Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission file number 0-15945
Transition Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Central and Southern Holding Company
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(Exact name of registrant as specified in its charter)
Georgia 58-1413533
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Drawer 748, Milledgeville, GA 31061
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (912) 457-3500
Securities registered pursuant to Section 12(b) of the Act: none
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
-----------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No
---- ----
Aggregate market value of the voting stock held by non
affiliates of the Registrant as of March 12, 1997:
$47,495,799 based on $13.00 per share, the closing sale price
of the Common Stock as quoted on The Nasdaq Stock Market. See
Item 12
At March 12, 1997 there were issued and outstanding
3,653,523 shares of Common Stock, par value $1.00 per share.
DOCUMENTS INCORPORATED BY REFERENCE.
PART I
ITEM 1. BUSINESS.
General
Central and Southern Holding Company (the "Company") was
organized under the laws of Georgia in 1980 and is a
registered bank holding company. All of the Company's
activities are conducted by its wholly-owned subsidiaries, The
Central and Southern Bank of Georgia ("Milledgeville") and The
Central and Southern Bank of North Georgia ("North Georgia")
(collectively, the "Banks"), which were organized as Georgia
banking corporations in 1874 and 1926, respectively. North
Georgia was formerly known as The Central and Southern Bank of
Greensboro until its name was changed in 1996. During 1996,
the Company received regulatory approval to convert North
Georgia to a federal savings bank and opened branches in
Winder and Gainesville, Georgia. The bank was converted to a
thrift charter on April 1, 1996.
Both Banks are community-oriented, with particular
emphasis on retail banking, and offer such customary banking
services as consumer and commercial checking accounts, NOW
accounts, savings accounts, certificates of deposit, lines of
credit and money transfers. The Banks finance commercial and
consumer transactions, make secured and unsecured loans, and
provide a variety of other banking services.
On February 3, 1997, the Company executed a
definitive agreement of reorganization and plan of merger with
First Alliance/Premier Bancshares, Inc. (Premier), a Marietta,
Georgia-based bank holding company. Premier will be the
surviving corporation. In the transaction each of the
Company's outstanding common shares will be converted into one
share of Premier common stock. The deal is expected to close
in the second quarter and is subject to approval by regulatory
authorities and stockholders of the Company.
Markets
The Company conducts general banking activities through
the Banks primarily in Baldwin, Greene, Barrow, Hall and
surrounding counties of Georgia. Customers of the Banks are
primarily consumers and small businesses.
Deposits
The Banks offer a full range of depository accounts and
services to both consumers and businesses. At December 31,
1996, the Banks' deposits, totaling an aggregate of
approximately $195,000,000, consisted of approximately
$18,000,000 in noninterest-bearing demand deposits (9% of
total deposits); approximately $41,000,000 in interest-bearing
demand deposits (21% of total deposits); approximately
$9,000,000 in savings deposits (5% of total deposits);
approximately $88,000,000 in time deposits in amounts less
than $100,000 (47% of total deposits); and approximately
$39,000,000 in time deposits of $100,000 or more (18% of total
deposits).
Loans
The Banks make both secured and unsecured loans to
individuals, firms and corporations, and both consumer and
commercial lending operations include various types of credit
for the Banks' customers. Secured loans include first and
second real estate mortgage loans. The Banks also make direct
installment loans to consumers on both a secured and unsecured
basis. From 1975 through 1992, Milledgeville's principal
source of loans was the purchase of sales finance contracts
for new and used motor vehicles and, to a lesser extent,
mobile homes. This portfolio grew to $89 million (including
unearned interest) by December 31, 1991. Under new
management, Milledgeville discontinued the purchase of sales
finance contracts in April, 1993, and by December 31, 1996 the
sales finance portfolio of Milledgeville had contracted to
approximately $1,314,000.
Lending Policy
The current lending strategy of the Banks is to make
loans only to local customers or to national or international
firms doing business locally. Unsecured loans normally will
not be made to persons who do not reside or work in the Banks'
primary trade areas. Secured loans can be made to customers
outside the Banks' trade areas who are well established and
have net worth and collateral to support the loan. Real
estate loans usually are made only when such loans are secured
by real property located in Baldwin County, in the case of
Milledgeville, or in Greene, Barrow, and Hall Counties, in
the case of North Georgia.
The Banks provide each lending officer with written
guidelines for lending activities. Lending authority is
delegated by the Board of Directors of each of the Banks to
loan officers, each of whom is limited in the amount of
secured and unsecured loans which he or she can make to a
borrower.
Employees
As of January 1, 1997, the Banks had 91 full-time
employees and 15 part-time employees. The Company has no
salaried employees. Neither Milledgeville nor North Georgia
is a party to any collective bargaining agreement, and the
Banks believe that their employee relations are good.
Competition
The banking business is highly competitive. The Banks
compete with other banks, many of which are substantially
larger and have greater financial resources than the Banks.
In particular, Milledgeville competes with four other banks in
Baldwin County, and North Georgia competes with two other
banks in Greene County. The Banks also compete with other
financial service organizations, including savings and loan
associations and finance companies, insurance companies,
credit unions and certain governmental agencies. To the
extent that the Banks must maintain non-interest-earning
reserves against deposits, they may be at a competitive
disadvantage when compared with other financial service
organizations that are not required to maintain reserves
against substantially similar sources of funds. Further, the
deregulation of banks, savings and loan associations and other
financial institutions and the increased competition from
investment bankers and brokers and other financial service
organizations has had a significant impact on the competitive
environment in which the Banks operate.
Supervision and Regulation
General. The Company is a registered bank holding
company subject to regulation by the Board of Governors of the
Federal Reserve (the "Federal Reserve") under the Bank Holding
Company Act of 1956, as amended (the "Act"). The Company is
required to file financial information with the Federal
Reserve periodically and is subject to periodic examination by
the Federal Reserve.
The Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before (i) it may
acquire direct or indirect ownership or control of more than
5% of the voting shares of any bank that it does not already
control; (ii) it or any of its subsidiaries, other than a
bank, may acquire all or substantially all of the assets of a
bank; and (iii) it may merge or consolidate with any other
bank holding company. In addition, a bank holding company is
generally prohibited from engaging in, or acquiring, direct or
indirect control of the voting shares of any company engaged
in non-banking activities. This prohibition does not apply to
activities found by the Federal Reserve, by order or
regulation, to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Some of
the activities that the Federal Reserve has determined by
regulation or order to be closely related to banking are:
making or servicing loans and certain types of leases;
performing certain data processing services; acting as
fiduciary or investment or financial advisor; providing
discount brokerage services; underwriting bank eligible
securities; underwriting debt and equity securities on a
limited basis through separately capitalized subsidiaries; and
making investments in corporations or projects designed
primarily to promote community welfare.
The Company must also register with the Department of
Banking and Finance (the "DBF") and file periodic information
with the DBF. As part of such registration, the DBF requires
information with respect to the financial condition,
operations, management and intercompany relationships of the
Company and the Banks and related matters. The DBF may also
require such other information as is necessary to keep itself
informed as to whether the provisions of Georgia law and the
regulations and orders issued thereunder by the DBF have been
complied with, and the DBF may examine the Company and each of
the Banks.
The Company is an "affiliate" of the Banks under the
Federal Reserve Act, which imposes certain restrictions on (i)
loans by the Banks to the Company, (ii) investments in the
stock or securities of the Company by the Banks, (iii) the
Bank's taking the stock or securities of an "affiliate" as
collateral for loans by the Bank to a borrower and (iv) the
purchase of assets from the Company by the Banks. Further, a
bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing
of services.
Milledgeville, as a state banking association organized
under Georgia law, is subject to the supervision of, and, is
regularly examined by the DBF and the Federal Deposit
Insurance Corporation (the "FDIC"). The FDIC and the DBF must
grant prior approval of any merger, consolidation or other
corporation reorganization involving Milledgeville. A bank
can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with the
default of a commonly-controlled institution.
North Georgia is a Federal-chartered thrift subject to
regulation and examination by the Office of Thrift Supervision
(the "OTS"). North Georgia is required to file reports with
the OTS describing its activities and financial conditions.
Payment of Dividends. The Company is a legal entity
separate and distinct from the Banks. Most of the revenues of
the Company result from dividends paid to it by the Banks.
There are statutory and regulatory requirements applicable to
the payment of dividends by the Banks, as well as by the
Company to its shareholders.
Milledgeville is a state chartered bank regulated by the
DBF and the FDIC. Under the regulations of the DBF, dividends
may not be declared out of the retained earnings of a state
bank without first obtaining the written permission of the DBF
unless such bank meets all the following requirements:
(a) Total classified assets as of the most recent
examination of the bank do not exceed 80% of equity capital
(as defined by regulation);
(b) The aggregate amount of dividends declared or
anticipated to be declared in the calendar year does not
exceed 50% of the net profits after taxes but before dividends
for the previous calendar year; and
(c) The ratio of equity capital to adjusted assets is
not less than 6%.
North Georgia is subject to regulations of the OTS
concerning the payment of dividends. The payment of dividends
by the Company and the Banks may also be affected or limited
by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines. In addition, if, in the
opinion of the applicable regulatory authority, a bank under
its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending upon the
financial condition of the bank, could include the payment of
dividends), such authority may require, after notice and
hearing, that such bank cease and desist from such practice.
The FDIC has issued a policy statement providing that insured
banks should generally only pay dividends out of current
operating earning. In addition to the formal statutes and
regulations, regulatory authorities consider the adequacy of
each of the Bank's total capital in relation to its assets,
deposits and other such items. Capital adequacy
considerations could further limit the availability of
dividends to the Banks. At December 31, 1996, retained
earnings available from the Banks to pay dividends totaled
approximately $2.0 million. For 1996, the Company's cash
dividend payout to stockholders was 27% of net earnings.
Monetary Policy. The results of operations of the Banks
are affected by credit policies of monetary authorities,
particularly the Federal Reserve. The instruments of monetary
policy employed by the Federal Reserve include open market
operations in U.S. government securities, changes in the
discount rate on bank borrowings and changes in reserve
requirements against bank deposits. In view of changing
conditions in the national economy and in the money markets,
as well as the effect of actions by monetary and fiscal
authorities, including the Federal Reserve, no prediction can
be made as to possible future changes in interest rates,
deposit levels, loan demand or the business and earnings of
the Banks.
Capital Adequacy. The Federal Reserve and the FDIC have
implemented substantially identical risk-based rules for
assessing bank and bank holding company capital adequacy.
These regulations establish minimum capital standards in
relation to assets and off-balance sheet exposures as adjusted
for credit risk. Banks and bank holding companies are
required to have (1) a minimum level of total capital (as
defined) to risk-weighted assets of eight percent (8%); (2) a
minimum Tier One Capital (as defined) to risk-weighted assets
of four percent (4%); and (3) a minimum stockholders' equity
to risk-weighted assets of four percent (4%). In addition,
the Federal Reserve and the FDIC have
established a minimum three percent (3%) leverage ratio of
Tier One Capital to total assets for the most highly-rated
banks and bank holding companies. "Tier One Capital"
generally consists of common equity not including unrecognized
gains and losses on securities, minority interests in equity
accounts of consolidated subsidiaries and certain perpetual
preferred stock less certain intangibles. The Federal Reserve
and the FDIC will require a bank holding company and a bank,
respectively, to maintain a leverage ratio greater than three
percent (3%) if either is experiencing or anticipating
significant growth or is operating with less than well-
diversified risks in the opinion of the Federal Reserve. The
Federal Reserve and the FDIC use the leverage ratio in tandem
with the risk-based ratio to assess the capital adequacy of
banks and bank holding companies. The FDIC, the Office of the
Comptroller of the Currency (the "OCC") and the Federal
Reserve have proposed amending the capital adequacy standards
to provide for the consideration of interest rate risk in the
overall determination of a bank's capital ratio, requiring
banks with greater interest rate risk to maintain adequate
capital for the risk. The revised standards expected to have
a significant effect on the Company's capital requirements, if
adopted in their current form.
Similarly, OTS' regulatory capital regulations specify
capital standards consisting of three components, a "core
capital," a "tangible capital" and a "risk-based capital"
requirement. These regulations require that thrifts maintain
core capital in an amount of not less than 3% of adjusted
total assets and tangible capital in an amount of not less
than 1.5% of adjusted total assets. Under the OTS' regulatory
capital regulations, federal savings banks are required to
maintain capital equal to 8% of risk-weighted assets. The OTS
requires assets to be weighted on the basis of risk and
assigned a weighting factor of between 0% and 100%.
Approximately one-half of risk-based capital must consist of
core capital, and one-half may consist of other preferred
stock, a portion of general loan loss reserves and other
hybrid capital instruments such as convertible and
subordinated debentures.
Effective December 19, 1992, a new Section 38 to the
Federal Deposit Insurance Act implemented the prompt
corrective action provisions that Congress enacted as a part
of the Federal Deposit Insurance Corporation Improvement Act
of 1991 (the "1991 Act"). The "prompt corrective action"
provisions set forth five regulatory zones in which all banks
are placed largely based on their capital positions.
Regulators are permitted to take increasingly harsh action as
a bank's financial condition declines. Regulators are also
empowered to place in receivership or require the sale of a
bank to another depository institution when a bank's capital
leverage ratio reaches two percent. Better capitalized
institutions are generally subject to less onerous regulation
and supervision than banks with lesser amounts of capital.
The FDIC has adopted regulations implementing the prompt
corrective action provisions of the 1991 Act, which place
financial institutions in the following five categories based
upon capitalization ratios: (1) a "well capitalized"
institution has a total risk-based capital ratio of at least
10%, a Tier One risk-based ratio of at least 6% and a leverage
ratio of at least 5%; (2) an "adequately capitalized"
institution has a total riskbased capital ratio of at least
8%, a Tier One risk-based ratio of at least 4% and a leverage
ratio of at least 4%; (3) an "undercapitalized" institution
has a total risk-based capital ratio of under 8%, a Tier One
risk-based ratio of under 4% or a leverage ratio of under 4%;
(4) a "significantly undercapitalized" institution has a total
risk-based capital ratio of under 6%, a Tier One risk-based ratio
of under 3% or a leverage ratio of under 3%; and (5) a "critically
undercapitalized" institution has a leverage ratio of 2% or
less. Institutions in any of the three undercapitalized
categories would be prohibited from declaring dividends or
making capital distributions. The FDIC regulations also
establish procedures for "downgrading" an institution to a
lower capital category based on supervisory factors other than
capital. Under the FDIC's regulations, each of the Banks were
"well capitalized" institutions at December 31, 1996.
Set forth below are pertinent capital ratios for each of
the Banks as of December 31, 1996.
<TABLE>
<CAPTION>
Minimum Capital
Requirement Milledgeville North Georgia
----------- ------------- -------------
<S> <C> <C>
Tier One Capital to 18.27% 10.52%
Risk-based
Assets 4.00%(1)
Total Capital to 19.54% 11.77%
Risk-based
Assets 8.00%(2)
Leverage Ratio (Tier One 11.87% N/A
Capital to Average
Assets): 3.00% (3)
Tangible Capital to N/A 7.27%
Tangible Assets 4.00%
</TABLE>
___________________________
(1) Minimum required ratio for "well capitalized" banks is 6%
(2) Minimum required ratio for "well capitalized" banks is 10%
(3) Minimum required ratio for "well capitalized" banks is 5%
Regulations Applicable to Federal Savings Banks. OTS
regulations use the Qualified Thrift Lender ("QTL") test to
determine a thrift's eligibility for Federal Home Loan Bank
advances and for certain other purposes. Unless an
institution qualifies as a QTL, its borrowing privileges from
a Federal Home Loan Bank may be restricted, and it may be
subject to other operating limitations. To meet the QTL test,
an institution must maintain at least 65% of its assets in
"Qualified Thrift Investments," which under the regulations
consists of (i) loans made to purchase, refinance, construct,
improve or repair domestic, residential or manufactured
housing, (ii) home equity loans, (iii) securities backed by or
presenting an interest in mortgages on domestic, residential
or manufactured housing, and (iv) obligations issued by
federal deposit insurance agencies. Subject to a limitation of
15% of assets, Qualified Thrift Investments may also include
consumer loans, investments in certain subsidiaries, loans for
construction of schools, churches, nursing homes and hospitals
and 200% of investments in loans for low-to-moderate-income
housing and certain other community oriented investments.
Although North Georgia expects to qualify as a QTL under
applicable regulations, there can be no assurance that it will
do so.
As a thrift, North Georgia will be required to maintain
average daily balances of liquid assets (consisting of cash,
certain time deposits, banker's acceptances, highly-rated
corporate debt and commercial paper, securities of certain
mutual funds and specific U.S. government, state of federal
agency obligations) of not less than 5% of the total amount of
its net withdrawable savings deposits plus short-term
borrowings and to maintain average daily balances of short-
term liquid assets of not less than 1% of such total amount.
Recent Legislative and Regulatory Action. On April 19,
1995, the four federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the
Community Reinvestment Act (the "CRA"), which are intended to
set distinct assessment standards for financial institutions.
The revised regulation contains three evaluation tests: (i) a
lending test, which will compare an institution's market share
of loans in low- and moderate-income areas to its market share
of loans in its entire service area and the percentage of a
bank's outstanding loans to low- and moderate-income areas or
individuals, (ii) a services test, which will evaluate the
provisions of services that promote the availability of credit
to low- and moderate-income areas, and (iii) an investment
test, which will evaluate an institution's record of
investments in organizations designed to foster community
development, small- and minority-owned businesses and
affordable housing lending, including state and local
government housing or revenue bonds. The regulations are
designed to reduce some paperwork requirements of the current
regulations and provide regulators, institutions and community
groups with a more objective and predictable manner with which
to evaluate the CRA performance of financial institutions.
The rule became effective on January 1, 1996, at which time
evaluation under streamlined procedures began for institutions
with assets of less than $250 million that are owned by a
holding company with total assets of less than $1 billion. It
is not expected that these regulations will have any
appreciable impact upon the Company and the Banks.
Congress and various federal agencies (including, in
addition to the bank regulatory agencies, the Department of
Housing and Urban Development, the Federal Trade Commission
and the Department of Justice) (collectively the "Federal
Agencies") responsible for implementing the nation's fair
lending laws have been increasingly concerned that prospective
home buyers and other borrowers are experiencing
discrimination in their efforts to obtain loans. In recent years,
the Department of Justice has filed suit against financial
institutions which it determined had discriminated, seeking
fines and restitution for borrowers who allegedly suffered
from discriminatory practices. Most, if not all, of these
suits have been settled (some for substantial sums) without
a full adjudication on the merits.
On March 8, 1994 the Federal Agencies, in an effort to
clarify what constitutes lending discrimination and specify
the factors the agencies will consider in determining if
lending discrimination exists, announced a joint policy
statement detailing specific discriminatory practices
prohibited under the Equal Opportunity Act and the Fair
Housing Act. In the policy statement, three methods of
proving lending discrimination were identified: (1) overt
evidence of discrimination, when a lender blatantly
discriminates on a prohibited basis, (2) evidence of disparate
treatment, when a lender treats applicants differently based
on a prohibited factor even where there is no showing that the
treatment was motivated by prejudice or a conscious intention
to discriminate against a person, and (3) evidence of
disparate impact, when a lender applies a practice uniformly
to all applicants, but the practice has a discriminatory
effect, even where such practices are neutral on their face
and are applied equally, unless the practice can be justified
on the basis of business necessity.
On September 23, 1994, President Clinton signed the
Reigle Community Development and Regulatory Improvement Act of
1994 (the "Regulatory Improvement Act"). The Regulatory
Improvement Act contains funding for community development
projects through banks and community development financial
institutions and also numerous regulatory relief provisions
designed to eliminate certain duplicative regulations and
paperwork requirements.
On September 29, 1994, President Clinton signed the
Reigle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Federal Interstate Bill") which amends federal law
to permit bank holding companies to acquire existing banks in
any state effective September 29, 1995, and any interstate
bank holding company is permitted to merge its various bank
subsidiaries into a single bank with interstate branches after
May 31, 1997. States have the authority to authorize
interstate branching prior to June 1, 1997, or alternatively,
to opt out of interstate branching prior to that date. The
Georgia Financial Institutions Code was amended in 1994 to
permit the acquisition of a Georgia bank or bank holding
company by out-of-state bank holding companies beginning July
1, 1995. On September 29, 1995, the interstate banking
provisions of the Georgia Financial Institutions Code were
superseded by the Federal Interstate Bill.
On January 26, 1996, the Georgia legislature adopted
a bill (the "Georgia Intrastate Bill") to permit, effective
July 1, 1996, any Georgia bank or group of affiliated banks
under one holding company to establish up to an aggregate of
three new or additional branch banks anywhere within the State
of Georgia, excluding any branches established by a bank in a
county in which it has current operations. After July 1,
1998, all restrictions on state-wide branching are removed.
Prior to adoption of the Georgia Intrastate Bill, Georgia only
permitted branching within a county, via merger or
consolidation with an existing bank or in certain other
limited circumstances.
FDIC Insurance and FICO Assessments for the Bank
Subsidiaries. The Banks are subject to FDIC deposit insurance
assessments for the Bank Insurance Fund (the "BIF"). In the
first six months of 1995, the Banks were assessed $.23 per
$100 of deposits based upon a risk-based system whereby banks
are assessed on a sliding scale depending upon their placement
in nine separate supervisory categories, from $.23 per $100 of
deposits for the healthiest banks (those with the highest
capital, best management and best overall condition) to as
much as $.31 per $100 of deposits for the less-healthy
institutions, for an average $.259 per $100 of deposits.
On August 8, 1995, the FDIC lowered the BIF premium for
healthy banks by 83% from $.23 per $100 in deposits to $.04
per $100 in deposits, while retaining the $.31 level for the
riskiest banks. The average assessment rate was therefore
reduced from $.232 to $.044 per $100 of deposits. The new
rate took effect on September 29, 1995. On September 15,
1995, the FDIC refunded $114,000 to the Banks for premium
overpayments in the second and third quarter of 1995. On
November 14, 1995, the FDIC again lowered the BIF premium for
healthy banks from $.04 per $100 of deposits to zero for the
highest rated institutions (92% of the industry). As a
result, North Georgia paid only the legally required annual
minimum payment of $2,000 per year for insurance beginning in
January 1996. Milledgeville paid $180,000 in premiums with
respect to certain OAKAR deposits acquired from the Resolution
Trust Corporation which were assessed at $.23 per $100 of
deposits and an additional one time assessment during 1996.
Had the current rates been in effect for all of 1994 and 1995,
the annual FDIC insurance premiums paid by the Banks would
have been reduced by $475,000 and $300,000, respectively.
On September 29, 1996, the Economic Growth and Regulatory
Paperwork Reduction Act of 1996 was enacted. This Act's chief
accomplishment was to provide for the recapitalization of the
Savings Association Insurance Fund ("SAIF") by levying a one-
time special assessment on SAIF deposits to bring the fund to
a reserve ratio equal to $.25 per $100 of insured deposits and
to provide that beginning in 1997, BIF assessments would be
used to help pay off the $780 million in annual interest
payments on the $8 billion Financing Corporation ("FICO")
bonds issued in the late 1980s as part of the government
rescue of the thrift industry. The law provides that BIF
assessments for FICO bond payments must be set at a rate equal
to 20% of the SAIF rates for such assessments in for 1997,
1998 and 1999. After 1999, all FDIC insured institutions will
pay the same assessment rates. For the first six months of
1997, the assessment for the FICO bond payments will be $.0132
per $100 of deposits for BIF deposits and $.0648 per $100 of
deposits for SAIF deposits. The FDIC announced on November
26th that the premium for the first six months for deposit
insurance assessments would range from zero to $.27 per $100
of deposits with 94% of banks paying nothing for deposit
insurance. One of the provisions of the 1996 Act was to
eliminate the minimum $2,000 per year charge for deposit
insurance. As a result, the Banks will pay no premium for
deposit insurance in the first six months of 1997 and a first
quarter FICO bond assessment of $19,000. The Bill also
provided for certain limited regulatory relief and
modifications to certain out-of-date regulations.
Executive Officers of the Company
Executive officers are elected by the Board of Directors
annually in January and hold office until the following
January unless they sooner resign or are removed from office
by the Board of Directors.
The executive officers of the Company, and their ages,
positions with the Company and terms of office, as of January
1, 1997, are as follows:
<TABLE>
<CAPTION>
Officer of the
Name (Age) Principal Position Company Since
- ---------- ------------------ -------------
<S> <C> <C>
Robert C. Oliver (48) President, Chief Executive Officer 1992
and Director of the Company and
Milledgeville; Director of North
Georgia
Michael E. Ricketson (47) Executive Vice President, Chief 1993
Financial Officer and Director of
the Company and Chief Financial
Officer of Milledgeville
John H. Ferguson (53) Director and Secretary of the 1987
Company; Director of Milledgeville
</TABLE>
Mr. Oliver has been President of Milledgeville since
October 1992 and President of the Company since January 1993.
He became a director of Milledgeville in October 1992, a
director of North Georgia in January 1993 and a director of
the Company in January 1993. He was Senior Vice President and
Regional Executive of Wachovia Bank of Georgia prior to
September 1992.
Mr. Ricketson has been Executive Vice President of the
Company since 1996 and Chief Financial Officer of
Milledgeville since October 1993. He was formerly First Vice
President and Financial Officer of First National Bancorp from
1990 through April 1992. Prior to 1990 he was controller of
the First National Bank of Gainesville.
Dr. Ferguson has been a director of Milledgeville and the
Company since 1977 and 1980, respectively. He became
secretary of the Company in 1987. He is an orthodontist.
ITEM 2. PROPERTIES.
The Company owns a parcel of land and a 7,000 square-foot
building in Winder, Georgia which is leased to North Georgia
as a bank branch.
The executive offices of the Company and the main banking
office of Milledgeville are located in a 22,800 square-foot
facility at 150 West Greene Street, Milledgeville, Georgia.
Both the building and the land for this facility, are owned by
Milledgeville. Milledgeville has two full-service branches
located on North Columbia Street in Milledgeville, which
includes drive-in facilities and an automated teller machine
linked to the HONOR and CIRRUS networks of automated teller
machines. The land and buildings for the branches are owned by
Milledgeville.
North Georgia owns the land and a 9,000 square-foot
building, including drive-in teller lanes, for its banking
facility located at 201 South Main Street, Greensboro,
Georgia, approximately 35 miles from Milledgeville.
None of the real properties owned by Company,
Milledgeville, or North Georgia is subject to any
encumbrances.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not aware of any material pending legal
proceedings to which the Company or any of its subsidiaries is
a party or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders
of the Company during the fourth quarter of its fiscal year.
PART II
ITEM 5. COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Stock. Since 1987, the Company's Common Stock has been
traded on a limited basis in the over-the-counter market and
is included in The Nasdaq Stock Market ("Nasdaq") under the
symbol "CSBC." Prior to 1987, there was no established public
trading market for the Common Stock. The following table sets
forth quarterly high and low sales prices per share of Common
Stock as reported by Nasdaq.
<TABLE>
<CAPTION>
Sales Prices
----------------------
High Low
---------- ---------
<S> <C> <C>
Year ended December 31, 1995
First Quarter $ 7 1/4 6
Second Quarter 7 3/4 6 1/2
Third Quarter 9 1/8 7
Fourth Quarter 9 1/4 8 3/8
Year ended December 31, 1996
First Quarter $ 9 3/8 8 1/2
Second Quarter 9 1/8 8 1/4
Third Quarter 8 7/8 8 3/8
Fourth Quarter 12 5/8 8 3/4
First Quarter 1997 (through February 25, 1997) $13 1/8 11
</TABLE>
Dividends. During fiscal 1996, the Company paid four
cash dividends totaling $.22 per share of Common Stock. The
Company paid cash dividends of $0.175 per share of Common
Stock during fiscal 1995. The Company has also paid stock
dividends from time to time. The primary source of funds
available to the Company is the receipt of dividends from the
Banks and management fees for managerial and administrative
services provided to the Banks. The amount and frequency of
dividends will be determined by the Company in light of the
earnings, capital requirements and financial condition of the
Company, and no assurances can be given that dividends will be
declared in the future.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Years ended December 31: 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Interest income $17,236 $16,274 $16,769 $20,938 $28,986
Interest expense 8,956 8,381 8,916 11,307 16,766
Net interest Income 8,280 7,893 7,853 9,631 12,220
Provision for possible loan losses (1,016) (1,038) ---- 2,725 11,842
Other income 1,263 934 1,660 1,110 2,237
Other expense 6,975 6,683 7,499 8,707 6,796
Net earnings (loss) 2,954 2,559 1,617 (111) (2,983)
Per share data:
Net earnings (loss) 0.81 0.68 0.44 (0.05) (0.88)
Cash dividends declared 0.22 0.175 0.03 0.10
Note payable to bank 1,600 250 300
Average total equity 22,917 21,480 19,435 19,002 19,104
Average total assets 212,833 200,579 227,412 259,651 305,332
Ratios:
Net earnings (loss) to average assets 1.39% 1.28% 0.71% (0.04)% (0.98)%
Net earnings (loss) to average equity 12.89% 11.91% 8.32% (0.58)% (15.61)%
Dividend payout ratio 27.16% 25.82% 6.82% N/A N/A
Average equity to average assets 10.77% 10.71% 8.55% 7.32% 6.26%
</TABLE>
<TABLE>
<CAPTION>
1996 1995 % Change
---- ---- --------
(in thousands except per share data)
<S> <C> <C> <C>
Statement of condition:
Assets $225,786 $207,849 8.63%
Loans, net of unearned interest 126,433 114,071 10.84%
Deposits 195,165 180,474 8.14%
Stockholders' equity 23,905 22,660 5.49%
Statement of earnings:
Net interest income 8,280 7,893 4.90%
Provision for loan losses (1,016) (1,038) (2.12)%
Other income 1,263 934 35.22%
Other expense 6,975 6,683 4.37%
Net earnings 2,954 2,559 15.46%
Per share data
Book value 6.52 6.10 7.21%
Net earnings 0.81 0.68 18.88%
Cash dividends declared 0.22 0.175 25.71%
Performance ratios
Return on average total assets 1.39% 1.28%
Return on average total equity 12.89% 11.91%
</TABLE>
Average balances and interest rates, interest yields/rates on
a fully taxable equivalent basis
The following table details average balances of interest-
earning assets and interest-bearing liabilities, the fully
taxable equivalent amount of interest earned/paid, and the
fully taxable equivalent yield/rate for each of the three
years in the period ended December 31, 1996. The loan
averages include nonaccrual loans.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994
---- ---- ----
Yield/ Yield/ Yield/
Avg.Bal. Int. Rate Avg.Bal. Int. Rate Avg.Bal. Int. Rate
-------- ---- ------ -------- ---- ------ -------- ---- ------
(in thousands)
ASSETS
Loans, net of unearned interest $117,251 $11,975 10.21% $108,273 $11,190 10.34% $113,712 $11,125 9.78%
Interest-bearing deposits other banks 1,397 46 3.29% 1,404 55 3.92% --- ---
Investment securities:
Taxable 58,624 3,626 6.19% 58,906 3,531 5.99% 70,596 3,957 5.61%
Non-taxable 9,892 901 9.11% 9,894 1,017 10.28% 13,690 1,380 10.08%
Federal funds sold 17,242 952 5.52% 14,250 828 5.81% 18,813 776 4.12%
------ --- ----- ------ --- ------ ---
Total interest earning assets 204,406 $17,500 8.56% 192,727 $16,621 8.62% 216,811 $17,238 7.95%
======= ======= =======
Allowance for loan losses (4,274) (4,299) (4,732)
Other assets 12,701 12,151 15,333
------ ------ ------
Total assets $212,833 $200,579 $227,412
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings and interest-bearing
Demand deposits $48,126 1,588 3.30% $42,627 $1,319 3.09% $53,242 $1,523 2.86%
Time deposits 121,678 7,227 5.94% 118,398 6,988 5.90% 128,829 7,054 5.48%
Repurchase agreements 1,252 65 5.22% 1,379 74 5.36% 6,704 339 5.06%
Note payable to bank 1,100 76 6.94% --- --- --- ---
----- -- ----- --- --- --- ---
Total interest-bearing liabilities 172,156 $8,956 5.20% 162,404 $8,381 5.16% 188,775 $8,916 4.72%
====== ====== ======
Demand deposits 16,414 15,561 18,004
Other liabilities 1,346 1,134 1,198
----- ----- -----
Total liabilities 189,916 179,099 207,977
Total stockholders' equity 22,917 21,480 19,435
------ ------ ------
Total liabilities and stockholders'
equity $212,833 $200,579 $227,412
======== ======== ========
Net interest income $8,544 $8,240 $8,322
Net interest margin 4.18% 4.28% 3.84%
Net interest spread 3.36% 3.46% 3.23%
</TABLE>
Volume - rate analysis
The following table shows a summary of the changes in interest
income and interest expense on a fully taxable equivalent
basis resulting from changes in volume and changes in rates
for each category of interest-earning assets and interest-
bearing liabilities for 1996/1995 and 1995/1994. Changes not
solely attributable to a change in rate or volume are
allocated proportionately relative to the total change of rate
and volume.
<TABLE>
<CAPTION>
1996 versus 1995 1995 versus 1994
---------------- ----------------
Increase (decrease) due to change in: Increase (decrease) due to change: in:
Volume Yield/ Volume Yield/
Outstanding Rate Total Outstanding Rate Total
----------- ---- ----- ----------- ---- -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Deposits with other banks $ --- $(9) $(9) $55 $--- $55
Loans 915 (130) 785 (546) 611 65
Investment securities:
Taxable (17) 112 95 (687) 261 (426)
Non-taxable (116) (116) (390) 27 (363)
Federal funds sold 163 (39) 124 (217) 269 52
--- ---- --- ----- --- --
Total interest income 1,061 (182) 879 (1,785) 1,168 (617)
----- ----- --- ------- ----- -----
Interest expense on:
Saving and interest-bearing
demand deposits 178 91 269 (321) 117 (204)
Time deposits 195 44 239 (594) 528 (66)
Repurchase agreements (7) (2) (9) (284) 19 (265)
Notes payable to bank 76 ---- 76 ---- ---- ----
-- ---- -- ---- ---- ----
Total interest expense 442 133 575 (1,199) 664 (535)
--- --- --- ------- --- -----
Net interest income $619 $(315) $304 $(586) $504 $(82)
==== ====== ==== ====== ==== =====
</TABLE>
A sound credit policy and careful, consistent credit review
are vital to a successful lending program. The Banks operate
under written loan policies which attempt to maintain a consistent
lending philosophy, provide sound traditional credit
decisions, provide an adequate return and render service to
the communities in which the banks are located. Credit reviews
and loan examinations help confirm that the Banks are adhering
to these loan policies.
The Banks make both secured and unsecured loans to
individuals, firms and corporations, and both consumer and
commercial lending operations include various types of credit
for the Banks' customers. Secured loans include first and
second real estate mortgage loans. The Banks also make direct
installment loans to consumers on both a secured and unsecured
basis.
From 1975 through 1992, Milledgeville's principal source of
loans was the purchase of sales finance loans for new and used
motor vehicles and to a lesser extent, mobile homes. This
portfolio grew to $89,000,000 (including unearned interest) by
December 31, 1991. Under new management, Milledgeville
discontinued the operation in April, 1993. This has resulted
in the sales finance portfolio declining to $1,314,000 by
December 31, 1996.
LOANS
The amount of loans outstanding by loan type at the indicated
dates are shown in the following tables according to type of
loan :
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $22,260 $25,178 $26,103 $32,574 $29,108
Real estate-construction 27,696 21,747 13,271 3,263 9,291
Real estate-mortgage 64,145 51,104 41,204 36,703 48,281
Sales finance 1,314 5,822 18,233 43,952 86,398
Consumer installment 11,091 10,554 10,397 11,146 12,503
------ ------ ------ ------ ------
126,506 114,405 109,208 127,638 185,581
Less:
Unearned income (73) (334) (1,478) (4,886) (12,523)
Allowance for loan losses (4,164) (4,190) (4,313) (4,681) (5,106)
------- ------- ------- ------- -------
Loans, net $122,269 $109,881 $103,417 $118,071 $167,952
======== ======== ======== ======== ========
</TABLE>
Of the loans maturing after one year, approximately
$49,000,000 have fixed rates and approximately $23,000,000
have variable rates. The maturity of real estate construction
and commercial, financial and agricultural loans outstanding
at December 31, 1996 are as follows:
LOAN MATURITIES
<TABLE>
<CAPTION>
Commercial,
Real estate financial
construction and agricultural
------------ ----------------
(in thousands)
<S> <C> <C>
In one year or less $24,181 $10,485
After one year but within five years 1,457 10,735
After five year 2,058 1,040
----- -----
Total $27,696 $22,260
======= =======
</TABLE>
All loans carry some degree of risk. The risk is reflected in
the consolidated financial statements by the allowance for
loan losses, the amount of loans charged off and the provision
for loan losses charged to operating expense. It is the Company's
policy that when a loss is identified, it is charged against
the loan loss allowance in the current period. The policy
regarding recognition of losses requires immediate recognition
of a loss if significant doubt exists as to principal
repayment. In addition, consumer installment credit is
generally recognized as a loss when it becomes 90 days or more
past due, or the consumer has filed for protection under the
bankruptcy laws. A loss will not be recognized if the
underlying collateral or the customer's financial position
makes a loss improbable.
The Company's provision for loan losses is a reflection
of actual losses experienced during the year and management's
judgment as to the adequacy of the allowance for loan losses
to absorb future losses. Some of the factors considered by
management in determining the amount of the provision and
resulting allowance include: (1) credit reviews of individual
loans; (2) gross and net loan charge-offs in the current year;
(3) growth in the loan portfolio; (4) the current level of the
allowance in relation to total loans and to historical loss
levels, (5) past due and nonaccruing loans; (6) collateral
values of properties securing loans; (7) the composition of
the loan portfolio (types of loans); and (8) management's
estimate of future economic conditions and the resulting
impact on the Company. The Company made $1,016,000 of
negative provisions to the allowance for loan losses during
the year. See Provision for Loan Losses for discussion of the
negative provisions.
ALLOWANCE FOR LOAN LOSSES
The following table summarizes loan balances at the end of
each year, average loans outstanding during the year and
activity in the allowance for loan losses for each of the last
five years.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Amount of loans, net of unearned income & allowance
for loan losses at end of year $122,269 $109,881 $103,417 $118,071 $167,952
======== ======== ======== ======== ========
Average loans, net of unearned income $117,252 $108,273 $113,712 $145,016 $184,560
======== ======== ======== ======== ========
Allowance for loan losses at
beginning of year $4,190 $4,313 $4,681 $5,106 $2,513
------ ------ ------ ------ ------
Loans charged off:
Commercial, financial, and agricultural 17 167 826 838 1,544
Real estate loans 36 231 741 694 3,911
Consumer installment 310 838 1,613 3,723 5,086
--- --- ----- ----- -----
Total loans charged off 363 1,236 3,180 5,255 10,541
--- ----- ----- ----- ------
Recoveries of loans previously charged off:
Commercial, financial, and agricultural 117 324 493 148 23
Real estate loans 166 92 210 115 91
Consumer installment 1,070 1,735 2,109 1,842 1,178
----- ----- ----- ----- -----
Total loans recovered 1,353 2,151 2,812 2,105 1,292
----- ----- ----- ----- -----
Net (recoveries) charge-offs (990) (915) 368 3,150 9,249
----- ----- --- ----- -----
Provision for loan losses (1,016) (1,038) --- 2,725 11,842
------- ------- --- ----- ------
Allowance for loan losses at end of year $4,164 $4,190 $4,313 $4,681 $5,106
====== ====== ====== ====== ======
Ratio of net charge-offs (recoveries)to average net loans
outstanding (.84)% (.85)% .32% 2.17% 5.01%
</TABLE>
A coordinated effort is undertaken to identify risks in the
loan portfolio for management purposes and to establish the
loan loss provision and resulting allowance. A regular, formal
and ongoing loan review is conducted to identify loans with
unusual risks. The primary responsibility for this review
rests with the management of the individual banks. Their work
is supplemented with reviews by the Company's internal audit
staff. Bank regulatory agencies provide additional levels of
review. This process provides information which helps in
assessing the quality of the portfolio, assists in the prompt
identification of problems and potential problems and aids in
deciding if a loan represents a loss which should be recorded
immediately or a risk for which an allowance should be
maintained. Management believes this continuous effort will
identify the majority of potential problem loans and recognize
their impact on future earnings.
If, as a result of the Company's loan review and evaluation
procedures, it is determined that payment of interest on a
commercial or real estate loan is questionable, it is the
Company's policy to reverse interest previously accrued on the
loan against interest income. Interest on such loans is
thereafter recorded on a "cash basis" and is included in
earnings only when actually received in cash and when full
payment of principal is no longer doubtful. A loan can be
reinstated to full accrual status when and if the borrower's
financial condition and payment performance can justify sustainable
performance of all conditions and terms of the loan.
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The Company has allocated the allowance for loan losses
according to the amount deemed to be reasonably necessary at
each year end to provide for losses being incurred within the
categories of loans set forth in the table below, based on the
previous year's gross charge-offs in each category as a
percentage of total charge-offs. The components of the
allowance for loan losses for each of the past five years, and
the percent of loans in each category to total loans are
presented below .
<TABLE>
<CAPTION>
Allowance allocation by loan category
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands)
<S> <C> <c <C> <C> <C>
Commercial, financial and agriculture $562 $1,089 $690 $702 $510
Consumer installment 2,823 2,125 3,062 2,247 3,116
Real estate 779 976 561 1,732 1,480
--- --- --- ----- -----
$4,164 $4,190 $4,313 $4,681 $5,106
====== ====== ====== ====== ======
Percent of loans by category to total loans
Commercial, financial and agriculture 18% 22% 24% 26% 16%
Consumer installment 10% 14% 26% 43% 53%
Real estate 72% 64% 50% 31% 31%
--- --- --- --- ---
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
</TABLE>
Although it is the Company's policy to immediately charge off
as loss all loan amounts judged to be uncollectible,
historical experience indicates that certain losses exist in
the loan portfolio which have not been specifically identified.
To anticipate and provide for these unidentifiable losses, the
allowance for loan losses is established by charging the
provision for loan losses expense against current earnings.
No portion of the resulting allowance is in any way allocated
or restricted to any individual loan or group of loans. The
entire allowance is available to absorb losses from any and
all loans.
The following table presents nonperforming loans at December
31, 1996, 1995, 1994, 1993 and 1992. Nonperforming loans
consist solely of loans which are contractually past due 90
days or more as to interest or principal payments (past-due
loans) and loans accounted for on a nonaccrual basis
(nonaccrual loans).
NONPERFORMING LOANS
<TABLE>
<CAPTION>
Past-due loans Nonaccrual loans
-------------- ----------------
(in thousands)
<S> <C> <C>
December 31, 1996 $--- $201
December 31, 1995 12 796
December 31, 1994 205 1,060
December 31, 1993 99 2,761
December 31, 1992 674 2,879
</TABLE>
Total interest income recognized on nonperforming loans for
the year ended December 31, 1996 was $104,000. Additional
interest income of $20,000 would have been recorded in 1996 if
all nonperforming loans had performed in accordance with their
original terms.
NONPERFORMING ASSETS
Nonperforming assets of the Company peaked in June, 1993.
They have steadily declined since that time. Nonperforming
assets have declined by $1,828,000, or 77% since December 31,
1994.
The following table analyzes nonperforming assets for each of
the past three years.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Loans past due 90 days or more $ $12 $205
Non accrual loans 201 796 1,060
--- --- -----
Total nonperforming loans 201 808 1,265
Other real estate 346 594 1,110
--- --- -----
Total nonperforming assets $547 $1,402 $2,375
==== ====== ======
Nonperforming loans/Total loans, net of unearned 0.16% 0.71% 1.17%
Nonperforming assets/Total assets 0.24% 0.67% 1.16%
Loan loss allowance/Total loans, net of unearned 3.29% 3.67% 4.00%
Loan loss allowance/Nonperforming loans 2,072.74% 518.56% 340.95%
</TABLE>
The allowance for loan losses as a percentage of non-
performing loans (including loans past due ninety days or
more) was 2,073% at December 31, 1996, compared to 519% at
December 31, 1995. Management considers the current level of
the allowance for loan losses more than adequate to absorb
losses from loans in the portfolio. Management's
determination of the adequacy of the allowance for loan
losses, which is based on the factors and risk identification
procedures previously discussed, requires the use of judgments
and estimations that may change in the future. Unfavorable
changes in the factors used by management to determine the
adequacy of the allowance, or the availability of new
information, could cause the allowance for loan losses to be
increased or decreased in future periods.
Generally, the Company's market areas have not experienced
rapid increases in real estate property values or significant
overbuilding. Therefore, in management's opinion, real estate
loan collateral values in the Company's market areas should
not be as vulnerable to significant deterioration, as would
other market areas which have experienced rapidly increasing
property values and significant overbuilding. However,
collateral values, are difficult to estimate and are subject
to change depending on economic conditions, the supply of and
demand for properties, and other factors. The Company
attempts to mitigate the risky nature of real estate lending
by adhering to conservative loan underwriting standards and by
diversifying the portfolio within its market area and within
industry groups.
INVESTMENT SECURITIES
The carrying values of investment securities at the indicated
dates are presented below:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
U.S. Treasury and U.S. Gov't agencies $21,150 $23,996 $25,344
State and municipals 9,735 9,578 10,248
Mortgage-backed securities 32,626 29,558 35,179
Other 645 475 491
--- --- ---
Total $64,156 $63,607 $71,262
======= ======= =======
</TABLE>
Investment portfolio policy stresses quality and liquidity. At
December 31, 1996, the average maturity of U. S. Treasury and
government agency securities was 2.9 years and the average
maturity of obligations of states and political subdivisions
was 4.98 years. Mortgage-backed securities had an average
maturity of 12.50 years due to purchases of adjustable rate
mortgage securities which adjust annually. Overall, the
average maturity of the portfolio was 8.19 years using
contractual maturities and slightly greater than 2.40 years
using expected maturities. Expected maturities differ from
contractual maturities because borrowers have the right to
call or prepay obligations with or without call or prepayment
penalties. Securities purchased during the last several years
have primarily short to intermediate term maturities.
The following table shows the contractual maturities of
investment securities at December 31, 1996 and the average
yields (for all obligations on a fully taxable basis assuming
a 34% tax rate) on such securities:
<TABLE>
<CAPTION>
Investment Securities Maturing
After One Within After Five Within
Within One Year Five Years Ten Years After Ten Years
--------------- ---------- --------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S. Gov't agencies $2,410 6.24% $18,741 6.48% $ --- --- $ --- ---
State and municipal 2,094 11.13% 3,615 9.17% 3,774 9.30% 252 11.50%
Mortgage-backed securities 1,925 4.93% 11,685 6.93% 5,160 6.01% 13,856 6.21%
----- ------ ----- ------
Total $6,429 6.87% $34,041 6.93% $8,934 7.48% $14,108 6.45%
====== ======= ====== =======
</TABLE>
The estimated fair market value of the Company's investment
portfolio at December 31, 1996, was $422,000 above amortized
cost. Market values vary significantly as interest rates
change; however, management expects normal maturities in the
portfolio to meet and exceed liquidity requirements.
Of the tax-free securities rated by Moody's Investors Service,
Inc., 80% are rated "A" or better. Twenty percent of the tax
free bond portfolio is non-rated. These non-rated securities
are principally issued by various political subdivisions
within the State of Georgia. The portfolio is carefully
monitored to assure there is no unreasonable concentration of
securities in the obligations of a single debtor.
LIQUIDITY
Liquidity is an important factor in the financial condition of
the Company and affects the Company's ability to meet the
borrowing needs and deposit withdrawal requirements of its
customers. Assets, consisting principally of loans and
investment securities, are funded by customer deposits,
purchased funds and borrowed funds.
The investment portfolio is one of the Company's primary
sources of liquidity. Maturities of securities provide a
constant flow of funds which are available for cash needs.
Contractual investment securities that mature within one year
total $6.4 Million. However, mortgage-backed securities and
securities with call provisions create cash flows earlier than
the contractual maturities. Estimates of prepayments on
mortgage-backed securities and call provisions on state and
municipals increase the forecasted cash flow from the
investment portfolio within one year to approximately $18
Million. Maturities in the loan portfolio also provide a
steady flow of funds. The Company's liquidity also continues
to be enhanced by a relatively stable core deposit base. At
December 31, 1996, the loan to deposit ratio was 65%.
AVERAGE DEPOSITS
The following table summarizes average deposits and related
weighted average rates for each of the three years in the
period ended December 31, 1996.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995 1994
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand deposits $16,414 --- $15,561 --- $18,004 ---
Savings and interest-bearing
demand deposits 48,126 3.30% 42,627 3.09% 53,242 2.86%
Time deposits 121,678 5.94% 118,398 5.90% 128,829 5.48%
------- ------- -------
Total average deposits $186,218 4.73% $176,586 4.70% $200,075 4.29%
======== ======== ========
</TABLE>
The maturities of certificates of deposit of $100,000 or more
as of December 31, 1996 are presented below:
(in thousands)
3 months or less $10,613
Over 3 through 6 months 14,000
Over 6 through 12 months 8,290
Over 12 months 6,297
-----
$39,200
=======
The Company had short-term borrowings of $5,021,000 at
December 31, 1996. These borrowings represent $3,421,000 of
repurchase agreements and $1,600,000 line of credit. The
repurchase agreements include seven day automatic renewal
agreements as well as daily automatic renewal agreements with
interest rates paying from 75 to 50 basis points under the
daily Federal funds rate. The weighted average interest rate
was 4.65% at December 31, 1996. The repurchase agreements
maximum amount during the year was $3,500,000 with a weighted
average interest rate of 4.70%. The line of credit of credit
has a variable rate indexed to the prime rate and was at 7.50%
at December 31, 1996.
The Company had short-term borrowings of $2,600,000 at
December 31, 1995. These borrowings represented two
repurchase agreements and one line of credit. The repurchase
agreements were seven day automatic renewal agreements with
interest rates paying from 75 to 50 basis points under the
daily Federal funds rate. The weighted average interest rate
was 5.35% at December 31, 1995. The repurchase agreements
maximum amount during the year 1995 was $6,715,000 with a
weighted average interest rate of 5.34%. The line of credit
of $250,000 has a variable rate indexed to the prime rate and
was at 7.75% at December 31, 1995.
STOCKHOLDERS' EQUITY
The Company maintains a ratio of stockholders' equity to total
assets that is adequate relative to industry standards. The
Company's ratio of stockholders' equity to total assets was
10.59% at December 31, 1996, compared to 10.90% at December
31, 1995 and 9.55% at December 31, 1994. The Company has
initiated a stock repurchase program that allows the purchase
of up to 170,000 shares of the Company's common stock for
treasury purposes. At December 31, 1996, the Company has
repurchased 123,494 shares of common stock.
The Company and its subsidiary banks are required to comply
with capital adequacy standards established by the Federal
Reserve and the FDIC. Currently, there are two basic measures
of capital adequacy: risk-based measure and leverage measure.
The risk-based capital standards are designed to make
regulatory capital requirements more sensitive to differences
in risk profile among banks and bank holding companies, to
account for off-balance sheet exposure and to enhance the value
of holding liquid assets. The resulting capital ratios
represent capital as a percentage of total risk-weighted
assets and off-balance sheet items. Recently the Federal
Reserve and the FDIC proposed that interest rate risk be
considered in computing risk-based capital ratios.
The minimum standard for the ratio of total capital to risk
weighted assets is 8%. At least 50% of that capital level
must consist of common equity, undivided profits and
noncumulative perpetual preferred stock, less goodwill and
certain other intangibles ("Tier I capital"). The remainder
("Tier II capital") may consist of a limited amount of other
preferred stock, mandatory convertible securities,
subordinated debt and a limited amount of the allowance for
loan losses. The sum of Tier I capital and Tier II capital is
"total risk-based capital."
The Federal Reserve and the FDIC also adopted regulations
which supplement the risk-based guidelines to include a
minimum leverage ratio of 3% of Tier I capital to total assets
less goodwill (the "leverage ratio"). Depending upon the risk
profile of the institution and other factors, the regulatory
agencies may require a leverage 1% to 2% higher than the
minimum 3% level.
The following table summarizes the Company's capital ratios at
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Minimum
1996 1995 Requirements
---- ---- ------------
<S> <C> <C> <C>
Tier 1 Capital leverage ratio 11.49% 10.59% 3%
Tier 1 Risk-based capital ratio 15.22% 17.15% 4%
Tier 2 Risk-based capital ratio 1.25% 1.25%
Total Risk-based capital ratio 16.47% 18.40% 8%
</TABLE>
The Company's common stock has been traded on a limited basis
in the over-the-counter market and is included in the National
Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") under the symbol "CSBC" and is listed on
the NASDAQ National Market System.
The following table sets forth quarterly high and low sales
prices per share of common stock as reported by NASDAQ for
each of the last three years.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
High Low High Low High Low
---- --- ---- --- ---- ---
<S> <C> <C> <c <C> <C> <C>
First quarter 9 3/8 8 1/4 $7 1/4 $6 $7 1/4 $4 1/4
Second quarter 9 1/8 8 1/4 7 3/4 6 1/2 7 1/4 6
Third quarter 8 7/8 8 3/8 9 1/8 7 7 1/4 6 1/2
Fourth quarter 12 5/8 8 3/4 9 1/4 8 3/8 7 6
</TABLE>
As of February 15, 1997, the Company had approximately 712
shareholders of record. The following table presents dividends
and earnings per share by quarter for each of the last three years.
<TABLE>
<CAPTION>
1996 1995 1994
Dividends Earnings Dividends Earnings Dividends Earnings
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $.0500 $.20 $.0400 $.16 $ - $.06
Second Quarter .0525 .21 .0425 .17 - .10
Third Quarter .0575 .21 .0450 .18 - .17
Fourth Quarter .0600 .19 .0475 .17 .03 .11
</TABLE>
The Company's board of directors had suspended the payment of
dividends in 1992 in order that the Banks increase their
capital levels and because the Georgia Department of Banking
and Finance had required that the Banks not pay dividends to
the Company without the prior consent. During 1994, all
regulatory constraints against the payment of dividends from
the Banks to the Company were lifted. The board of directors
has reinstated the Company's dividend policy of paying out a
portion of earnings to stockholders on a regular basis. It is
the current intent of the Company to increase the amount of
dividends, given earnings growth, to a level that will provide
a reasonable return to the stockholders of the Company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Tax Equivalent Basis
Net interest income on a tax equivalent basis increased for
the first time in four years as the Company continued its
rebuilding process and expanded its market area by opening
three new branches during 1996. The average balance sheet for
1996 grew $12 Million due to loan demand in the Company's new
markets. The net interest margin declined by 10 basis points
as the Company's cost of funds increased faster than overall yields
on earning assets. Management anticipates improvement in the net
interest margin for 1997 as loan demand increases continue.
The table below illustrates the changes in the net interest
margin over the past four years.
<TABLE>
<CAPTION>
NET INTEREST MARGIN
1996 1995 1994 1993
---- ---- ---- ----
% of Earning % of Earning % of Earning % of Earning
Amount Assets Amount Assets Amount Assets Amount Assets
------ ------ ------ ------ ------ ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $17,236 $16,274 $16,769 $20,938
Tax-equivalent adjustment 264 347 469 625
--- --- --- ---
Interest income, taxable equivalent 17,500 8.56% 16,621 8.62% 17,238 7.95% 21,563 8.74%
Interest expense 8,956 4.38% 8,381 4.35% 8,916 4.11% 11,307 4.58%
----- ----- ----- ----- ----- ----- ------ -----
Net interest income, taxable equivalent $8,544 4.18% $8,240 4.28% $8,322 3.84% $10,256 4.16%
====== ===== ====== ===== ====== ===== ======= =====
Average earning assets $204,406 $192,727 $216,811 $246,743
======== ======== ======== ========
</TABLE>
Interest Rate Sensitivity
Interest rates play a major part in the net interest income of
a financial institution. The sensitivity to rate changes is
known as "interest rate risk." The repricing of interest-
earning assets and interest-bearing liabilities can influence
the changes in net interest income. As part of the Company's
asset/liability management program, the timing of repricing
assets and liabilities is referred to as Gap management. It
is the policy of the Company to maintain a Gap ratio in the
one-year time horizon of .80 to 1.20. The table below has two
measures of Gap, regulatory and management adjusted. The
regulatory Gap considers only contractual maturities or
repricings. The management adjusted Gap considers such things
as prepayments on certain interest rate sensitive assets and
the circumstances under which core deposits are repriced.
Although interest-bearing transaction accounts are available
to reprice in the three-month window, historical experience
shows these deposits to be more stable over the course of one
year. The management adjusted Gap indicates the Company to be
somewhat neutral in relation to changes in market interest
rates.
GAP ANALYSIS
<TABLE>
<CAPTION>
Regulatory Defined
3-MONTH 6-MONTH 1-YEAR
------- ------- ------
(in thousands)
--------------------------------
<S> <C> <C> <C>
Rate Sensitive Assets (RSA) $83,304 $100,567 $124,746
Rate Sensitive Liabilities (RSL) 86,802 114,821 149,493
------ ------- -------
RSA minus RSL (Gap) $(3,498) $(14,254) $(24,747)
======== ========= =========
Gap Ratio (RSA/RSL) .96 .88 .84
=== === ===
Management Defined
3-MONTH 6-MONTH 1-YEAR
------- ------- ------
(in thousands)
--------------------------------
Rate Sensitive Assets (RSA) $86,770 $107,500 $135,145
Rate Sensitive Liabilities (RSL) 66,078 98,242 137,059
------ ------ -------
RSA minus RSL (Gap) $20,692 $9,258 $(1,914)
======= ====== ========
Gap Ratio (RSA/RSL) 1.32 1.10 .99
==== ==== ===
</TABLE>
The Company uses simulation analysis to monitor changes in net
interest income due to changes in market interest rates. The
simulation of rising, declining, and most likely interest rate
scenarios allow management to monitor and adjust interest rate
sensitivity to minimize the impact of market interest rate
swings. Each month management updates all available data
concerning cash flows of assets and liabilities, changes in
market interest rates, and expectations as to new volumes of
loans.
PROVISION FOR LOAN LOSSES
Under normal circumstances, this expense is used to establish
the allowance for loan losses. Actual loan losses, net of
recoveries, are charged directly to the allowance. Expense
recorded is a reflection of actual losses experienced during
the year and management's judgment as to the adequacy of the
allowance to absorb future losses.
The Company did not make a provision for loan losses during
1996. Instead, the Company made negative provisions which
amounted to $1,016,000 for the year. The negative provisions
were based on the net recovery stream of previously charged
off loans which amounted to $990,000 for the year.
The Company did not make a provision for loan losses during
1995. Instead, the Company made negative provisions which
amounted to $1,038,000 for the year. The negative provisions
were based on the net recovery stream of previously charged
off loans which amounted to $915,000 for the year.
Several years ago, the Company experienced credit problems
with it's concentration of loans in dealer sales finance paper
on automobiles. During 1990 and 1991 the chargeoff experience
for the Company was in the range of over 2% of average loans
outstanding. In 1992, regulators placed Cease and Desist
Orders on the Banks (lifted in 1994) and subsequent analysis
of the loan portfolio determined that the Banks had not
recognized the risk within their portfolios. In 1992, the
Company made a provision of $11.8 Million to the allowance for
loan losses and charged off $10.5 Million in loans. Under new
management, the Company discontinued it's sales finance
operation in the spring of 1993 which has resulted in a
contraction of the loan portfolio since that time. Total
sales finance loans have declined $85 Million since the end of
1992.
Management's analysis of the allowance for loan losses,
nonperforming assets, and net recoveries on a monthly basis
concluded that the allowance was more than adequate given the
risk resident within the loan portfolio. The allowance as a
percent of total loans is 3.29%, nonperforming loans to total
loans are .16%, and net recoveries as a percent of average
loans (net of unearned interest) were .84% for the year.
Management does not anticipate having any provision expense
for loan losses during 1997. The Company will most likely
make negative provisions during 1997 to balance the level of
the allowance for loan losses in relation to nonperforming
loans, net charge-offs, and projected loan growth.
NONINTEREST INCOME
Total noninterest income increased $329,000 in 1996, or 35% as
compared to 1995. The majority of the increase was due to a
$228,000 securities loss in 1995. However, service charges on
deposits increased in 1996 as well as mortgage loan
origination fees due to deposit fees being revised and
mortgage originations increasing.
Total noninterest income decreased $726,000 in 1995 as
compared to 1994. The majority of the decrease was due to the
sale in 1995 of approximately $4,000,000 in Collateralized
Mortgage Obligations which created a loss of $228,000 compared
to a gain on the sale of securities in 1994 of $241,000.
Additionally, other income declined $215,000 during 1995 as
fees received from certain legal proceedings were collected in
1994 and by 1995 were fully paid.
NONINTEREST EXPENSE
Total noninterest expense increased $292,000 in 1996, or 4%
compared to 1995. The Company opened three new branches
during 1996 which added to expense. Management anticipates
continued increases in noninterest expense during 1997 as the
expansion into select markets will require additional
expenses.
Several areas which registered significant changes for the
year were:
* Compensation expense increased $388,000 for the year due to
the Company hiring staff for new branches.
* Net occupancy increased $116,000 as the new branches became
operational during the year.
* Professional service fees declined $105,000 as problem
assets and their resolution have required less assistance from
professionals outside the Company.
* Other real estate expense was reduced approximately $130,000
as properties were sold and levels and quality of the
properties maintained became more manageable.
Total noninterest expense decreased $816,000 in 1995, or 11%
compared to 1994.
Several areas which registered significant changes for the
1995 year were:
* Employee benefits increased $192,000 for the year due to the
Company recognizing certain pension plan costs related to
anticipated termination of the pension plan during 1996.
* Legal fees were reduced over $106,000 as the reliance on
counsel for determinations concerning problem loans and the
their overall level has declined.
* Professional service fees declined $99,000 as problem assets
and their resolution have required less assistance from
professionals outside the Company.
* Federal Deposit Insurance Corporation premiums were down
$300,000 as risk rated premiums were reduced as well as
refunds of premiums received from the FDIC.
* Other real estate expense was reduced approximately $134,000
as properties were sold and levels and quality of the
properties maintained became more manageable.
INCOME TAX
The Company experienced pre-tax operating earnings of
$3,584,000 for the year 1996 which resulted in a tax provision
of $630,000. The effective rate of 18% resulted from a
reduction of a valuation allowance against a portion of the
deferred tax assets and tax-exempt income. For more
information on income taxes, see note 9 of the consolidated
financial statements.
OTHER INFORMATION
Fourth Quarter Results
The Company had a profit of $668,000 for the fourth quarter
1996. Return on average assets was 1.19%, return on average
equity was 10.94%. The net interest margin was 4.20% which
compared to fourth quarter 1995's 4.23% showed a decline of 3
basis points.
INFLATION
Inflation has an impact on financial assets which can be
readily identified in a market value economy. However, the
past several years have seen inflation fall to a level which
has had a nominal effect on the banking industry.
QUARTERLY RESULTS
<TABLE>
<CAPTION>
1996 Quarter ended
------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $4,239 $4,184 $4,356 $4,457
Net interest income 2,056 1,974 2,092 2,158
Provision for loan losses (300) (260) (270) (186)
Earnings before income taxes 1,014 965 920 685
Net earnings 742 782 762 668
Net earnings per share .20 .21 .21 .19
1995 Quarter ended
------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(in thousands, except per share data)
Interest income $3,968 $4,007 $4,087 $4,212
Net interest income 1,957 1,887 1,990 2,059
Provision for loan losses (200) (300) (250) (288)
Earnings before income taxes 790 806 928 658
Net earnings 608 631 668 652
Net earnings per share .16 .17 .18 .17
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CENTRAL AND SOUTHERN HOLDING COMPANY
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(with Independent Accountants' Report thereon)
CENTRAL AND SOUTHERN HOLDING COMPANY
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(with Independent Accountants' Report thereon)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Central and Southern Holding Company and Subsidiaries
We have audited the accompanying consolidated balance sheets
of Central and Southern Holding Company and subsidiaries as of
December 31, 1996 and 1995, and the related statements of
earnings, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
financial position of Central and Southern Holding Company and
subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
PORTER KEADLE MOORE,LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
January 23, 1997
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets
------
1996 1995
---- ----
<S> <C> <C>
Cash and due from banks, including reserve requirements
of $569,000 and $645,000, respectively $ 7,906,871 8,564,294
Federal funds sold 21,216,410 16,687,208
---------- ----------
Cash and cash equivalents 29,123,281 25,251,502
Interest-bearing deposits with other banks 1,250,000 2,400,000
Investment securities available for sale 64,578,022 64,514,785
Loans, net 122,268,747 109,880,856
Premises and equipment, net 5,930,004 2,878,118
Other assets 2,635,725 2,923,375
--------- ---------
$ 225,785,779 207,848,636
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Demand $ 18,087,985 16,668,652
Interest-bearing demand 40,982,045 35,239,329
Savings 9,313,083 9,271,407
Time 126,781,456 119,294,850
----------- -----------
Total deposits 195,164,569 180,474,238
Repurchase agreements 3,421,170 2,350,000
Note payable 1,600,000 250,000
Other liabilities 1,695,429 2,114,000
--------- ---------
Total liabilities 201,881,168 185,188,238
----------- -----------
Commitments
Stockholders' equity:
Preferred stock, 2,000,000 shares authorized, no shares
issued or outstanding - -
Common stock, $1 par value; 10,000,000 shares authorized;
3,777,017 shares issued 3,777,017 3,777,017
Additional paid-in capital 6,492,246 6,492,246
Unrealized gain on investment securities, net of tax 278,250 599,454
Retained earnings 14,490,538 12,339,119
---------- ----------
25,038,051 23,207,836
Treasury stock, at cost (123,494 and 59,528 shares) (1,133,440) (547,438)
---------- --------
Total stockholders' equity 23,904,611 22,660,398
---------- ----------
$ 225,785,779 207,848,636
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 11,975,517 11,189,778 11,125,466
Interest on deposits with other banks 46,186 54,758 297
Interest on federal funds sold 951,539 828,094 776,001
Interest on investment securities:
Taxable 3,625,938 3,530,802 3,956,229
Tax-exempt 637,180 671,062 910,844
------- ------- -------
Total interest income 17,236,360 16,274,494 16,768,837
---------- ---------- ----------
Interest expense:
Deposits 8,814,809 8,306,689 8,576,863
Other 141,656 74,771 339,494
------- ------ -------
Total interest expense 8,956,465 8,381,460 8,916,357
--------- --------- ---------
Net interest income 8,279,895 7,893,034 7,852,480
--------- --------- ---------
Provision for loan losses (1,016,000) (1,038,000) -
---------- ---------- ---------
Net interest income after provision for loan losses 9,295,895 8,931,034 7,852,480
--------- --------- ---------
Other operating income:
Service charges 758,488 700,827 742,819
Gains (losses) on sales of investment securities - (227,635) 240,975
Other 504,387 460,867 676,270
------- ------- -------
Total other operating income 1,262,875 934,059 1,660,064
--------- ------- ---------
Other operating expenses:
Salaries and employee benefits 3,938,270 3,550,776 3,359,226
Occupancy and equipment 882,248 765,752 967,647
Miscellaneous 2,154,354 2,366,224 3,172,295
--------- --------- ---------
Total other operating expenses 6,974,872 6,682,752 7,499,168
--------- --------- ---------
Earnings before income taxes 3,583,898 3,182,341 2,013,376
Income tax expense 629,875 623,346 396,000
------- ------- -------
Net earnings 2,954,023 2,558,995 1,617,376
Preferred dividend requirements - - (117,525)
--------- --------- --------
Net earnings available to
common shareholders $ 2,954,023 2,558,995 1,499,851
========= ========= =========
Earnings per common share:
Net earnings per common share $ 0.81 0.68 0.44
==== ==== ====
See accompanying notes to consolidated financial statements.
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) On
Additional Investment
Preferred Common Paid-In Securities, Retained Treasury
Stock Stock Capital Net of Tax Earnings Stock Total
----- ----- ------- ---------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 1,708,605 3,397,327 5,163,331 - 9,104,294 - 19,373,557
Cash dividend declared of $.03 per common
share - - - - (101,920) - (101,920)
Cash dividends declared of $4.71 per preferred
share - - - - (178,913) - (178,913)
Conversion of preferred stock into common stock (1,708,605) 379,690 1,328,915 - - - -
Effect of accounting change related to investment
securities, net of tax - - - 576,679 - - 576,679
Change in unrealized gain (loss) on investment
securities, net of tax - - - (1,803,407) - - (1,803,407)
Net earnings - - - - 1,617,376 - 1,617,376
--------- --------- --------- --------- --------- -------- ----------
Balance, December 31, 1994 - 3,777,017 6,492,246 (1,226,728) 10,440,837 - 19,483,372
Cash dividends declared of $.175 per common
share - - - - (660,713) - (660,713)
Acquisition of treasury stock - - - - - (547,438) (547,438)
Change in unrealized gain (loss) on investment
securities, net of tax - - - 1,826,182 - - 1,826,182
Net earnings - - - - 2,558,995 - 2,558,995
---------- --------- --------- -------- ---------- ------- ----------
Balance, December 31, 1995 - 3,777,017 6,492,246 599,454 12,339,119 (547,438) 22,660,398
Cash dividends declared of $.22 per common
share - - - - (802,604) - (802,604)
Acquisition of treasury stock - - - - - (586,002) (586,002)
Change in unrealized gain (loss) on investment
securities, net of tax - - - (321,204) - - (321,204)
Net earnings - - - - 2,954,023 - 2,954,023
---------- --------- --------- ------- ---------- ------- ----------
Balance, December 31, 1996 $ - 3,777,017 6,492,246 278,250 14,490,538 (1,133,440) 23,904,611
========== ========= ========= ======= ========== ========= ==========
See accompanying notes to consolidated financial statements.
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,954,023 2,558,995 1,617,376
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Provision for loan losses (1,016,000) (1,038,000) -
Depreciation, amortization and accretion 408,002 361,257 564,947
Deferred income tax provision (benefit) 129,666 106,589 174,598
Losses (gains) on sales of investment securities - 227,635 (240,975)
Gain on sale of branches - - (115,324)
Change in assets and liabilities:
Other assets 228,786 796,708 1,140,048
Other liabilities (418,571) 689,157 900
--------- ------- ---------
Net cash provided by operating activities 2,285,906 3,702,341 3,141,570
--------- --------- ---------
Cash flows from investing activities:
Net change in interest-bearing deposits 1,150,000 (2,400,000) 100,000
Proceeds from maturities and calls of investment securities
available for sale 28,433,421 6,108,539 11,752,863
Proceeds from sales of investment securities
available for sale - 3,761,490 -
Purchases of investment securities available for sale (29,003,787) (1,115,470) (3,499,862)
Proceeds from maturities and calls of investment securities
held to maturity - 13,408,110 10,353,386
Proceeds from sales of investment securities held to maturity - - 5,076,098
Purchases of investment securities held to maturity - (12,903,593) (110,000)
Net change in loans (11,277,225) (5,269,234) 14,182,183
Proceeds from sales of premises and equipment 26,673 13,830 31,616
Purchases of premises and equipment (3,466,104) (625,321) (413,527)
Sale of branches - - (40,928,208)
------------ ------------ ------------
Net cash provided by (used in) investing activities (14,137,022) 978,351 (3,455,451)
------------ ------------ ------------
Cash flows from financing activities:
Net change in deposits 14,690,331 3,792,330 (4,567,223)
Net change in repurchase agreements 1,071,170 (4,365,000) 6,715,000
Borrowings under note payable 1,350,000 250,000 -
Cash dividends paid (802,604) (660,713) (280,833)
Acquisition of treasury stock (586,002) (547,438) -
---------- ----------- -----------
Net cash provided by (used in) financing activities 15,722,895 (1,530,821) 1,866,944
---------- ----------- -----------
Net increase in cash and cash equivalents 3,871,779 3,149,871 1,553,063
Cash and cash equivalents at beginning of year 25,251,502 22,101,631 20,548,568
---------- ---------- ----------
Cash and cash equivalents at end of year $ 29,123,281 25,251,502 22,101,631
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Nature of Operations
--------------------
Central and Southern Holding Company and subsidiaries (the
"Company") provide a full range of banking services in central
and north Georgia to individual and corporate customers
through its subsidiaries and branch offices. The subsidiary
banks are subject to the regulations of certain Federal and state
agencies and undergo periodic examinations by those regulatory
authorities.
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of
Central and Southern Holding Company (the "Parent") and its
wholly owned subsidiaries, The Central and Southern Bank of
Georgia ("Milledgeville") and The Central and Southern Bank of
North Georgia, FSB ("North Georgia"), collectively referred to
as "the bank subsidiaries." All significant intercompany
accounts and transactions have been eliminated in
consolidation.
The accounting principles followed by the Company and the
methods of applying these principles conform with generally
accepted accounting principles ("GAAP") and with general
practices within the banking industry. In preparing financial
statements in conformity with GAAP, management is required to
make estimates and assumptions that affect the reported
amounts in the financial statements. Actual results could
differ significantly from those estimates. Material estimates
common to the banking industry that are particularly
susceptible to significant change in the near term include,
but are not limited to, the determination of the allowance for
loan losses, the valuation of real estate acquired in
connection with or in lieu of foreclosure on loans, and
valuation allowances associated with deferred tax assets
recognized in anticipation of future taxable income.
Investment Securities
---------------------
Effective January 1, 1994, the Company adopted the provisions
of Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity
Securities." Under SFAS No. 115, the Company classifies its
securities in one of three categories: trading, available for
sale, or held to maturity. Trading securities are bought and
held principally for sale in the near term. Held to maturity
securities are those securities for which the Company has the
ability and intent to hold until maturity. All other
securities not included in the trading or held to maturity
portfolios are classified as available for sale. The Company
does not hold any trading securities.
Available for sale securities are recorded at fair value. Held
to maturity securities are recorded at amortized cost.
Unrealized holding gains and losses, net of the related tax
effect, on securities available for sale are excluded from
earnings and are reported as a separate component of
stockholders' equity. Transfers of securities between
categories are recorded at fair value at the date of transfer.
Unrealized holding gains or losses associated with transfers
of securities from held to maturity to available for sale are
recorded as a separate component of stockholders' equity. The
unrealized holding gains or losses included in the separate
component of stockholders' equity for securities transferred
from available for sale to held to maturity are maintained and
amortized into earnings over the remaining life of the
security as an adjustment to yield in a manner consistent with
the amortization or accretion of premium or discount on the
associated security.
A decline in the market value of any available for sale or
held to maturity investment below cost that is deemed other
than temporary is charged to earnings and establishes a new
cost basis for the security.
Premiums and discounts are amortized or accreted over the life
of the related security as an adjustment to the yield.
Realized gains and losses for securities classified as available
for sale and held to maturity are included in earnings and are
derived using the specific identification method for
determining the cost of securities sold.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(1) Summary of Significant Accounting Policies, continued
Loans and Allowance for Loan Losses
-----------------------------------
Loans are reported at the principal amount outstanding, net of
unearned interest and the allowance for loan losses. Interest
income on installment loans made on a discount basis is
recognized using a method which approximates the level yield
method. Interest income on all other loans is recognized on
the level yield method.
Effective January 1, 1995, the Company adopted SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan" and SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures." A loan is impaired when,
based on current information and events, it is probable that
all amounts due according to the contractual terms of the loan
will not be collected. Impaired loans are measured based on
the present value of expected future cash flows, discounted at
the loan's effective interest rate, or at the loan's
observable market price, or the fair value of the collateral
if the loan is collateral dependent. The adoption of these
statements had no significant impact on the consolidated
financial statements.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions
and collection efforts, that the borrower's financial
condition is such that collection of interest is doubtful.
When a loan is placed on nonaccrual status, previously accrued
and uncollected interest is charged to interest income on
loans. Generally, payments on nonaccrual loans are applied to
principal. Interest income, if any, on impaired loans is
recognized on the cash basis.
The allowance for loan losses is established through a
provision for loan losses charged to expense. Loans are
charged against the allowance for loan losses when management
believes the collectibility of the principal is unlikely. The
allowance represents an amount which, in management's
judgment, will be adequate to absorb probable losses on
existing loans that may become uncollectible.
Management's judgment in determining the adequacy of the
allowance is based on evaluations of the collectibility of
loans. These evaluations take into consideration such factors
as changes in the nature and volume of the loan portfolio,
current economic conditions that may affect the borrower's
ability to pay, overall portfolio quality, and review of
specific problem loans.
Management believes the allowance for loan losses is adequate.
While management uses available information to recognize
losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's
allowance for loan losses. Such agencies may require the
Company to recognize additions to the allowance based on their
judgments of information available to them at the time of their
examination.
Bank Premises and Equipment
---------------------------
Premises and equipment are carried at cost less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the related assets.
When assets are retired or otherwise disposed, the cost and
related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is reflected in
income for the period. The cost of maintenance and repairs
which do not improve or extend the useful life of the
respective asset is charged to income as incurred, whereas
significant renewals and improvements are capitalized. The
range of estimated useful lives for premises and equipment are
generally as follows:
Buildings and improvements 7 - 40 years
Furniture and equipment 3 - 10 years
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES Notes to
Consolidated Financial Statements, continued
(1) Summary of Significant Accounting Policies, continued
Goodwill
--------
The excess of the purchase price over the fair value of net
assets acquired (goodwill) is being amortized using the
straightline method over 20 years for North Georgia. The
goodwill net of accumulated amortization is included in other
assets. On an ongoing basis, management reviews the valuation
and amortization of goodwill. As part of this review,
management considers the value and future benefits of the net
earnings generated by North Georgia to determine that no
impairment has occurred.
Income Taxes
------------
The Company accounts for income taxes under the liability
method which requires the recognition of deferred tax assets
and liabilities for the future tax consequences attributable
to differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which the assets and liabilities are
expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income tax expense in the period that includes
the enactment date.
In the event the future tax consequences of differences
between the financial reporting bases and the tax bases of the
Company's assets and liabilities result in deferred tax
assets, the Company evaluates the probability of being able to
realize the future benefits indicated by such assets. A
valuation allowance is provided for the portion of the
deferred tax asset when it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
In assessing the realizability of the deferred tax assets,
management considers the scheduled reversals of deferred tax
liabilities, projected future taxable income, and tax planning
strategies.
Net Earnings Per Common Share
-----------------------------
The impact of outstanding stock options and preferred stock
conversions has no significant effect on net earnings per
common share. Accordingly, net earnings per common share are
based on the weighted average number of common shares
outstanding during 1996, 1995 and 1994 of 3,664,604, 3,770,251
and 3,429,575, respectively.
(2) Sale of Bank Branches and Conversion of North Georgia
Effective August 1, 1994, Milledgeville sold two of its
bank branches located in Douglas and McRae, Georgia, to an
unrelated commercial bank. This sale included approximately
$43,400,000 in deposits and related accrued interest, premises
and equipment with a net book value of approximately
$1,700,000, and other assets of approximately $900,000,
including unamortized deposit premiums of approximately
$535,000. Milledgeville paid approximately $40,700,000 in
connection with the sale and recorded a gain of approximately
$115,000. The branch sale was financed through a combination
of borrowings under repurchase agreements and available cash
and cash equivalents.
Effective January 16, 1996, the Company received final
regulatory approval to convert North Georgia (formerly Central
& Southern Bank of Greensboro) to a federal savings bank
charter. This conversion was completed in the first quarter of
1996. The primary purpose of the conversion is to allow North
Georgia to branch into other markets in the north Georgia
area.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(3) Cash Flow Information
Certain supplemental cash flow information for the years ended
December 31, 1996, 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 8,910,201 8,445,017 8,984,329
Income taxes $ 948,000 140,000 270,000
Noncash investing and financing activities:
Transfer of investment securities from held
to maturity to available for sale $ - 35,073,414 -
Real estate acquired through foreclosure $ 92,834 160,913 833,293
Financed portion of sales of other real estate $ 187,500 317,056 481,000
Conversion of preferred stock into common stock $ - - 1,708,605
Change in unrealized gain (loss) on investment
securities, net of tax $ (321,204) 1,826,182 (1,226,728)
</TABLE>
(4) Investment Securities
---------------------
Investment securities available for sale at December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasuries and
U.S. government agencies $ 21,150,573 68,502 121,351 21,097,724
State and municipal 9,735,184 490,448 21 10,225,611
Mortgage-backed securities 32,625,874 222,180 238,167 32,609,887
Other investments 644,800 - - 644,800
---------- ------- ------- ----------
Total $ 64,156,431 781,130 359,539 64,578,022
========== ======= ======= ==========
December 31, 1995
------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasuries and
U.S. government agencies $ 23,996,053 148,175 84,198 24,060,030
State and municipal 9,577,580 578,325 4,973 10,150,932
Mortgage-backed securities 29,557,578 398,359 127,614 29,828,323
Other investments 475,500 - - 475,500
---------- ------- ------- ----------
Total $ 63,606,711 1,124,859 216,785 64,514,785
========== ========= ======= ==========
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(4) Investment Securities, continued
The amortized cost and fair value of investment
securities available for sale at December 31, 1996, by
contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers have
the right to call or prepay certain obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
---- ----------
<S> <C> <C>
Total securities:
Within 1 year $ 4,504,383 4,541,878
1 to 5 years 22,356,137 22,480,143
5 to 10 years 3,773,654 4,020,806
More than 10 years 251,583 280,508
Mortgage-backed securities 32,625,874 32,609,887
Other investments 644,800 644,800
---------- ----------
$ 64,156,431 64,578,022
========== ==========
</TABLE>
There were no sales of securities in 1996. In 1995, the
Company received proceeds of $3,761,490 from the sale of
certain mortgage-backed securities and recognized gross losses
of $231,635. Additionally, one held to maturity security was
called by the issuer and the Company received a $4,000 call
premium.
In late 1995, the FASB issued an implementation guide
relating to SFAS No. 115. Included in this implementation
guide was a one-time opportunity to reallocate investments
between the categories without calling into question the
validity of the classifications. Accordingly, at year end, the
Company reclassified all held to maturity securities to the
available for sale category. As a result, an unrealized gain
of approximately $637,000 was recorded.
In 1994, the Company received proceeds from the sale of
investments held to maturity of $5,076,098 and recognized
gross gains of $244,162 and gross losses of $3,187. The 1994
sales occurred in connection with the sale of two of
Milledgeville's branch bank facilities which maintained
approximately twenty percent of the total deposits of the
Company. The sale of the branches altered the interest rate
risk of Milledgeville's assets and liabilities and in response
the security sales were required to restructure the interest
rate risk to an acceptable level.
Securities with a carrying value of approximately
$21,829,000 and $15,801,000 at December 31, 1996 and 1995,
respectively, were pledged against U.S. government and other
public deposits as required by law.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(5) Loans
Major classifications of loans at December 31, 1996
and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Commercial, financial and agricultural $ 22,259,587 25,177,880
Real estate - construction 27,695,706 21,746,596
Real estate - mortgage 64,145,313 51,104,156
Consumer loans 12,405,366 16,376,878
---------- ----------
Total loans 126,505,972 114,405,510
Less: Unearned interest 73,043 334,347
Allowance for loan losses 4,164,182 4,190,307
----------- -----------
Loans, net $122,268,747 109,880,856
=========== ===========
</TABLE>
The Company's bank subsidiaries grant loans and extensions of
credit to individuals and a variety of firms and corporations
located primarily in central and north Georgia. Although the
bank subsidiaries have diversified loan portfolios, a
substantial portion of the loan portfolios is collateralized
by improved and unimproved real estate and is dependent upon
the real estate market.
Changes in the allowance for loan losses are summarized
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 4,190,307 4,312,876 4,680,841
Provision for loan losses (1,016,000) (1,038,000) -
Loans charged off (362,844) (1,236,091) (3,179,899)
Recoveries of loans previously charged off 1,352,719 2,151,522 2,811,934
--------- --------- ---------
Balance at end of year $ 4,164,182 4,190,307 4,312,876
========= ========= =========
</TABLE>
As a result of its ongoing evaluation of the adequacy of the
bank subsidiaries' allowance for loan losses, a decline in
problem credits and continued significant recoveries of loans
previously charged off, management decided to reduce the
allowance for loan losses during 1996 and 1995.
(6) Bank Premises and Equipment
Bank premises and equipment at December 31, 1996 and 1995
are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land and buildings $ 5,765,790 3,515,996
Furniture and equipment 2,798,597 1,855,406
Construction in progress 293,105 74,686
--------- ---------
8,857,492 5,446,088
Less accumulated depreciation 2,927,488 2,567,970
--------- ---------
$ 5,930,004 2,878,118
========= =========
</TABLE>
Depreciation expense was approximately $388,000, $335,000
and $506,000 in 1996, 1995 and 1994, respectively.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(7) Deposits
At December 31, 1996, maturities of time deposits are as
follows:
Maturing In:
1997 $ 94,236,401
1998 16,238,027
1999 4,333,441
2000 4,844,105
2001 7,113,505
Thereafter 15,977
----------
$ 126,781,456
===========
The Bank subsidiaries had deposits from related parties
totaling approximately $4,051,000 and $3,681,000 at December
31, 1996 and 1995. Time deposits of $100,000 or more were
approximately $39,200,000 and $31,759,000 at December 31, 1996
and 1995.
(8) Note Payable
The Company has a note payable to a bank under which it can
borrow up to $2,500,000. The note bears interest at prime less
0.75% and interest is payable quarterly. The note, which is
collateralized by the common stock of Milledgeville, matures
in June 1997.
(9) Income Taxes
The components of income tax expense for the years ended
December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current $ 500,209 516,757 221,402
Deferred 129,666 106,589 174,598
------- ------- -------
$ 629,875 623,346 396,000
======= ======= =======
</TABLE>
The differences between income tax expense and the amount
computed by applying the statutory federal income tax rate to
earnings before taxes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Pretax income at statutory rates $ 1,218,526 1,081,996 684,548
Tax-exempt interest income (195,837) (213,330) (311,323)
Change in beginning of year balance of
the valuation allowance for deferred tax
assets allocated to income tax expense (423,000) (262,000) (26,245)
Other, net 30,186 16,680 49,020
--------- --------- -------
$ 629,875 623,346 396,000
========= ========= =======
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(9) Income Taxes, continued
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities as of December 31, 1996 and 1995 are presented
below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Other real estate $ 27,710 34,000
Pension 44,540 44,540
Postretirement benefits other than pensions 48,583 48,583
Alternative minimum tax credit carryforward 588,939 777,635
Other 206 143
------- -------
Total gross deferred tax asset 709,978 904,901
Less valuation allowance 41,000 464,000
------- -------
668,978 440,901
------- -------
Deferred tax liabilities:
Allowance for loan losses 416,054 73,470
Unrealized gains on investment securities available for sale 143,341 308,620
Premises and equipment 367,773 350,210
Change in accounting method - 33,892
Other 60,268 28,780
------- -------
Total deferred tax liabilities 987,436 794,972
------- -------
Net deferred tax liability $ (318,458) (354,071)
======= =======
</TABLE>
The Company's Federal alternative minimum tax
credits can be carried forward indefinitely.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(10) Employee Benefit Plans
The Company has a noncontributory, trusteed pension plan.
Effective April 15, 1994, the plan was amended to freeze
participation in the plan. Participants as of April 15, 1994,
became fully vested and no new benefits will accrue. Pension
expense recorded by the Company for 1996, 1995, and 1994
included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest cost on projected benefit obligation $ 38,381 31,518 41,572
Return on plan assets (29,127) (30,313) (17,777)
Net amortization and deferral (13,497) (5,463) (59,831)
------ ------ ------
Pension benefit $ (4,243) (4,258) (36,036)
====== ====== ======
</TABLE>
The Company's funding policy provides that payments to the
plan shall be consistent with minimum government funding
requirements plus additional amounts which may be approved by
the Company.
The following table sets forth the plan's funded status and
amounts recognized in the Company's consolidated balance
sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of approximately $608,000 in 1996 and
$662,000 in 1995 $ 611,640 666,860
======= =======
Projected benefit obligation $ (611,640) (666,860)
Plan assets at fair value, primarily consisting of investments
in common stock and money market funds 549,595 537,992
------- -------
Plan assets less than projected benefit obligation (62,045) (128,868)
Unrecognized net gain (64,712) (2,132)
------- -------
Accrued pension cost $ (126,757) (131,000)
======= =======
</TABLE>
A weighted average discount rate of 6.48% and 6.26% was used
in 1996 and 1995, respectively. The expected long-term rate of
return on assets was 8% in 1996 and 1995.
In addition to the Company's defined benefit pension plan, the
Company has sponsored a defined benefit health care plan that
provides post retirement medical benefits to retired
employees. Effective January 1, 1993, the Company discontinued
the plan but will continue to provide benefits to individuals
who had retired or were eligible for retirement as of December
31, 1993.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(10) Employee Benefit Plans, continued
The following table presents the health care plan's funded
status reconciled with amounts recognized in the Company's
consolidated balance sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accumulated post retirement benefit obligation ("APBO") $ 372,508 397,190
Unrecognized net gain from experience different
than assumed (208,699) (254,298)
------- -------
Accrued post retirement benefit cost included in
other liabilities $ 163,809 142,892
======= =======
</TABLE>
Net periodic post retirement benefit cost for the years
ended December 31, 1996, 1995 and 1994 includes the
following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Amortization of unrecognized net gain $ 15,468 14,068 15,468
Interest cost 26,346 27,916 29,740
------ ------ ------
Net periodic post retirement benefit cost $ 41,814 41,984 45,208
====== ====== ======
</TABLE>
For measurement purposes, a 9% annual rate of increase in the
per capita cost of covered benefits (i.e., health care cost
trend rate) was assumed for 1996. A 13% annual rate of
increase was assumed for 1995. The rate was assumed to
decrease gradually to 5% by the year 2004 and remain at that
level thereafter. A one percent increase in the medical trend
rate assumed at December 31, 1996, would have resulted in an
increase to the APBO at December 31, 1996, of $29,221 and
would have increased 1996 post retirement benefit cost by
$2,119. The weighted average discount rate used in determining
the accumulated post retirement benefit obligation was 7.5%
and 7.25% at December 31, 1996 and 1995, respectively.
The Company has a contributory profit sharing plan covering
substantially all employees who have one year of service.
Participating employees may contribute up to 15% of their
salary to the plan. The Company makes certain matching
contributions to the plan and may make discretionary
contributions to the plan. The Company's contributions were
approximately $85,000, $79,000 and $52,000 in 1996, 1995 and
1994, respectively.
The Company has entered into an employment agreement with its
chief executive officer which provides for a full year's
payment of compensation upon a change in control of the
Company and termination of employment, as defined in the
agreement. The terms of the agreement automatically extend the
agreement for a rolling two-year period unless the Company
elects to cease the automatic extension provision, which will
cause the agreement to terminate two years from the date of
election.
(11) Stock Options
In August 1993, the Company adopted the Key Employee Stock
Option Plan. This plan provides for the issuance of stock
options on up to 170,000 shares of the Company's common stock.
Options are granted at the discretion of the Company's Board
of Directors. Options granted under the plan are at an option
price not less than the fair value of the Company's common
stock at the date of grant, are exercisable any time after 90
days from the date of grant, and expire ten years from the
date of grant. The Board of Directors establishes vesting
periods at its discretion within the guidelines of the plan
document. Historically, vesting has ranged from 90 days to
three years.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(11) Stock Options, continued
SFAS No. 123, "Accounting for Stock-Based Compensation,"
became effective for the Company January 1, 1996. This
statement encourages, but does not require, entities to
compute the fair value of options at the date of grant and to
recognize such costs as compensation expense immediately if
there is no vesting period or ratably over the vesting period
of the options. The Company has chosen not to adopt the cost
recognition principles of this statement. No compensation
expense has been recognized in 1996, 1995 or 1994 related to
the stock option plan. Had compensation cost been determined
based upon the fair value of the options at the grant dates
consistent with the method of the new statement, the Company's
net earnings and net earnings per share would have been
reduced to the proforma amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net earnings As reported $ 2,954,005 2,558,995
Proforma $ 2,928,356 2,551,469
Earnings per share As reported $ 0.81 0.68
Proforma $ 0.80 0.68
</TABLE>
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes options-pricing model with
the following weighted average assumptions used for grants in
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Dividend yield 2.5% 2.0%
Expected volatility 37.5% 35.3%
Risk free interest rate 5.0% 5.0%
Expected life (in years) 10 10
</TABLE>
A summary of activity in the Company's stock option plan
is presented below.
<TABLE>
<CAPTION>
Weighted
Average
Option Option Price
Shares Per Share
------ ---------
<S> <C> <C>
Options outstanding at December 31, 1993 75,000 $4.25
Options granted in 1994 23,500 $6.25
------
Options outstanding at December 31, 1994 98,500 $4.73
Options granted in 1995 22,000 $7.50
------
Options outstanding at December 31, 1995 120,500 $5.23
Options granted in 1996 32,500 $8.76
------
Options outstanding at December 31, 1996 153,000 $5.98
=======
</TABLE>
Options on 105,832, 92,625 and 67,750 shares were exercisable
at December 31, 1996, 1995 and 1994, respectively. The weighted
average grant-date fair value of options granted in 1996 and
1995 was $3.49 and $3.11, respectively. Options outstanding at
December 31, 1996 are exercisable at option prices ranging from
$4.25 to $9.25 as presented in the table above. Such options have
a weighted average remaining contractual life of approximately 8
years.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(12) Stockholders' Equity
On December 1, 1994, the Company converted the 37,969 shares
of Series A nonvoting preferred stock into 379,690 shares of
its $1 par value common stock. The preferred stock, which was
issued in 1993 and had a stated liquidation value of $45 per
share, entitled the holders to cumulative annual dividends at
7 1/2%. Prior to effecting the conversion, cumulative
dividends totaling $178,913 since the date of issuance were
paid.
Dividends paid by the bank subsidiaries are the primary source
of funds available to the Company for payment of dividends to
its shareholders and other needs. Applicable Federal and state
statutes and regulations impose restrictions on the amount of
dividends that may be declared by the bank subsidiaries. In
addition to the formal statutes and regulations, regulatory
authorities also consider the adequacy of each bank
subsidiary's total capital in relation to its assets, deposits
and other such items. Capital adequacy considerations could
further limit the availability of dividends from the bank
subsidiaries. At December 31, 1996, the bank subsidiaries
could pay approximately $2,000,000 in dividends to the Parent
without regulatory approval.
During 1995, the Company's Board of Directors approved a stock
repurchase program that allows the purchase of up to 100,000
shares of the Company's common stock. During 1996 the Board of
Directors raised this amount to 170,000 shares. At December
31, 1996, the Company has repurchased 123,494 shares of its
common stock.
(13) Related Party Transactions
The bank subsidiaries conduct transactions with directors and
officers, including companies in which they have beneficial
interest, in the normal course of business. It is the policy
of the bank subsidiaries that loan transactions with directors
and officers be made on substantially the same terms as those
prevailing at the time made for comparable loans to other
persons. The following is a summary of activity for related
party loans for 1996:
Beginning balance $ 1,983,000
New loans 965,000
Repayments (793,000)
-------
Ending balance $ 2,155,000
=========
(14) Supplementary Statement of Earnings Information
Components of miscellaneous operating expenses in excess of 1%
of total income for the respective years are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Deposit insurance $ 210,048 240,183 540,434
Legal fees $ 108,669 128,173 233,962
Other professional services $ 119,246 143,822 243,174
Other real estate $ 34,732 165,263 299,127
Data processing $ 262,524 224,527 149,265
</TABLE>
(15) Commitments
The bank subsidiaries are parties to financial instruments
with off-balance-sheet risk in the normal course of business
to meet the financing needs of their customers. These
financial instruments include commitments to extend credit,
standby letters of credit and financial guarantees. These
instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the balance sheets.
The contract amounts of these instruments reflect the extent
of involvement the bank subsidiaries have in particular
classes of financial instruments.
The exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to
extend credit and standby letters of credit and financial
guarantees written is represented by the contractual amount of
these instruments. The bank subsidiaries use the same credit
policies in making commitments and conditional obligations as
for on-balance-sheet instruments.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(15) Commitments, continued
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments may expire
without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The bank
subsidiaries evaluate each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if
deemed necessary, upon extension of credit is based on
management's credit evaluation. Collateral held varies, but
may include unimproved and improved real estate, certificates
of deposit, personal property or other acceptable collateral.
At December 31, 1996 and 1995, the bank subsidiaries had
commitments to extend credit of approximately $21,530,000 and
$13,295,000, respectively.
Standby letters of credit and financial guarantees written are
conditional commitments issued by the bank subsidiaries to
guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to local businesses. The
credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan
facilities to customers. At December 31, 1996 and 1995, the
bank subsidiaries had standby letters of credit of
approximately $164,000 and $10,000.
(16) Condensed Financial Information of Central and Southern
Holding Company (Parent Company Only)
Condensed Balance Sheets
December 31, 1996 and 1995
Assets
------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash $ 8,536 28,158
Interest-earning deposits with bank subsidiary 21,251 39,252
Investment in bank subsidiaries 23,838,045 22,830,597
Building, net 1,102,316 -
Other assets 582,436 66,477
---------- ----------
$ 25,552,584 22,964,484
========== ==========
Liabilities and Stockholders' Equity
Note payable $ 1,600,000 250,000
Other liabilities 47,973 54,086
---------- ----------
1,647,973 304,086
Stockholders' equity 23,904,611 22,660,398
---------- ----------
$ 25,552,584 22,964,484
========== ==========
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(16) Condensed Financial Information of Central and Southern
Holding Company (Parent Company Only), continued
Condensed Statements of Earnings
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income:
Dividends from bank subsidiaries $ 1,408,000 860,000 -
Other 93,238 15,377 11,796
--------- ------- ------
Total income 1,501,238 875,377 11,796
--------- ------- ------
Expenses:
Interest expense 65,328 1,090 -
Other expenses 283,225 217,463 232,128
--------- ------- -------
Total expenses 348,553 218,553 232,128
--------- ------- -------
Earnings (loss) before income taxes and equity in
undistributed earnings of bank subsidiaries 1,152,685 656,824 (220,332)
Income tax benefit 312,730 115,653 93,330
Equity in undistributed earnings of bank subsidiaries 1,488,608 1,786,518 1,744,378
--------- --------- ---------
Net earnings $ 2,954,023 2,558,995 1,617,376
========= ========= =========
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(16) Condensed Financial Information of Central and Southern
Holding Company (Parent Company Only), continued
Condensed Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,954,023 2,558,995 1,617,376
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation 10,200 - -
Equity in undistributed earnings of bank subsidiaries (1,488,608) (1,786,518) (1,744,378)
Change in other assets (356,003) (36,472) 112,470
Change in other liabilities (6,113) (114,562) (28,248)
--------- --------- ---------
Net cash provided by (used in) operating activities 1,113,499 621,443 (42,780)
--------- --------- ---------
Cash flows from investing activities:
Net change in interest-bearing deposits 18,001 232,632 130,658
Purchase of building (1,112,516) - -
--------- --------- ---------
Net cash provided by (used in) investing activities (1,094,515) 232,632 130,658
--------- --------- ---------
Cash flows from financing activities:
Borrowings under note payable 1,350,000 250,000 -
Purchase of treasury stock (586,002) (547,438) -
Cash dividends paid (802,604) (660,713) (280,833)
--------- ------- -------
Net cash used in financing activities (38,606) (958,151) (280,833)
--------- ------- -------
Net change in cash (19,622) (104,076) (192,955)
Cash at beginning of year 28,158 132,234 325,189
--------- ------- -------
Cash at end of year $ 8,536 28,158 132,234
========= ======= =======
Noncash investing and financing activities:
Conversion of preferred stock into common stock $ - - 1,708,605
Change in unrealized gain (loss) on investment
securities of subsidiaries $ (321,204) 1,826,182 (1,226,728)
</TABLE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(17) Fair Value of Financial Instruments
The assumptions used in the estimation of the fair value
of the Company's financial instruments are detailed below.
Where quoted prices are not available, fair values are based
on estimates using discounted cash flows and other valuation
techniques. The use of discounted cash flows can be
significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. The
following disclosures should not be considered a surrogate of
the liquidation value of the Company or its bank subsidiaries,
but rather a good faith estimate of the increase or decrease
in value of financial instruments held by the Company since
purchase, origination, or issuance.
Cash and Short-Term Investments
-------------------------------
For cash, due from banks, federal funds sold and interest
bearing deposits with other banks, the carrying amount is a
reasonable estimate of fair value.
Investment Securities
---------------------
Fair values for investment securities are based on quoted
market prices.
Loans
-----
The fair value of fixed rate loans is estimated by discounting
the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings.
For variable rate loans, the carrying amount is a reasonable
estimate of fair value.
Deposits
--------
The fair value of demand deposits, savings, and certain money
market deposits is the amount payable on demand at the
reporting date. The fair value of fixed maturity certificates
of deposit is estimated by discounting the future cash flows
using the rates currently offered for deposits of similar
remaining maturities.
Repurchase Agreements
---------------------
The fair value of repurchase agreements is approximately equal
to the carrying value as a result of their short remaining
lives and their market interest rates.
Note Payable
------------
Since the note payable bears a variable, market rate of
interest, its carrying value approximates fair value.
Commitments to Extend Credit and Standby Letters of Credit
----------------------------------------------------------
Because commitments to extend credit and standby
letters of credit are made using variable rates, the
contract value is a reasonable estimate of fair value.
Limitations
-----------
Fair value estimates are made at a specific point in
time, based on relevant market information and information
about the financial instrument. These estimates do not reflect
any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a
significant portion of the Company's financial instruments,
fair value estimates are based on many judgments. These
estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could
significantly affect the estimates.
Fair value estimates are based on existing on and off-balance
sheet financial instruments without attempting to estimate the
value of anticipated future business and the value of assets
and liabilities that are not considered financial instruments.
Significant assets and liabilities that are not considered
financial instruments include the deferred income taxes,
premises and equipment, and goodwill. In addition, the tax
ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(17) Fair Value of Financial Instruments, continued
The carrying amount and estimated fair values of the Company's
financial instruments at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and short-term investments $ 30,373 30,373 27,652 27,652
Investment securities available for sale $ 64,578 64,578 64,515 64,515
Loans $ 122,269 121,493 109,881 109,366
Liabilities:
Deposits $ 195,165 195,504 180,474 180,789
Repurchase agreements $ 3,421 3,421 2,350 2,350
Note payable $ 1,600 1,600 250 250
Unrecognized financial instruments:
Commitments to extend credit $ 21,530 21,530 13,295 13,295
Standby letters of credit $ 164 164 10 10
</TABLE>
(18) Regulatory Matters
The Company is subject to various regulatory capital
requirements administered by state and federal banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial
statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company
must meet specific capital guidelines that involve
quantitative measures of the Company's assets, liabilities,
and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company's capital
amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Company to maintain minimum
amounts and ratios (set forth in the table below) of total and
Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Additionally, under
regulations from the Office of Thrift Supervision, North
Georgia must maintain a minimum ratio of tangible capital (as
defined) to tangible assets (as defined). Management believes,
as of December 31, 1996, that the Company meets all capital
adequacy requirements to which it is subject.
As of December 31, 1996 the most recent notification from the
various regulators categorized the Company and the bank
subsidiaries as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as
well capitalized the Company and the bank subsidiaries must
maintain minimum total risk-based, Tier I risk-based, Tier I
leverage ratios as set forth in the table. There are no
conditions or events since that notification that management
believes have changed the institution's category.
The Company's actual capital amounts and ratios are also
presented in the table below.
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
(18) Regulatory Matters, continued
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets):
Consolidated $ 24,923 16% > or = 12,095 > or = 8% N/A N/A
Milledgeville $ 19,064 20% > or = 7,805 > or = 8% > or = 9,757 > 0r = 10%
North Georgia $ 5,810 12% > or = 3,946 > or = 8% > or = 4,933 > or = 10%
Tier I Capital (to Risk Weighted Assets):
Consolidated $ 23,005 15% > or = 6,047 > or = 4% N/A N/A
Milledgeville $ 17,822 18% > or = 3,903 > or = 4% > or = 5,854 > or = 6%
North Georgia $ 5,187 11% > or = 1,973 > or = 4% > or = 2,960 > or = 6%
Tier I Capital (to Average Assets):
Consolidated $ 23,005 11% > or = 8,673 > or = 4% N/A N/A
Milledgeville $ 17,822 12% > or = 6,004 > or = 4% > or = 7,505 > or = 5%
Tangible Capital (to Tangible Assets) -
North Georgia $ 5,187 7% > or = 1,070 > or = 1.5% N/A N/A
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Consolidated $ 24,183 18% > or = 10,514 > or = 8% N/A N/A
Milledgeville $ 17,793 19% > or = 7,617 > or = 8% > or = 9,521 > or = 10%
North Georgia $ 5,056 14% > or = 2,916 > or = 8% > or = 3,645 > or = 10%
Tier I Capital (to Risk Weighted Assets):
Consolidated $ 22,540 17% > or = 5,257 > or = 4% N/A N/A
Milledgeville $ 16,603 17% > or = 3,808 > or = 4% > or = 5,713 > or = 6%
North Georgia $ 4,600 13% > or = 1,458 > or = 4% > or = 2,187 > or = 6%
Tier I Capital (to Average Assets):
Consolidated $ 22,540 11% > or = 8,014 > or = 4% N/A N/A
Milledgeville $ 16,603 11% > or = 6,127 > or = 4% > or = 7,658 > or = 5%
North Georgia $ 4,600 9% > or = 2,007 > or = 4% > or = 2,508 > or = 5%
</TABLE>
(19) Proposed Merger
On February 3, 1997, the Company executed a definitive
agreement of reorganization and plan of merger with First
Alliance/Premier Bancshares, Inc. ("Premier"), a Marietta,
Georgia-based bank holding company. This transaction will be
subject to regulatory and shareholder approval. Premier will
be the surviving corporation. In the transaction each of the
Company's outstanding common shares will be converted into one
share of Premier common stock.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
During the Company's two most recent fiscal years, the
Companys did not change accountants and had no disagreement
with its accountants on any matter of accounting principles or
practices or financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Pursuant to Instruction 3 to paragraph (b) of Item 401 of
Regulation S-K, information relating to the executive officers
of the Company is included in Item 1 of this Report.
ITEM 11. EXECUTIVE COMPENSATION.
The Company did not pay any remuneration to its executive
officers during the year ended December 31, 1996, other than
directors' fees to the executive officer who served on the
Board of Directors of the Company. The following table sets
forth the annual and other compensation paid by the Company,
Milledgeville and North Georgia to Robert C. Oliver, President
and Chief Executive Officer of the Company, the only executive
officer of the Company who was paid $100,000 or more during
1996.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------------------------------ ------------
Awards
------------
Securities
------------
Underlying
------------
Options/SARs All Other
Name and Principal ------------ ---------
Positions During 1996 Year Salary(1) Bonus Other (No. of Shares) Compensation(3)
- --------------------- ---- --------- ----- ----- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Oliver 1996 $151,100 $43,875 $---2) --- $6,179
President, Chief Executive Officer and 1995 143,100 35,351 ---(2) --- 5,738
Director of the Company; President, 1994 135,100 30,000 ---(2) --- 2,700
Chief Executive Officer and Director of
Milledgeville; Director of North Georgia
___________________________
(1) Includes amounts received as directors' fees for
Milledgeville, North Georgia and the Company, as applicable.
Directors' fees for the Company were suspended in 1993 and
reinstated in May of 1994.
(2) Perquisites do not meet the Securities and Exchange
Commission threshold for disclosure.
(3) All other compensation for Mr. Oliver is equal to the
amount paid by the Company to match Mr. Oliver's contributions
to the Company's profit-sharing plan.
</TABLE>
Members of the Board currently receive $600 each month
for their services as directors] The Company has never
granted restricted stock, stock appreciation rights or similar
awards to any of its present or past executive officers,
except for the grant of stock options under the Central and
Southern Holding Company Key Individual Stock Option Plan (the
"Plan").
Option Grants. Mr. Oliver was not granted any options
during the 1996 fiscal year.
Option Fiscal Year-End Values. Shown below is
information with respect to unexercised options to purchase
the Company's Common Stock granted under the Plan to Mr.
Oliver and held by him at December 31, 1996
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
No. of Securities Underlying Value of Unexercised
---------------------------- --------------------
Unexercised Options In-the-Money Options
------------------- --------------------
Held at December 31, 1996 at December 31, 1996(1)
------------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert C. Oliver 50,000 --- $375,000 $---
(1) Based on the closing sale price of $11.75 of the Common
Stock on The NASDAQ National Market at December 31, 1996 (the
last day during 1996 on which any shares of the Common Stock
were traded), less the aggregate exercise price of the option.
</TABLE>
Pension Plan. Effective April 15, 1994, the Company's
defined benefit pension plan (the "Pension Plan") was amended
to freeze future benefit accruals. As a result, after such
date, an employee's benefit accruals under the Pension Plan do
not increase. The Company terminated the Pension Plan
effective February 1, 1997. Following receipt of all
necessary government approvals, the Company will distribute
benefits to the participants.
The following table shows the estimated annual pension
benefit payable to participating employees, including
officers, under the Company's defined benefit pension plan
(the "Pension Plan"), in the earnings and years of service
categories indicated. Such annual pension benefits are
calculated based on a straight life annuity basis commencing
at age 65 and reflect an offset for social security benefits.
The benefits shown are subject to statutory limitations that
may require an employee's benefit to be reduced.
<TABLE>
<CAPTION>
RETIREMENT PLAN OF CENTRAL AND SOUTHERN HOLDING COMPANY
BENEFIT ILLUSTRATION
Years of Service
-------------------------------------------------------------------
Average 35 or more
Earnings 15 Years 20 Years 25 Years 30 Years Years
- -------- -------- -------- -------- -------- -----
<C> <C> <C> <C> <C> <C>
$ 25,000 $ 4,365 $ 5,820 $ 7,275 $ 8,730 $10,185
$ 50,000 10,914 14,552 18,190 21,828 25,466
$ 75,000 17,717 23,622 29,528 35,433 41,339
$100,000 24,519 32,692 40,865 49,038 57,211
$125,000 31,322 41,762 52,203 62,643 73,084
$150,000 38,124 50,832 63,540 76,248 88,956
$175,000 38,124 50,832 63,540 76,248 88,956
$200,000 38,124 50,832 63,540 76,248 88,956
$225,000 38,124 50,832 63,540 76,248 88,956
$250,000 38,124 50,832 63,540 76,248 88,956
$275,000 38,124 50,832 63,540 76,248 88,956
$300,000 38,124 50,832 63,540 76,248 88,956
$325,000 38,124 50,832 63,540 76,248 88,956
</TABLE>
Annual pension benefits are based upon the employee's
years of service and final average annual earnings, with an
offset for social security benefits, all determined as of
April 15, 1994, and an assumed retirement date of January 1,
1996. "Annual Earnings" include regular basic compensation
paid to an employee for services during a calendar year
(including all pre-tax employee contributions made to the
company's profit-sharing plan), but exclude bonuses, overtime,
commissions or any other remuneration of any kind. "Final
Average Annual Earnings" means the average annual earnings of
the employee during the 60 completed calendar months (or
completed calendar months of employment if less than 60)
immediately preceding the earliest of the employee's
retirement, termination of employment or death, whichever is
applicable. Prior to 1993, Mr. Oliver did not participate in
the Pension Plan; therefore, he has less than four years of
credited service for purpose of determining benefits payable
under the Pension Plan.
Termination of Employment and Change in Control
Arrangement. On August 31, 1993, the Company and Mr. Oliver
entered into an Agreement (the "Agreement") which provides
that Mr. Oliver shall be paid a lump sum cash payment equal to
his previous year's salary, subject to certain limitations, in
the event of his voluntary or involuntary termination, as
defined in the Agreement, following or immediately preceding a
change in control of the Company, as defined in the Agreement.
The Agreement provides for a rolling term, such that each day
the term renews for a two-year period unless and until the
Company provides notice that the term of the Agreement shall
cease to renew. At such time, the term of the Agreement shall
become two years from the date of such notice.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company set the
compensation of Mr. Oliver for the 1996 fiscal year. The
compensation for Mr. Oliver and the Company's other executive
officer for the 1996 fiscal year was set by Mr. Oliver and
reviewed by the compensation committee and the entire Board.
Mr. Oliver did not participate in any decisions regarding his
own compensation as an executive officer.
George S. Carpenter, Jr., a director of the Company, is
an attorney in Milledgeville, Georgia who, from time to time,
handles various legal matters for Milledgeville
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth as of January 1, 1997,
beneficial ownership of the Common Stock by each "person" (as
that term is defined by the Securities and Exchange
Commission) known by the Company to be the beneficial owner of
more than five percent (5%) of the Company's voting
securities, by each director of the Company, and by all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares Percent
Name and address of Beneficial Owner Owned Beneficially of Class
- ------------------------------------ ------------------ --------
<S> <C> <C>
Jerry M. McRee 323,025 8.84%(1)
1690 Cardinal Road
Milledgeville, GA 31061
Robert C. Oliver 76,890 2.07%(2)
Albert F. Gandy 70,841 1.91%
George S. Carpenter, Jr. 20,484 * (3)
Alan V. Davis 2,885 *
Donald N. Ellis 6,655 *
John H. Ferguson 94,999 2.56%(4)
Ralph A. Harrington 100,030 2.69%(5)
C. Steve McQuaig 22,166 * (6)
Gay H. Morgan 19,085 * (7)
Thomas E. Owen, Jr. 25,199 * (8)
Michael E. Ricketson 48,975 1.32%(9)
All Directors and Executive Officers as a Group (11 persons) 488,209 13.13%(10)
___________________
* Less than one percent (1%).
</TABLE>
(1) Does not include 25,325 shares owned by Mr. McRee's wife,
as to which shares he disclaims beneficial ownership.
Pursuant to an Order of Prohibition From Further Participation
(the "Order") issued by the Federal Deposit Insurance
Corporation ("FDIC"), dated November 8, 1993, Mr. McRee is
prohibited from voting or granting a proxy to vote the shares
owned by him (323,025 shares) for directors, until the Order
is terminated by the FDIC. The Order does not affect the 25,325
shares owned by Mr. McRee's wife.
(2) Includes 21,533 shares owned through individual
retirement accounts, and 1,257 shares held by Mr. Oliver in a
custodial account for his children, as to which shares Mr.
Oliver exercises voting power. Includes currently exercisable
options to purchase 50,000 shares of the Common Stock granted
to Mr. Oliver by the Board of Directors.
(3) Includes 6,062 shares owned through an individual
retirement account. Does not include 1,687 shares owned by
Mr. Carpenter's wife, as to which shares he disclaims
beneficial ownership.
(4) Includes 40,982 shares held by Dr. Ferguson as trustee
for the Pension Plan and Trust of John H. Ferguson, D.D.S.,
P.C., and 21,792 shares held by Dr. Ferguson as trustee for
the Profit Sharing Plan and Trust of John H. Ferguson, D.D.S.,
P.C. Does not include 2,872 shares held by Dr.. Ferguson's
wife, as to which shares he disclaims beneficial ownership.
(5) Does not include 21,250 shares held by Mr. Harrington's
wife, as to which shares he disclaims beneficial ownership.
(6) Includes 3,800 shares owned through an individual
retirement account, 11,806 shares held by Dr. McQuaig's wife
and children, and 1,000 shares owned jointly by a partnership
to which he claims beneficial ownership.
(7) Includes 7,750 shares held by Mrs. Morgan as custodian for
her children. Does not include 2,000 shares owned by Mrs.
Morgan's husband, as to which shares she disclaims beneficial
ownership.
(8) Includes 18,291 shares owned by Mr. Owen through an
individual retirement account, and 6,908 shares which Mr. Owen
and his wife own jointly and over which they share voting and
investment power.
(9) Includes 15,860 shares owned by Mr. Ricketson through an
individual retirement account, and 7,661 shares held by Mr.
Ricketson in a custodial account for his children, as to which
shares Mr. Ricketson exercises voting power. Includes
currently exercisable options to purchase 14,168 shares of the
Common Stock granted to Mr. Ricketson by the Board of
Directors.
(10) Does not include 27,809 shares owned by spouses of
directors, as to which such directors disclaim beneficial
ownership. Includes currently exercisable options to purchase
64,168 shares of Common Stock that have been granted to
executive officers.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Milledgeville and North Georgia have had, and expect to
have in the future, banking transactions in the ordinary
course of business with directors and officers of the Company
and their associates, including corporations in which such
officers or directors are shareholders, directors and/or
officers, on the same terms (including interest rates and
collateral) as those prevailing at the time for comparable
transactions with other persons. Such transactions have not
involved more than the normal risk of collectibility or
presented other unfavorable features.
George S. Carpenter, Jr., a director of the Company, is
an attorney in Milledgeville, Georgia who, from time to time,
handles various legal matters for Milledgeville.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are included in Item 8 to this
Report:
1. Consolidated Financial Statements of Central and
Southern Holding Company:
Report of Independent Certified Public Accountants;
Consolidated Balance Sheets as of December 31, 1996
and 1995;
Consolidated Statements of Earnings for the years
ended December 31, 1996, 1995 and 1994;
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1996, 1995 and 1994;
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994;
Notes to Consolidated Financial Statements for the
years ended December 31, 1996, 1995 and 1994.
2. Financial Statement Schedules:
No Financial Statement Schedules are required to be
filed as part of this Form 10-K.
3. Exhibits:
The exhibits filed as a part of this Annual Report
on Form 10-K are as follows:
Exhibit No. Description of Exhibit
- ----------- ----------------------
3.1 and 4.1 Articles of Incorporation of Central and
Southern Holding Company, as amended (included
as Exhibit 3.1 and 4.1 to the Company's annual
report on Form 10-K for the year ended December
31, 1993, previously filed with the Commission
and incorporated herein by reference).
3.2 and 4.2 By-Laws of Central and Southern Holding
Company, as amended (included as Exhibit
3.2 to the Company's annual report on
Form 10-K for the year ended December 31,
1990, previously filed with the Commission
and incorporated herein by reference).
10.1 Central and Southern Holding Company Key Employee
Stock Option Plan, dated August 19, 1993 (included
as Exhibit 4(a) to Amendment No. 1 to the
Company's Form S-8, Commission File No. 33-82518,
previously filed with the Commission and incorporated
herein by reference).*
10.2 Agreement, dated August 31, 1993 by and between
Robert C. Oliver and Central and Southern Holding
Company (included as Exhibit 10.7 to the
Company's annual report on Form 10-K for the
year ended December 31, 1993, previously filed
with the Commission and incorporated herein by
reference).*
10.5 Amendment No. 4 to the Central and Southern Holding
Company Retirement Plan, dated December 19,1996, by
Central and Southern Holding Company.
10.6 Amendment No. 5. to the Retirement Pension Plan and
Trust of Central and Southern Holding Company, dated
December 19, 1996, by Central and Southern Holding
Company.
10.7 Agreement and Plan of Reorganization by and between
First Alliance/Premier Bancshares, Inc. and Central
and Southern Holding Company, dated February 3, 1997.
21 List of Subsidiaries of Central and Southern Holding
Company: The Central and Southern Bank of Georgia and
The Central and Southern Bank of North Georgia
23 Consent of Porter Keadle Moore, LLP, successor to
the practice of Evans, Porter, Bryan & Company.
27 Financial Data Schedule.
_____________________________
* Management contract or compensatory plan or arrangement
required to be filed as an Exhibit to this Annual Report on
Form 10-K pursuant to Item 14(c) of Form 10-K.
(b) The Company filed no current reports on Form 8-K during
the fourth quarter of the 1996 fiscal year.
SIGNATURES
Pursuant to the requirements of Section 12(g) of the
Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTRAL AND SOUTHERN HOLDING COMPANY
Date: March __, 1997. By:__________________________
Robert C. Oliver, President
POWER OF ATTORNEY AND SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Robert C.
Oliver and Michael E. Ricketson, or either of them, as
attorney-in-fact, either with power of substitution, for him
in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and
confirming all that each of the attorneys-in-fact, or his or
her substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below on the ___ day
of March, 1997 by the following persons on behalf of the
Company and in the capacities indicated.
Signature and Capacity
----------------------
___________________
Robert C. Oliver
President and Director
(Principal Executive Officer)
____________________
Michael E. Ricketson
Executive Vice President and Director
(Chief Financial and Accounting Officer)
(Signatures continued on following Page)
(Signatures continued from preceding Page)
_________________________________
Albert F. Gandy
Chairman of the Board of Directors
_________________________________
George S. Carpenter, Jr.
Director
_________________________________
Alan Davis
Director
_________________________________
Don Ellis
Director
_________________________________
John Hopkins Ferguson
Director
_________________________________
Ralph A. Harrington
Director
_________________________________
C. Steve McQuaig
Director
_________________________________
Gay H. Morgan
Director
_________________________________
Thomas E. Owen, Jr.
Director
SIGNATURES
Pursuant to the requirements of Section 12(g) of the
Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTRAL AND SOUTHERN HOLDING COMPANY
Date: March ___, 1997. By: /s/ Robert C. Oliver
----------------------
Robert C. Oliver, President
POWER OF ATTORNEY AND SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Robert C.
Oliver and Michael E. Ricketson, or either of them, as
attorney-in-fact, either with power of substitution, for him
in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and
confirming all that each of the attorneys-in-fact, or his or
her substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below on the ___ day
of _______, 1997 by the following persons on behalf of the
Company and in the capacities indicated.
Signature and Capacity
----------------------
/s/ Robert C. Oliver
-------------------------
Robert C. Oliver
President and Director
(Principal Executive Officer)
/s/ Michael E. Ricketson
--------------------------
Michael E. Ricketson
Executive Vice President and Director
(Chief Financial and Accounting Officer)
(Signatures continued on following Page)
(Signatures continued from preceding Page)
/s/ Albert F. Gandy
-------------------
Albert F. Gandy
Chairman of the Board of Directors
/s/ George S. Carpenter, Jr.
----------------------------
George S. Carpenter, Jr.
Director
/s/Alan Davis
-------------
Alan Davis
Director
/s/ Don Ellis
-------------
Don Ellis
Director
/s/ John Hopkins Ferguson
-------------------------
John Hopkins Ferguson
Director
/s/ Ralph A. Harrington
-----------------------
Ralph A. Harrington
Director
/s/ C. Steve McQuaig
--------------------
C. Steve McQuaig
Director
/s/ Gay H. Morgan
-----------------
Gay H. Morgan
Director
/s/ Thomas E. Owen, Jr.
-----------------------
Thomas E. Owen, Jr.
Director
Exhibit Index
-------------
Exhibit No. Description of Exhibit
- -------------- ---------------------------------
10.5 Amendment No. 4 to the Central and Southern Holding
Company Retirement Plan, dated December 19, 1996.
10.6 Amendment No. 5. to the Retirement Pension Plan and
Trust of Central and Southern Holding Company, dated
December 19, 1996.
10.7 Agreement and Plan of Reorganization by and between
First Alliance/Premier Bancshares, Inc. and Central
and Southern Holding Company
23 Consent of Porter Keadle Moore, LLP
Exhibit 10.5
AMENDMENT NO. 4 TO THE
CENTRAL AND SOUTHERN HOLDING COMPANY
RETIREMENT PLAN
THIS AMENDMENT made and entered into on this 19th day of
December, 1996, by Central and Southern Holding Company, a
Georgia corporation (referred to herein as the "Corporation");
W I T N E S S E T H:
WHEREAS, effective as of January 1, 1970, the Corporation
adopted the Central and Southern Holding Company Retirement
Plan (the "Plan) for the benefit of its eligible employees and
their beneficiaries, which Plan has been amended from time to
time to comply with changes in the Internal Revenue Code and
ERISA; and
WHEREAS, pursuant to Article VII of the Plan, the
Corporation retains the power to amend or terminate the Plan
at any time; and
WHEREAS, the Corporation previously amended the Plan
effective as of the close of business on April 15, 1994, to
provide (i) that no future benefits would accrue under the
Plan for any Participant after April 15, 1994, and (ii) that
any Participant who was actively employed by the Corporation
on April 15, 1994, or any former Participant who had not yet
received a distribution of his or her Accrued Benefit prior to
April 15, 1994, would become fully vested in his or her
Accrued Benefit; and
WHEREAS, the Corporation now deems it advisable that the
Plan be amended to terminate the Plan effective as of June 1,
1996; and
WHEREAS, the Corporation further deems it advisable that
the Plan distribution provision be amended: (i) to permit a
participant who is actively employed by the Corporation on the
date his distribution is paid to direct to the Trustee to make
a trustee-to-trustee transfer of the lump sum equivalent of
his or her Accrued Benefit to the Profit Sharing and Savings
Plan and Trust of Central and Southern Holding Company and
(ii) to permit lump sum distributions without limitations; and
WHEREAS, the Corporation further deems it advisable to
amend the Plan (i) to delete Section 4.4 regarding Disability
Benefits, and (ii) to change the interest rate and mortality
table used for purposes of calculating lump sum distributions
under the Plan as permitted pursuant to Regulation Section
1.417(e)-1T(d) (10) (iii);
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants herein contained, the parties hereto
agree as follows:
1.
Effective as of the close of business on June 1, 1996,
the Plan shall terminate.
2.
Section 4.7(c) of the Plan is hereby amended by deleting
subsections (i), (ii), and (iii) in their entirety and
substituting the following:
(i) A lump sum distribution; or
(ii) Joint and 50% Survivor Annuity for the life of the
Participant and a designated Beneficiary; or
(iii) Single life annuity for the life of the Participant only; or
(iv) A trustee-to-trustee transfer of the Actuarial
Equivalent lump sum value of his Accrued Benefit
to the Profit Sharing and Savings Plan and
Trust of Central and Southern Holding Company.
This payment option shall be available only to
a Participant who is actively employed by the Corporation
as of the date such Participant's benefits are distributed.
3.
Section 4.4 regarding Disability Benefits is deleted in
its entirety.
4.
Section 1.3 of the Plan is hereby amended by deleting the
second paragraph thereof and substituting the following
therefore:
"With respect to a lump sum payment, the Actuarial
Equivalent of such payment shall not be less than that calculated
as follows:
(a) for distributions occurring prior to April
1, 1996:
(i) (A) if the present value of the vested
Accrued Benefit is not in excess of $25,000, by
using the interest rate that would be used as of
the beginning of the Plan Year immediately
preceding the date of distribution by the Pension
Benefit Guaranty Corporation to determine the
present value of the lump sum distribution on
Plan termination, or if less, eight percent (8%)
(the lesser rate shall be the "Applicable
Interest Rate"); or (B) if the present value
of the vested Accrued Benefit exceeds
$25,000, by using and interest rate that
is not greater than one hundred twenty
percent (120%) of the Applicable Interest
Rate; and
(ii) by using the basic Unisex (UP) 1984
Mortality Table with a one-year setback for participants
and a two-year setback for Beneficiaries.
(b) for distributions occurring on or after
April 1, 1996:
(i) by using the interest rate applicable
to 30-year Treasury securities determined as of
the second calendar month immediately preceding
the beginning of the Plan Year in which the distribution
is made; and
(ii) by using the mortality table based on
the prevailing commissioners' standard table described
in Code Section 807(d) (5) (A)."
5.
Except as provided herein to the contrary, this Amendment
No. 4 shall be effective as of March 14, 1996. Except as
herein amended, the provisions of the Plan shall remain in
full force and effect.
IN WITNESS WHEREOF, the Corporation has executed this
Amendment No. 4 as of the day and year first written above.
CORPORATION:
CENTRAL AND SOUTHERN HOLDING COMPANY
(CORPORATE SEAL)
By:________________________________
Title:_____________________________
ATTEST:
By:____________________________
Title:_________________________
Exhibit 10.6
AMENDMENT NO. 5 TO THE
RETIREMENT PENSION PLAN AND TRUST
OF CENTRAL AND SOUTHERN HOLDING COMPANY
THIS AMENDMENT made and entered into as of this 19th day
of December, 1996, by Central and Southern Holding Company, a
Georgia corporation (referred to herein as the "Corporation");
W I T N E S S E T H:
WHEREAS, effective as of January 1, 1970, the Corporation
adopted the Central and Southern Holding Company Retirement
Plan (the "Plan") for the benefit of its eligible employees
and their beneficiaries, which Plan has been amended from time
to time to comply with the changes in the Internal Revenue
Code and ERISA; and
WHEREAS, pursuant to Article VII of the Plan, the
Corporation retains the power to amend or terminate the Plan
at any time; and
WHEREAS, the Corporation previously amended the Plan
effective as of the close of business on April 15, 1994, to
provide that (i) no future benefits would accrue under the
Plan for any participant after April 15, 1994, and (ii) any
Participant who is actively employed by the Corporation on
April 15, 1994, or any former Participant who had not yet
received a distribution of his or her accrued benefit prior to
April 15, 1994, would become fully vested in his or her
account benefit; and
WHEREAS, the Corporation previously executed Amendment
No. 4 to the Plan which, among other actions, terminated the
Plan effective as of June 1, 1996, and distributed a Notice of
Intent to Terminate to Participants which reserved the right
to revoke such Plan termination; and
WHEREAS, due to fluctuating interest rates, the
Corporation revoked the Plan termination which was to be
effective June 1, 1996, but intends that the remaining
provision of Amendment No. 4 to the Plan remain in full force
and effect; and
WHEREAS, the Corporation now deems it advisable to
terminate the Plan effective as of February 1, 1997;
NOW, THEREFORE, for and in consideration of the premises
and mutual covenants herein contained and contained in the
Plan, the parties hereto agree as follows:
1.
Effective as of the close of business on February 1,
1997, the Plan shall terminate.
2.
This Amendment No. 4 shall be effective as of December 1,
1996. Except as herein amended, the provision of this Plan
shall remain in full force and effect.
IN WITNESS WHEREOF, the Corporation has executed this
Amendment No. 5 as of the day and year first written above by
its duly authorized corporate officers and its corporate seal
to be hereunto affixed.
CORPORATION:
CENTRAL AND SOUTHERN HOLDING
COMPANY
(CORPORATE SEAL)
By:_________________________
Title_______________________
ATTEST:
By:________________________
Title:_____________________
Exhibit 10.7
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST ALLIANCE/PREMIER BANCSHARES, INC.
AND
CENTRAL AND SOUTHERN HOLDING COMPANY
Dated as of February 3, 1997
TABLE OF CONTENTS
Page
----
Preamble A-6
ARTICLE 1TRANSACTIONS AND TERMS OF MERGER A-6
--------------------------------
Merger A-6
Time and Place of Closing A-7
Effective Time A-7
ARTICLE 2TERMS OF MERGER A-7
---------------
Articles of Incorporation A-7
Bylaws A-7
Directors and Officers A-7
Names A-8
ARTICLE 3MANNER OF CONVERTING SHARES A-8
---------------------------
Conversion of Shares A-8
Anti-Dilution Provisions A-8
Shares Held by Premier or Central and Southern A-8
Conversion of Stock Options; Restricted Stock A-9
ARTICLE 4EXCHANGE OF SHARES A-9
------------------
Exchange Procedures A-9
Rights of Former Central and Southern Shareholders A-10
ARTICLE 5REPRESENTATIONS AND WARRANTIES OF CENTRAL AND SOUTHERN A-11
------------------------------------------------------
Organization, Standing, and Power A-11
Authority; No Breach By Agreement A-11
Common Stock A-12
Central and Southern Subsidiaries A-12
Financial Statements A-13
Absence of Undisclosed Liabilities A-13
Absence of Certain Changes or Events A-14
Tax Matters A-14
Allowance for Possible Loan Losses A-15
Assets A-15
Environmental Matters A-16
Compliance with Laws A-16
Labor Relations A-17
Employee Benefit Plans A-17
Material Contracts A-19
Legal Proceedings A-19
Reports A-20
Statements True and Correct A-20
Accounting, Tax and Regulatory Matters A-21
Charter Provisions A-21
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PREMIER A-21
-----------------------------------------
Organization, Standing, and Power A-21
Authority; No Breach By Agreement A-21
Capital Stock A-22
Premier Subsidiaries A-23
Financial Statements A-23
Absence of Undisclosed Liabilities A-24
Absence of Certain Changes or Events A-24
Tax Matters A-24
Allowance for Possible Loan Losses A-25
Assets A-25
Environmental Matters A-26
Compliance with Laws A-26
Labor Relations A-27
Employee Benefit Plans A-27
Material Contracts A-29
Legal Proceedings A-29
Reports A-30
Statements True and Correct A-30
Accounting, Tax and Regulatory Matters A-30
Charter Provisions A-31
ARTICLE 7CONDUCT OF BUSINESS PENDING CONSUMMATION A-31
----------------------------------------
Affirmative Covenants of Central and Southern A-31
Negative Covenants of Central and Southern A-31
Affirmative Covenants of Premier A-33
Negative Covenants of Premier A-34
Adverse Changes in Condition A-36
Reports A-36
ARTICLE 8ADDITIONAL AGREEMENTS A-36
---------------------
Registration Statement; Proxy Statement; Shareholder Approval A-36
Exchange Listing A-37
Applications A-37
Filings with State Offices A-37
Agreement as to Efforts to Consummate A-37
Investigation and Confidentiality A-37
Press Releases A-38
Acquisition Proposals A-38
Accounting and Tax Treatment A-38
Agreement of Affiliates A-39
Employee Benefits and Contracts A-39
ARTICLE 9CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE A-40
-------------------------------------------------
Conditions to Obligations of Each Party A-40
Conditions to Obligations of Premier A-41
Conditions to Obligations of Central and Southern A-43
ARTICLE 10TERMINATION A-44
-----------
Termination A-44
Effect of Termination A-46
Non-Survival of Representations and Covenants A-46
ARTICLE 11MISCELLANEOUS A-46
-------------
Definitions A-46
Expenses A-53
Brokers and Finders A-54
Entire Agreement A-54
Amendments A-54
Waivers A-55
Assignment A-55
Notices A-55
Governing Law A-56
Counterparts A-56
Captions A-56
Enforcement of Agreement A-57
Severability A-57
LIST OF EXHIBITS
- ----------------
Exhibit Number Description
- -------------------------------
1. Form of Agreement of Affiliates of Central and
Southern. ((S) 8.10).
2. Matters as to which Counsel for Central and
Southern will opine. ((S) 9.2(d)).
3. Form of Claims/Indemnification Letter ((S)9.2(e)).
4. Matters as to which Counsel for Premier will
opine. ((S) 9.3(d)).
5. Central and Southern Employment Agreements.
((S)8.11(b)).
6. Premier Employment Agreement. ((S) 8.11(c)).
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is made and entered into as of February 3, 1997
by and between FIRST ALLIANCE/PREMIER BANCSHARES, INC.
("Premier"), a corporation organized and existing under the
laws of the State of Georgia, with its principal office
located in Marietta, Georgia, and CENTRAL AND SOUTHERN HOLDING
COMPANY ("Central and Southern"), a corporation organized and
existing under the laws of the State of Georgia, with its
principal office located in Milledgeville, Georgia.
Preamble
--------
The Boards of Directors of Premier and Central and
Southern 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 Central and Southern with and into Premier, with
Premier being the surviving corporation of the merger. At the
effective time of such merger, the outstanding shares of
capital stock of Central and Southern will be converted into
the right to receive shares of capital stock of the surviving
corporation. As a result, shareholders of Central and
Southern will become shareholders of the surviving
corporation, and each of the subsidiaries of Central and
Southern will continue to conduct its business and operations
as a wholly-owned subsidiary of the surviving corporation.
The transactions described in this Agreement are subject to
the approvals of the Boards of Directors and the shareholders
of both Central and Southern and Premier, 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
(i) for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code and (ii) for accounting purposes shall
be accounted for 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:
I. ARTICLE
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
A. Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Central and Southern shall
be merged with and into Premier in accordance with the
provisions of Section 14-2-1101 of the GBCC and with the
effect provided in Section 14-2-1106 of the GBCC (the
"Merger"). Premier 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
Premier and Central and Southern.
A. 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 Womble Carlyle Sandridge & Rice, PLLC, Atlanta, Georgia, or
such other place as may be mutually agreed upon by the
Parties.
A. Effective Time. The Merger and other transactions
contemplated by this Agreement shall become effective on the
date and at the time the Articles of Merger reflecting the
Merger shall become effective with the Secretary of State of
the State of Georgia (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 Parties shall use their reasonable efforts to cause the
Effective Time to occur on the last business day of the month
in which occurs the last to occur of (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 Central and Southern approve
this Agreement to the extent such approval is required by
applicable Law, and (c) the date on which the shareholders of
Premier approve this Agreement to the extent such approval is
required; or such later date as may be mutually agreed upon in
writing by the chief executive officer of each Party.
I. ARTICLE
TERMS OF MERGER
---------------
A. Articles of Incorporation. The Articles of
Incorporation of Premier in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until otherwise amended or repealed.
A. Bylaws. The Bylaws of Premier in effect immediately
prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until otherwise amended or repealed.
A. Directors and Officers. The directors of the
Surviving Corporation from and after the Effective Time shall
consist of six outside directors of Premier to be specified to
Central and Southern within fifteen (15) days after the
execution of this Agreement, six outside directors of Central
and Southern to be specified to Premier within fifteen (15)
days after the execution of this Agreement, and Darrell D.
Pittard, Robert C. Oliver and J. Edward Mulkey, Jr., as inside
directors who shall serve in accordance with the Bylaws of the
Surviving Corporation. The officers of the Surviving
Corporation shall be as follows: Darrell D. Pittard shall be
its Chairman of the Board and Chief Executive Officer and
Robert C. Oliver shall be its President and Chief Operating
Officer, J. Edward Mulkey, Jr., shall be its Vice Chairman and
Michael E. Ricketson and Frank H. Roach shall be its Executive
Vice Presidents. Such officers, together with such additional
persons as may thereafter be elected, shall serve as the
officers of the Surviving Corporation from and after the
Effective Time in accordance with the Bylaws of the Surviving
Corporation. At the Effective Time of the Merger, Mr.
Pittard, Mr. Mulkey and Mr. Oliver will be elected to the
board of directors of all of the Subsidiaries of the Surviving
Corporation. Mr. Pittard will continue as Chairman and Chief
Executive Officer of Premier Lending Corporation. Mr. Oliver
will continue as President of The Central and Southern Bank of
Georgia and on the Board of Directors of The Central and Southern
Bank of North Georgia, F.S.B. Mr. Mulkey will continue as
President and Chief Executive Officer of Premier Bank and on
the board of directors of Premier Bank, F.S.B. and Alliance
Finance. Mr. Ricketson will continue as Chief Financial
Officer of The Central and Southern Bank of Georgia and The
Central and Southern Bank of North Georgia, F.S.B.
A. Names. At the Effective Time of the Merger, the
Surviving Corporation will change its name to "Premier
Bancshares, Inc." As soon as practicable following the
Effective Time, The Central and Southern Bank of North
Georgia, F.S.B. will change its name to "Premier Bank F.S.B."
I. ARTICLE
MANNER OF CONVERTING SHARES
A. 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:
Each share of Premier Common Stock issued and
outstanding immediately prior to the Effective Time shall
remain issued and outstanding from and after the Effective
Time.
Each share of Central and Southern Common Stock
(excluding shares held by Premier or Central and Southern or
any of their respective Subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously
contracted) issued and outstanding at the Effective Time shall
cease to be outstanding and shall be converted into and
exchanged for the right to receive one share of Surviving
Corporation Common Stock (the "Exchange Ratio").
A. Anti-Dilution Provisions. In the event Premier or
Central and Southern changes the number of shares of Premier
Common Stock or Central and Southern 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,
provided, however, that the Exchange Ratio shall not be
adjusted for the Premier stock split described in Section
9.3(e) herein.
A. Shares Held by Premier or Central and Southern.
Each of the shares of Premier Common Stock held by any Premier
Company or by any Central and Southern 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.
A. Conversion of Stock Options; Restricted Stock.
1. At the Effective Time, all rights with respect
to Central and Southern Common Stock pursuant to stock options
("Central and Southern Options") granted by Central and
Southern under the Central and Southern 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 Central and Southern Option,
in accordance with the terms of the Central and Southern
Stock Plan and stock option agreement by which it is evidenced.
From and after the Effective Time, (i) each Central and
Southern 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 Central and Southern Option shall
be equal to the number of shares of Central and Southern Common
Stock subject to such Central and Southern Option immediately
prior to the Effective Time, and (iii) the per share exercise
price under each such Central and Southern Option shall not be
changed. 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." Central and
Southern and Premier agree to take all necessary steps to
effect the provisions of this Section 3.4.
1. All restrictions or limitations on transfer
with respect to Central and Southern Common Stock awarded
under the Central and Southern Stock Plans or any other plan,
program or arrangement of any Central and Southern 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.
I. ARTICLE
EXCHANGE OF SHARES
A. Exchange Procedures. Unless the parties otherwise
agree, promptly after the Effective Time, the Surviving
Corporation shall mail to the former holders of Central and
Southern 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 Central and Southern Common Stock shall pass, only
upon proper delivery of such certificates to the Surviving
Corporation. After the Effective Time, each holder of shares
of Central and Southern Common Stock (other than shares to be
canceled pursuant to Section 3.3 of this Agreement) issued and
outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the
Surviving Corporation 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. The Surviving Corporation shall not be
obligated to deliver the consideration to which any former
holder of Central and Southern Common Stock is entitled as a
result of the Merger until such holder surrenders his or her
certificate or certificates representing the shares of Central
and Southern Common Stock for exchange as provided in this
Section 4.1. The certificate or certificates of Central and
Southern Common Stock so surrendered shall be duly endorsed as
the Surviving Corporation may require. Any other provision of
this Agreement notwithstanding, the Surviving Corporation
shall not be liable to a holder of Central and Southern Common
Stock for any amounts paid or property delivered in good faith
to a public official pursuant to any applicable abandoned
property Law.
A. Rights of Former Central and Southern Shareholders.
The stock transfer books of Central and Southern shall be
closed as to holders of Central and Southern Common Stock
immediately prior to the Effective Time and no transfer of
Central and Southern 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 Central and Southern Common Stock (other than shares
to be canceled pursuant to Section 3.3) shall from and after
the Effective Time represent for all purposes only the right
to receive the consideration provided in Section 3.1 of this
Agreement in exchange therefor. To the extent permitted by
Law, former holders of record of Central and Southern 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 Central and Southern Common
Stock are converted, regardless of whether such holders have
exchanged their certificates representing Central and Southern
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 the 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 Central and Southern 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 Central and Southern Common Stock certificate, the
Surviving Corporation Common Stock certificate and with all
such undelivered dividends or other distributions (without
interest) shall be delivered and paid with respect to each
share represented by such certificate.
I. ARTICLE
REPRESENTATIONS AND WARRANTIES
OF CENTRAL AND SOUTHERN
Central and Southern hereby represents and warrants to Premier as follows:
A. Organization, Standing, and Power. Central and
Southern 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. Central and Southern has the corporate power and
authority to carry on its business as now conducted and to
own, lease and operate its Assets. Central and Southern 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 Central and Southern.
A. Authority; No Breach By Agreement.
1. Central and Southern 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 Central and Southern,
subject to the approval of this Agreement by the holders of a
majority of the outstanding Central and Southern Common Stock,
which is the only shareholder vote required for approval of
this Agreement and consummation of the Merger by Central and
Southern. Subject to such requisite shareholder approval, this
Agreement represents a legal, valid and binding obligation of
Central and Southern, enforceable against Central and Southern
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).
1. Neither the execution and delivery of this
Agreement by Central and Southern, nor the consummation by
Central and Southern of the transactions contemplated hereby,
nor compliance by Central and Southern with any of the
provisions hereof will (i) conflict with or result in a breach
of any provision of Central and Southern'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 Central and
Southern Company under, any Contract or Permit of any Central
and Southern 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
Central and Southern, 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 Central
and Southern Company or any of their respective Assets.
1. Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate
and securities Laws, and rules of the NASD, 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 Central and Southern, no notice to,
filing with, or Consent of any public body or authority is
necessary for the consummation by Central and Southern of the
Merger and the other transactions contemplated in this
Agreement.
A. Common Stock.
1. The authorized Common stock of Central and
Southern consists of 10,000,000 shares of Central and Southern
Common Stock, of which 3,653,523 shares are issued and
outstanding as of the date of this Agreement and not more than
3,653,523 shares will be issued and outstanding at the
Effective Time (as a result of the exercise of outstanding
options). All of the issued and outstanding shares of capital
stock of Central and Southern 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
Central and Southern has been issued in violation of any
preemptive rights of the current or past shareholders of
Central and Southern. Central and Southern has reserved
170,000 shares of Central and Southern
Common Stock for issuance under the Central and Southern Stock
Plans, pursuant to which options to purchase not more than
153,000 shares of Central and Southern Common Stock are
outstanding as of the date of this Agreement and at the
Effective Time.
1. Except as set forth in Section 5.3(a) of this
Agreement, or as disclosed in Section 5.3 of the Central and
Southern Disclosure Memorandum, there are no shares of capital
stock or other equity securities of Central and Southern
outstanding and no outstanding Rights relating to the capital
stock of Central and Southern.
A. Central and Southern Subsidiaries. Central and
Southern has disclosed in Section 5.4 of the Central and
Southern Disclosure Memorandum all of the Central and Southern
Subsidiaries as of the date of this Agreement. Except as
disclosed in Section 5.4 of the Central and Southern
Disclosure Memorandum, Central and Southern or one of its
Subsidiaries owns all of the issued and outstanding shares of
capital stock of each Central and Southern Subsidiary. No
equity securities of any Central and Southern Subsidiary are
or may become required to be issued (other than to another
Central and Southern Company) by reason of any Rights, and
there are no Contracts by which any Central and Southern
Subsidiary is bound to issue (other than to another Central
and Southern Company) additional shares of its capital stock
or Rights, or by which any Central and Southern Company is or
may be bound to transfer any shares of the capital stock of
any Central and Southern Subsidiary (other than to another
Central and Southern Company), and there are no Contracts by
which any Central and Southern Subsidiary is bound to issue
(other than to another Central and Southern Company)
additional shares of its capital stock. There are no
Contracts relating to the rights of any Central and Southern
Company to vote or to dispose of any shares of the capital
stock of any Central and Southern Subsidiary. All of the
shares of capital stock of each Central and Southern
Subsidiary held by a Central and Southern 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 Central and Southern Company
free and clear of any Lien. Each Central and Southern
Subsidiary is either a bank, 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 Central and Southern 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 Central and Southern. Each Central and Southern
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 by the Bank Insurance Fund or the Savings
Association Insurance Fund, as appropriate.
A. Financial Statements. Central and Southern has
included in Section 5.5 of the Central and Southern Disclosure
Memorandum copies of all Central and Southern Financial
Statements for periods ended prior to the date hereof and will
deliver to Premier copies of all Central and Southern
Financial Statements prepared subsequent to the date hereof. The
Central and Southern 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 Central and Southern
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 Central and
Southern Companies as of the dates indicated and the
consolidated results of operations, changes in shareholders'
equity, and cash flows of Central and Southern 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).
A. Absence of Undisclosed Liabilities. No Central and
Southern Company has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on Central and Southern except Liabilities
which are accrued or reserved against in the consolidated
balance sheets of Central and Southern as of December 30, 1995
and September 30, 1996, included in Central and Southern
Financial Statements or reflected in the notes thereto. No
Central and Southern Company has incurred or paid any
Liability since September 30, 1996, except for such
Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are
not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Central and Southern.
A. Absence of Certain Changes or Events. Since
September 30, 1996, except as disclosed in SEC Documents filed
by Central and Southern prior to the date of this Agreement,
and except as disclosed in Section 5.7 of the Central and
Southern 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 Central and Southern, and (b) the Central
and Southern 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 Central and Southern
provided in Article 7 of this Agreement.
A. Tax Matters.
1. All Tax returns required to be filed by or on
behalf of any of the Central and Southern Companies have been
timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or
before September 30, 1996, and on or before the date of the
most recent fiscal year end immediately preceding the
Effective Time, except to the extent that all such failures to
file, taken together, are not reasonably likely to have a
Material Adverse Effect on Central and Southern and all
returns filed are complete and accurate to the Knowledge of
Central and Southern. All Taxes shown on filed returns have
been paid. As of the date of this Agreement, there is no
audit examination, deficiency or refund Litigation with
respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the
aggregate, a Material Adverse Effect on Central and Southern,
except as reserved against in the Central and Southern
Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 5.8(a) of the Central and
Southern Disclosure Memorandum. All Taxes and other Liabilities due
with respect to completed and settled examinations or
concluded Litigation have been paid.
1. Except as disclosed in Section 5.8(b) of the
Central and Southern Disclosure Memorandum, none of the
Central and Southern 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 Central and Southern Company, which
deficiency is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Central and
Southern.
1. Adequate provision for any Taxes due or to
become due for any of the Central and Southern Companies for
the period or periods through and including the date of the
respective Central and Southern Financial Statements has been
made and is reflected on such Central and Southern Financial
Statements.
1. Deferred Taxes of the Central and Southern
Companies have been provided for in accordance with GAAP.
1. Each of the Central and Southern Companies is
in compliance with, and its records contain all information
and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding
requirements under federal, state and local Tax Laws, and such
records identify with specificity all accounts subject to
backup withholding under Section 3406 of the Internal Revenue
Code, except for such instances of noncompliance and such
omissions as are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Central and
Southern.
A. Allowance for Possible Loan Losses. The allowance
for possible loan or credit losses (the "Allowance") shown on
the consolidated balance sheets of Central and Southern
included in the most recent Central and Southern Financial
Statements dated prior to the date of this Agreement was, and
the Allowance shown on the consolidated balance sheets of
Central and Southern included in the Central and Southern
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 Central and Southern
Companies and other extensions of credit (including letters of
credit and commitments to make loans or extend credit) by the
Central and Southern 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 Central
and Southern.
A. Assets. Except as disclosed in Section 5.10 of the
Central and Southern Disclosure Memorandum or as disclosed or
reserved against in the Central and Southern Financial
Statements, the Central and Southern 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 Central and Southern Companies are in
good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with
Central and Southern's past practices. All Assets which are
material to Central and Southern's business on a consolidated
basis, held under leases or subleases by any of the Central
and Southern 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. The policies
of fire, theft, liability and other insurance maintained with
respect to the Assets or businesses of the Central and
Southern Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity
and blanket bonds in effect as to which any of the Central and
Southern Companies is a named insured are reasonably
sufficient. The Assets of the Central and Southern Companies
include all assets required to operate the business of the
Central and Southern Companies as presently conducted.
A. Environmental Matters.
1. Except as disclosed in Section 5.11(a) of the
Central and Southern Disclosure Memorandum, to the Knowledge
of Central and Southern, each Central and Southern Company,
its Participation Facilities and its Loan Properties are, and
have been, in compliance with all Environmental Laws, except
for noncompliance which is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
Central and Southern.
1. To the Knowledge of Central and Southern, there
is no Litigation pending or threatened before any court,
governmental agency or authority or other forum in which any
Central and Southern 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
with any Environmental Law or (ii) relating to the Release
into the Environment of any Hazardous Material (as defined
below), whether or not occurring at, on, under or involving a
site owned, leased or operated by any Central and Southern
Company or any of its Loan Properties or Participation
Facilities, except for such Litigation pending or threatened
the resolution of which is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
Central and Southern or to the Knowledge of Central and
Southern, there is no reasonable basis for any such
Litigation.
1. To the Knowledge of Central and Southern, there
have been no releases of Hazardous Material 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 Central and
Southern.
A. Compliance with Laws. Central and Southern is duly
registered as a bank holding company and as a thrift holding
company under the BHC Act and HOLA, respectively. Each
Central and Southern 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 Central and Southern, 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 Central and Southern.
Except as disclosed in Section 5.12 of the Central and
Southern Disclosure Memorandum, no Central and Southern
Company:
1. 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 Central and Southern; and
1. 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 Central and Southern 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 Central and
Southern, (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 Central and
Southern, or (iii) requiring any Central and Southern 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.
A. Labor Relations. No Central and Southern Company is
the subject of any Litigation asserting that it or any other
Central and Southern 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 Central and Southern 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 Central
and Southern Company, pending or, to its Knowledge,
threatened, nor, to its Knowledge, is there any activity
involving any Central and Southern Company's employees seeking
to certify a collective bargaining unit or engaging in any
other organization activity.
A. Employee Benefit Plans.
1. Central and Southern has disclosed in Section
5.14 of the Central and Southern Disclosure Memorandum and
delivered or made available to Premier 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 Central and Southern Company or
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 "Central and Southern Benefit Plans"). Any of the Central
and Southern 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 "Central and Southern ERISA
Plan." Each Central and Southern ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "Central and
Southern Pension Plan." No Central and Southern Pension Plan
is or has been a multiemployer plan within the meaning of Section
3(37) of ERISA.
1. All Central and Southern Benefit Plans are in
compliance with the applicable terms of ERISA, the Internal
Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Central and
Southern. Each Central and Southern ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal
Revenue Code has received a favorable determination letter
from the Internal Revenue Service, and Central and Southern is
not aware of any circumstances likely to result in revocation
of any such favorable determination letter. To the Knowledge
of Central and Southern, no Central and Southern Company nor
any other party has engaged in a transaction with respect to
any Central and Southern Benefit Plan that, assuming the
taxable period of such transaction expired as of the date
hereof, would subject any Central and Southern 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 Central and Southern.
1. Central and Southern maintains an "employee
pension benefit plan," within the meaning of Section 3(2) of
ERISA that is or was subject to Title IV of ERISA.
1. Neither Central and Southern nor any ERISA
Affiliate of Central and Southern has any past, present or
future obligation or liability to contribute to any multi-
employer plan, as defined in Section 3(37) of ERISA.
1. Except as disclosed in Section 5.14(e) of the
Central and Southern Disclosure Memorandum, (i) no Central and
Southern Company has any obligations for retiree health and
life benefits under any of the Central and Southern Benefit
Plans, except as required by Section 6.01 of ERISA and Section
4980B of the Code; (ii) there are no restrictions on the
rights of any Central and Southern Company to amend or
terminate any such Plan; and (iii) any amendment or
termination of any such Plan will not cause any Central and
Southern Company to incur any Liability that is reasonably
likely to have a Material Adverse Effect on Central and
Southern.
1. Except as disclosed in Section 5.14(f) of the
Central and Southern 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 Central
and Southern Company from any Central and Southern Company
under any Central and Southern Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Central and
Southern Benefit Plan, or (iii) result in any acceleration of
the time of payment or vesting of any such benefit.
1. 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 Central and Southern Company and
their respective beneficiaries have been fully reflected on
the Central and Southern Financial Statements to the extent
required by and in accordance with GAAP.
1. Central and Southern and each ERISA Affiliate
of Central and Southern has complied with the continuation of
coverage requirements of Section 1001 of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, and
ERISA Sections 601 through 608.
1. Neither Central and Southern nor any ERISA
Affiliate of Central and Southern 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).
1. Other than routine claims for benefits, there
are no actions, audits, investigations, suits or claims
pending, or threatened against any Central and Southern
Benefit Plan, any trust or other funding agency created
thereunder, or against any fiduciary of any Central and
Southern Benefit Plan or against the assets of any Central and
Southern Benefit Plan.
A. Material Contracts. Except as disclosed in Section
5.15 of the Central and Southern Disclosure Memorandum or
otherwise reflected in the Central and Southern Financial
Statements, none of the Central and Southern 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 $10,000, excluding
"at will" employment arrangements, (b) any Contract relating
to the borrowing of money by any Central and Southern Company
or the guarantee by any Central and Southern 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 Central and Southern Companies, and (d) any
other Contract (excluding this Agreement) or amendment thereto
that is required to be filed as an exhibit to a Form 10-KSB or
Form 10-QSB filed by Central and Southern with the SEC as of
the date of this Agreement that has not been filed as an
exhibit to any Central and Southern Form 10-KSB or 10-QSB
filed with the SEC (together with all Contracts referred to in
Sections 5.10 and 5.14(a) of this Agreement, the "Central and
Southern Contracts"). None of the Central and Southern
Companies is in Default under any Central and Southern
Contract, other than Defaults which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect on Central and Southern. All of the indebtedness of any
Central and Southern Company for money borrowed is prepayable
at any time by such Central and Southern Company without
penalty or premium.
A. Legal Proceedings. Except as disclosed in Section
5.16 of the Central and Southern Disclosure Memorandum, there
is no Litigation instituted or pending, or, to the Knowledge
of Central and Southern, 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 Central and Southern 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 Central and Southern, nor are there
any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any Central and
Southern Company, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect
on Central and Southern.
A. Reports. Since January 1, 1996, each Central and
Southern 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-KSB, 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 Central and Southern). 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
Central and Southern'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.
A. Statements True and Correct. No statement,
certificate, instrument or other writing furnished or to be
furnished by any Central and Southern Company or any Affiliate
thereof to Premier pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains
or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to
be supplied by any Central and Southern Company or any
Affiliate thereof for inclusion in the Registration Statement
to be filed by Premier 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 Central and Southern Company or any Affiliate
thereof for inclusion in the Proxy Statement to be mailed to
Central and Southern's shareholders in connection with the
Central and Southern Shareholders' Meeting, and any other
documents to be filed by a Central and Southern Company or any
Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed,
and with respect to the Proxy Statement, when first mailed to
the shareholders of Central and Southern, 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
Central and Southern 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 Central and Southern Shareholders' Meeting. All
documents that any Central and Southern Company or any
Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
A. Accounting, Tax and Regulatory Matters. No Central
and Southern Company or 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 Central and Southern, there
exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement
cannot be received in a timely manner without the imposition
of any condition or restriction of the type described in the
second sentence of such Section 9.1(b).
A. Charter Provisions. Each Central and Southern
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 Central and Southern 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 Central and Southern Company that may be
acquired or controlled by it.
I. ARTICLE
REPRESENTATIONS AND WARRANTIES OF PREMIER
Premier hereby represents and warrants to Central and Southern as follows:
A. Organization, Standing, and Power. Premier 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.
Premier has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its
Assets. Premier 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 Premier.
A. Authority; No Breach By Agreement.
1. Premier 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 Premier, subject to the
approval of this Agreement by the holders of a majority of the
outstanding Premier Common Stock, which is the only
shareholder vote required for approval of this Agreement and
consummation of the Merger by Premier. Subject to such
requisite shareholder approval, this Agreement represents a
legal, valid and binding obligation of Premier,
enforceable against Premier 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).
1. Neither the execution and delivery of this
Agreement by Premier, nor the consummation by Premier of the
transactions contemplated hereby, nor compliance by Premier
with any of the provisions hereof will (i) conflict with or
result in a breach of any provision of Premier'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 Premier
Company under, any Contract or Permit of any Premier 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 Premier, 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 Premier Company or any of their respective
Assets.
1. Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate
and securities Laws, and rules of the NASD, 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 Premier, no notice to, filing with,
or Consent of any public body or authority is necessary for
the consummation by Premier of the Merger and the other
transactions contemplated in this Agreement.
A. Capital Stock.
1. The authorized capital stock of Premier
consists of 20,000,000 shares of Premier Common Stock, of
which 2,353,779 shares were issued and outstanding as of the
date of this Agreement and not more than 2,353,779 shares will
be issued and outstanding at the Effective Time (as a result
of the exercise of outstanding options). All of the issued
and outstanding shares of Premier Common Stock are, and all of
the shares of Surviving Corporation Common Stock to be issued
in exchange for shares of Central and Southern 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 Premier Common
Stock has been, and none of the shares of Surviving
Corporation Common Stock to be issued in exchange for shares
of Central and Southern Common Stock upon consummation of the
Merger will be, issued in violation of any preemptive rights
of the current or past shareholders of Premier. Premier has
reserved 210,000 shares of Premier Common Stock for issuance
under the Premier Stock Plans, pursuant to which options to
purchase not more than 136,250 shares of Premier Common Stock
are outstanding as of the date of this Agreement and at the
Effective Time.
1. Except as set forth in Section 6.3(a) of this
Agreement, or as disclosed in Section 6.3(b) of the Premier
Disclosure Memorandum, there are no shares of capital stock or
other equity securities of Premier outstanding and no
outstanding Rights relating to the capital stock of Premier.
A. Premier Subsidiaries. Premier has disclosed in
Section 6.4 of the Premier Disclosure Memorandum all of the
Premier Subsidiaries as of the date of this Agreement. Except
as disclosed in Section 6.4 of the Premier Disclosure
Memorandum, Premier or one of its Subsidiaries owns all of the
issued and outstanding shares of capital stock of each Premier
Subsidiary. No equity securities of any Premier Subsidiary are
or may become required to be issued (other than to another
Premier Company) by reason of any Rights, and there are no
Contracts by which any Premier Subsidiary is bound to issue
(other than to another Premier Company) additional shares of
its capital stock or Rights, or by which any Premier Company
is or may be bound to transfer any shares of the capital stock
of any Premier Subsidiary (other than to another Premier
Company), and there are no Contracts by which any Premier
Company is bound to issue (other than to another Premier
Company) additional shares of its capital stock. There are no
Contracts relating to the rights of any Premier Company to
vote or to dispose of any shares of the capital stock of any
Premier Subsidiary. All of the shares of capital stock of each
Premier Subsidiary held by a Premier 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 Premier Company free and clear of any Lien. Each
Premier Subsidiary is either a bank, 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
Premier 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 Premier. Each
Premier 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 by the Bank Insurance Fund or
the Savings Association Insurance Fund, as appropriate.
A. Financial Statements. Premier has included in
Section 6.5 of the Premier Disclosure Memorandum copies of all
Premier Financial Statements for periods ended prior to the
date hereof and will deliver to Central and Southern copies of
all Premier Financial Statements prepared subsequent to the
date hereof. The Premier 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 Premier
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 Premier Companies
as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of
the Premier Companies for the periods indicated, in accordance
with GAAP (subject to exceptions as to consistency specified
therein or as may be indicated in the notes thereto or, in the
case of interim financial statements, to normal recurring year
end adjustments that are not material in amount or effect).
A. Absence of Undisclosed Liabilities. No Premier
Company has any Liabilities that are reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect on Premier, except Liabilities which are accrued or
reserved against in the consolidated balance sheets of Premier
as of December 31, 1995 and September 30, 1996, included in
the Premier Financial Statements or reflected in the notes
thereto. No Premier Company has incurred or paid any
Liability since September 30, 1996, except for such
Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are
not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier.
A. Absence of Certain Changes or Events. Since
September 30, 1996, except as disclosed in SEC Documents filed
by Premier prior to the date of this Agreement and except as
disclosed in Section 6.7 of the Premier 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 Premier, and (b)
the Premier 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 Premier provided in
Article 7 of this Agreement.
A. Tax Matters.
1. All Tax returns required to be filed by or on
behalf of any of the Premier Companies have been timely filed
or requests for extensions have been timely filed, granted,
and have not expired for periods ended on or before September
30, 1996, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, except to
the extent that all such failures to file, taken together, are
not reasonably likely to have a Material Adverse Effect on
Premier, and all returns filed are complete and accurate to
the Knowledge of Premier. All Taxes shown on filed returns
have been paid. As of the date of this Agreement, there is no
audit examination, deficiency or refund Litigation with
respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the
aggregate, a Material Adverse Effect on Premier, except as
reserved against in the Premier Financial Statements delivered
prior to the date of this Agreement or as disclosed in Section
6.8(a) of the Premier Disclosure Memorandum. All Taxes and
other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
1. Except as disclosed in Section 6.8(b) of the
Premier Disclosure Memorandum none of the Premier 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
Premier Company, which deficiency is reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect on Premier.
1. Adequate provision for any Taxes due or to
become due for any of the Premier Companies for the period or
periods through and including the date of the respective
Premier Financial Statements has been made and is reflected on
such Premier Financial Statements.
1. Deferred Taxes of the Premier Companies have
been provided for in accordance with GAAP.
1. Each of the Premier Companies is in compliance
with, and its records contain all information and documents
(including, without limitation, properly completed IRS Forms W-
9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal,
state and local Tax Laws, and such records identify with
specificity all accounts subject to backup withholding under
Section 3406 of the Internal Revenue Code, except for such
instances of noncompliance and such omissions as are not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier.
A. Allowance for Possible Loan Losses. The Allowance
shown on the consolidated balance sheets of Premier included
in the most recent Premier Financial Statements dated prior to
the date of this Agreement was, and the Allowance shown on the
consolidated balance sheets of Premier included in the Premier
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 Premier Companies and
other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the Premier
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 Premier.
A. Assets. Except as disclosed in Section 6.10 of the
Premier Disclosure Memorandum or as disclosed or reserved
against in the Premier Financial Statements, the Premier
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 Premier
Companies are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business
consistent with Premier's past practices. All Assets which are
material to Premier's business on a consolidated basis, held
under leases or subleases by any of the Premier 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. The policies of fire, theft, liability
and other insurance maintained with respect to the Assets or
businesses of the Premier Companies provide adequate coverage
under current industry practices against loss or Liability,
and the fidelity and blanket bonds in effect as to which any
of the Premier Companies is a named insured are reasonably
sufficient. The Assets of the Premier Companies include all
assets required to operate the business of the Premier
Companies as presently conducted.
A. Environmental Matters.
1. Except as disclosed in Section 6.11(a) of the
Premier Disclosure Memorandum, to the Knowledge of Premier,
each Premier Company, its Participation Facilities and its
Loan Properties are, and have been, in compliance with all
Environmental Laws, except for noncompliance which is not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier.
1. To the Knowledge of Premier, there is no
Litigation pending or threatened before any court,
governmental agency or authority or other forum in which any
Premier 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 with any Environmental Law or
(ii) relating to the Release into the Environment of any
Hazardous Material (as defined below), whether or not
occurring at, on, under or involving a site owned, leased or
operated by any Premier Company or any of its Loan Properties
or Participation Facilities, except for such Litigation
pending or threatened the resolution of which is not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier or to the Knowledge of
Premier, there is no reasonable basis for any such Litigation.
1. To the Knowledge of Premier, there have been no
releases of Hazardous Material 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 Premier.
A. Compliance with Laws. Premier is duly registered as
a bank holding and thrift holding company under the BHC Act
and HOLA, respectively. Each Premier 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 Premier, 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 Premier. Except as disclosed in
Section 6.12 of the Premier Disclosure Memorandum, no Premier
Company:
1. 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 Premier; and
1. 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 Premier 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 Premier, (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 Premier, or (iii) requiring any
Premier 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.
A. Labor Relations. No Premier Company is the subject
of any Litigation asserting that it or any other Premier
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 Premier
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 Premier Company, pending or, to its
Knowledge, threatened, nor, to its Knowledge, is there any
activity involving any Premier Company's employees seeking
to certify a collective bargaining unit or engaging in any
other organization activity.
A. Employee Benefit Plans.
1. Premier has disclosed in Section 6.14 of the
Premier Disclosure Memorandum and delivered or made available
to Central and Southern 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 Premier Company or 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 "Premier Benefit
Plans"). Any of the Premier 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 "Premier
ERISA Plan." Each Premier ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j) of the Internal
Revenue Code) is referred to herein as a "Premier Pension
Plan." No Premier Pension Plan is or has been a multi-
employer plan within the meaning of Section 3(37) of ERISA.
1. All Premier Benefit Plans are in compliance
with the applicable terms of ERISA, the Internal Revenue Code,
and any other applicable Laws the breach or violation of which
are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier. Each Premier
ERISA Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and
Premier is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. To the
Knowledge of Premier, no Premier Company nor any other party
has engaged in a transaction with respect to any Premier
Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any
Premier 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 Premier.
1. Neither Premier nor any ERISA Affiliate of
Premier maintains or has maintained an "employee pension
benefit plan," within the meaning of Section 3(2) of ERISA
that is or was subject to Title IV of ERISA.
1. Neither Premier nor any ERISA Affiliate of
Premier has any past, present or future obligation or
liability to contribute to any multi-employer plan, as defined
in Section 3(37) of ERISA.
1. Except as disclosed in Section 6.14(e) of the
Premier Disclosure Memorandum, (i) no Premier Company has any
obligations for retiree health and life benefits under any of
the Premier Benefit Plans, except as required by Section 6.01
of ERISA and Section 4980B of the Code; (ii) there are no
restrictions on the rights of any Premier Company to amend or
terminate any such Plan; and (iii) any amendment or
termination of any such Plan will not cause any Premier
Company to incur any Liability that is reasonably likely to
have a Material Adverse Effect on Premier.
1. Except as disclosed in Section 6.14(f) of the
Premier 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 Premier
Company from any Premier Company under any Premier Benefit
Plan or otherwise, (ii) increase any benefits otherwise
payable under any Premier Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such
benefit.
1. 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 Premier Company and their
respective beneficiaries have been fully reflected on the
Premier Financial Statements to the extent required by and in
accordance with GAAP.
1. Premier and each ERISA Affiliate of Premier has
complied with the continuation of coverage requirements of
Section 1001 of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and ERISA Sections 601 through 608.
1. Except as disclosed in Section 6.14(i) of the
Premier Disclosure Memorandum, neither Premier nor any ERISA
Affiliate of Premier 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).
1. Other than routine claims for benefits, there
are no actions, audits, investigations, suits or claims
pending, or threatened against any Premier Benefit Plan, any
trust or other funding agency created thereunder, or against
any fiduciary of any Premier Benefit Plan or against the
assets of any Premier Benefit Plan.
A. Material Contracts. Except as disclosed in Section
6.15 of the Premier Disclosure Memorandum or otherwise
reflected in the Premier Financial Statements, none of the
Premier 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 $10,000, excluding "at will" employment
arrangements, (b) any Contract relating to the borrowing of
money by any Premier Company or the guarantee by any Premier
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 Premier
Companies, and (d) any other Contract (excluding this
Agreement) or amendment thereto that is required to be filed
as an exhibit to a Form 10-KSB or Form 10-QSB filed by Premier
with the SEC as of the date of this Agreement that has not
been filed as an exhibit to any Premier Form 10-KSB filed with
the SEC (together with all Contracts referred to in Sections
6.10 and 6.14(a) of this Agreement, the "Premier Contracts").
None of the Premier Companies is in Default under any Premier
Contract, other than Defaults which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect on Premier. All of the indebtedness of any Premier
Company for money borrowed is prepayable at any time by such
Premier Company without penalty or premium.
A. Legal Proceedings. Except as disclosed in Section
6.16 of the Premier Disclosure Memorandum, there is no
Litigation instituted or pending, or, to the Knowledge of
Premier, 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
Premier 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 Premier, nor
are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against
any Premier Company, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
Premier.
A. Reports. Since January 1, 1996, each Premier
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-KSB, 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 Premier). 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 Premier'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.
A. Statements True and Correct. No statement,
certificate, instrument or other writing furnished or to be
furnished by any Premier Company or any Affiliate thereof to
Central and Southern pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains
or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to
be supplied by any Premier Company or any Affiliate thereof
for inclusion in the Registration Statement to be filed by
Premier 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 Premier Company
or any Affiliate thereof for inclusion in the Proxy Statement
to be mailed to Premier's shareholders in connection with the
Premier Shareholders' Meeting, and any other documents to be
filed by any Premier Company or any Affiliate thereof with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Proxy Statement,
when first mailed to the shareholders of Premier, 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
Premier 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 Premier Shareholders' Meeting. All documents that any
Premier Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable Law.
A. Accounting, Tax and Regulatory Matters. No Premier
Company or 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. To the
Knowledge of Premier, there exists no fact, circumstance, or
reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner
without the imposition of any condition or restriction of the
type described in the second sentence of such Section 9.1(b).
A. Charter Provisions. Each Premier 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
Premier 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 Premier
Company that may be acquired or controlled by it.
I. ARTICLE
CONDUCT OF BUSINESS PENDING CONSUMMATION
A. Affirmative Covenants of Central and Southern.
Unless the prior written consent of Premier shall have been
obtained, and except as otherwise contemplated herein or
disclosed in the Central and Southern Disclosure Memorandum,
Central and Southern 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.
A. Negative Covenants of Central and Southern. Except
as disclosed in the Central and Southern Disclosure
Memorandum, from the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement,
Central and Southern 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
Premier, which consent shall not be unreasonably withheld:
1. amend the Articles of Incorporation, Bylaws or
other governing instruments of any Central and Southern
Company, or
1. incur any additional debt obligation or other
obligation for borrowed money (other than indebtedness of a
Central and Southern Company to another Central and Southern
Company) in excess of an aggregate of $100,000 (for the
Central and Southern Companies on a consolidated basis) except
in the ordinary course of the business of Central and Southern
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 Central and Southern 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 Central
and Southern Disclosure Memorandum); or
1. 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 Central and Southern Company, or declare or pay
any dividend or make any other distribution in respect of
Central and Southern's capital stock; provided, however, that
Central and Southern may (to the extent legally and
contractually permitted to do so) pay an annual cash dividend
of up to $.27 per share on the shares of Central and Southern
Common Stock in quarterly installments during 1997; or
1. 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 Central and
Southern 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 Central and Southern Common Stock or any other capital
stock of any Central and Southern 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
1. except as disclosed in Section 7.2(e) of the
Central and Southern Disclosure Memorandum, adjust, split,
combine or reclassify any capital stock of any Central and
Southern Company or issue or authorize the issuance of any
other securities in respect of or in substitution for shares of
Central and Southern Common Stock or sell, lease, mortgage or
otherwise dispose of or otherwise encumber (i) any shares of
capital stock of any Central and Southern Subsidiary (unless
any such shares of stock are sold or otherwise transferred to
another Central and Southern Company) or (ii) any Asset having
a book value in excess of $50,000 other than in the ordinary
course of business for reasonable and adequate consideration;
or
1. except for purchases of U.S. Treasury
securities or U.S. Government agency securities or securities
of like maturity or grade or general obligations of states and
municipalities, purchase any securities or make any material
investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly-owned Central and
Southern Subsidiary; or otherwise acquire direct or indirect
control over any Person, other than in connection with (i)
foreclosures in the ordinary course of business, or (ii)
acquisitions of control by Central and Southern Bank in its
fiduciary capacity; or
1. grant any increase in compensation or benefits
to any employees whose annual salary exceeds $50,000 of any
Central and Southern 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 Central and
Southern, in each case as disclosed in Section 7.2(g) of the
Central and Southern 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 Central and Southern Disclosure Memorandum;
enter into or amend any severance agreements with officers of
any Central and Southern Company; grant any general increase
in compensation to all employees; grant any increase in fees
or other increases in compensation or other benefits to
directors of any Central and Southern Company; or voluntarily
accelerate the vesting of any stock options or other stock-
based compensation or employee benefits; or
1. enter into or amend any employment Contract
between any Central and Southern Company and any Person
(unless such amendment is required by Law) that the Central
and Southern 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
1. adopt any new employee benefit plan of any
Central and Southern Company or make any material change in
or to any existing employee benefit plans of any Central and
Southern 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
1. 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
1. commence any Litigation other than in
accordance with past practice, settle any Litigation involving
any Liability of any Central and Southern Company for money
damages in excess of $50,000 or which imposes material
restrictions upon the operations of any Central and Southern
Company; or
1. 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.
A. Affirmative Covenants of Premier. Unless the prior
written consent of Central and Southern shall have been
obtained, and except as otherwise contemplated herein or as
disclosed in the Premier Disclosure Memorandum, Premier 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.
A. Negative Covenants of Premier. Except as disclosed
in the Premier Disclosure Memorandum, from the date of this
Agreement until the earlier of the Effective Time or the
termination of this Agreement, Premier 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 Central and Southern, which consent shall
not be unreasonably withheld:
1. amend the Articles of Incorporation, Bylaws or
other governing instruments of any Premier Company, or
1. incur any additional debt obligation or other
obligation for borrowed money (other than indebtedness of a
Premier Company to another Premier Company) in excess of an
aggregate of $100,000 (for the Premier Companies on a
consolidated basis) except in the ordinary course of the
business of Premier Companies consistent with past practices
(which shall include, for Premier Bank, 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 Premier 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
Premier Disclosure Memorandum); or
1. 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 Premier Company, or declare or pay any dividend
or make any other distribution in respect of Premier's
capital stock; provided, however, that Premier may (to the
extent legally and contractually permitted to do so) pay a
cash dividend of up to $.56 per share on the shares of Premier
Common Stock in January or February of 1997; or
1. 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 Premier
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 Premier Common Stock or any other capital stock of any
Premier 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
1. adjust, split, combine or reclassify any
capital stock of any Premier Company (other than the stock
split contemplated in Section 9.3(e) hereof) or issue or
authorize the issuance of any other securities in respect of
or in substitution for shares of Premier Common Stock or sell,
lease, mortgage or otherwise dispose of or otherwise encumber
(i) any shares of capital stock of any Premier Subsidiary
(unless any such shares of stock are sold or otherwise
transferred to another Premier Company) or (ii) any Asset
having a book value in excess of $50,000 other than in the
ordinary course of business for reasonable and adequate
consideration; or
1. except for purchases of U.S. Treasury
securities or U.S. Government agency securities or securities
of like maturity or grade or general obligations of states and
municipalities, purchase any securities or make any material
investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly-owned Premier
Subsidiary; or otherwise acquire direct or indirect control
over any Person, other than in connection with (i)
foreclosures in the ordinary course of business, or (ii)
acquisitions of control by Premier Bank in its fiduciary
capacity; or
1. grant any increase in compensation or benefits
to any employees whose annual salary exceeds $50,000 of any
Premier 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 Premier, in each case as disclosed in
Section 7.4(g) of the Premier 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 Premier Disclosure
Memorandum; enter into or amend any severance agreements with
officers of any Premier Company; grant any general increase in
compensation to all employees; grant any increase in fees or
other increases in compensation or other benefits to
directors of any Premier Company; or voluntarily accelerate
the vesting of any stock options or other stock-based
compensation or employee benefits; or
1. enter into or amend any employment Contract
between any Premier Company and any Person (unless such
amendment is required by Law) that the Premier 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
1. adopt any new employee benefit plan of any
Premier Company or make any material change in or to any
existing employee benefit plans of any Premier 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
1. 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
1. commence any Litigation other than in
accordance with past practice, settle any Litigation involving
any Liability of any Premier Company for money damages in
excess of $50,000 or which imposes material restrictions upon
the operations of any Premier Company; or
1. 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.
A. 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. Reports. Each Party and its Subsidiaries shall file
all reports required to be filed by it with Regulatory
Authorities between the date of this Agreement and the
Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed.
I. ARTICLE
ADDITIONAL AGREEMENTS
A. Registration Statement; Proxy Statement; Shareholder Approval.
1. As soon as practicable after execution of this
Agreement, Premier shall file the Registration Statement with
the SEC, and shall use its reasonable efforts to cause the
Registration Statement to become effective under the 1933 Act
and take any action required to be taken under the applicable
state Blue Sky or securities Laws in connection with the
issuance of the shares of Surviving Corporation Common Stock
upon consummation of the Merger. Central and Southern shall
furnish all information concerning it and the holders of its
capital stock as Premier may reasonably request in connection
with such action.
1. Central and Southern 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 Central and Southern deems
appropriate.
1. In connection with the Central and Southern
Shareholders' Meeting, (i) Premier shall prepare and file with
the SEC on Central and Southern's behalf a Proxy Statement
(which shall be included in the Registration Statement) and
mail it to Central and Southern's shareholders, (ii) the
Parties shall furnish to each other all information concerning
them that they may reasonably request in connection with such
Proxy Statement, (iii) the Board of Directors of Central and Southern 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 (iv)
the Board of Directors and officers of Central and Southern
shall use their reasonable efforts to obtain such
shareholders' approval (subject to compliance with their
fiduciary duties as advised by counsel).
A. Exchange Listing. Premier shall use its reasonable
efforts to list, prior to the Effective Time, on the American
Stock Exchange the Premier Common Stock and the shares of
Surviving Corporation Common Stock to be issued to the holders
of Central and Southern Common Stock pursuant to the Merger.
A. Applications. Premier shall promptly prepare and
file, and Central and Southern shall cooperate in the
preparation and, where appropriate, filing of, applications
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.
A. Filings with State Offices. Upon the terms and
subject to the conditions of this Agreement, Premier shall
execute and file the Certificate of Merger with the Secretary
of State of the State of Georgia in connection with the
Closing.
A. Agreement as to Efforts to Consummate. 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 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 Premier 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.
A. Investigation and Confidentiality.
1. 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.
1. 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.
1. 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.
A. Press Releases. Prior to the Effective Time, Premier
and Central and Southern 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 8.7 shall be deemed to prohibit any
Party from making any disclosure which its counsel deems
necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
A. Acquisition Proposals. Except with respect to this
Agreement and the transactions contemplated hereby, no Party
nor any Affiliate thereof nor any investment banker, attorney,
accountant or other representative (collectively,
"Representatives") retained by any Party shall directly or
indirectly solicit any Acquisition Proposal by any Person.
Except to the extent necessary to comply with the fiduciary
duties of a Party's Board of Directors as advised by counsel,
no Party or any Affiliate or Representative thereof shall
furnish any non-public information that it is not legally
obligated to furnish, negotiate with respect to, or enter into
any Contract with respect to, any Acquisition Proposal, but 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. Unless the prior written consent of the other
Party is obtained, each Party shall (a) immediately cease and
cause to be terminated any existing activities, discussions or
negotiations with any Persons conducted heretofore with
respect to any of the foregoing, and (b) direct and use its
reasonable efforts to cause all of its Representatives not to
engage in any of the foregoing.
A. Accounting and Tax Treatment. Each of the Parties
undertakes and agrees to use its reasonable efforts to cause
the Merger to qualify, and to take no action which would cause
the Merger not to qualify, for treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes. Each of the Parties
further undertakes and agrees to use its reasonable best
efforts to cause the Merger to be eligible, and to take no
action which would cause the Merger not to be eligible, to be
accounted for as a "pooling of interests."
A. Agreement of Affiliates. Central and Southern has
disclosed in Section 8.10 of the Central and Southern
Disclosure Memorandum all Persons whom it reasonably believes
is an "affiliate" of Central and Southern for purposes of Rule
145 under the 1933 Act. Central and Southern shall use its
reasonable efforts to cause each such Person to deliver to
Premier and Central and Southern, not later than thirty (30)
days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 1, providing that such
Person will not sell, pledge, transfer or otherwise dispose of
the shares of Central and Southern Common Stock held by such
Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer or otherwise
dispose of the shares of Surviving Corporation Common Stock to
be received by such Person upon consummation of the Merger
except in compliance with applicable provisions of the 1933
Act and the rules and regulations thereunder. The Surviving
Corporation shall be entitled to place restrictive legends
upon certificates for shares of Surviving Corporation Common
Stock issued to Affiliates of Central and Southern pursuant to
this Agreement to enforce the provisions of this Section 8.10.
The Surviving Corporation 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.
A. Employee Benefits and Contracts.
1. Following the Effective Time, the Surviving
Corporation shall provide generally to officers and employees
of the Central and Southern Companies who continue employment
with the Surviving Corporation or its Subsidiaries following
the Effective Time employee benefits under employee benefit
plans, on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the
Premier Companies to their similarly situated officers and
employees. For purposes of participation under such employee
benefit plans, the service of the employees of the Central and
Southern Companies prior to the Effective Time shall be
treated as service with a Premier Company participating in
such employee benefit plans, provided that, with respect to
any employee benefit plan where the benefits are funded
through insurance, the granting of such service shall be
subject to the consent of the appropriate insurer and may be
conditioned upon an employee's participation in a Central and
Southern Benefit Plan of the same type immediately prior to
the Effective Time.
1. 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 8.11 of the Central and
Southern Disclosure Memorandum to Premier between any Central
and Southern Company and any current or former director,
officer, or employee thereof and all provisions for vested
benefits accrued through the Effective Time under the Central
and Southern Benefit Plans. The Surviving Corporation shall
enter into three year employment agreements with each of
Robert C. Oliver and Michael E. Ricketson and shall enter into
one year employment agreements with each of George D.
Henderson and Tren B. Watson in substantially the forms
attached hereto as Exhibit 5.
1. At the Effective Time the Surviving Corporation
shall enter into a three year employment agreement with
Darrell D. Pittard in substantially the form attached hereto
as Exhibit 6.
I. ARTICLE
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
A. 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:
1. Shareholder Approval. The shareholders of
Premier and Central and Southern shall have approved this
Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the
extent required by Law, the American Stock Exchange or by the
provisions of any governing instruments.
1. 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.
1. 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.
1. 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 the Surviving Corporation Common Stock issuable
pursuant to the Merger shall have been received.
1. Exchange Listing. The shares of Surviving
Corporation Common Stock issuable pursuant to the Merger shall
have been approved for listing on the American Stock Exchange.
1. Tax Matters. Premier and Central and Southern
shall have received a written opinion of counsel from Womble
Carlyle Sandridge & Rice, PLLC, in form reasonably
satisfactory to them (the "Tax Opinion"), to the effect that
for federal income tax purposes (i) the Merger will constitute
a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) the exchange in the Merger of
Central and Southern Common Stock for Surviving Corporation
Common Stock will not give rise to gain or loss to the
shareholders of Central and Southern with respect to such
exchange (except to the extent of any cash received), and
(iii) neither Premier nor Central and Southern 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 Premier and Central and
Southern reasonably satisfactory in form and substance to such
counsel.
1. Affiliate Agreements. The Parties shall have
received from each affiliate of Central and Southern the
affiliates letter referred to in Section 8.10 hereof.
1. Pooling Letter. The Parties shall have
received a letter from Mauldin & Jenkins, LLC, and from Porter
Keadle Moore, LLP dated as of the Effective Time, to the
effect that the Merger will qualify for pooling-of-interests
accounting treatment under Accounting Principles Board Opinion
No. 16 if closed and consummated in accordance with this
Agreement.
A. Conditions to Obligations of Premier. The
obligations of Premier 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 Premier pursuant to Section
11.6(a) of this Agreement:
1. Representations and Warranties. For purposes
of this Section 9.2(a), the accuracy of the representations
and warranties of Central and Southern set forth or referred
to in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made
on and as of the Effective Time (provided that representations
and warranties which are confined to a specified date shall
speak only as of such date). The representations and
warranties of Central and Southern set forth in Section 5.3 of
this Agreement shall be true and correct (except for
inaccuracies which are de minimis in amount). The
representations and warranties of Central and Southern set
forth in Section 5.19 of this Agreement shall be true and
correct in all material respects. There shall not exist
inaccuracies in the representations and warranties of Central
and Southern set forth in this Agreement (excluding the
representations and warranties set forth in Sections 5.3 and
5.19) such that the aggregate effect of such inaccuracies
would have, or is reasonably likely to have, a Material
Adverse Effect on Central and Southern; 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.
1. Performance of Agreements and Covenants. Each
and all of the agreements and covenants of Central and
Southern 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.
1. Certificates. Central and Southern shall have
delivered to Premier (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 Central and
Southern's Board of Directors and shareholders evidencing
the taking of all corporate action necessary to authorize
the execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated
hereby, all in such reasonable detail as Premier and its
counsel shall request.
1. Opinion of Counsel. Central and Southern shall
have delivered to Premier an opinion of Kilpatrick & Cody,
LLP, counsel to Central and Southern, dated as of the
Effective Time, in form reasonably satisfactory to Premier, as
to the matters set forth in Exhibit 2 hereto.
1. Claims/Indemnification Letters. Each of the
directors and officers of Central and Southern shall have
executed and delivered to Premier letters in substantially the
form of Exhibit 3 hereto.
1. Premier Fairness Opinion. Premier shall have
received from Brown, Burke Capital Partners, Inc. a letter,
dated not more than five (5) business days prior to the date
of the Proxy Statement, to the effect that, in the opinion of
such firm, the consideration to be paid to Central and
Southern shareholders in connection with the Merger is fair,
from a financial point of view, to the shareholders of
Premier.
1. Litigation. No preliminary or permanent
injunction or other order by any federal or state court which
prevents the consummation of the Merger shall have been issued
and shall remain in effect, nor any action therefor initiated
which, in the good faith judgment of the Board of Directors of
Premier, it is not in the best interests of the shareholders
of Premier to contest; and there shall not have been
instituted or be pending any action or proceeding by any
United States federal or state government or governmental
agency or instrumentality (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or seeking
material damages in connection with the Merger; or (ii)
seeking to prohibit Premier's or the Surviving Corporation's
ownership or operation of all or a material portion of
Premier's or Central and Southern's business or assets, or
compel Premier or the Surviving Corporation to dispose of or
hold separate all or a material portion of Premier's or
Central and Southern's business or assets as a result of the
Merger, which, in any case, in the reasonable judgment of
Premier based upon a legal opinion from legal counsel, could
result in the relief sought being obtained.
A. Conditions to Obligations of Central and Southern.
The obligations of Central and Southern 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 Central and Southern
pursuant to Section 11.6(b) of this Agreement:
1. Representations and Warranties. For purposes
of this Section 9.3(a), the accuracy of the representations
and warranties of Premier set forth or referred to in this
Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and
as of the Effective Time (provided that representations and
warranties which are confined to a specified date shall speak
only as of such date). The representations and warranties of
Premier set forth in Section 6.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimis
in amount). The representations and warranties of Premier set
forth in Section 6.19 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 and 6.19) such that the aggregate effect of such
inaccuracies would have, or is reasonably likely to have a
Material Adverse Effect on Premier; 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.
1. Performance of Agreements and Covenants. Each
and all of the agreements and covenants of Premier 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.
1. Certificates. Premier shall have delivered to
Central and Southern (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 Premier'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 Central and Southern and its counsel shall request.
1. Opinion of Counsel. Premier shall have
delivered to Central and Southern an opinion of Womble Carlyle
Sandridge & Rice, PLLC, counsel to Premier, dated as of the
Effective Time, in form reasonably acceptable to Central and
Southern, as to matters set forth in Exhibit 4 hereto.
1. Premier Stock Split. Immediately prior to the
Effective Time, Premier shall have effected a 1.8055 for one
split of the Premier Common Stock, so that Premier shall have
4,495,747 shares of common stock outstanding and issuable upon
the exercise of outstanding stock options immediately prior to
the Effective Time.
1. Central and Southern Fairness Opinion. Central
and Southern shall have received from Alex Sheshunoff & Co.
Investment Banking a letter, dated not more than five (5)
business days prior to the date of the Proxy Statement, to the
effect that, in the opinion of such firm, the consideration to
be paid to Central and Southern shareholders in connection
with the Merger is fair, from a financial point of view, to
the shareholders of Central and Southern.
1. Litigation. No preliminary or permanent
injunction or other order by any federal or state court which
prevents the consummation of the Merger shall have been issued
and shall remain in effect, nor any action therefor initiated
which, in the good faith judgment of the Board of Directors of
Central and Southern, it is not in the best interests of the
shareholders of Central and Southern to contest; and there
shall not have been instituted or be pending any action or
proceeding by any United States federal or state government or
governmental agency or instrumentality (i) challenging or
seeking to restrain or prohibit the consummation of the Merger
or seeking material damages in connection with the Merger; or (ii)
seeking to prohibit Premier's or the Surviving Corporation's
ownership or operation of all or a material portion of Premier's
or Central and Southern's business or assets, or compel
Premier or the Surviving Corporation to dispose of or hold
separate all or a material portion of Premier's or Central
and Southern's business or assets as a result of the Merger,
which, in any case, in the reasonable judgment of Central
and Southern based upon a legal opinion from legal counsel,
could result in the relief sought being obtained.
I. ARTICLE
TERMINATION
A. Termination. Notwithstanding any other provision of
this Agreement, and notwithstanding the approval of this
Agreement by the shareholders of Premier and Central and
Southern, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
1. By mutual consent of the Board of Directors of
Central and Southern and the Board of Directors of Premier; or
1. 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 Central and Southern and Section
9.3(a) in the case of Premier or in the material breach of any
covenant or agreement contained in this Agreement) in the
event of a material breach by the other Party of 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
breach and which breach would provide the non-breaching Party
the ability to refuse to consummate the Merger under the
standard set forth in Section 9.2(a) of this Agreement in the
case of Premier and Section 9.3(a) of this Agreement in the
case of Central and Southern; or
1. 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 Central and Southern and Section
9.3(a) in the case of Premier or in the 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
1. 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 Central and Southern
and Section 9.3(a) in the case of Premier or in the material
breach of any covenant or 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 Central and
Southern 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 (iii) if the
shareholders of Premier 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
1. By the Board of Directors of either Party in
the event that both parties are in breach of any
representation or warranty contained in the Agreement under
the applicable standard set forth in Section 9.2(a) or 9.3(a)
and only in the case of an event described in 10.1(d)(i)-(iii)
above;
1. By the Board of Directors of either Party in
the event that the Merger shall not have been consummated on
or before June 30, 1997, but only if the failure to consummate
the transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party
electing to terminate pursuant to this Section 10.1(f); or
1. 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 Central and Southern and Section
9.3(a) in the case of Premier or in the material breach of any
covenant or other agreement contained in this Agreement) in
the event that any of the conditions precedent to the
obligations of such Party to consummate the Merger (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(f) of this Agreement; or
1. By the Board of Directors of either Party, at
any time prior to the 15th day after execution of this
Agreement without any Liability in the event that the review
of the Assets, business, financial condition, results of
operations, and prospects of the other Party undertaken by it
or any of the disclosures contained in the other Party's
Disclosure Memorandum causes its Board of Directors to
determine, in its reasonable good faith judgment, that a fact
or circumstance exists or is likely to exist or result which
materially and adversely impacts one or more of the economic
benefits to it of the transactions contemplated by this
Agreement so as to render inadvisable the consummation of the
Merger.
A. 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 Section 8.6(b) of this
Agreement shall survive any such termination and abandonment.
A. Non-Survival of Representations and Covenants. The
respective representations, warranties, obligations,
covenants, and agreements of the Parties shall not survive the
Effective Time except for this Section 10.3 and Articles 2, 3,
4 and 11 and Section 8.10 of this Agreement.
I. ARTICLE
MISCELLANEOUS
A. Definitions. Except as otherwise provided herein,
the capitalized terms set forth below (in their singular and
plural forms as applicable) shall have the following meanings:
"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: (i) any other Person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such
Person; (ii) any officer, director, partner, employer, or
direct or indirect beneficial owner of any 10% or greater
equity or voting interest of such Person; or (iii) any other
Person for which a Person described in clause (ii) acts in
such capacity.
"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.
"Central and Southern Benefit Plans" shall have the
meaning set forth in Section 5.14 of this Agreement.
"Central and Southern Common Stock" shall mean the $1.00
par value common stock of Central and Southern.
"Central and Southern Companies" shall mean,
collectively, Central and Southern and all Central and
Southern Subsidiaries.
"Central and Southern Disclosure Memorandum" shall mean
the written information entitled "Central and Southern
Disclosure Memorandum" delivered on or prior to the date of
this Agreement to Premier describing in reasonable detail the
matters contained therein, specifically referencing each
Section of this Agreement under which such disclosure is being
made.
"Central and Southern Financial Statements" shall mean
(a) the consolidated balance sheets (including related notes
and schedules, if any) of Central and Southern as of September
30, 1996 and December 31, 1996, and as of December 31, 1995
and 1994, and the related statements of income, changes in
shareholders' equity, and cash flows (including related notes
and schedules, if any) for the nine months ended September 30,
1996, and for each of the two fiscal years ended December 31,
1995 and 1994, included in the Central and Southern Disclosure
Memorandum, and (b) the consolidated balance sheets (including
related notes and schedules, if any) of Central and Southern and related
statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any)
included in any SEC Documents filed with respect to periods
ended subsequent to September 30, 1996.
"Central and Southern Options" shall have the meaning set
forth in Section 3.4 of this Agreement.
"Central and Southern Stock Plans" shall mean the
existing stock option and other stock-based compensation plans
of Central and Southern disclosed in Section 5.14 of the
Central and Southern Disclosure Memorandum.
"Central and Southern Subsidiaries" shall mean the
subsidiaries of Central and Southern.
"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.
"Environment" shall have the meaning specified in the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601(8).
"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, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. 9601 et. seq., the Resource, Conservation and Recovery
Act, 42 U.S.C. 6901 et. seq., the Toxic Substance Control
Act, 15 U.S.C. 2601, et. seq., and all implementing
regulations and state counterparts of such acts.
"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 Internal Revenue 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 of this Agreement.
"Exhibits" 1 through 5, inclusive, shall mean the
Exhibits so marked, copies of which are attached to this
Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof and may be referred to in this
Agreement and any other related instrument or document without
being attached hereto.
"GAAP" shall mean generally accepted accounting
principles, consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Georgia Certificate of Merger" shall mean the
Certificate of Merger to be executed by the Surviving
Corporation and filed with the Secretary of State of the State
of Georgia relating to the Merger as contemplated by Section
1.1 of this Agreement.
"Hazardous Material" shall mean any substance which is a
"hazardous substance"or "toxic substance" as defined in the
Comprehensive Environment Response, Compensation, and
Liability Act, 42 U.S.C. 9601 et seq., or any other substance
or material defined, designated, classified or regulated as
hazardous or toxic under any Environmental Law, specifically
including asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of Environmental
Laws of polychlorinated biphenyls, and petroleum and petroleum
products).
"HOLA" shall mean the Home Owners Loan Act of 1933, as
amended.
"Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
"Knowledge" as used with respect to a Person shall mean
the knowledge after due inquiry of the Chairman, President,
Chief Financial Officer, Chief Accounting Officer, Chief
Credit Officer, or any Senior or Executive Vice President of
such Person, Steven S. Dunlevie, G. Leighton Stradtman and
Elizabeth O. Derrick with regard to Premier and Richard R.
Cheatham, F. Sheffield Hale and Neil D. Falis with regard to
Central and Southern.
"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,
easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or other
security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever on, or with respect
to, any property or property interest, other than (i) Liens
for current property Taxes not yet due and payable; (ii) for
depository institution Subsidiaries of a Party, pledges to
secure deposits and (iii) 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 other than the violations of law
section from such reports.
"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 (w) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or
governmental authorities, (x) changes in GAAP or regulatory
accounting principles generally applicable to banks and their
holding companies, (y) 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, or (z) the Merger and compliance with the
provisions of this Agreement on the operating performance of
the Parties.
"Merger" shall mean the merger of Central and Southern
with and into Premier referred to in Section 1.1 of this
Agreement.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"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 Premier or Central and
Southern, and "Parties" shall mean both Premier and Central
and Southern.
"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.
"Premier Bank" shall mean First Alliance Bank, a Georgia
state-chartered bank and a Premier Subsidiary.
"Premier Benefit Plans" shall have the meaning set forth
in Section 6.14 of this Agreement.
"Premier Common Stock" shall mean the $1.00 par value
common stock of Premier.
"Premier Companies" shall mean, collectively, Premier and
all Premier Subsidiaries.
"Premier Disclosure Memorandum" shall mean the written
information entitled "Premier Disclosure Memorandum" delivered
on or prior to the date of this Agreement to Central and
Southern describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under
which such disclosure is being made.
"Premier Financial Statements" shall mean (a) the
consolidated balance sheets (including related notes and
schedules, if any) of Premier as of September 30, 1996, and as
of December 31, 1995 and 1994, and the related statements of
income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the nine
months ended September 30, 1996, and for each of the two years
ended December 31, 1995 and 1994, as filed by Premier in SEC
Documents and (b) the consolidated balance sheets (including
related notes and schedules, if any) of Premier and related
statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any)
included in SEC Documents filed with respect to periods ended
subsequent to September 30, 1996.
"Premier Stock Plans" shall mean the existing stock
option and other stock-based compensation plans.
"Premier Subsidiaries" shall mean the Subsidiaries of
Premier at the Effective Time.
"Proxy Statement" shall mean (a) the proxy statement used
by Central and Southern to solicit the approval of its
shareholders of the transactions contemplated by this
Agreement and (b) the proxy statement used by Premier to
solicit the approval of its shareholders of the transactions
contemplated by this Agreement, both of which shall be
included in the prospectus of the Surviving Corporation
relating to shares of Surviving Corporation Common Stock to be
issued to the shareholders of Central and Southern.
"Registration Statement" shall mean the Registration
Statement on Form S-4, or other appropriate form, filed with
the SEC by Premier under the 1933 Act with respect to the
shares of Surviving Corporation Common Stock to be issued to
the shareholders of Central and Southern 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.
"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 Central and Southern or the meeting of the
shareholders of Premier to be held pursuant to Section 8.1 of
this Agreement, including any adjournment or adjournments
thereof.
"Subsidiaries" shall mean all those corporations, banks,
associations or other entities of which the entity in question
owns or controls 50% or more of the outstanding equity
securities 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 Premier as the
surviving corporation resulting from the Merger to be known as
Premier Bancshares, Inc.
"Surviving Corporation Common Stock" shall mean the $1.00
par value common stock of the Surviving Corporation.
"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. Expenses.
1. 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 Proxy Statements.
1. Notwithstanding the provisions of Section
11.2(a) of this Agreement, if for any reason this Agreement is
terminated pursuant to Sections 10.1(b) or 10.1(c) of this
Agreement, the breaching Party agrees to pay the non-breaching
Party (i) an amount equal to the reasonable and documented
fees and expenses incurred by such non-breaching Party in
connection with the examination and investigation of the
breaching Party, the preparation and negotiation of this
Agreement and related agreements, regulatory filings and other
documents related to the transactions contemplated hereunder,
including, without limitation, fees and expenses of investment
banking consultants, accountants, attorneys and other agents
and (ii) (x) $50,000 if the breach is not willful or (y)
$150,000 if the breach is willful or this Agreement is
terminated in contemplation of an Acquisition Proposal, which
sums represent compensation for the non-breaching Party's loss
as a result of the transaction contemplated by this Agreement
not being consummated. Final settlement with respect to
payment of such fees and expenses shall be made within thirty
(30) days after the termination of this Agreement. This
Section 11.2(b) shall be the non-breaching Party's sole and
exclusive remedy for actionable breach by the breaching Party
under this Agreement.
A. Brokers and Finders. 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, other than Brown, Burke
Capital Partners, Inc. employed by Premier. 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 Premier or Central and Southern, each of
Premier and Central and Southern, 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.
A. 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 8.10 and Section 8.13 of this
Agreement.
A. Amendments. To the extent permitted by Law, this
Agreement may amended by a subsequent writing signed by each
of the Parties upon the approval of the Boards of Directors of
each of the Parties; provided, however, that after any such
approval by the holders of Premier Common Stock or Central and
Southern 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.
A. Waivers.
1. Prior to or at the Effective Time, Premier,
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
Central and Southern, to waive or extend the time for the
compliance or fulfillment by Central and Southern of any and
all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of
Premier 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 Premier.
1. Prior to or at the Effective Time, Central and
Southern, 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 Premier, to waive or extend the time for the
compliance or fulfillment by Premier of any and all of its
obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of Central and
Southern 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 Central and Southern.
1. 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.
A. 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.
A. 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, 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:
Premier: First Alliance/Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Telecopy Number: (404)814-3672
Attention: Darrell D. Pittard
Chairman and CEO
Copy to Counsel: Womble Carlyle Sandridge & Rice, PLLC
Suite 700
1275 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telecopy Number: (404) 888-7490
Attention: Steven S. Dunlevie, Esq.
Central & Southern: Central and Southern Holding Company
150 West Greene Street
Milledgeville, Georgia 31061
Telecopy Number: (912) 452-3532
Attention: Robert C. Oliver
President and CEO
Copy to Counsel: Kilpatrick & Cody, LLC
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309-4530
Telecopy Number: (404) 815-6555
Attention: Richard R. Cheatham, Esq.
A. 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.
A. 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.
A. Captions. The captions contained in this Agreement
are for reference purposes only and are not part of this
Agreement.
A. 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.
A. 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.
[SIGNATURES ON NEXT 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: FIRST ALLIANCE/PREMIER BANCSHARES, INC.
By: _____________________
Secretary Darrell D. Pittard
Chairman and CEO
[CORPORATE SEAL]
ATTEST: CENTRAL AND SOUTHERN HOLDING COMPANY
By:_______________________
Secretary Robert C. Oliver
President and CEO
[CORPORATE SEAL]
EXHIBIT 1
AFFILIATE AGREEMENT
First Alliance/Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Central and Southern Holding Company
Post Office Box 748
Milledgeville, Georgia 31061
Gentlemen:
The undersigned is a shareholder of Central and Southern
Holding Company ("Central and Southern"), a corporation
organized and existing under the laws of the State of Georgia,
and will become a shareholder of First Alliance/Premier
Bancshares, Inc. ("Premier" or the "Surviving Corporation")
pursuant to the transactions described in the Agreement and
Plan of Reorganization, dated as of February 3, 1997 (the
"Agreement"), by and between Central and Southern and Premier.
Under the terms of the Agreement, Premier and Central and
Southern will be merged (the "Merger") and the shares of
common stock of Central and Southern ("Central and Southern
Common Stock") will be converted into shares of common stock
of the Surviving Corporation ("Surviving Corporation Common
Stock"). This Affiliate Agreement represents an agreement
between the undersigned and the Surviving Corporation
regarding certain rights and obligations of the undersigned in
connection with the shares of the Surviving Corporation to be
received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants
contained herein, the undersigned and the Surviving
Corporation hereby agree as follows:
Affiliate Status. The undersigned understands and
agrees that as to Central and Southern the undersigned is an
"affiliate" under Rule 145(c) as defined in Rule 405 of the
Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as
amended ("1933 Act"), and the undersigned anticipates that the
undersigned will be such an "affiliate" at the time of the
Merger.
Initial Restriction on Disposition. The undersigned
agrees that the undersigned will not, except by operation of
law, by will or under the laws of descent and distribution,
sell, transfer, or otherwise dispose of the undersigned's
interests in, or reduce the undersigned's risk relative to,
any of the shares of the Surviving Corporation Common Stock
into which the undersigned's shares of Central and Southern
Common Stock are converted upon consummation of the Merger
until such time as the Surviving Corporation notifies the
undersigned that the requirements of SEC Accounting Series
Release Nos. 130 and 135 ("ASR 130 and 135") have been met.
The undersigned understands that ASR 130 and 135 relate to
publication of financial results of post-Merger combined
operations of the Surviving Corporation and Central and
Southern. The Surviving Corporation agrees that it will
publish such results within 45 days after the end of the first
fiscal quarter of the Surviving Corporation containing the
required period of post-Merger combined operations and that it
will notify the undersigned promptly following such
publication.
Covenants and Warranties of Undersigned. The
undersigned represents, warrants and agrees that:
(a) During the 30 days immediately preceding the
effective time of the Merger, the undersigned will not, except
by operation of law, by will, or under the laws of descent and
distribution, sell, transfer, or otherwise dispose of the undersigned's
interests in, or reduce the undersigned's risk relative to,
any of the shares of Central and Southern Common Stock
beneficially owned by the undersigned as of the date of the
shareholders' meeting of Central and Southern held to approve
the merger.
(b) The Surviving Corporation Common Stock received by
the undersigned as a result of the Merger will be taken for
the undersigned's own account and not for others, directly or
indirectly, in whole or in part.
(c) The undersigned understands that any distribution by
the undersigned of the Surviving Corporation Common Stock has
not been registered under the 1933 Act and that shares of the
Surviving Corporation Common Stock received pursuant to the
Merger can only be sold by the undersigned (1) following
registration under the 1933 Act, or (2) in conformity with the
volume and other requirements of Rule 145(d) promulgated by
the SEC as the same now exist or may hereafter be amended, or
(3) to the extent some other exemption from registration under
the 1933 Act might be available. The undersigned understands
that the Surviving Corporation is under no obligation to file
a registration statement with the SEC covering the disposition
of the undersigned's shares of the Surviving Corporation
Common Stock.
(d) The undersigned is aware that the Merger is to be
treated as a tax-free reorganization under Section 368 of the
Internal Revenue Code ("Code") for federal income tax
purposes. The undersigned agrees to treat the transaction in
the same manner for federal income tax purposes. The
undersigned acknowledges that Section 1.368-1(b) of the Income
Tax Regulations requires "continuity of interest" in order for
the Merger to be treated as tax-free under Section 368 of the
Code. This requirement is satisfied if, taking into account
those who dissent from the Merger, there is no plan or
intention on the part of the Central and Southern shareholders
to sell or otherwise dispose of the Surviving Corporation
Common Stock to be received in the Merger that will reduce
such shareholders' ownership to a number of shares having, in
the aggregate, a value at the time of the Merger of less than
50% of the total fair market value of the Central and Southern
Common Stock outstanding immediately prior to the Merger. The
undersigned has no prearrangement, plan or intention to sell
or otherwise dispose of an amount of the undersigned's
Surviving Corporation Common Stock to be received in the
Merger which would cause the foregoing requirement not to be
satisfied.
4. Restrictions on Transfer. The undersigned
understands and agrees that stop transfer instructions with
respect to the shares of the Surviving Corporation Common
Stock received by the undersigned pursuant to the Merger will
be given to the Surviving Corporation's transfer agent and
that there will be placed on the certificates for such shares,
or shares issued in substitution thereof, a legend stating in
substance:
"The shares represented by this certificate were issued
pursuant to a business combination which is accounted for as
a "pooling of interests" and may not be sold, nor may the
owner thereof reduce his risks relative thereto in any way,
until such time as the Surviving Corporation has published the
financial results covering at least 30 days of combined
operations after the effective date of the merger through
which the business combination was effected. In addition, the
shares represented by this certificate may not be sold,
transferred or otherwise disposed of except or unless (a)
covered by an effective registration statement under the Securities
Act of 1933, as amended, (b) in accordance with (i) Rule 145(d)
(in the case of shares issued to an individual who is not an affiliate of
the Surviving Corporation) or (ii) Rule 144 (in the case of
shares issued to an individual who is an affiliate of the
Surviving Corporation) of the Rules and Regulations of such
Act, or (c) in accordance with a legal opinion satisfactory to
counsel for the Surviving Corporation that such sale or
transfer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate
representing the Surviving Corporation securities issued
subsequent to the original issuance of the Surviving
Corporation Common Stock pursuant to the Merger as a result of
any stock dividend, stock split or other recapitalization as
long as the Surviving Corporation Common Stock issued to the
undersigned pursuant to the Merger has not been transferred in
such manner to justify the removal of the legend therefrom.
If the provisions of Rules 144 and 145 are amended to
eliminate restrictions applicable to the Surviving Corporation
Common Stock received by the undersigned pursuant to the
Merger, or at the expiration of the restrictive period set
forth in Rule 145(d), the Surviving Corporation, upon the
request of the undersigned, will cause the certificates
representing the shares of the Surviving Corporation Common
Stock issued to the undersigned in connection with the Merger
to be reissued free of any legend relating to the restrictions
set forth in Rules 144 and 145(d) upon receipt by the
Surviving Corporation of an opinion of its counsel to the
effect that such legend may be removed.
5. Understanding of Restrictions on Dispositions. The
undersigned has carefully read the Agreement and this
Affiliate Agreement and discussed their requirements and
impact upon his or her ability to sell, transfer or otherwise
dispose of the shares of the Surviving Corporation Common
Stock received by the undersigned, to the extent the
undersigned believes necessary, with the undersigned's counsel
or counsel for Central and Southern.
6. Filing of Reports by the Surviving Corporation. The
Surviving Corporation agrees, for a period of three years
after the effective date of the Merger, to file on a timely
basis all reports required to be filed by it pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended,
so that the public information provisions of Rule 145(d)
promulgated by the SEC as the same are presently in effect
will be available to the undersigned in the event the
undersigned desires to transfer any shares of the Surviving
Corporation Common Stock issued to the undersigned pursuant to
the Merger.
7. Transfer Under Rule 145(d). If the undersigned
desires to sell or otherwise transfer the shares of the
Surviving Corporation Common Stock received by the undersigned
in connection with the Merger at any time during the
restrictive period set forth in Rule 145(d), the undersigned
will provide the necessary representation letter to the
transfer agent for the Surviving Corporation Common Stock
together with such additional information as the transfer
agent may reasonably request. If the Surviving Corporation's
counsel concludes that such proposed sale or transfer complies
with the requirements of Rule 145(d), the Surviving
Corporation shall cause such counsel to provide such opinions
as may be necessary to the Surviving Corporation's transfer
agent so that the undersigned may complete the proposed sale
or transfer.
8. Acknowledgments. The undersigned recognizes and
agrees that the foregoing provisions also apply to (a) the
undersigned's spouse, (b) any relative of the undersigned or
of the undersigned's spouse who has the same home as the undersigned,
(c) any trust or estate in which the undersigned, the
undersigned's spouse, and any such relative collectively own
at least a 10% beneficial interest or of which any of the
foregoing serves as trustee, executor or in any similar
capacity and (d) any corporation or other organization in
which the undersigned, the undersigned's spouse and any such
relative collectively own at least 10% of any class of equity
securities or of the equity interest. The undersigned further
recognizes that, in the event that the undersigned is a
director or officer of the Surviving Corporation or becomes a
director or officer of the Surviving Corporation upon
consummation of the Merger, among other things, any sale of
the Surviving Corporation Common Stock by the undersigned
within a period of less than six months following the
effective time of the Merger may subject the undersigned to
liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the
complete agreement between the Surviving Corporation and the
undersigned concerning the subject matter hereof. Any notice
required to be sent to any party hereunder shall be sent by
registered or certified mail, return receipt requested, using
the addresses set forth herein or such other address as shall
be furnished in writing by the parties. This Affiliate
Agreement shall be governed by the laws of the State of
Georgia. This Affiliate Agreement is executed as of the_____ day
of _______________, 1997.
Very truly yours,
___________________________________
Signature
___________________________________
Print Name
AGREED TO AND ACCEPTED as of
______________________, 1997
FIRST ALLIANCE/PREMIER BANCSHARES, INC.
By:_____________________________
AGREED TO AND ACCEPTED as of
______________________, 1997
CENTRAL AND SOUTHERN HOLDING COMPANY
By:_____________________________
EXHIBIT 2
MATTERS AS TO WHICH
COUNSEL TO CENTRAL AND SOUTHERN WILL OPINE*
1. Central and Southern is a corporation duly
organized, existing and in good standing under the laws of the
State of Georgia with corporate power and authority to conduct
its business as now conducted and to own and use its Assets.
2. Central and Southern's authorized capital stock
consists of ____________ shares of Central and Southern Common
Stock, of which ____________ shares were outstanding as of the
date hereof. The outstanding shares of Central and Southern
Common Stock are duly authorized, validly issued, fully paid
and nonassessable. None of the outstanding shares of Central
and Southern Common Stock has been issued in violation of any
statutory preemptive rights. Except as disclosed in Central
and Southern's Disclosure Memorandum dated
____________________, 1997, to our knowledge, there are no
options, subscriptions, warrants, calls, rights or commitments
obligating Central and Southern to issue equity securities or
acquire its equity securities.
3. The execution and delivery by Central and Southern
of the Agreement do not, and if Central and Southern were now
to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles
of Incorporation or Bylaws of any Central and Southern
Company, or, to our knowledge, result in any breach of, or
default or acceleration under, any material Contract or Order
to which a Central and Southern Company is a party or by which
a Central and Southern Company is bound.
4. Central and Southern has duly authorized the
execution and delivery of the Agreement and all performance by
Central and Southern thereunder and has duly executed and
delivered the Agreement.
5. The Agreement is enforceable against Central
and Southern.
______________________________
*Pursuant to the January 1, 1992 edition of the Interpretive
Standards Applicable to Legal Opinions to Third Parties in
Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of
Georgia.
EXHIBIT 3
CLAIMS/INDEMNIFICATION LETTER
_______________________, 1997
First Alliance/Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Ladies and Gentlemen:
This letter is delivered pursuant to Section 9.2(e) of
the Agreement and Plan of Merger (the "Agreement"), dated as
of February 3, 1997, by and between Central and Southern
Holding Company ("Central and Southern ") and First
Alliance/Premier Bancshares, Inc. ("Premier") which provides
for the merger (the "Merger") of Central and Southern and
Premier.
Concerning claims which I may have against Central and
Southern or its wholly-owned subsidiaries, The Central and
Southern Bank of Georgia and The Central and Southern Bank of
North Georgia, F.S.B., in my capacity as an officer or
director:
(a) Premier shall assume all liability (to the extent
Central and Southern was so liable) for claims for
indemnification arising under Central and Southern's Articles
of Incorporation or Bylaws or under any indemnification
contract disclosed to Premier, as existing on February 3,
1997, and for claims for salaries, wages or other
compensation, employee benefits, reimbursement of expenses, or
worker's compensation arising out of employment through the
effective time of the Merger;
(b) The Central and Southern Bank of Georgia and The
Central and Southern Bank of North Georgia, F.S.B., shall
retain all liability (to the extent they were so liable) for
claims for indemnification arising under their respective
Articles of Incorporation or Bylaws as existing on February 3,
1997, and for claims for salaries, wages, or other
compensation, employee benefits, reimbursement of expenses, or
worker's compensation arising out of employment through the
effective time of the Merger;
(c) In my capacity as an officer or a director, I am not
aware that I have any claims (other than those referred to in
paragraphs (a) or (b) above) against Central and Southern, The
Central and Southern Bank of Georgia or The Central and
Southern Bank of North Georgia, F.S.B. (other than routine
deposit, loan and other banking services conducted in the
ordinary course of business with Central and Southern, The
Central and Southern Bank of Georgia or The Central and
Southern Bank of North Georgia, F.S.B.; and
(d) I hereby release Central and Southern, The Central
and Southern Bank of Georgia and The Central and Southern Bank
of North Georgia, F.S.B., from any and all claims which I am
aware that I have against any of them in my capacity as an
officer or a director, other than those referred to in
paragraphs (a) or (b) above.
By executing this letter on behalf of Premier, you shall
acknowledge the assumption by Premier of the liabilities
described in paragraphs (a) and (b) above.
Sincerely,
__________________________________
Signature of Officer or Director
__________________________________
Printed Name of Officer or Director
On behalf of Premier, I hereby acknowledge receipt of
this letter and affirm the assumption by Premier of the liabilities
described in paragraph (a) and (b) above, as of this _____ day
of _______________, 1997.
FIRST ALLIANCE/PREMIER BANCSHARES, INC.
By:______________________________________
Darrell D. Pittard, Chairman and CEO
EXHIBIT 4
MATTERS AS TO WHICH
COUNSEL TO PREMIER WILL OPINE*
1. Premier is a corporation duly organized, existing
and in good standing under the laws of the State of Georgia
with corporate power and authority to conduct its business as
now conducted and to own and use its Assets.
2. Premier's authorized capital stock consists of
20,000,000 shares of Premier Common Stock, of which ______
shares were outstanding as of the date hereof. The
outstanding shares of Premier Common Stock are, and all of the
shares of Surviving Corporation Common Stock to be issued in
exchange for Central and Southern Common Stock upon
consummation of the Merger, when issued in accordance with the
terms of the Agreement, will be, duly authorized, validly
issued, fully paid and nonassessable. None of the outstanding
shares of Premier Common Stock has been, and none of the
shares of Surviving Corporation Common Stock to be issued in
exchange for shares of Central and Southern Common Stock upon
consummation of the Merger will be, issued in violation of any
statutory preemptive rights. Except as disclosed in Premier's
Disclosure Memorandum dated _______________, 1997, to our
knowledge, there are no options, subscriptions, warrants,
calls, rights or commitments obligating Premier to issue
equity securities or acquire its equity securities.
3. The execution and delivery by Premier of the
Agreement do not, and if Premier were now to perform its
obligations under the Agreement such performance would not,
result in any violation of the Articles of Incorporation or
Bylaws of any Premier Company, or, to our knowledge, result in
any breach of, or default or acceleration under, any material
Contract or Order to which a Premier Company is a party or by
which a Premier Company is bound.
4. Premier has duly authorized the execution and
delivery of the Agreement and all performance by Premier
thereunder and has duly executed and delivered the Agreement.
5. The Agreement is enforceable against Premier.
______________________________
*Pursuant to the January 1, 1992 edition of the Interpretive
Standards Applicable to Legal Opinions to Third Parties in
Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of
Georgia.
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report, dated January 23, 1997,
accompanying the consolidated financial statements
incorporated by reference in the Annual Report of Central and
Southern Holding Company on Form 10-K for the year ended
December 31, 1996. We hereby consent to the incorporation by
reference of said report in the Registration Statement of
Central and Southern Holding Company on Form S-8 (File No. 33-
82518, effective August 5, 1994 as amended).
PORTER KEADLE MOORE, LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
March ______, 1997
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