactions contemplated hereby, including the
Merger, from qualifying for pooling-of-interests accounting treatment or
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (b) materially impede or delay receipt of any Consents
of Regulatory Authorities referred to in Section 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 FSB, there exists
no fact, circumstance, or reason attributable to FSB why the requisite Consents
referred to in Section 9.1(b) of this Agreement cannot be received in a timely
manner without the imposition of any condition or restriction of the type
described in the second sentence of such Section 9.1(b).
5.20 CHARTER PROVISIONS. Each FSB Company has taken all action so that the
------------------
entering into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement 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 any FSB Company or restrict or impair the ability
of the Surviving Corporation to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of any FSB Company that may be acquired or
controlled by it.
5.21 DERIVATIVES CONTRACTS. Except as set forth in Section 5.21 of the FSB
---------------------
Disclosure Memorandum, neither FSB nor any of its Subsidiaries is a party to or
- ---------------------
has agreed to enter into an exchange-traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract, or any other interest
rate or foreign currency protection contract not included on its balance sheet
which is a financial derivative contract (including various combinations
thereof).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CBC
-------------------------------------
CBC hereby represents and warrants to FSB as follows:
6.1 ORGANIZATION, STANDING, AND POWER. CBC 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.
CBC has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. CBC 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 CBC.
A-21
<PAGE>
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(a) CBC has the corporate power and authority necessary to execute,
deliver and perform its 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 CBC, subject to the approval
of this Agreement and the transactions contemplated hereby by the holders of a
majority of the outstanding Surviving Corporation Common Stock, which is the
only shareholder vote required for approval of this Agreement and consummation
of the Merger by CBC. Subject to such requisite shareholder approval and any
approvals required of Regulatory Authorities, this Agreement represents a legal,
valid and binding obligation of CBC, enforceable against CBC 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). CBC has reserved for issuance 842,374 shares of Surviving
Corporation Common Stock for consummation of the Merger and for issuance
pursuant to FSB Options.
(b) Neither the execution and delivery of this Agreement by CBC, nor the
consummation by CBC of the transactions contemplated hereby, nor compliance by
CBC with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of CBC'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 CBC Company under, any
Contract or Permit of any CBC Company, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on CBC, 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 CBC Company or any of their respective
Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, and applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
CBC, no notice to, filing with, or Consent of any public body or authority is
necessary for the consummation by CBC of the Merger and the other transactions
contemplated in this Agreement.
6.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of CBC consists of 5,000,000 shares of
Surviving Corporation Common Stock, of which 1,329,684 shares were issued and
outstanding as of the date of this Agreement. All of the issued and outstanding
shares of Surviving Corporation Common Stock are, and all of the shares of
Surviving Corporation Common Stock to be issued in exchange for shares
A-22
<PAGE>
of FSB 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 CBC Common Stock has been, and none of the shares of
Surviving Corporation Common Stock to be issued in exchange for shares of FSB
Common Stock upon consummation of the Merger will be, issued in violation of any
preemptive rights of the current or past shareholders of CBC. CBC has reserved
no shares of Surviving Corporation Common Stock for issuance under the CBC Stock
Plans, pursuant to which options to purchase no shares of Surviving Corporation
Common Stock are outstanding as of the date of this Agreement and at the
Effective Time.
(b) Except as set forth in Section 6.3(a) of this Agreement, or as
disclosed in Section 6.3(b) of the CBC Disclosure Memorandum, there are no
---------------------
shares of capital stock or other equity securities of CBC outstanding and no
outstanding Rights relating to the capital stock of CBC.
6.4 CBC SUBSIDIARIES. CBC has disclosed in Section 6.4 of the CBC
----------------
Disclosure Memorandum all of the CBC Subsidiaries as of the date of this
- ---------------------
Agreement. Except as disclosed in Section 6.4 of the CBC Disclosure Memorandum,
---------------------
CBC or one of its Subsidiaries owns all of the issued and outstanding shares of
capital stock of each CBC Subsidiary. No equity securities of any CBC
Subsidiary are or may become required to be issued (other than to another CBC
Company) by reason of any Rights, and there are no Contracts by which any CBC
Subsidiary is bound to issue (other than to another CBC Company) additional
shares of its capital stock or Rights, or by which any CBC Company is or may be
bound to transfer any shares of the capital stock of any CBC Subsidiary (other
than to another CBC Company), and there are no Contracts by which any CBC
Company is bound to issue (other than to another CBC Company) additional shares
of its capital stock. There are no Contracts relating to the rights of any CBC
Company to vote or to dispose of any shares of the capital stock of any CBC
Subsidiary. All of the shares of capital stock of each CBC Subsidiary held by a
CBC Company are fully paid and nonassessable under the applicable Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the CBC Company free and clear of any Lien. Each CBC Subsidiary is either a
bank, a trust company, a savings association or a corporation and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is organized and has the corporate power
and authority necessary for it to own, lease and operate its Assets and to carry
on its business as now conducted. Each CBC Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CBC. Each CBC Subsidiary that is a
depository institution is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and the deposits in
which are insured to applicable limits by the Bank Insurance Fund or the Savings
Association Insurance Fund, as appropriate.
A-23
<PAGE>
6.5 FINANCIAL STATEMENTS. CBC has included in Section 6.5 of the CBC
--------------------
Disclosure Memorandum copies of all CBC Financial Statements for the periods
- ---------------------
ended on or before December 31, 1996 and will deliver to FSB copies of all CBC
Financial Statements prepared subsequent to the date hereof. The CBC Financial
Statements (as of the dates thereof and for the periods covered thereby) (a)
are, or if dated after the date of this Agreement will be, in accordance with
the books and records of the CBC Companies, which are or will be, as the case
may be, complete and correct and which have been or will have been, as the case
may be, maintained in accordance with good business practices, and (b) present
or will present, as the case may be, fairly the consolidated financial position
of the CBC Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the CBC Companies
for the periods indicated, in accordance with GAAP (subject to any exceptions as
to consistency specified therein or as may be indicated in the notes thereto or,
in the case of interim financial statements, to normal recurring year-end
adjustments that are not material in amount or effect).
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No CBC Company has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CBC, except Liabilities which are
reflected or otherwise accrued or reserved against in the consolidated balance
sheets of CBC as of December 31, 1996, included in the CBC Financial Statements
or reflected in the notes thereto. No CBC Company has incurred or paid any
Liability since December 31, 1996, except for such Liabilities reflected or
otherwise accrued or reserved against in the CBC Financial Statements, or as may
have been 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 CBC.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996, except
------------------------------------
as disclosed or in Section 6.7 of the CBC Disclosure Memorandum, (a) there have
---------------------
been no events, changes or occurrences which have had, or are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on CBC, and
(b) the CBC 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 CBC provided in Article 7 of
this Agreement.
6.8 TAX MATTERS.
-----------
(a) All Tax returns required to be filed by or on behalf of any of the
CBC Companies have been timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1996, except to the extent that all such failures to file, taken together, are
not reasonably likely to have a Material Adverse Effect on CBC, and all returns
filed are complete and accurate in all material respects to the Knowledge of
CBC. All Taxes shown as due on filed returns have been paid. 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 CBC, except as reserved against
in the CBC Financial Statements delivered prior to the date of this Agreement or
as disclosed
A-24
<PAGE>
in Section 6.8(a) of the CBC Disclosure Memorandum. All material Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid.
(b) Except as disclosed in Section 6.8(b) of the CBC Disclosure
----------
Memorandum none of the CBC Companies has executed an extension or waiver of any
- ----------
statute of limitations on the assessment or collection of any Tax due that is
currently in effect, and no unpaid tax deficiency has been asserted in writing
against or with respect to any CBC Company, which deficiency is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
CBC.
(c) Adequate provision for any Taxes due or to become due for any of the
CBC Companies for the period or periods through and including the date of the
respective CBC Financial Statements has been made and is reflected on such CBC
Financial Statements.
(d) Deferred Taxes of the CBC Companies have been provided for in
accordance with GAAP.
(e) Each of the CBC Companies is in compliance in all material respects
with, and its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to comply in all
material respects 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 CBC.
6.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The Allowance shown on the
----------------------------------
consolidated balance sheets of CBC included in the most recent CBC Financial
Statements dated prior to the date of this Agreement was, and the Allowance
shown on the consolidated balance sheets of CBC included in the CBC 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 the CBC Companies and other extensions of credit (including
letters of credit and commitments to make loans or extend credit) by the CBC
Companies 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
CBC.
6.10 ASSETS. Except as disclosed in Section 6.10 of the CBC Disclosure
------ ----------
Memorandum or as disclosed or reserved against in the CBC Financial Statements,
- ----------
the CBC Companies have good and marketable title, free and clear of all Liens,
to all of their respective Assets. All tangible properties used in the
businesses of the CBC Companies are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
CBC's past practices. All Assets which are material to CBC's business on a
consolidated basis, held under leases or subleases by any of the CBC Companies,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is
A-25
<PAGE>
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 CBC Companies
currently maintain insurance in amounts, scope and coverage as disclosed in
Section 6.10 of the CBC Disclosure Memorandum. None of the CBC Companies has
---------------------
received written notice from any insurance carrier that (a) such insurance will
be cancelled or that coverage thereunder will be reduced or eliminated, or (b)
premium costs with respect to such policies of insurance will be substantially
increased. Except as disclosed in Section 6.10 of the CBC Disclosure Memorandum,
to the Knowledge of CBC, there are presently no occurrences giving rise to a
claim under such policies of insurance and no notices have been given by any CBC
Company under such policies. The Assets of the CBC Companies include all assets
required to operate the business of the CBC Companies as presently conducted.
6.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Except as disclosed in Section 6.11(a) of the CBC Disclosure
----------
Memorandum, to the Knowledge of CBC, each CBC Company, its Participation
- ----------
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on CBC.
(b) To the Knowledge of CBC, there is no Litigation pending or threatened
before any court, governmental agency or authority or other forum in which any
CBC Company or any of its Loan Properties or Participation Facilities has been
or, with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material (as defined below) or oil, whether or not
occurring at, on, under or involving a site owned, leased or operated by any CBC
Company or any of its Loan Properties or Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CBC and to the
Knowledge of CBC, there is no reasonable basis for any such Litigation.
(c) To the Knowledge of CBC, there have been no releases of Hazardous
Material or oil in, on, under or affecting any Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on CBC.
6.12 COMPLIANCE WITH LAWS. Each CBC Company has in effect all Permits
--------------------
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on CBC, 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 CBC. Except as disclosed in Section
6.12 of the CBC Disclosure Memorandum, no CBC Company:
---------------------
(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 CBC; and
A-26
<PAGE>
(b) 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 CBC Company is not in compliance with
any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CBC, (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 CBC, or
(iii) requiring any CBC Company to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
6.13 LABOR RELATIONS. No CBC Company is the subject of any Litigation
---------------
asserting that it or any other CBC Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other CBC Company to bargain with any
labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any CBC Company, pending or, to its
Knowledge, threatened, nor, to its Knowledge, is there any activity involving
any CBC Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
6.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) CBC has disclosed in Section 6.14 of the CBC Disclosure Memorandum
---------------------
and delivered or made available to FSB prior to the execution of this Agreement
copies in each case of all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus, or other incentive plans, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including, 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 any CBC Company or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "CBC Benefit
Plans"). Any of the CBC Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "CBC ERISA Plan."
(b) Except as to those plans disclosed in Section 6.14(b) of the CBC
Disclosure Memorandum as tax-qualified CBC ERISA Plans (the "CBC Qualified
- ---------------------
Plans"), no CBC Company maintains or previously maintained during the six years
preceding the date of this Agreement an CBC Plan which meets or was intended to
meet the requirements of Code Section 401(a). The Internal Revenue Service has
issued favorable determination letters to the effect that each CBC Qualified
Plan qualifies under Code Section 401(a) and that any related trust is exempt
from taxation under Code Section 501(a), and such determination letters remain
in effect and have not been revoked. Copies of the most recent determination
letters and any outstanding requests for a determination letter with
A-27
<PAGE>
respect to each CBC Qualified Plan have been delivered or made available to FSB.
Except as disclosed in Section 6.14(b) of the CBC Disclosure Memorandum, no CBC
Qualified Plan has been amended since the issuance of each respective
determination letter. The CBC Qualified Plans currently comply in form with the
requirements under Code Section 401(a), other than changes required by statutes,
regulations and rulings for which amendments are not yet required. No issue
concerning qualification of the CBC Qualified Plans is pending before or is
threatened by the Internal Revenue Service. The CBC Qualified Plans have been
administered according to their terms (except for those terms which are
inconsistent with the changes required by statutes, regulations, and rulings for
which changes are not yet required to be made, in which case the CBC Qualified
Plans have been administered in accordance with the provisions of those
statutes, regulations and rulings) and in accordance with the requirements of
Code Section 401(a). No CBC Company, any ERISA Affiliate or any fiduciary of any
CBC Qualified Plan has done anything that would adversely affect the qualified
status of the CBC Qualified Plans or the related trusts. Any CBC Qualified Plan
which is required to satisfy Code Section 401(k)(3) and 401(m)(2) has been
tested for compliance with, and has satisfied the requirements of, Code Section
401(k)(3) and 401(m)(2) for each plan year ending prior to the date of this
Agreement.
(c) All CBC Benefit Plans are in compliance in all material respects with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CBC. To the
Knowledge of CBC, no CBC Company nor any other party has engaged in a
transaction with respect to any CBC Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any CBC
Company to a tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on CBC.
(d) Neither CBC nor any ERISA Affiliate of CBC maintains or has during
the six years preceding the date of this Agreement maintained an "employee
benefit pension plan," within the meaning of Section 3(2) of ERISA that is or
was subject to Title IV of ERISA.
(e) Neither CBC nor any ERISA Affiliate of CBC has any past, present or
future obligation or liability to contribute to any multi-employer plan, as
defined in Section 3(37) of ERISA.
(f) Except as disclosed in Section 6.14(f) of the CBC Disclosure
Memorandum, (i) no CBC Company has any obligations for retiree health and life
benefits under any of the CBC Benefit Plans and (ii) there are no restrictions
on the rights of such CBC Company to amend or terminate any such Plan without
incurring any Liability thereunder, which Liability is reasonably likely to have
a Material Adverse Effect on CBC, other than for benefits accrued before the
date of such termination or amendment.
(g) Except as disclosed in Section 6.14(g) of the CBC Disclosure
----------
Memorandum, 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 director or any employee of
any CBC Company from any CBC Company under any CBC Benefit Plan or otherwise,
A-28
<PAGE>
(ii) increase any benefits otherwise payable under any CBC Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit.
(h) 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 any CBC Company and their 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 reflected on the CBC Financial Statements to the extent required by
and in accordance with GAAP.
(i) CBC and each ERISA Affiliate of CBC has complied in all material
respects with applicable continuation of coverage requirements of Section 1001
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and
ERISA Sections 601 through 608.
(j) Except as disclosed in Section 6.14(j) of the CBC Disclosure
----------
Memorandum, neither CBC nor any ERISA Affiliate of CBC is obligated,
- ----------
contingently or otherwise, under any agreement to pay any amount which would be
treated as a "parachute payment," as defined in Section 280G(b) of the Internal
Revenue Code (determined without regard to Section 280G(b)(2)(A)(ii) of the
Internal Revenue Code).
(k) Other than routine claims for benefits, there are no actions, audits,
investigations, suits or claims pending, or threatened against any CBC Benefit
Plan, any trust or other funding agency created thereunder, or against any
fiduciary of any CBC Benefit Plan or against the assets of any CBC Benefit Plan.
6.15 MATERIAL CONTRACTS. Except as disclosed in Section 6.15 of the CBC
------------------
Disclosure Memorandum or otherwise reflected in the CBC Financial Statements,
- ---------------------
none of the CBC Companies, nor any of their respective Assets, businesses or
operations, is a party to, or is bound or affected by, or receives benefits
under, (a) any employment, severance, termination, consulting or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $25,000, excluding "at will" employment arrangements, (b) any Contract
relating to the borrowing of money by any CBC Company or the guarantee by any
CBC Company of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, Federal Home Loan Bank advances, fully-
secured repurchase agreements, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (c) any
Contracts between or among CBC Companies, and (d) any other Contract (excluding
this Agreement) or amendment thereto that would be required to be filed as an
exhibit to a Form 10-KSB filed by CBC with the SEC as of the date of this
Agreement that has not been filed as an exhibit to CBC's Form 10-KSB for the
fiscal year ended December 31, 1996, and identified to FSB (together with all
Contracts referred to in Sections 6.10 and 6.14(a) of this Agreement, the "CBC
Contracts"). None of the CBC Companies is in Default under any CBC Contract,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on CBC. Except as to FHLB advances,
all of the indebtedness of any CBC Company for money borrowed is prepayable at
any time by such CBC Company without penalty or premium.
A-29
<PAGE>
6.16 LEGAL PROCEEDINGS. Except as disclosed in Section 6.16 of the CBC
-----------------
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
- ---------------------
Knowledge of CBC, threatened (or unasserted but considered probable of assertion
and which if asserted would have at least a reasonable probability of an
unfavorable outcome) against any CBC Company, or against any Asset, interest, or
right of any of them, that is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CBC, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any CBC Company, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CBC.
6.17 REPORTS. Except as disclosed in Section 6.17 of the CBC Disclosure
------- ----------
Memorandum, since January 1, 1994, each CBC Company has timely filed all reports
- ----------
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with (a) the SEC, including but not
limited to Forms 10-KSB, Forms 10-QSB, Forms 8-K, and proxy statements, (b)
other Regulatory Authorities, and (c) any applicable state securities or banking
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on CBC). 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 its respective date, each such report and document to CBC's Knowledge did
not, in any material respects, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by any CBC Company to FSB pursuant to
this Agreement 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 CBC Company for inclusion in
the Registration Statement to be filed by CBC 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 CBC Company for inclusion in the Proxy Statement to be mailed to
FSB's shareholders in connection with the FSB Shareholders' Meeting, and any
other documents to be filed by any CBC Company 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 FSB, 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 FSB
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the FSB
Shareholders' Meeting. All documents that any CBC Company is responsible for
filing with any Regulatory Authority in connection with the transactions
A-30
<PAGE>
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
6.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No CBC Company or, to the
--------------------------------------
Knowledge of CBC, any Affiliate thereof has taken any action, or agreed to take
any action, or has any Knowledge of any fact or circumstance that is reasonably
likely to (a) prevent the transactions contemplated hereby, including the
Merger, from qualifying for pooling-of-interests accounting treatment or
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (b) materially impede or delay receipt of any Consents
of Regulatory Authorities referred to in Section 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 CBC, there exists
no fact, circumstance, or reason attributable to CBC why the requisite Consents
referred to in Section 9.1(b) of this Agreement cannot be received in a timely
manner without the imposition of any condition or restriction of the type
described in the second sentence of such Section 9.1(b).
6.20 CHARTER PROVISIONS. Each CBC Company has taken all action so that the
------------------
entering into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement 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 any CBC Company or restrict or impair the ability
of the Surviving Corporation to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of any CBC Company that may be acquired or
controlled by it.
6.21 DERIVATIVES CONTRACTS. Except as set forth in Section 6.21 of the CBC
---------------------
Disclosure Memorandum, neither CBC nor any of its Subsidiaries is a party to or
- ---------------------
has agreed to enter into an exchange-traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract, or any other interest
rate or foreign currency protection contract not included on its balance sheet
which is a financial derivative contract (including various combinations
thereof).
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 AFFIRMATIVE COVENANTS OF FSB. Unless the prior written consent of CBC
----------------------------
shall have been obtained, and except as otherwise contemplated herein, FSB
shall, and shall cause each of its Subsidiaries, from the date of this Agreement
until the Effective Time or termination of this Agreement: (a) to operate its
business in the usual, regular and ordinary course; (b) to preserve intact its
business organization and Assets and maintain its rights and franchises; (c) to
use its reasonable efforts to cause its representations and warranties to be
correct at all times; and (d) to take no action which would (i) adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) or 9.1(c) of this Agreement
or (ii) adversely affect in any material respect the ability of either Party to
perform its covenants and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF FSB. Except as contemplated hereby, from the
-------------------------
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, FSB
A-31
<PAGE>
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer of CBC, which consent
shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any FSB Company, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a FSB Company to another FSB Company)
in excess of an aggregate of $25,000 (for the FSB Companies on a consolidated
basis) except in the ordinary course of the business of FSB Companies consistent
with past practices (which shall include, for FSB, advances against its line of
credit consistent with past practices, and for any of its Subsidiaries, creation
of deposit liabilities, purchases of federal funds, advances from the Federal
Reserve Bank or 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 Asset of any FSB Company of any Lien or permit any such Lien
to exist (other than in connection with deposits, repurchase agreements, bankers
acceptances, Federal Home Loan Bank advances, "treasury tax and loan" accounts
established in the ordinary course of business, the satisfaction of legal
requirements in the exercise of trust powers, and Liens in effect as of the date
hereof that are disclosed in the FSB Disclosure Memorandum); 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 any FSB Company, or declare or pay any dividend or make any
other distribution in respect of FSB's Common Stock; provided, however, that FSB
may (to the extent legally and contractually permitted to do so) continue to pay
its regular annual cash dividend of up to $.05 per share; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereof, or as disclosed in Section 7.2(d) of the FSB
Disclosure Memorandum, issue, sell, pledge, encumber, authorize the issuance of
- ---------------------
or enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of or otherwise permit to become outstanding, any additional shares of
FSB Common Stock or any other capital stock of any FSB Company, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any FSB
Company or issue or authorize the issuance of any other securities in respect of
or in substitution for shares of FSB Stock or sell, lease, mortgage or otherwise
dispose of or otherwise encumber (i) any shares of capital stock of any FSB
Subsidiary (unless any such shares of stock are sold or otherwise transferred to
another FSB Company) or (ii) any Asset having a book value in excess of $25,000
other than in the ordinary course of business for reasonable and adequate
consideration; or
A-32
<PAGE>
(f) acquire direct or indirect control over, or invest in equity
securities of, any Person, other than in connection with (i) foreclosures in the
ordinary course of business, or (ii) acquisitions of control by a FSB Subsidiary
in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any FSB Company (including such discretionary increases as may be
contemplated by existing employment agreements), except in accordance with past
practice or previously approved by the Board of Directors of FSB, in each case
as disclosed in Section 7.2(g) of the FSB Disclosure Memorandum or as required
---------------------
by Law; pay any severance or termination pay or any bonus other than pursuant to
written policies or written Contracts in effect on the date of this Agreement
and disclosed in Section 7.2(g) of the FSB Disclosure Memorandum; enter into or
---------------------
amend any severance agreements with officers of any FSB Company; grant any
increase in fees or other increases in compensation or other benefits to
directors of any FSB Company; or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits; or
(h) except as disclosed in Section 7.2(h) of the FSB Disclosure
----------
Memorandum, enter into or amend any employment Contract between any FSB Company
- ----------
and any Person (unless such amendment is required by Law) that the FSB Company
does not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(i) adopt any new employee benefit plan of any FSB Company or make any
material change in or to any existing employee benefit plans of any FSB Company
other than any such change that is required by Law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified status of any
such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) settle any Litigation involving any Liability of any FSB Company for
money damages in excess of $25,000 or material restrictions upon the operations
of any FSB Company; or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
7.3 AFFIRMATIVE COVENANTS OF CBC. Unless the prior written consent of FSB
----------------------------
shall have been obtained, and except as otherwise contemplated herein, CBC
shall, and shall cause each of its Subsidiaries, from the date of this Agreement
until the Effective Time or termination of this Agreement: (a) to operate its
business in the usual, regular and ordinary course; (b) to preserve intact its
business organization and Assets and maintain its rights and franchises; (c) to
use its reasonable efforts to cause its representations and warranties to be
correct at all times; (d) to take no action which would (i) adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) or 9.1(c) of this Agreement
or (ii) adversely affect in any
A-33
<PAGE>
material respect the ability of either Party to perform its covenants and
agreements under this Agreement.
7.4 NEGATIVE COVENANTS OF CBC. From the date of this Agreement until the
-------------------------
earlier of the Effective Time or the termination of this Agreement, CBC
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer of FSB, which consent
shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any CBC Company, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a CBC Company to another CBC Company)
in excess of an aggregate of $75,000 (for the CBC Companies on a consolidated
basis) except in the ordinary course of the business of CBC Companies consistent
with past practices (which shall include, for any of its Subsidiaries, creation
of deposit liabilities, purchases of federal funds, advances from the Federal
Reserve Bank or 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 Asset of any CBC Company of any Lien or permit any such Lien
to exist (other than in connection with deposits, repurchase agreements, bankers
acceptances, Federal Home Loan Bank advances, "treasury tax and loan" accounts
established in the ordinary course of business, the satisfaction of legal
requirements in the exercise of trust powers, and Liens in effect as of the date
hereof that are disclosed in the CBC Disclosure Memorandum); 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 any CBC Company, or declare or pay any dividend or make any
other distribution in respect of CBC's Common Stock; provided, however, that CBC
may (to the extent legally and contractually permitted to do so) continue to pay
its regular annual cash dividend of up to $.10 per share; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereof, or as disclosed in Section 7.4(d) of the CBC
Disclosure Memorandum, issue, sell, pledge, encumber, authorize the issuance of
or enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of or otherwise permit to become outstanding, any additional shares of
Surviving Corporation Common Stock or any other capital stock of any CBC
Company, or any stock appreciation rights, or any option, warrant, conversion,
or other right to acquire any such stock, or any security convertible into any
such stock; or
(e) adjust, split, combine or reclassify any capital stock of any CBC
Company or issue or authorize the issuance of any other securities in respect of
or in substitution for shares of CBC Capital Stock or sell, lease, mortgage or
otherwise dispose of or otherwise encumber (i) any shares of capital stock of
any CBC Subsidiary (unless any such shares of stock are sold or otherwise
A-34
<PAGE>
transferred to another CBC Company) or (ii) any Asset having a book value in
excess of $25,000 other than in the ordinary course of business for reasonable
and adequate consideration; or
(f) acquire direct or indirect control over, or invest in equity
securities of, any Person, other than in connection with (i) foreclosures in the
ordinary course of business, or (ii) acquisitions of control by an CBC
Subsidiary in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any CBC Company (including such discretionary increases as may be
contemplated by existing employment agreements), except in accordance with past
practice or previously approved by the Board of Directors of CBC, in each case
as disclosed in Section 7.4(g) of the CBC Disclosure Memorandum or as required
---------------------
by Law; pay any severance or termination pay or any bonus other than pursuant to
written policies or written Contracts in effect on the date of this Agreement
and disclosed in Section 7.4(g) of the CBC Disclosure Memorandum; enter into or
---------------------
amend any severance agreements with officers of any CBC Company; grant any
increase in fees or other increases in compensation or other benefits to
directors of any CBC Company; or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any CBC Company
and any Person (unless such amendment is required by Law) that the CBC Company
does not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(i) adopt any new employee benefit plan of any CBC Company or make any
material change in or to any existing employee benefit plans of any CBC Company
other than any such change that is required by Law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified status of any
such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) settle any Litigation involving any Liability of any CBC Company for
money damages in excess of $75,000 or material restrictions upon the operations
of any CBC Company; or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
7.5 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
----------------------------
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (b) 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.
A-35
<PAGE>
7.6 REPORTS. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all non-confidential portions of such reports promptly after the same are filed.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 REGISTRATION STATEMENT; SHAREHOLDER APPROVAL.
--------------------------------------------
(a) As soon as practicable after execution of this Agreement, the
Parties shall cause the Registration Statement to be filed with the SEC, and
shall use their reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act and take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of Surviving Corporation Common Stock upon consummation of the
Merger. Each Party shall furnish all information concerning it and the holders
of its capital stock as may be reasonably requested in connection with such
action.
(b) FSB shall call a Shareholders' Meeting, to be held as soon as
reasonably practicable after the Registration Statement is declared effective by
the SEC, for the purpose of voting upon approval of this Agreement and such
other related matters as FSB deems appropriate.
(c) In connection with the FSB Shareholders' Meeting, (i) the Board of
Directors of FSB shall recommend (subject to compliance with the fiduciary
duties of the members of the Board of Directors as advised by counsel) to its
shareholders the approval of this Agreement and (ii) the Board of Directors and
officers of FSB shall use their reasonable efforts to obtain such shareholders'
approval (subject to compliance with their fiduciary duties as advised by
counsel).
8.2 APPLICATIONS. The Parties shall promptly prepare and file any
------------
applications, including without limitation, those with the Board of Governors of
the Federal Reserve System and the Georgia Department of Banking and Finance,
seeking the requisite Consents necessary to consummate the transactions
contemplated by this Agreement.
8.3 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
--------------------------
conditions of this Agreement, the Parties shall execute and file the Certificate
of Merger with the Secretary of State of the State of Georgia in connection with
the Closing.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE. No Party shall take, or cause
-------------------------------------
to be taken, any action which may reasonably be foreseen as delaying or
otherwise adversely impacting consummation of the Merger. No CBC Company nor
FSB Company shall take any action which would cause the Merger not to be treated
as a pooling of interests. Subject to the terms and conditions of this
Agreement, each Party agrees to use, and to cause its Subsidiaries to use, its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
Laws, as promptly as practicable so as to permit
A-36
<PAGE>
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 CBC in connection with the Surviving
Corporation Common Stock to be issued in the Merger shall not violate this
covenant), including, without limitation, using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement. Each Party shall use, 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.
8.5 INVESTIGATION AND CONFIDENTIALITY.
---------------------------------
(a) Prior to the Effective Time, each Party will keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions 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
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof and all work papers containing
confidential information received from the other Party, except for one copy of
any materials prepared by that Party or any attorney for or other representative
of that Party based upon such confidential information.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
8.6 PRESS RELEASES. Prior to the Effective Time, FSB and CBC shall agree
--------------
with each other as to the form and substance of any press release or other
public disclosure materially related to this Agreement or any other transaction
contemplated hereby; provided, however, that nothing in this Section 8.6 shall
be deemed to prohibit any Party from making any disclosure which its counsel
deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
A-37
<PAGE>
8.7 ACQUISITION PROPOSALS.
---------------------
(a) Except with respect to this Agreement and the transactions
contemplated hereby, no FSB Company nor CBC Company nor any director, employee,
investment banker, attorney, accountant or other representative thereof
(collectively, "Representatives") retained by any FSB Company or CBC Company, as
the case may be, shall directly or indirectly solicit any Acquisition Proposal
by any Person. Except to the extent necessary to comply with the fiduciary
duties of a Party's Board of Directors as advised by counsel, no FSB Company nor
CBC Company nor 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 a Party 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. Each Party shall promptly notify the
other orally and in writing in the event that it receives any inquiry or
proposal relating to any such transaction.
(b) Except as set forth herein, neither FSB nor CBC shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to the other
Party, the approval or recommendation of its Board of Directors of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal or (iii) enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, if in the
opinion of the Board of Directors of FSB or CBC, as applicable, after
consultation with counsel, failure to do so would be inconsistent with its
fiduciary duties to its shareholders under applicable law, then the Board of
Directors of FSB or CBC, as applicable, may (subject to the terms of this
section (b)) withdraw or modify its approval or recommendation of this Agreement
or the Merger, approve or recommend an Acquisition Proposal, or enter into an
agreement with respect to an Acquisition Proposal, in each case at any time
after the second business day following the receipt of written notice (a "Notice
of Acquisition Proposal") by CBC or FSB, as applicable, advising it that the
other Party has received an Acquisition Proposal, specifying the material terms
and conditions of such proposal and identifying the Person making such proposal;
provided that neither Party shall enter into an agreement with respect to an
Acquisition Proposal unless it shall have furnished the other Party with written
notice no later than 12:00 noon Georgia time one (1) day in advance of any date
that it intends to enter into such agreement.
(c) In addition to the obligations set forth in section (b) above, each
Party shall immediately advise the other Party orally and in writing of any
request for information or of any Acquisition Proposal, or any inquiry with
respect to or which could lead to an Acquisition Proposal, the material terms
and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the Person making a request, Acquisition Proposal or inquiry. FSB or
CBC, as the case may be, shall keep the other Party fully informed of the status
and details (including amendments or proposed amendments) of any such request,
Acquisition Proposal or inquiry.
(d) Nothing contained in this Section 8.7 shall prohibit FSB or CBC, as
the case may be, from making any disclosure to its shareholders if, in the
opinion of its Board of Directors, after consultation with counsel, failure to
so disclose would be inconsistent with federal securities laws or its fiduciary
duties to its shareholders under applicable law; provided that the applicable
Party does
A-38
<PAGE>
not, except as permitted by section (b) above, withdraw or modify, or propose to
withdraw or modify, its position with respect to the Merger or approve or
recommend, or propose to approve or recommend, an Acquisition Proposal.
8.8 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and
----------------------------
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for treatment as a pooling of
interests for accounting purposes or as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.9 AGREEMENT OF AFFILIATES. FSB has disclosed in Section 8.9 of the FSB
-----------------------
Disclosure Memorandum all Persons whom it reasonably believes is an "affiliate"
- ---------------------
of FSB for purposes of Rule 145 under the 1933 Act, and CBC has disclosed in
Section 8.9 of the CBC Disclosure Memorandum all Persons whom it reasonably
---------------------
believes to be an "affiliate" of CBC for purposes of Rule 145 under the 1933
Act. Each of CBC and FSB shall use its reasonable efforts to cause each such
Person to deliver to CBC and FSB, not later than thirty (30) days after the date
of this Agreement, a written agreement, substantially in the form of Exhibit 1
---------
as to Affiliates of FSB, and substantially in the form of Exhibit 2 as to
---------
Affiliates of CBC, providing that such Person will not sell, pledge, transfer or
otherwise dispose of the shares of FSB Common Stock and/or CBC Common Stock, as
applicable, 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 Surviving Corporation Common Stock to be held upon consummation of the
Merger except in compliance with applicable provisions of the 1933 Act and the
rules and regulations thereunder. The Surviving Corporation shall be entitled
to place restrictive legends upon certificates for shares of Surviving
Corporation Common Stock issued to Affiliates of FSB pursuant to this Agreement
to enforce the provisions of this Section 8.9. CBC shall not be required to
maintain the effectiveness of the Registration Statement under the 1933 Act for
the purposes of resale of Surviving Corporation Common Stock by such Affiliates.
8.10 INDEMNIFICATION.
---------------
(a) The Surviving Corporation shall indemnify, defend, and hold harmless
the present and former directors, officers, employees, and agents of the FSB
Companies (each, an "Indemnified Party") against all Liabilities arising out of
actions or omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the full extent permitted under
Georgia Law and by FSB's Articles of Incorporation and Bylaws as in effect on
the date hereof, including provisions relating to advances of expenses incurred
in the defense of any Litigation. Without limiting the foregoing, in any case in
which approval by CBC is required to effect any indemnification, the Surviving
Corporation shall direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent counsel mutually
agreed upon between CBC and the Indemnified Party.
(b) If the Surviving Corporation or any of its successors or assigns
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consolidation or merger or shall transfer
all or substantially all of its assets to any Person,
A-39
<PAGE>
then and in each case, proper provision shall be made so that the successors and
assigns of CBC shall assume the obligations set forth in this Section 8.10.
(c) The provisions of this Section 8.10 are intended to be for the
benefit of and shall be enforceable by, each Indemnified Party, his or her heirs
and representatives.
8.11 CERTAIN MODIFICATIONS. CBC and FSB shall consult with respect to
---------------------
their loan, litigation, and real estate valuation policies and practices
(including loan classifications and levels of reserves) and shall make such
modifications or changes to its policies and practices, if any, prior to the
Effective Time, as may be mutually agreed upon. CBC and FSB also shall consult
with respect to the character, amount, and timing of restructuring and Merger-
related expense charges to be taken by each of the Parties in connection with
the transactions contemplated by this Agreement and shall take charges in
accordance with GAAP, prior to the Effective Time, as may be mutually agreed
upon by the Parties. Neither Parties' representations, warranties, and
covenants contained in this Agreement shall be deemed to be inaccurate or
breached in any respect as a consequence of any modifications or charges
undertaken solely on account of this Section 8.11.
8.12 EMPLOYEE BENEFITS AND CONTRACTS. CBC and FSB shall consult with each
-------------------------------
other to develop mutually agreeable employee benefit programs for officers and
employees of the Surviving Corporation which will be implemented as soon as
practicable following the Effective Time. The Surviving Corporation and its
Subsidiaries also shall honor in accordance with their terms all employment,
severance, consulting and other compensation Contracts disclosed in Section 8.12
of the FSB Disclosure Memorandum between any FSB Company and any current or
---------------------
former director, officer, or employee thereof and all provisions for vested
benefits accrued through the Effective Time under the FSB Benefit Plans. As
soon as reasonably practicable following the Effective Time, the Surviving
Corporation shall register under the 1933 Act and any applicable state
securities laws, the shares of Surviving Corporation Common Stock issuable
pursuant to FSB Options.
8.13 DELIVERY TO EXCHANGE AGENT. The Surviving Corporation shall have
--------------------------
delivered to the Exchange Agent a sufficient number of shares of Surviving
Corporation Common Stock to make the payment contemplated by Section 3.1 hereof,
and sufficient cash to make the payment contemplated by Section 3.5 hereof.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
---------------------------------------
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby 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 FSB shall have approved
--------------------
this Agreement, and the consummation of the transactions contemplated hereby,
including the Merger, as and to the extent required by Law, or by the provisions
of any governing instruments.
A-40
<PAGE>
(B) REGULATORY APPROVALS. All Consents of, filings and registrations
--------------------
with, and notifications to all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(including, without limitation, requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of either Party would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement 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 so 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 either
party would so materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement 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 Surviving Corporation Common Stock issuable pursuant to the Merger
shall have been received.
(F) TAX MATTERS. FSB and CBC shall have received a written opinion of
-----------
counsel from Smith, Gambrell & Russell, LLP, in form reasonably satisfactory to
them (the "Tax Opinion"), to the effect that for federal income tax purposes (i)
the Merger is a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) the exchange in the Merger of FSB Common Stock for
Surviving Corporation Common Stock will not give rise to gain or loss to the
shareholders of FSB with respect to such exchange (except to the extent of any
cash received), (iii) the adjusted tax basis of whole shares of Surviving
Corporation Common Stock received by shareholders of FSB who exchange shares of
FSB Common Stock in the Merger will be the same as the adjusted tax basis of the
shares of FSB Common Stock exchanged therefor (reduced by any amount allocable
to a fractional share interest for which cash is received), (iv) the holding
period of the shares of Surviving Corporation Common Stock received in the
Merger will include the period during which the shares of FSB Common Stock
exchanged therefor were held, provided such shares
A-41
<PAGE>
of Surviving Corporation Common Stock were held as capital assets at the
Effective Time, (v) the payment of cash to a FSB shareholder in lieu of a
fractional share interest in Surviving Corporation Common Stock will be treated
as if the fractional share had been distributed as part of the exchange and then
redeemed by the Surviving Corporation, and (vi) neither FSB nor CBC will
recognize gain or loss as a consequence of the Merger (except for income and
deferred gain recognized pursuant to Treasury regulations issued under Section
1502 of the Internal Revenue Code). In rendering such Tax Opinion, counsel shall
be entitled to rely upon representations of officers of FSB and CBC reasonably
satisfactory in form and substance to such counsel.
(G) EMPLOYMENT AGREEMENT MATTERS. The Employment Agreement currently in
----------------------------
effect by and among FSB, First Southern Bank and James E. Young, President and
Chief Executive Officer of FSB, shall be terminated by written agreement among
FSB, First Southern Bank and Mr. Young, and the Parties shall have entered into
a new mutually satisfactory employment agreement with Mr. Young.
(H) POOLING LETTER. The Parties shall have received a letter from Porter
--------------
Keadle Moore, LLP, dated as of the Effective Time, to the effect that the Merger
will be accounted for as a pooling-of-interests under GAAP if consummated in
accordance with this Agreement.
9.2 CONDITIONS TO OBLIGATIONS OF CBC. The obligations of CBC 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 CBC pursuant to Section 11.6(a) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section 9.2(a),
------------------------------
the accuracy of the representations and warranties of FSB set forth or referred
to in this Agreement shall be assessed as of the date of this Agreement and as
of immediately prior to the Effective Time with the same effect as though all
such representations and warranties had been made on and as of immediately prior
to the Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of FSB set forth in Section 5.3 of this Agreement
shall be true and correct (except for inaccuracies which are de minimus in
amount or effect). The representations and warranties of FSB set forth in
Sections 5.19 and 5.20 of this Agreement shall be true and correct in all
material respects. There shall not exist inaccuracies in the representations and
warranties of FSB set forth in this Agreement (excluding the representations and
warranties set forth in Sections 5.3, 5.19 and 5.20) such that the aggregate
effect of such inaccuracies would have, or is reasonably likely to have, a
Material Adverse Effect on FSB; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of FSB 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.
A-42
<PAGE>
(C) CERTIFICATES. FSB shall have delivered to CBC (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 Sections 9.2(a) and 9.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by FSB'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 CBC and its counsel shall request.
(D) CLAIMS/INDEMNIFICATION LETTERS. Each of the directors and officers
------------------------------
of FSB shall have executed and delivered to CBC letters in substantially the
form of Exhibit 3.
---------
(E) AFFILIATE AGREEMENTS. CBC shall have received from each affiliate of
--------------------
FSB the affiliate letter referred to in Section 8.10 hereof.
(F) OPINION OF COUNSEL. CBC shall have received an opinion of Powell,
------------------
Goldstein, Frazer & Murphy LLP, counsel to FSB, dated as of the Effective Time,
in form reasonably satisfactory to CBC, as to the matters set forth in
Exhibit 4.
- ---------
9.3 CONDITIONS TO OBLIGATIONS OF FSB. The obligations of FSB 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 FSB pursuant to Section 11.6(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section 9.3(a),
------------------------------
the accuracy of the representations and warranties of CBC set forth or referred
to in this Agreement shall be assessed as of the date of this Agreement and as
of immediately prior to the Effective Time with the same effect as though all
such representations and warranties had been made on and as of immediately prior
to the Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of CBC set forth in Section 6.3 of this Agreement
shall be true and correct (except for inaccuracies which are de minimus in
amount or effect). The representations and warranties of CBC set forth in
Section 6.19 and 6.20 of this Agreement shall be true and correct in all
material respects. There shall not exist inaccuracies in the representations and
warranties set forth in this Agreement (excluding the representations and
warranties set forth in Sections 6.3, 6.19 and 6.20) such that the aggregate
effect of such inaccuracies would have, or is reasonably likely to have a
Material Adverse Effect on CBC; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by reference to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of CBC 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.
A-43
<PAGE>
(C) CERTIFICATES. CBC shall have delivered to FSB (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 CBC'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 FSB and its counsel shall request.
(D) AFFILIATE AGREEMENTS. FSB shall have received from each affiliate of
--------------------
CBC the affiliate letter referred to in Section 8.10 hereof.
(F) OPINION OF COUNSEL. FSB shall have received an opinion Smith,
Gambrell & Russell, LLP, counsel to CBC, dated as of the Effective Time, in form
reasonably satisfactory to FSB, as to the matters set forth in Exhibit 5.
---------
ARTICLE 10
TERMINATION
-----------
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the shareholders of FSB,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of the Board of Directors of CBC and the Board of
Directors of FSB; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of FSB and Section 9.3(a) in the case of
CBC or in material breach of any covenant or other agreement contained in this
Agreement) in the event of an inaccuracy or any representation or warranty
contained in this Agreement which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the breaching Party of such
inaccuracy and which inaccuracy would provide the terminating Party the ability
to refuse to consummate the Merger under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of CBC and Section 9.3(a) of this
Agreement in the case of FSB; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of FSB and Section 9.3(a) in the case of
CBC or in material breach of any covenant or other agreement contained in this
Agreement) in the event of a material breach by the other Party of any covenant
or agreement contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach; or
A-44
<PAGE>
(d) By the Board of Directors of either Party in the event (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of FSB and Section 9.3(a) in the
case of CBC or in material breach of any covenant or other agreement contained
in this Agreement) (i) any Consent of any Regulatory Authority required for
consummation of the Merger and the other transactions contemplated hereby shall
have been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal,
or (ii) if the shareholders of FSB fail to vote their approval of this Agreement
and the transactions contemplated hereby as required by the GBCC, at the
Shareholders' Meeting where the transactions were presented to such shareholders
for approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated on or before March 31, 1998, 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(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of FSB and Section 9.3(a) in the case of
CBC or in material breach of any covenant or agreement contained in this
Agreement) in the event that any of the conditions precedent to the obligations
of such Party to consummate the Merger (other than as contemplated by Section
10.1(d) of this Agreement) cannot be satisfied or fulfilled by the date
specified in Section 10.1(e) of this Agreement; or
(g) By the Board of Directors of FSB or CBC, as the case may be, in
connection with such Party's entering into a definitive agreement in accordance
with Section 8.8(b), provided that it has compiled with all provisions thereof,
including the notice provisions therein.
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 the provisions of
this Section 10.2 and Article 11 and 8.6(b) of this Agreement shall survive any
such termination and abandonment, and a termination pursuant to Sections
10.1(b), 10.1(c), or 10.1(f) of this Agreement shall not relieve the breaching
Party from Liability for an uncured willful breach of a representation,
warranty, covenant, or agreement giving rise to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
---------------------------------------------
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for this Section 10.3 and
Articles 2, 3, 4 and 11 and Sections 8.10 and 8.11 of this Agreement.
A-45
<PAGE>
ARTICLE 11
MISCELLANEOUS
-------------
11.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
-----------
terms set forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger (other than the
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 any person who is an affiliate for
purposes of Rule 145 under the 1933 Act and for purposes of qualifying the
Merger for pooling of interests accounting treatment.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"ALLOWANCE" shall have the meaning provided in Section 5.9 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.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CBC PLANS" shall have the meaning set forth in Section 6.14 of this
Agreement.
"CBC CAPITAL STOCK" shall mean, collectively, the CBC Common Stock and
any other class or series of capital stock of CBC.
"CBC COMMON STOCK" shall mean the $1 par value of common stock of CBC.
"CBC COMPANIES" shall mean, collectively, CBC and all CBC
Subsidiaries.
A-46
<PAGE>
"CBC DISCLOSURE MEMORANDUM" shall mean the written information
---------------------
entitled "CBC Disclosure Memorandum" delivered on or prior to the date of
---------------------
this Agreement to FSB describing in reasonable detail the matters contained
therein.
"CBC FINANCIAL STATEMENTS" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of CBC as of
December 31, 1996 and 1995, and the related statements of income, changes
in shareholders' equity, and cash flows (including related notes and
schedules, if any) for each of the three years ended December 31, 1996,
1995 and 1994, as filed by CBC in SEC Documents and (b) the consolidated
balance sheets (including related notes and schedules, if any) of CBC 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 quarterly periods ended subsequent to
December 31, 1996.
"CBC STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans and agreements of CBC disclosed in Section
6.14 of the CBC Disclosure Memorandum.
---------------------
"CBC SUBSIDIARIES" shall mean the direct and indirect Subsidiaries of
CBC. "CLOSING" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (a) any breach or violation of or default under
any Contract, Order or Permit, (b) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order or Permit, or
(c) any occurrence of any event that with or without the passage of 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 Merger
becomes effective as defined in Section 1.3 of this Agreement.
A-47
<PAGE>
"ENVIRONMENTAL LAWS" shall mean all Laws pertaining to pollution or
protection of the environment and which are administered, interpreted or
enforced by the United States Environmental Protection Agency and state and
local agencies with primary jurisdiction over pollution or protection of
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall refer to a relationship between entities such
that the entities would, now or at any time in the past, constitute a
"single employer" within the meaning of Section 414 of the Code.
"ERISA PLAN" shall have the meaning provided in Section 5.14 of this
Agreement.
"EXCHANGE RATIO" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"EXHIBITS" 1 through 6, 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.
"FSB BENEFIT PLANS" shall have the meaning set forth in Section 5.14
of this Agreement.
"FSB COMMON STOCK" shall mean the $5 par value common stock of FSB.
"FSB COMPANIES" shall mean, collectively, FSB and all FSB
Subsidiaries.
"FSB DISCLOSURE MEMORANDUM" shall mean the written information
---------------------
entitled "FSB Disclosure Memorandum" delivered on or prior to the date of
---------------------
this Agreement to CBC describing in reasonable detail the matters contained
therein.
"FSB FINANCIAL STATEMENTS" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of FSB as of
December 31, 1996 and 1995, and the related statements of income, changes
in shareholders' equity, and cash flows (including related notes and
schedules, if any) for each of the three years ended December 31, 1996,
1995 and 1994 and (b) the consolidated balance sheets (including related
notes and schedules, if any) of FSB and related statements of income,
changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) with respect to quarterly periods ended subsequent
to December 31, 1996.
"FSB OPTIONS" shall have the meaning set forth in Section 3.4 of this
Agreement.
A-48
<PAGE>
"FSB STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans and agreements of FSB disclosed in Section
5.14 of the FSB Disclosure Memorandum.
---------------------
"FSB SUBSIDIARIES" shall mean the direct and indirect subsidiaries of
FSB.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC shall mean the Georgia Business Corporation Act.
"GEORGIA CERTIFICATE OF MERGER" shall mean the Certificate of Merger
to be filed with the Secretary of State of the State of Georgia relating to
the Merger as contemplated by Section 1.1 of this Agreement.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, or toxic
or hazardous substance, pollutant, chemical or waste within the meaning of
the Comprehensive Environment Response, Compensation, and Liability Act, 42
U.S.C. (S) 9601 et seq., or any similar federal, state or local Law (and
specifically shall include asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of governmental authorities,
polychlorinated biphenyls, and petroleum and petroleum products).
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to FSB or CBC, as the case may be,
shall mean the actual knowledge of the Chairman, President, Chief Financial
Officer, Chief Accounting Officer, Chief Credit Officer, General Counsel,
any Assistant or Deputy General Counsel, or any Senior or Executive Vice
President of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including, 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
A-49
<PAGE>
adverse right or interest, charge, or claim of any nature whatsoever of on,
or with respect to any property or property interest, other than (a) Liens
for current property Taxes not yet due and payable and (b) for depository
institution Subsidiaries of a Party, pledges to secure deposits and other
Liens incurred in the ordinary course of the banking business.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or affecting a
Party, its business, its Assets (including, without limitation, Contracts
related to it), or the transactions contemplated by this Agreement, but
shall not include regular, periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial
position, business, or results of operations of such Party and its
Subsidiaries, taken as a whole, or (b) the ability of such Party to perform
its obligations under this Agreement or to consummate the Merger or the
other transactions contemplated by this Agreement, provided that "material
adverse impact" shall not be deemed to include the impact of (i) changes in
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (ii) changes in GAAP or
regulatory accounting principles generally applicable to banks and their
holding companies, (iii) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, (iv) the Merger and
compliance with the provisions of this Agreement on the operating
performance of the Parties or (v) changes in economic or other conditions
affecting the banking industry in general.
"MERGER" shall mean the merger of FSB with and into CBC referred to in
Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers,
Inc., including the Nasdaq.
"NASDAQ" shall mean the National Market System of the Nasdaq Stock
Market.
A-50
<PAGE>
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management (including any property or facility held in a joint venture)
and, where required by the context, said term means the owner or operator
of such facility or property, but only with respect to such facility or
property.
"PARTY" shall mean either FSB or CBC, and "Parties" shall mean both
FSB and CBC.
"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 securities, 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.
"PROXY STATEMENT" shall mean the proxy statement used by FSB to
solicit the approval of its shareholders of the transactions contemplated
by this Agreement which shall be included in the prospectus of CBC relating
to shares of Surviving Corporation Common Stock to be issued to the
shareholders of FSB.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC under the 1933 Act with
respect to the shares of Surviving Corporation Common Stock to be issued to
the shareholders of FSB in connection with the transactions contemplated by
this Agreement and which shall include the Proxy Statements.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of Thrift Supervision
(including its predecessor, the Federal Home Loan Bank Board), the Office
of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, all state regulatory agencies having jurisdiction over the
Parties and their respective Subsidiaries, the NASD and the SEC.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
A-51
<PAGE>
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, 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.
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
FSB to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, banks, associations,
partnerships or other entities or ventures of which the entity in question
owns or controls 50% or more of the outstanding equity securities or the
ownership interest, as the case may be, either directly or through an
unbroken chain of entities as to each of which 50% 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 CBC as the surviving corporation
resulting from the Merger.
"SURVIVING CORPORATION COMMON STOCK" shall mean the CBC Common Stock
outstanding upon consummation of the Merger, including that to be issued to
shareholders of FSB.
"SURVIVING CORPORATION COMPANIES" shall mean, collectively, the
Surviving Corporation and all Surviving Corporation Subsidiaries.
"TAX" OR "TAXES" shall mean any federal, state, county, local or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy and other taxes,
assessments, charges, fares or impositions, including interest, penalties
and additions imposed thereon or with respect thereto.
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation."
A-52
<PAGE>
11.2 EXPENSES.
---------
(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants and
counsel, except that each of the Parties shall bear and pay (i) one-half of the
filing fees payable in connection with the Registration Statement and the
applications filed with other Regulatory Authorities, and (ii) one-half of the
costs incurred in connection with the printing or copying of the Registration
Statement and the Proxy Statement.
(b) Notwithstanding the foregoing:
(i) if this Agreement is terminated by CBC pursuant to any of
Sections 10.1(b), 10.1(c) or 10.1(f) (but only on the basis
of the failure of FSB to satisfy any of the conditions
enumerated in Section 9.2), or
(ii) if the Merger is not consummated as a result of the failure
of FSB to satisfy any of the conditions set forth in
Section 9.2, or
(iii) if this Agreement is terminated by CBC pursuant to Section
10.1(d)(ii) (but only after receipt by FSB of an
Acquisition Proposal), or
(iv) if this Agreement is terminated by CBC pursuant to Section
10.1(g) of this Agreement,
then FSB shall promptly pay to CBC $250,000 plus all the out-of-pocket costs and
expenses of CBC incurred in connection with the transactions contemplated by
this Agreement, including its enforcement, including costs of counsel,
consultants, investment bankers, actuaries and accountants, up to but not
exceeding $250,000.
(c) Notwithstanding the foregoing:
(i) if this Agreement is terminated by FSB pursuant to any of
Sections 10.1(b), 10.1(c) or 10.1(f) (but only on the basis
of the failure of CBC to satisfy any of the conditions
enumerated in Section 9.3), or
(ii) if the Merger is not consummated as a result of the failure
of CBC to satisfy any of the conditions set forth in
Section 9.3), or
(iii) if this Agreement is terminated by FSB pursuant to Section
10.1(g) of this Agreement,
then CBC shall promptly pay to FSB $250,000 plus all the out-of-pocket costs and
expenses of FSB incurred in connection with the transactions contemplated by
this Agreement, including costs of
A-53
<PAGE>
counsel, consultants, investment bankers, actuaries and accountants, up to but
not exceeding $250,000.
(d) The Parties agree and acknowledge that they have agreed upon
Sections 11.2(b) and (c) above to liquidate the amount of damages they estimate
each Party would suffer in the event of termination of this Agreement in the
circumstances described. Each Party acknowledges that such damages cannot be
estimated exactly, that each Party intends that the foregoing provisions provide
for damages rather than a penalty inserted for the purpose of deterring a Party
from breaching the Agreement and penalizing such Party in the event of such
breach, and that the foregoing amount is agreed upon in good faith as a
reasonable estimate at this time of the damages that each Party would suffer in
the event of termination of the Agreement in the circumstances described.
11.3 BROKERS AND FINDERS. Except as set forth in Section 11.3 of the CBC
-------------------
or FSB Disclosure Memorandum, each of the Parties represents and warrants that
---------------------
neither it nor any of its officers, directors, employees or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon his or its
representing or being retained by or allegedly representing or being retained by
FSB or CBC, each of FSB and CBC, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any Liability in respect of any such
claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
----------------
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Section 8.9 and Section 8.10 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 Board of Directors of each of the Parties; provided, however, that after
any such approval by the holders of FSB Common Stock or Surviving Corporation
Common Stock, there shall be made no amendment that pursuant to the GBCC
requires further approval by such shareholders without the further approval of
such shareholders.
11.6 WAIVERS.
-------
(a) Prior to or at the Effective Time, CBC, 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
FSB, to waive or extend the time for the compliance or fulfillment by FSB of any
and all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of CBC under this Agreement, except any
condition
A-54
<PAGE>
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 CBC.
(b) Prior to or at the Effective Time, FSB, 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
CBC, to waive or extend the time for the compliance or fulfillment by CBC of any
and all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of FSB 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 FSB.
(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:
CBC: Citizens Bancshares Corporation
175 John Wesley Dobbs Avenue, NE
P. O. Box 4485
Atlanta, Georgia 30303-4485
Fax: (404) 653-2883
Attn: Johnnie L. Clark, Vice Chairman
With a copy (which shall not constitute notice) to:
Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II, 1230 Peachtree Street, NE
Atlanta, Georgia 30309
Fax: (404) 815-3509
Attn: Robert C. Schwartz, Esq.
A-55
<PAGE>
FSB: First Southern Bancshares, Inc.
2727 Panola Road
Lithonia, Georgia 30358
Fax: (770) 593-8129
Attn: James E. Young, President and CEO
With a copy (which shall not constitute notice) to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor, 191 Peachtree Street, NE
Atlanta, Georgia 30303
Fax: (404) 572-6999
Attn: Kathryn L. Knudson, Esq.
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, except to the extent that the federal laws of the
United States may apply to the Merger.
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 of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
A-56
<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.
ATTEST: CITIZENS BANCSHARES CORPORATION
/s/ Annette G. Petty By: /s/ H.J. Russell
- -------------------- ----------------
Annette G. Petty Herman J. Russell
Secretary Chairman
[CORPORATE SEAL]
ATTEST: FIRST SOUTHERN BANCSHARES, INC.
/s/ Willard C. Lewis By: /s/ Gregory T. Baranco
- -------------------- ----------------------
Willard C. Lewis Gregory T. Baranco
Secretary Chairman
[CORPORATE SEAL]
A-57
<PAGE>
The undersigned, a director of First Southern Bancshares, Inc. ("FSB"), hereby
agrees (subject to fiduciary duties) to support and to personally vote his or
her shares of FSB Common Stock (and those over which he or she has voting power)
in favor of, the Agreement and Plan of Merger dated as of October 1, 1997 to
which this signature page is attached, and the transactions contemplated
thereby.
-----------------------------------
(Signature)
-----------------------------------
(Print Name)
A-58
<PAGE>
The undersigned, a director of Citizens Bancshares Corporation ("CBC"), hereby
agrees (subject to fiduciary duties) to support and to personally vote his or
her shares of CBC Common Stock (and those over which he or she has voting power)
in favor of, the Agreement and Plan of Merger dated as of October 1, 1997 to
which this signature page is attached, and the transactions contemplated
thereby.
-----------------------------------
(Signature)
-----------------------------------
(Print Name)
A-59
<PAGE>
APPENDIX B
FAIRNESS OPINION
OF
T. STEPHEN JOHNSON & ASSOCIATES, INC.
October 6, 1997
Board of Directors
First Southern Bancshares, Inc.
2727 Panola Road
Lithonia, Georgia 30058
Dear Directors:
T. Stephen Johnson & Associates, Inc., Roswell, Georgia ("TSJ&A") has been asked
to render an opinion as to the fairness from a financial point of view of the
consideration to be received by the shareholders of First Southern Bancshares,
Inc. ("FSB") in connection with the proposed merger of FSB with and into
Citizens Bancshares Corporation ("CBC"), pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") dated as of October 1, 1997 (the "Merger"). The
Merger Agreement calls for each outstanding share of FSB's common stock to be
converted into 1.508 shares of CBC Common Stock.
TSJ&A is an investment banking and consulting firm that specializes in the
valuation of closely-held corporations and provides fairness opinions as part of
its practice. Because of its prior experience in the appraisal of Southeastern
financial institutions involved in mergers, it has developed an expertise in
fairness opinions related to the securities of Southeastern financial
institutions.
TSJ&A was engaged jointly with FSB and CBC in July, 1997 to develop a
preliminary exchange ratio for the two institutions to use to determine the
financial aspects of a merger, issue a final exchange ratio and deliver fairness
opinions to either institution requiring a shareholders vote.
In performing its analysis, TSJ&A relied upon and assumed without independent
verification, the accuracy and completeness of all information provided to it.
TSJ&A has not performed any independent appraisal or evaluation of the assets of
FSB or of CBC or any of its subsidiaries. As such, TSJ&A does not express an
opinion as to the fair market value of FSB. The opinion of financial fairness
expressed herein is necessarily based on market, economic and other relevant
considerations as they exist and can be evaluated as of October 6, 1997.
In arriving at its opinion, TSJ&A reviewed and analyzed audited and unaudited
financial information through June 30, 1997, regarding FSB and CBC and reviewed
its analysis regarding the preliminary exchange ratio prepared as of June 30,
1997.
B-1
<PAGE>
Board of Directors
October 6, 1997
Page 2
TSJ&A delivered its preliminary exchange ratio to the merger committee for the
two institutions on July 27, 1997 and rendered an oral opinion at that time that
the shares exchanged based on the preliminary exchange ratio would be fair from
a financial point of view. The exchange ratio negotiated between FSB and CBC
was the same as the preliminary exchange ratio.
TSJ&A has since reviewed the Merger Agreement and due diligence examination
reports prepared on behalf of the two institutions as well as registration and
draft proxy material to be filed with the Securities and Exchange Commission and
has determined that there has been no material change. Based on TSJ&A's review
as well as discussions with both parties, the preliminary exchange ratio was
determined to be the final exchange ratio. This final exchange ratio was issued
as of October 6, 1997.
Therefore, in consideration of the above, it is the opinion of TSJ&A that, based
on the structure of the Merger and the analyses that have been performed, the
consideration to be received by the shareholders of FSB is fair from a financial
point of view.
Sincerely,
/s/ T. Stephen Johnson & Associates, Inc.
T. Stephen Johnson & Associates, Inc.
B-2
<PAGE>
APPENDIX C
SUBTITLE 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
GEORGIA FINANCIAL INSTITUTIONS CODE
SECTION 7-1-537
RIGHT OF SHAREHOLDER TO DISSENT
AND
GEORGIA BUSINESS CORPORATION CODE
ARTICLE 13
DISSENTERS' RIGHTS
7-1-537. Right of shareholder to dissent.
(a) A shareholder of a bank or trust company which is a party to a plan of
proposed merger or consolidation under this part who objects to the plan shall
be entitled to the rights and remedies of a dissenting shareholder as determined
under Chapter 2 of Title 14, known as the "Georgia Business Corporation Code."
[PART (b) OMITTED.]
14-2-1302. Right to dissent.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his or her shares in the event of, any
of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange
C-1
<PAGE>
pursuant to Code Section 14-2-1202, but not including a sale pursuant to
court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to
the shareholder within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the rights of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for
their shares.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this article may not challenge the corporate action creating his or
her entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
C-2
<PAGE>
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. Dissent by nominees and beneficial owners.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his or her name only if dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which dissents and his or her
other shares were registered in the names of different shareholders.
14-2-1320. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section 14-
2-1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in Code Section 14-2-
1322.
14-2-1321. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his or her intent to demand payment for his or her shares if the
proposed action is effectuated; and
(2) Must not vote his or her shares in favor of the proposed action.
C-3
<PAGE>
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his or her
shares under this article.
14-2-1322. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. Duty to demand payment.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his or her certificates in
accordance with the terms of the notice.
(b) A record shareholder who demands payment and deposits his or her shares
under subsection (a) of this Code section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(c) A record shareholder who does not demand payment or deposit his or her
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his or her shares under this article.
C-4
<PAGE>
14-2-1324. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. Offer of payment.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall offer to pay each dissenter who complied with Code
Section 14-2-1323 the amount the corporation estimates to be the fair value of
his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer, payment for his or
her shares shall be made within 60 days after the making of the offer or the
taking of the proposed corporate action, whichever is later.
C-5
<PAGE>
14-2-1326. Failure to take action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1422 and repeat the payment demand
procedure.
14-2-1327. Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his or her own
estimate of the fair value of his or her shares and amount of interest due, and
demand payment of his or her estimate of the fair value of his or her shares and
interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his or her shares or that the
interest due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section unless he notifies the corporation of his or her demand in writing under
subsection (a) of this Code section within 30 days after the corporation made or
offered payment for his or her shares.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his or her own
estimate of the fair value of his or her shares and the amount of interest
due and demand payment of his or her estimate of the fair value of his or
her shares and interest due.
C-6
<PAGE>
14-2-1330. Court action.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the 60 day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail and publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. Except as
otherwise provided in this chapter, Chapter 11 of the Title 9, known as the
"Georgia Civil Practice Act," applies to any proceeding with respect to
dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his or her shares,
plus interest to the date of judgment.
14-2-1331. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section 14-2-
1327.
C-7
<PAGE>
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. Limitation of actions.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
C-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14-2-851 of the Georgia Business Corporation Code provides that a
corporation may indemnify its directors and officers against civil and criminal
liabilities. Directors and officers may be indemnified against expenses if they
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interest of the corporation, if they have not been adjudged liable
on the basis of the improper receipt of a personal benefit and, with respect to
any criminal action, if they had no reasonable cause to believe their conduct
was unlawful. A director or officer may be indemnified against expenses
incurred in connection with a derivative suit if he or she acted in good faith
and in a manner reasonably believed to be in or not opposed to the best interest
of the corporation, except that no indemnification may be made without court
approval if such person was adjudged liable for negligence or misconduct in the
performance of his or her duty to the corporation. Statutory indemnification is
not exclusive of any rights provided by any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise.
Article VII of the Registrant's Bylaws provides that the Registrant shall
indemnify a director who has been successful in the defense of any proceeding to
which he was a party or in defense of any claim, issue or matter therein because
he is or was a director of the Registrant, against reasonable expenses incurred
by him in connection with such defense.
The Registrant's Bylaws also provide that the Registrant is required to
indemnify any director, officer, employee or agent made a party to a proceeding
because he is or was a director, employee or agent against liability incurred in
the proceeding if he acted in a manner he believed in good faith or to be in or
not opposed to the best interests of the Registrant and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Determination concerning whether or not the applicable standard of
conduct has been met can be made by (a) a disinterested majority of the Board of
Directors, (b) a majority of a committee of disinterested directors, (c)
independent legal counsel, or (d) an affirmative vote of a majority of shares
held by disinterested stockholders. No indemnification may be made to or on
behalf of a director, officer, employee or agent (i) in connection with a
proceeding by or in the right of the Registrant in which such person was
adjudged liable to the Registrant or (ii) in connection with any other
proceeding in which such person was adjudged liable on the basis that personal
benefit was improperly received by him.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
1 - Agreement and Plan of Merger, dated as of October 1, 1997, between CBC and FSB (included as
Appendix A to the Proxy Statement/Prospectus contained herein).
3.1 - Articles of Incorporation of CBC.(1)
3.1.1 - Amendment to Articles of Incorporation of CBC.(2)
3.2 - Bylaws of CBC.(1)
5.1 - Opinion of Smith, Gambrell & Russell, LLP, including consent.
8.1 - Opinion of Smith, Gambrell & Russell, LLP, including consent.
10.1 - Citizens Trust Bank Pension Plan & Trust, as amended and restated effective January 1,
1984.(1)(3)
10.2 - Lease and Option Agreement by and between Citizens Trust Bank and Resolution Trust
Corporation, dated April 22, 1994.(4)
10.3 - First Amended and Restated Employment Agreement dated September 18, 1995, between Citizens
Trust Bank and William L. Gibbs.(3)(5)
10.4 - Loan Agreement by and between CBC and SunTrust Bank, Atlanta, dated April 22, 1996.(6)
10.5 - Employment Agreement dated October ___, 1997, between CBC, FSB and of James E. Young (to be
filed by amendment).
21 - Subsidiaries of CBC.(7)
23.1 - Consent of Smith, Gambrell & Russell, LLP (included in Exhibit 5.1).
23.2 - Consent of Smith, Gambrell & Russell, LLP (included in Exhibit 8.1).
23.3 - Consent of Porter Keadle Moore, LLP regarding CBC consolidated financial statements.
23.4 - Consent of KPMG Peat Marwick LLP regarding CBC consolidated financial statements.
23.5 - Consent of Banks, Finley, White & Co. regarding FSB consolidated financial statements.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
24 - Power of Attorney (included on signature page to the Registration Statement).
99.1 - FSB's 1996 Annual Report on Form 10-KSB for the year ended December 31, 1996.(8)
99.2 - FSB's 1996 Annual Report on Form 10-KSB/A for the year ended December 31, 1996.(9)
99.3 - FSB's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997.(10)
99.4 - CBC's 1996 Annual Report on Form 10-KSB for the year ended December 31, 1996.(11)
99.5 - CBC's 1996 Annual Report on Form 10-KSB/A for the year ended December 31, 1996.(12)
99.6 - CBC's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997.(13)
</TABLE>
____________________
(1) Incorporated herein by reference to the exhibit of the same number in CBC's
Registration Statement on Form 10, previously filed with the Commission.
(File No. 0-14535).
(2) Incorporated herein by reference to Exhibits 3.3 and 4.2 to CBC's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987, previously
filed with the Commission. (File No. 0-14535).
(3) The indicated exhibit is a compensatory plan required to be filed as an
exhibit.
(4) Incorporated herein by reference to Exhibit 10.10 to CBC's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1994, previously filed
with the Commission. (File No. 0-14535).
(5) Incorporated herein by reference to Exhibit 10.11 to CBC's Annual Report on
Form 10-KSB for the year ended December 31, 1995, previously filed with the
Commission. (File No. 0-14535).
(6) Incorporated herein by reference to the exhibit of the same number in CBC's
1996 Annual Report on Form 10-KSB for the year ended December 31, 1996,
previously filed with the Commission. (File No. 0-14535).
(7) Incorporated herein by reference to Exhibit 22 to CBC's Registration
Statement on Form 10, previously filed with the Commission. (File No. 0-
14535).
(8) Incorporated herein by reference to FSB's Annual Report on Form 10-KSB for
the year ended December 31, 1996, previously filed with the Commission.
(File No. 0-28916).
(9) Incorporated herein by reference to FSB's Annual Report on Form 10-KSB/A
for the year ended December 31, 1996, previously filed with the Commission.
(File No. 0-28916).
(10) Incorporated herein by reference to FSB's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1997, previously filed with the Commission
(File No. 0-28916).
(11) Incorporated herein by reference to CBC's Annual Report on Form 10-KSB for
the year ended December 31, 1996, previously filed with the Commission
(File No. 0-14535).
(12) Incorporated herein by reference to CBC's 1996 Annual Report on Form 10-
KSB/A for the year ended December 31, 1996, previously filed with the
Commission. (File No. 0-14535).
(13) Incorporated herein by reference to CBC's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1997, previously filed with the Commission
(File No. 0-14535).
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
II-3
<PAGE>
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of the securities offered would not exceed
that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission (the "Commission") pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration Statement;
(iii) 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 of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
an initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes (i) that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration 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 the
persons who may be deemed underwriters in addition to the information called for
by the other items of the applicable form; (ii) that every prospectus filed
pursuant to paragraph (c)(i) immediately preceding or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 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 of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions (see Item 20), or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, 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.
(f) The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on October 17, 1997.
CITIZENS BANCSHARES CORPORATION
By: /s/ Johnnie L. Clark
--------------------
Johnnie L. Clark
Vice Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears on
the signature pages to this Registration Statement constitutes and appoints
Johnnie L. Clark and Ann I. Scott, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in his or her name, place, and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits hereto and other documents in
connection herewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents and each of them, full power and authority to
do so and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Herman J. Russell Chairman of the Board of Directors October 17, 1997
- ---------------------
Herman J. Russell
/s/ Johnnie L. Clark Vice Chairman of the Board October 17, 1997
- -------------------- of Directors, President and
Johnnie L. Clark Chief Executive Officer
(Principal Executive Officer)
/s/ William G. Anderson Director October 17, 1997
- -----------------------
William G. Anderson
II-5
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas E. Boland Director October 17, 1997
- ----------------------
Thomas E. Boland
/s/ Norris L. Connally Director October 17, 1997
- ----------------------
Norris L. Connally
/s/ Odie C. Donald Director October 17, 1997
- ----------------------
Odie C. Donald
/s/ H. Jerome Russell Director October 17, 1997
- ----------------------
H. Jerome Russell
/s/ R. K. Sehgal Director October 17, 1997
- ----------------------
R.K. Sehgal
/s/ Ann I. Scott Controller October 17, 1997
- ---------------------- (Principal Financial and
Ann I. Scott Accounting Officer)
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NUMBER
- --------- ----------------------- ------
<S> <C> <C>
1 -- Agreement and Plan of Merger, dated as of October 1, 1997,
between CBC and FSB (included as Appendix A to the
Proxy Statement/Prospectus contained herein).
3.1 -- Articles of Incorporation of CBC.(1)
3.1.1 -- Amendment to Articles of Incorporation of CBC.(2)
3.2 -- Bylaws of CBC.(1)
5.1 -- Opinion of Smith, Gambrell & Russell, LLP, including consent.
8.1 -- Opinion of Smith, Gambrell & Russell, LLP, including consent.
10.1 -- Citizens Trust Bank Pension Plan & Trust, as amended and restated effective January 1,
1984.(1)(3)
10.2 -- Lease and Option Agreement by and between Citizens Trust Bank and Resolution Trust
Corporation, dated April 22, 1994.(4)
10.3 -- First Amended and Restated Employment Agreement dated September 18, 1995, between Citizens
Trust Bank and William L. Gibbs.(3)(5)
10.4 -- Loan Agreement by and between CBC and SunTrust Bank, Atlanta, dated April 22, 1996.(6)
10.5 -- Employment Agreement dated October ___, 1997, between CBC, FSB and of James E. Young (to be
filed by amendment).
21 -- Subsidiaries of CBC.(7)
23.1 -- Consent of Smith, Gambrell & Russell, LLP (included in Exhibit 5.1).
23.2 -- Consent of Smith, Gambrell & Russell, LLP (included in Exhibit 8.1).
23.3 -- Consent of Porter Keadle Moore, LLP regarding CBC consolidated financial statements.
23.4 -- Consent of KPMG Peat Marwick LLP regarding CBC consolidated financial statements.
23.5 -- Consent of Banks, Finley, White & Co. regarding FSB consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
24 - Power of Attorney (included on signature page to the Registration Statement).
99.1 - FSB's 1996 Annual Report on Form 10-KSB for the year ended December 31, 1996.(8)
99.2 - FSB's 1996 Annual Report on Form 10-KSB/A for the year ended December 31, 1996.(9)
99.3 - FSB's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997.(10)
99.4 - CBC's 1996 Annual Report on Form 10-KSB for the year ended December 31, 1996.(11)
99.5 - CBC's 1996 Annual Report on Form 10-KSB/A for the year ended December 31, 1996.(12)
99.6 - CBC's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997.(13)
</TABLE>
____________________
(1) Incorporated herein by reference to the exhibit of the same number in CBC's
Registration Statement on Form 10, previously filed with the Commission.
(File No. 0-14535).
(2) Incorporated herein by reference to Exhibits 3.3 and 4.2 to CBC's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987, previously
filed with the Commission. (File No. 0-14535).
(3) The indicated exhibit is a compensatory plan required to be filed as an
exhibit.
(4) Incorporated herein by reference to Exhibit 10.10 to CBC's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1994, previously filed
with the Commission. (File No. 0-14535).
(5) Incorporated herein by reference to Exhibit 10.11 to CBC's Annual Report on
Form 10-KSB for the year ended December 31, 1995, previously filed with the
Commission. (File No. 0-14535).
(6) Incorporated herein by reference to the exhibit of the same number in CBC's
1996 Annual Report on Form 10-KSB for the year ended December 31, 1996,
previously filed with the Commission. (File No. 0-14535).
(7) Incorporated herein by reference to Exhibit 22 to CBC's Registration
Statement on Form 10, previously filed with the Commission. (File No. 0-
14535).
(8) Incorporated herein by reference to FSB's Annual Report on Form 10-KSB for
the year ended December 31, 1996, previously filed with the Commission.
(File No. 0-28916).
(9) Incorporated herein by reference to FSB's Annual Report on Form 10-KSB/A
for the year ended December 31, 1996, previously filed with the Commission.
(File No. 0-28916).
(10) Incorporated herein by reference to FSB's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1997, previously filed with the Commission
(File No. 0-28916).
(11) Incorporated herein by reference to CBC's Annual Report on Form 10-KSB for
the year ended December 31, 1996, previously filed with the Commission
(File No. 0-14535).
(12) Incorporated herein by reference to CBC's 1996 Annual Report on Form 10-
KSB/A for the year ended December 31, 1996, previously filed with the
Commission. (File No. 0-14535).
(13) Incorporated herein by reference to CBC's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1997, previously filed with the Commission
(File No. 0-14535).
<PAGE>
EXHIBIT 5.1
[Smith, Gambrell & Russell, LLP Letterhead]
October 17, 1997
Board of Directors
Citizens Bancshares Corporation
75 Piedmont Avenue
Atlanta, Georgia 30303
Re: Citizens Bancshares Corporation
Registration Statement on Form S-4
842,374 Shares of Common Stock (the "Registration Statement")
-------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Citizens Bancshares Corporation (the
"Company") in connection with the proposed public offering of the shares of its
Common Stock covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, as amended, certified by the
Secretary of State of the State of Georgia;
(2) The Bylaws of the Company, as amended, certified as complete and correct by
the Secretary of the Company;
(3) The minute book of the Company, certified as correct and complete by the
Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company, issued by the
Georgia Secretary of State; and
(5) The Registration Statement (including exhibits thereto).
<PAGE>
Based upon such examination and upon examination of such other instruments
and records as we have deemed necessary, we are of the opinion that:
(A) The Company has been duly incorporated under the laws of the State of
Georgia and is validly existing and in good standing under the laws of that
state.
(B) The 842,374 shares of Common Stock covered by the Registration Statement
have been legally authorized and when issued in accordance with the terms
described in said Registration Statement, will be validly issued, fully
paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the Proxy Statement/Prospectus. In giving this consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Sincerely,
SMITH, GAMBRELL & RUSSELL, LLP
/s/ Robert C. Schwartz
RCS:dsn[109526]
<PAGE>
EXHIBIT 8.1
[Smith, Gambrell & Russell, LLP Letterhead]
October 17, 1997
Citizens Bancshares Corporation
175 John Wesley Dobbs Avenue, N.E.
Atlanta, Georgia 30303
First Southern Bancshares, Inc.
2727 Panola Road
Lithonia, Georgia 30058
Re: Agreement and Plan of Merger under which First Southern Bancshares, Inc.
will merge with and into Citizens Bancshares Corporation
Gentlemen:
We have acted as counsel to Citizens Bancshares Corporation ("CBC") in
connection with the proposed merger (the "Merger") of First Southern Bancshares,
Inc. ("FSB"), with and into CBC, pursuant to the terms of and as described in
that certain Agreement and Plan of Merger (the "Merger Agreement") dated as of
October 1, 1997 by and between CBC and FSB, described in CBC's Registration
Statement on Form S-4, to be filed with the Securities and Exchange Commission
on or about October 16, 1997 (the "Registration Statement"). At your request,
in connection with the filing by CBC of the Registration Statement and the Proxy
Statement/Prospectus of CBC and FSB as amended through the date hereof (the
"Proxy Statement/Prospectus") included as part of the Registration Statement, we
are rendering our opinion concerning certain federal income tax consequences of
the Merger. Unless otherwise indicated, all capitalized terms used in this
opinion have the same meanings given therefor in the Proxy Statement/Prospectus.
For purposes of rendering our opinion herein, we have conducted an
examination of the Internal Revenue Code of 1986, as amended (the "Code"), and
such other applicable laws, regulations, rulings, decisions, documents and
records as we have deemed necessary. With respect to factual matters, we have
relied upon the Merger Agreement, including, without limitation, the
representations of CBC and FSB set forth therein, and upon certain statements
and representations made to us in certificates by officers of CBC and FSB,
respectively, in each case without independent verification thereof. We have,
with your consent, assumed the accuracy and completeness of the statements and
representations contained in such certificates and have
<PAGE>
further assumed that the statements and representations contained in such
certificates will be complete and accurate as of the Effective Time. We have
also relied on the accuracy and completeness of the statements and
representations contained in the Proxy Statement/Prospectus. In addition, for
purposes of this opinion, we have assumed that at least fifty percent (50%) of
the outstanding shares of FSB Common Stock will be exchanged for CBC Common
Stock in the Merger, and that the shares of FSB Common Stock constitute capital
assets in the hands of each holder thereof.
Based on the foregoing, and subject to the qualifications set forth below,
we are of the opinion that under the Code:
(1) The Merger will constitute a reorganization under Code (S)(S)368(a)(1)(A)
and CBC and FSB will each be a party to the reorganization within the meaning of
Code (S)368(b).
(2) Holders of shares of FSB Common Stock who exchange such shares solely for
shares of CBC Common Stock will not recognize gain or loss on the exchange.
(3) The federal income tax basis of shares of CBC Common Stock received in
exchange for shares of FSB Common Stock will be equal to the holder's basis of
the shares of FSB Common Stock surrendered in exchange therefor (reduced by the
basis allocable to any fractional interest in any share of CBC Common Stock for
which cash is received), and the holding period of such CBC Common Stock will
include the holding period of the shares of FSB Common Stock surrendered in
exchange therefor.
(4) The receipt of cash in lieu of fractional shares will be treated as if the
fractional shares were distributed as part of the exchange and then redeemed by
CBC, and capital gain or loss will be recognized in an amount equal to the
difference between the cash received and the basis of the fractional share of
CBC Common Stock surrendered.
(5) Neither FSB nor CBC will recognize gain or loss as a consequence of the
Merger.
The opinions expressed herein are based upon our interpretation of existing
legal authorities, and no assurance can be given that such interpretations would
be followed if the exchange of shares contemplated by the Merger became the
subject of administrative or judicial proceedings. Statements of opinion herein
are opinions only and should not be interpreted as guarantees of the current
status of the law, nor should they be accepted as a guarantee that a court of
law or administrative agency will concur in such statement.
No opinion is expressed with respect to any of the following:
(1) The appropriate method to determine the fair market value of any stock or
other consideration received in any sale or exchange;
<PAGE>
(2) The state, local or foreign tax consequences of any aspect of the Merger;
or
(3) The federal income tax consequences of any aspect of the Merger to holders
of FSB Common Stock who are subject to special tax treatment for federal income
tax purposes, including among others, life insurance companies, tax exempt
entities and foreign taxpayers, or to holders of FSB Options which are exchanged
for or converted into options or warrants to acquire CBC Common Stock.
We expressly consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to this opinion in the Proxy Statement/Prospectus. In giving this
opinion, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
SMITH, GAMBRELL & RUSSELL, LLP
/s/ David W. Santi
DWS:wp
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 31, 1997, accompanying the 1996
consolidated financial statements of Citizens Bancshares Corporation and
subsidiary incorporated by reference in the Form S-4 Registration Statement and
Prospectus. We consent to the use of the aforementioned report in this Form S-4
Registration Statement and Prospectus and to the use of our name as it appears
under the caption "Experts."
PORTER KEADLE MOORE, LLP
Atlanta, Georgia
October 17, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
October 17, 1997
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 13, 1997, accompanying the 1996
consolidated financial statements of First Southern Bancshares, Inc. and
subsidiaries incorporated by reference in the Form S-4 Registration Statement
and Prospectus. We consent to the use of the aforementioned report in this Form
S-4 Registration Statement and Prospectus and to the use of our name as it
appears under the caption "Experts."
BANKS, FINLEY, WHITE & CO.
Atlanta, Georgia
October 17, 1997
