<PAGE>
<PAGE> FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 1-11819
-------
HAYWOOD BANCSHARES, INC.
---------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1918006
- ----------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 North Main Street, Waynesville, North Carolina 28786
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(828) 456-9092
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
-----------------
(Former name, former address, and former fiscal year, if changed
since last report)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
As of August 12, 1999, shares of common stock outstanding
were 1,250,356.
1
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION> June 30, December 31,
1999 1998
------------ ------------
Assets (Unaudited)
------
<S> <C> <C>
Cash on hand and in banks $ 1,956,742 1,525,035
Interest-bearing balances in other banks 267,541 805,357
Federal funds sold 1,348,733 1,713,611
Investment securities:
Held to maturity (market value of $16,906,037
and $10,332,472, at June 30, 1999 and
December 31, 1998, respectively) 17,125,468 10,302,987
Available for sale (cost of $14,159,472
and $19,711,642 at June 30, 1999 and
December 31, 1998, respectively) 13,794,602 19,466,200
Loans receivable (net of allowance for loan
losses of $778,547 and $758,547, and
at June 30, 1999 and December 31, 1998,
respectively) 108,884,568 110,792,991
Real estate acquired in settlement of loans 7,192 7,192
Federal Home Loan Bank stock, at cost 1,108,300 1,427,300
Premises and equipment 1,510,160 1,565,173
Investment in mortgage servicing rights 1,207,985 977,720
Goodwill 648,980 675,030
Other assets 1,364,105 1,697,128
------------ -----------
$149,224,376 150,955,724
============ ===========
Liabilities and Stockholders' Equity
------------------------------------
Deposit accounts:
Noninterest-bearing $ 257,179 241,823
Interest-bearing, including $15,133,484
and $15,245,006, respectively, of time
deposits for $100,000 or more 118,017,637 116,519,550
------------ -----------
118,274,816 116,761,373
Advances from Federal Home Loan Bank 7,000,000 10,500,000
Accrued expenses and other liabilities 2,071,474 2,146,919
------------ -----------
Total liabilities 127,346,290 129,408,292
------------ -----------
Stockholders' equity:
Serial preferred stock, $1.00 par value,
5,000,000 shares authorized; no
shares issued or outstanding -- --
Common stock, $1.00 par value, 10,000,000
shares authorized; 1,250,356 shares issued
and outstanding, respectively 1,250,356 1,250,356
Additional paid-in capital 3,521,612 3,521,612
Retained income, substantially restricted 17,345,299 16,937,456
Accumulated other comprehensive income (loss) (239,181) (161,992)
------------ -----------
Total stockholders' equity 21,878,086 21,547,432
------------ -----------
$149,224,376 150,955,724
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION> Six Months Ended June 30,
------------------------------
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Interest income:
Loans $4,384,843 4,582,544
Investment securities 776,442 915,387
Interest-bearing balances in other banks 14,539 15,201
Federal funds sold 59,815 30,084
Other 48,364 52,204
---------- ----------
Total interest income 5,284,003 5,595,420
---------- ----------
Interest expense:
Deposits, including $313,230 in 1999 and
$324,816 in 1998, on time deposits for
$100,000 or more 2,536,557 2,770,705
Other borrowed money 204,654 301,997
---------- ----------
Total interest expense 2,741,211 3,072,702
---------- ----------
Net interest income 2,542,792 2,522,718
Provision for loan losses 20,000 10,000
---------- -----------
Net interest income after provision
for loan losses 2,522,792 2,512,718
---------- -----------
Other income:
Insurance income, net 96,472 77,313
Service charges on deposits 29,880 30,345
Rental income 27,078 25,367
Gain on sale of real estate acquired
in settlement of loans -- 426,872
Real estate operations, net (137) 1,210
Gain on sale of investment securities
available for sale 11,522 6,418
Income (loss) on investment in mortgage
servicing rights 230,265 (1,176,957)
Other income 21,098 39,511
---------- -----------
Total other income (loss), net 416,178 (569,921)
---------- -----------
General and administrative expenses:
Salaries and employee benefits 961,677 891,537
Occupancy and equipment 152,990 162,650
Federal and other insurance premiums 40,239 40,217
Amortization of goodwill 26,250 26,250
Other expenses 464,858 429,162
---------- -----------
Total general and administrative
expenses 1,646,014 1,549,816
---------- -----------
Income before income taxes 1,292,956 392,981
Income taxes 485,000 149,000
---------- -----------
Net income $ 807,956 243,981
========== ===========
Per share amounts:
Net income - basic $ 0.65 0.20
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION> Three Months Ended June 30,
------------------------------
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Interest income:
Loans $2,209,541 2,283,593
Investment securities 362,639 458,849
Interest-bearing balances in other banks 13,144 7,191
Federal funds sold 31,561 13,476
Other 21,970 26,689
---------- ----------
Total interest income 2,638,855 2,789,798
---------- ----------
Interest expense:
Deposits, including $145,564 in 1999 and
$152,759 in 1998, on time deposits for
$100,000 or more 1,274,338 1,383,579
Other borrowed money 88,471 152,087
---------- ----------
Total interest expense 1,362,809 1,535,666
---------- ----------
Net interest income 1,276,046 1,254,132
Provision for loan losses 10,000 5,000
---------- -----------
Net interest income after provision
for loan losses 1,266,046 1,249,132
---------- -----------
Other income:
Insurance income, net 45,560 32,338
Service charges on deposits 14,369 14,056
Rental income 13,923 12,904
Gain on sale of real estate acquired
in settlement of loans -- 20,000
Real estate operations, net (137) (36)
Gain on sale of investment securities
available for sale 11,522 --
Income (loss) on investment in mortgage
servicing rights 187,728 (1,215,792)
Other income 8,614 33,364
---------- -----------
Total other income (loss), net 281,579 (1,103,166)
---------- -----------
General and administrative expenses:
Salaries and employee benefits 506,311 447,067
Occupancy and equipment 79,660 78,930
Federal and other insurance premiums 18,975 20,148
Amortization of goodwill 13,125 13,125
Other expenses 268,839 235,498
---------- -----------
Total general and administrative
expenses 886,910 794,768
---------- -----------
Income (loss) before income taxes 660,715 (648,802)
Income taxes 247,000 (258,000)
---------- -----------
Net income (loss) $ 413,715 (390,802)
========== ===========
Per share amounts:
Net income (loss) - basic $ 0.33 (0.31)
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
and Comprehensive Income
Six Months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Stockholders'
Stock Capital Income Income (Loss) Equity
---------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $1,250,356 3,521,612 16,937,456 (161,992) 21,547,432
Comprehensive income:
Net income -- -- 807,956 -- 807,956
Other comprehensive income
(loss)--
unrealized gain on securities
available for sale, net of
income taxes of $42,239 -- -- -- (77,189) (77,189)
----------
Total comprehensive income 730,767
Cash dividends declared on
common stock, $.32 per share -- -- (400,113) -- (400,113)
---------- ---------- ---------- -------- ----------
Balance at June 30, 1999 $1,250,356 3,521,612 17,345,299 (239,181) 21,878,086
========== ========== ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Additional Other Obligation Total
Common Paid-in Retained Comprehensive of the Stockholders'
Stock Capital Income Income (Loss) ESOP Equity
---------- ----------- ---------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $1,250,356 3,437,275 17,487,686 56,831 (58,616) 22,173,532
Comprehensive income:
Net income -- -- 243,981 -- -- 243,981
Other comprehensive income
(loss)- unrealized gain on
securities available for
sale, net of income taxes
of $1,533 -- -- -- (2,976) -- (2,976)
----------
Total comprehensive income 241,005
Cash dividends declared on
common stock, $.30 per share -- -- (375,106) -- -- (375,106)
Principal repayment of
ESOP debt -- -- -- -- 31,500 31,500
Release and allocation of
ESOP shares -- 60,540 (30,789) -- -- 29,751
---------- ---------- ---------- -------- -------- ----------
Balance at June 30, 1998 $1,250,356 3,497,815 17,325,772 53,855 (27,116) 22,100,682
========== ========== ========== ======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION> Six Months Ended June 30,
------------------------------
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 807,956 243,981
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 20,000 10,000
Depreciation and amortization 61,076 115,970
Amortization of goodwill 26,250 26,250
Loss (income) from investment in
mortgage servicing rights (230,265) 1,176,957
Net gain on sale of real estate acquired
in settlement of loans -- (426,872)
Gain on sale of investment securities
available for sale (11,522) (6,418)
Increase (decrease) in allowance for
uncollected interest (6) 10,198
Decrease (increase) in other assets 332,824 (542,623)
Increase (decrease) in accrued expenses
and other liabilities (33,205) 51,764
Increase in deferred loan fees 20,322 30,331
Net noncash expense recorded for ESOP -- 29,751
----------- -----------
Net cash provided by operating
activities 993,430 719,289
----------- -----------
Cash flows from investing activities:
Purchases of investment securities held to
maturity (11,000,000) (4,500,000)
Proceeds from maturities and issuer calls
of investment securities held to maturity 4,136,957 4,800,000
Principal collected on investment securities
held to maturity 44,468 200,221
Principal collected on investment securities
available for sale 294,228 --
Proceeds from maturities and issuer calls
of investment securities available for sale 1,500,000
Proceeds from sale of investment securities
available for sale 12,949,379 3,505,963
Purchase of investment securities available
for sale (7,682,824) (6,026,250)
Proceeds from sale of FHLB stock 319,000 --
Purchase of mortgage servicing rights -- (108,675)
Repayment of loans, net 1,868,107 894,277
Purchases of premises and equipment (7,060) (31,498)
Proceeds from sales of real estate acquired
in settlement of loans -- 702,194
----------- -----------
Net cash provided by investing
activities 922,255 936,232
----------- -----------
<PAGE>
Cash flows from financing activities:
Net increase (decrease) in deposits 1,513,442 (1,707,255)
Repayment of advances from FHLB (3,500,000) --
Cash dividends paid (400,114) (375,106)
----------- -----------
Net cash used in financing activities (2,386,672) (2,082,361)
----------- -----------
Net decrease in cash and cash equivalents (470,987) (426,840)
Cash and cash equivalents at beginning of
period 4,044,003 4,195,001
----------- -----------
Cash and cash equivalents at end of period $ 3,573,016 3,768,161
=========== ===========
</TABLE>
(Continued)
6
<PAGE>
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION> Six Months Ended June 30,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $2,749,738 3,093,832
========== =========
Income taxes $ 545,750 206,273
========== =========
Supplemental schedule of noncash investing and
financing activities:
Loans transferred to real estate acquired in
settlement of loans $ -- 36,436
========== =========
Dividends payable $ 200,056 187,553
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
7
<PAGE>
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999
(Unaudited)
(1) Presentation of Financial Statements
------------------------------------
The consolidated financial statements include the
accounts of Haywood Bancshares, Inc. (the Corporation)
and its wholly-owned subsidiary, Haywood Savings Bank,
Inc., SSB (Haywood Savings). All intercompany
transactions and balances are eliminated in
consolidation.
The preparation of the consolidated financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect reported amounts
of assets and liabilities at the date of the financial
statements, as well as the amounts of income and
expenses during the reporting period. Actual results
could differ from those estimates.
All adjustments considered necessary for a fair
presentation of the results for the interim periods
presented have been included (such adjustments are
normal and recurring in nature). Operating results for
the six month period ended June 30, 1999, are not
necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
(2) Summary of Significant Accounting Policies
------------------------------------------
For a description of the significant accounting and
reporting policies, see note (1) in the notes to the
December 31, 1998 consolidated financial statements in
the 1998 Annual Report to stockholders.
(3) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash on hand and in
banks, interest-bearing balances in other banks, and
federal funds sold. Generally, cash and cash equivalents
are considered to have maturities of three months or
less.
(4) Investment in Mortgage Servicing Rights
---------------------------------------
During 1996, the Corporation made a $3,000,000 commitment
to be a limited partner in Dovenmuehle Mortgage Company
L.P. ("DMCLP") Tranche VIII Servicing Division of
Dovenmuehle Mortgage Inc. ("DMI"). DMI provides mortgage
servicing for a national portfolio of residential, multi-
family and commercial mortgage loans. These loans are
owned or securitized by national mortgage agencies, and
by a variety of private banks, thrifts, insurance
companies and other loan investors. DMI formed DMCLP as
a funding vehicle to purchase portfolios of the Federal
National Mortgage Association and the Federal Home Loan
Mortgage Corporation nonrecourse residential mortgage
servicing. DMI provides the mortgage servicing for these
portfolios. Under this structure investors in DMCLP
invest in separate tranches, each of which has its own
identified servicing rights and each of which may be
owned by one or a group of investors. The equity
investors in each tranche benefit from a financial return
based solely on the performance of the mortgage servicing
rights purchased for the tranche. The Corporation has
funded all of its $3,000,000 commitment.
8 (Continued)
<PAGE>
<PAGE>
The investment is accounted for under the equity method.
Management periodically evaluates the fair value of the
mortgage servicing rights owned by DMCLP using appraisals
prepared by a third party and adjusts the carrying value
of their investment when there is impairment.
During the year ended December 31, 1998, the Corporation
recognized an impairment valuation adjustment totaling
approximately $2,161,000. The Corporation recognized a
recovery of $56,903 and $69,590 during the three and six
months ended June 30, 1999, respectively, of the
impairment previously recorded. Total earnings (loss) of
DMCLP recognized by the Corporation on the equity method
of accounting were $187,728 and ($1,215,792) for the
three months ended June 30, 1999 and 1998, respectively
and $230,265 and ($1,176,957) for the six months ended
June 30, 1999 and 1998, respectively.
(5) Allowance for Loan Losses
-------------------------
The following is a reconciliation of the allowance for loan
losses for the three months and six months ended June 30,
1999 and 1998:
<TABLE>
<CAPTION>
Three Months Six Months
ended June 30, ended June 30,
------------------- ----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at beginning of period $768,547 743,547 758,547 738,547
Provision for loan losses 10,000 5,000 20,000 10,000
-------- ------- ------- -------
Balance at end of period $778,547 748,547 778,547 748,547
======== ======= ======= =======
</TABLE>
(6) Borrowings
----------
The Corporation has $7,000,000 in advances from the
Federal Home Loan Bank of Atlanta. These advances bear
interest at a floating rate equal to one month LIBOR and
mature on February 24, 2000.
(7) Earnings per Share
------------------
Basic earnings per share is computed by dividing net
income by the weighted average number of common shares
outstanding for the period. The Corporation had no
dilutive securities during the three months ended June
30, 1999 and 1998 and the six months ended June 30, 1999
and 1998. The weighted average number of common shares
outstanding is 1,250,356 and 1,247,588 for the three
months ended June 30, 1999 and 1998, respectively, and
1,250,356 and 1,247,073 for the six months ended June 30,
1999 and 1998, respectively.
(8) Other Accounting Changes
------------------------
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards for derivative
instruments and for hedging activities. SFAS No. 137,
"Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB
Statement No. 133 - an amendment of FASB Statement No.
133" delayed the effective date of this Statement for one
year. The Statement is
9 (Continued)
<PAGE>
effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Corporation does not have any
derivative financial instruments and is not involved in any
hedging activities.
In October 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting
Standards No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise" (SFAS No. 134). SFAS No. 134 establishes
accounting and reporting standards for certain mortgage
banking activities. SFAS No. 134 is effective for
financial statements for the first fiscal quarter
beginning after December 15, 1998. The Corporation adopted
SFAS No. 134 in 1999 without any impact on its
financial statements.
(9) Subsequent Event -- Proposed Merger
-----------------------------------
On August 5, 1999, the Corporation entered into an
Agreement and Plan of Merger ("the Agreement") with
Century South Banks, Inc. ("Century South"). Century
South is a bank holding company headquartered in
Dahlonega, Georgia with assets of approximately $1.1
billion at June 30, 1999. Under the terms of the
Agreement, each outstanding share of the Corporation
would be converted into the right to receive .8874 shares
of common stock subject to adjustment based upon the
average closing price for the Century South common stock
for a 20 day period preceding the closing of the
transaction. Subject to certain limitations,
stockholders may elect to receive cash in lieu of shares
of Century South common stock. In connection with the
execution of the Agreement, the Corporation and Century
South entered into a Stock Option Agreement pursuant to
which the Corporation granted Century South an option to
purchase up to 19.9% if the outstanding shares of Common
Stock. The option is only exercisable in certain
circumstances. The merger is expected to be finalized in
the first quarter of 2000 and is subject to a number of
conditions, including approval by regulatory authorities
and the stockholders of the Corporation.
10 (Continued)
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Comparison of Operating Results for the Six Months Ended June
- -------------------------------------------------------------
30, 1999 and 1998
- -----------------
Net income for the six months ended June 30, 1999 increased to
$807,956 or $.65 per basic and diluted share, from $243,981 or
$.20 per basic and diluted share for the same period in 1998.
The increase in net income was due to income from investment in
mortgage servicing rights of $230,000 during the six months
ended June 30, 1999 compared to a $1,177,000 loss on investment
in mortgage servicing rights for the same period in 1998. This
loss during the 1998 period was partially offset by a $403,000
pretax gain on the sale of two outparcels to the Waynesville
Plaza Shopping Center which the Corporation had been holding as
real estate acquired in settlement of loans. In addition,
general and administrative expenses increased by $96,000 between
periods.
Total interest income for the six months ended June 30, 1999 was
$5,284,003, a $311,417 decrease from the same period in 1998.
The reason for the change was a decrease in both average volume
and average yield of interest earning assets. The average
volume decreased $2.3 million between periods due to a decrease
in average loans receivable of $4.1 million. The decrease in
loans receivable is due to significant prepayments during the
period and competitive pressures in the marketplace. The
Corporation invested excess funds in investment securities and
federal funds sold. The average yield on interest earning
assets decreased by 31 basis points to 7.40% for the six months
ended June 30, 1999 compared to 7.71% for the same period in
1998. The decrease in average yield is partially due to a
decrease in average yield on investment securities of 123 basis
points from 6.71% for the six months ended June 30, 1998 to
5.48% for the six months ended June 30, 1999. This is due to
the Corporation's higher yielding securities either maturing or
being called during the period. Proceeds were reinvested in
lower yielding investments. Also attributing to the decrease in
average yield on interest earning assets is a change in the mix
of interest earning assets from loans receivable to investment
securities and federal funds sold. The average yield on loans
receivable was 7.92% for the six months ended June 30, 1999
compared to 5.48% and 5.63% on investment securities and
federal funds sold, respectively.
Interest expense for the six months ended June 30, 1999
decreased from 1998 by $331,491 or 10.8% mainly due to a
decrease in the cost of funds. The rate paid on interest
bearing liabilities decreased 44 basis points between periods
from 4.81% for the six months ended June 30, 1998 to 4.37% for
the six months ended June 30, 1999. In addition, the average
balance of interest-bearing liabilities decreased $2.2 million
due to the Corporation repaying $3.5 million in advances to the
Federal Home Loan Bank of Atlanta ("FHLB") in 1999.
The overall net effect of these changes was a $20,074 increase
in net interest income and an increase in the interest rate
spread between interest earning assets and interest bearing
liabilities from 2.90% in 1998 to 3.03% in 1999.
<PAGE>
Comparative yields, costs and spreads for the respective periods
are as follows:
<TABLE>
<CAPTION>
Six months Twelve Months
ended At ended
June 30, (1) June 30, December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average yield on interest earning assets 7.40% 7.71% 7.03% 7.64%
Average rate on interest bearing liabilities 4.37% 4.81% 4.61% 4.76%
---- ---- ---- ----
Asset/liability spread 3.03% 2.90% 2.42% 2.88%
==== ==== ==== ====
(1) Annualized
</TABLE>
11 (Continued)
<PAGE>
<PAGE>
During the six months ended June 30, 1999 and 1998, management
recorded provisions for loan losses of $20,000 and $10,000,
respectively. The Corporation had no charge-offs and no
recoveries in either 1999 or 1998. As discussed below,
management determines the provision for loan losses based on
their review of the loan portfolio and their estimate of the
allowance for loan losses required to absorb estimated probable
losses inherent in the loan portfolio.
Other income increased $986,099 for the six months ended June
30, 1999 compared to the same period in 1998. This is mainly due
to income from mortgage servicing rights of $230,000 for the six
months ended June 30, 1999 compared to loss from investment in
mortgage servicing rights of $1,177,000 for the same period in
1998. During the 1998 period, the Corporation recognized an
impairment valuation adjustment to an equity investment in a
mortgage servicing partnership totaling approximately
$1,235,000. The Corporation recognized a recovery of $69,590
during the six months ended June 30, 1999 of the impairment
previously recorded. The investment in mortgage servicing
rights is evaluated periodically by management for impairment
and no assurance can be given that additional impairment
valuation adjustments will not be required in the future. For
additional information, see note (4) to the consolidated
financial statements.
In addition, during the six months ended June 30, 1998, the
Corporation recognized a gain on the sale of the outparcels to
the Waynesville Plaza Shopping Center of approximately $403,000.
There was no such gain in the 1999 period.
General and administrative expenses increased by approximately
$96,000 or 6.2%, between periods. This is mainly due to a
$70,000 increase in salaries and employee benefits. This is due
to normal salary increases and increases in deferred
compensation expense due to a change in the discount rate from
8% to 7%. Also contributing to the increase was an increase in
other expenses of $36,000 mainly due an increase in professional
fees during the 1999 period.
As a result of these and other factors, income before income
taxes increased $899,975 or 229.0% in 1999 versus 1998. Income
tax expense of $485,000 during the six month period resulted in
an effective income tax rate of 37.5% compared to 37.9% in 1998.
Comparison of Operating Results for the Three Months ended June
- ---------------------------------------------------------------
30, 1999 and 1998
- -----------------
Net income for the three months ended June 30, 1999 was
$413,715, or $.33 per basic and diluted share as compared to a
net loss of $390,802 or $.31 per basic and diluted share for the
same period in 1998. The net loss in 1998 was due to a
$1,216,000 loss on investment in mortgage servicing rights.
Total interest income for the three months ended June 30, 1999
was $2,638,855, a $151,000 decrease from the same period in
1998. Average interest earning assets decreased approximately
$2.2 million between periods and the average yield on interest
earning assets decreased from 7.68% for the three months ended
June 30, 1998 to 7.37% for the three months ended June 30, 1999.
Interest expense for the three months ended June 30, 1999
decreased from the same period in 1998 by $173,000 due to a
decrease in the average balance of interest bearing liabilities
of $1.9 million and a decrease in the rate paid on interest
bearing liabilities of 48 basis points.
The overall net effect of these changes was a $21,914 increase
in net interest income and an increase in the interest rate
spread between interest earning assets and interest bearing
liabilities from 2.86% in 1998 to 3.03% in 1999.
Other income increased $1,384,745 for the three months ended
June 30, 1999 compared to the same period in 1998. The 1998
period reflected a $1,235,000 impairment valuation adjustment to
an equity investment in a mortgage servicing partnership as
discussed above. The Corporation recognized a recovery of
$56,903 during
12 (Continued)
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<PAGE>
the three months ended June 30, 1999 of the impairment
previously recorded. Total loss on mortgage servicing rights
was $1,216,000 for the three month period ended June 30, 1998
compared to income on mortgage servicing rights of $188,000 for
the same period in 1999. Also contributing to the change in
other income is a decrease in gain on sale of real estate
acquired in settlement of loans of $20,000 and a decrease in
other income of approximately $25,000.
General and administrative expenses increased by approximately
$92,000, or 11.6%, between three month periods. The increase is
mainly due to a $59,000 increase in salaries and employee
benefits. This is due to normal salary increases and increases
in deferred compensation expense due to change in the discount
rate from 8% to 7%. Also contributing to the increase was an
increase in other expenses of $33,000 mainly due an increase in
professional fees during the period.
As a result of these and other factors, income before income
taxes increased $1,309,517 for the three months ended June 30,
1999 versus 1998. Income tax expense of $247,000 during the
period resulted in an effective income tax rate of 37.4%
compared to 39.8% in 1998.
Comparison of Financial Condition at June 30, 1999 and December
- ---------------------------------------------------------------
31, 1998
- --------
Total assets decreased by $1,731,000 or 1.15% from $150,956,000
at December 31, 1998 to $149,224,000 at June 30, 1999. The
decrease is mainly due to a decrease in loans receivable of
$1,908,423. Loan originations for the six month period were
approximately $17,600,000 but were more than offset by
significant prepayments.
Total liabilities decreased by $2,062,000 to $127,346,000 at
June 30, 1999. The decrease is due to the repayment of
$3,500,000 of Advances from the Federal Home Loan Bank.
Stockholders' equity increased by $331,000 from $21,547,000 at
December 31, 1998 to $21,878,000 at June 30, 1999. This
increase is due to net income of $808,000 for the six months
ended June 30, 1999. This was offset by quarterly dividends of
$.32 per share or $400,113 in the aggregate and an increase in
unrealized loss on securities available for sale of $77,000.
Asset Quality
- -------------
At June 30, 1999, the Corporation had approximately $712,000 of
loans in nonaccrual status as compared to $841,000 at December
31, 1998 and $902,000 at June 30, 1998. At June 30, 1999 and
December 31, 1998, the Corporation had no loans that were
considered to be impaired under Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan". There were no loans contractually past
due 90 days or more and still accruing interest at June 30, 1999
and December 31, 1998. In the opinion of management, there are
no other loans which cause management to have serious doubts as
to the ability of such borrowers to comply with the present
repayment terms and thus resulting in such loans becoming
classified as problem assets. The Corporation's allowance
for loan losses was $778,547 or .71% of outstanding loans at
June 30, 1999. This compares to $758,547 or .68% at December
31, 1998.
The allowance for loan losses represents management's estimate
of an amount adequate to provide for probable losses inherent in
the loan portfolio. The adequacy of the allowance for loan
losses and the related provision are based upon management's
evaluation of the risk characteristics of the loan portfolio
under current economic conditions with consideration to such
factors as financial condition of the borrower, collateral
values, growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding
loans, and delinquency trends. Management believes the
allowance for loan losses is adequate. While management uses
all available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in
economic conditions. Various regulatory agencies, as an
integral part of their examination process, periodically review
the Corporation's allowance for loan losses. Such agencies may
13 (Continued)
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<PAGE>
require the Corporation to recognize additions to the allowance
based on their judgments about information available to them at
the time of their examination.
Proposed Merger
- ---------------
On August 5, 1999, the Corporation entered into an Agreement and
Plan of Merger ("the Agreement") with Century South Banks, Inc.
("Century South"). Century South is a bank holding company
headquartered in Dahlonega, Georgia with assets of approximately
$1.1 billion at June 30, 1999. Under the terms of the
Agreement, each outstanding share of the Corporation would be
converted into the right to receive .8874 shares of common stock
subject to adjustment based upon the average closing price for
the Century South common stock for a 20 day period preceding the
closing of the transaction. Subject to certain limitations,
stockholders may elect to receive cash in lieu of shares of
Century South common stock. In connection with the execution of
the Agreement, the Corporation and Century South entered into a
Stock Option Agreement pursuant to which the Corporation granted
Century South an option to purchase up to 19.9% of the
outstanding shares of Common Stock. The option is only
exercisable in certain circumstances. The merger is expected to
be finalized in the first quarter of 2000 and is subject to a
number of conditions, including approval by regulatory
authorities and the stockholders of the Corporation.
Year 2000 Readiness Disclosure
- ------------------------------
The Corporation recognizes and is addressing the potentially
severe implications of the "Year 2000 Issue." The "Year 2000
Issue" is a general term used to describe the various problems
that may result from the improper processing of dates and
date-sensitive calculations as the Year 2000 approaches. This
issue is caused by the fact that many of the world's existing
computer programs use only two digits to identify the year in
the date field of a program. These programs were designed and
developed without considering the impact of the upcoming change
in the century and could experience serious malfunctions when
the last two digits of the year change to "00" as a result of
identifying a year designated "00" as the year 1900 rather than
the year 2000. This misidentification could prevent the
Corporation from being able to engage in normal business
operations, including, among other things, miscalculating
interest accruals and the inability to process customer
transactions.
The Corporation's Board of Directors has approved a Year 2000
Plan that was developed in accordance with guidelines set forth
by the Federal Financial Institutions Examination Council. This
plan has three primary phases related to internal Year 2000
compliance.
The first phase of the Corporation's efforts to address the Year
2000 Issue was to inventory all known Corporation processes that
could reasonably be expected to be impacted by the Year 2000
Issue and their related vendors, if applicable. This phase is
complete, although it is periodically updated as necessary.
The Corporation's second phase in addressing the Year 2000 Issue
was to contact all third party vendors, request documentation
regarding their Year 2000 compliance efforts, and analyze the
responses. This was a significant phase because the Corporation
does not perform in-house programming, and thus is dependent on
external vendors to ensure and modify, if necessary, the
hardware, software, or service it provides to the Corporation to
be Year 2000 compliant. This phase is now virtually complete
and the Corporation is currently following up on any issues or
concerns identified in the responses received, as necessary.
The next phase for the Corporation under the plan is to complete
a comprehensive testing of all known processes. The most
significant phase of testing is the testing of the Corporation's
mainframe computer system, teller terminals and core software
applications. The Corporation installed a new mainframe
computer system and teller terminals in September 1998 that are
Year 2000 compliant. Both systems were tested in September
1998. Upgrades of the core software applications currently used
by the Corporation were received from the software vendor in
September and were represented to be Year 2000 compliant by the
vendor. These
14 (Continued)
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<PAGE>
applications were successfully loaded onto the Corporation's
hardware system in September and Year 2000 testing was also
completed immediately after installation.
Another part of the Corporation's Year 2000 plan is to assess
the Year 2000 readiness of its significant borrowers and
depositors. Through the use of questionnaire's and personal
contacts, the Corporation is in the process of assessing the
Year 2000 readiness of significant borrowers and depositors of
the Corporation. Since the majority of the loans are to
individuals and secured by one to four family residences this
step is not expected to require a significant amount of time or
resources.
The Corporation has estimated the total costs to address the
Year 2000 Issue to be approximately $202,000. Approximately
$117,500 of these costs related to the installation of the
mainframe computer system and were capitalized in accordance
with the Corporation's capitalization policy. Year 2000 project
costs incurred and expensed during the year ended December 31,
1998 were approximately $149,000. There were $12,000 Year 2000
project costs incurred and expensed during the six months ended
June 30, 1999. Funding of the Year 2000 project costs will come
from normal operating cash flow, however the expenses associated
with the Year 2000 Issue will directly reduce otherwise reported
net income for the Corporation.
Management of the Corporation believes that the potential
effects on the Corporation's internal operations of the Year
2000 Issue can and will be addressed prior to the Year 2000.
However, if required modifications or conversions are not made
or are not completed on a timely basis prior to the Year 2000,
the Year 2000 Issue could disrupt normal business operations.
The most reasonably likely worst case Year 2000 scenarios
foreseeable at this time would include the Corporation
temporarily not being able to process, in some combination,
various types of customer transactions. This could affect the
ability of the Corporation to, among other things, originate new
loans, post loan payments, accept deposits or allow immediate
withdrawals, and, depending on the amount of time such a
scenario lasted, could have a material adverse effect on the
Corporation. Because of the serious implications of these
scenarios, the primary emphasis of the Corporation's Year 2000
efforts is to correct, with complete replacement if necessary,
any systems or processes whose Year 2000 test results are not
satisfactory prior to the Year 2000. Nevertheless, should one
of the most reasonably likely worst case scenarios occur in the
Year 2000, the Corporation is also in the process of formalizing
a contingency plan that would allow for limited transactions,
including the ability to make certain deposit withdrawals, until
the Year 2000 problems are fixed.
The costs of the Year 2000 project and the date on which the
Corporation plans to complete Year 2000 compliance are based on
management's best estimates, which were derived using numerous
assumptions of future events such as the availability of certain
resources (including internal and external resources), third
party vendor plans and other factors. However, there can be no
guarantee that these estimates will be achieved at the cost
disclosed or within the time frame indicated, and actual results
could differ materially from these plans. Factors that might
affect the timely and efficient completion of the Corporation's
Year 2000 project include, but are not limited to, vendors'
abilities to adequately correct or convert software and the
effect on the Corporation's ability to test its systems, the
availability and cost of personnel trained in the Year 2000
area, the ability to identify and correct all relevant computer
programs and similar uncertainties.
Liquidity
- ---------
The Corporation's asset-liability management policy is to
maintain and enhance the net interest income and provide
adequate liquidity to meet continuing loan demand, withdrawal
requirements, and pay for normal operating expenses. Liquidity
is primarily provided by the ability to attract deposits,
maturities in the investment portfolio, loan repayments, and
current earnings.
15 (Continued)
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<PAGE>
At June 30, 1999, Haywood Bancshares had approximately $34.5
million in cash, interest bearing balances in other banks,
federal funds sold and investment securities. Management
believes that the level of liquidity at June 30, 1999, is
adequate and in compliance with regulatory requirements.
Impact of Inflation and Changing Prices
- ---------------------------------------
The consolidated financial statements and accompanying footnotes
have been prepared in accordance with generally accepted
accounting principles, which require the measurement of
financial position and operating results in terms of historical
dollars without consideration for changes in the relative
purchasing power of money over time due to inflation. The
assets and liabilities of the Corporation are primarily monetary
in nature and changes in interest rates have a greater impact on
the Corporation's performance than the effect of inflation.
Capital Resources
- -----------------
As a North Carolina-chartered savings bank, Haywood Savings is
subject to the capital requirements of the FDIC and the N.C.
Administrator of Savings Institutions ("the Administrator").
The FDIC requires Haywood Savings to maintain minimum ratios of
Tier I capital to total risk-weighted assets and total capital
to risk-weighted assets of 4% and 8%, respectively. To be well-
capitalized, the FDIC requires ratios of Tier I capital to total
risk-weighted assets and total capital to risk-weighted assets
of 6% and 10%, respectively. Tier I capital consists of total
stockholders' equity calculated in accordance with generally
accepted accounting principles less intangible assets, and total
capital is comprised of Tier I capital plus certain adjustments,
the only one of which is applicable to Haywood Savings is the
allowance for loan losses. Risk-weighted assets reflect Haywood
Savings' on- and off-balance sheet exposures after such
exposures have been adjusted for their relative risk levels
using formulas set forth in FDIC regulations. Haywood Savings
is also subject to a leverage capital requirement, which calls
for a minimum ratio of Tier I capital (as defined above) to
quarterly average total assets of 3%, and a ratio of 5% to be
"well capitalized." The Administrator requires a net worth
equal to at least 5% of assets. At June 30, 1999, Haywood
Savings was in compliance with all of the aforementioned capital
requirements and is deemed to be "well capitalized". The
Corporation must comply with FRB capital requirements which are
substantially the same.
Regulatory Matters and Contingencies
- ------------------------------------
Management is not presently aware of any current recommendations
to the Corporation or to Haywood Savings by regulatory
authorities which, if they were to be implemented, would have a
material effect on the Corporation's liquidity, capital
resources, or operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not Applicable.
16 (Continued)
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On April 27, 1999, the Company held its Annual Meeting
of Stockholders at which the following matters
were voted:
Proposal I Election of Directors
NOMINEE FOR WITHHELD
------- --- --------
Larry R. Ammons 1,045,013 14,900
Glenn W. Brown 1,045,013 14,900
G. D. Stovall, Jr. 1,045,013 14,900
William P. Burgin 1,045,013 14,900
There were no abstentions or broker non-votes.
The terms of office of Directors R. Neal Ensley, Joseph
E. Taylor, Jr., C. Leon Turner, Philip S. Dooly, C. Jeff
Reece, Jr. and R. Bruce Norman continued after the
Annual meeting.
Proposal II -- Ratification of Appointment of Auditors
FOR AGAINST ABSTAIN
--- ------- -------
1,045,013 14,900 --
In addition, there were no broker non-votes.
ITEM 5. OTHER INFORMATION
On August 5, 1999, the Corporation entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Century South
Banks, Inc. ("CSBI"), a Georgia corporation, and HBI Acquisition
Corp. ("HBI"), a wholly owned subsidiary of CSBI, pursuant to
which HBI will merge with and into the Corporation (the
"Merger"). As a result of the Merger, each outstanding share of
Haywood common stock, par value $1.00 per share ("Haywood Common
Stock"), will be converted into the right to receive .8874
shares (the "Exchange Ratio") of common stock of CSBI, par value
$1.00 per share ("CSBI Common Stock"). The Exchange Ratio is
subject to adjustment in certain circumstances if the Valuation
Period Market Value of the CSBI Common Stock (defined as the
average of the closing sales prices for CSBI Common Stock as
reported on the Nasdaq National Market for the 20 consecutive
trading day period ending on the last calendar day immediately
prior to the anticipated effective date of the Merger) is below
$24.00 or above $27.00, or if Haywood's stockholders' equity (as
of the month end immediately prior to the effective date, as
adjusted in accordance with the Merger Agreement) is less than
$21,000,000. In certain circumstances stockholders may elect to
receive cash in lieu of shares of CSBI Common Stock. The Merger
is conditioned upon, among other things, approval by holders of
a majority of Haywood Common Stock and the receipt of certain
regulatory and governmental approvals. For more information,
reference is made to the Merger Agreement attached as Exhibit
2.1 hereof.
Concurrently with the execution and delivery of the Merger
Agreement, the Corporation and CSBI entered into a stock option
agreement (the "Stock Option Agreement") pursuant to which the
Corporation granted CSBI the right, upon the terms and subject
to the conditions set forth in the Stock Option Agreement, to
purchase up to 249,946 shares (or 19.9%) of Haywood Common Stock
at a price of $16.30 per share, subject to certain adjustments.
For more information, reference is made to the Stock Option
Agreement attached as Exhibit 2.2.
17 (Continued)
<PAGE>
<PAGE>
For more information, a copy of a Press Release, dated August 5,
1999, issued by Haywood and CSBI relating to the Merger is
attached as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are being filed with
the report.
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger, dated as
of August 5, 1999, by and between
Haywood Bancshares, Inc. and Century
South Banks, Inc.
2.2 Stock Option Agreement, dated as of
August 5, 1999, by and between Haywood
Bancshares, Inc. and Century South
Banks, Inc.(incorporated by reference
to Exhibit A to the Agreement and Plan
of Merger filed as Exhibit 2.1)
27 Financial Data Schedule (EDGAR only)
99.1 Haywood Bancshares, Inc. Press Release
dated August 5, 1999
(b) Reports on Form 8-K. During the quarter ended June
30, 1999, the Registrant did not file any reports on
Form 8-K.
18 (Continued)
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<PAGE>
<PAGE>
SIGNATURES
----------
Under the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HAYWOOD BANCSHARES, INC.
(Registrant)
Date: August 12, 1999 By: /s/Larry R. Ammons
----------------------
Larry R. Ammons
(President and Principal
Executive Officer)
(Duly Authorized Representative)
Date: August 12, 1999 By: /s/Jack T. Nichols
----------------------
Jack T. Nichols
(Principal Financial Officer
and Principal Accounting Officer)
19
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is
made and entered into as of August 5, 1999 by and among Haywood
Bancshares, Inc. ("Haywood"), a corporation organized and
existing under the Laws of the State of North Carolina, with its
principal office located in Waynesville, North Carolina, Century
South Banks, Inc. ("CSBI"), a corporation organized and existing
under the Laws of the State of Georgia, with its principal
office located in Dahlonega, Georgia and HBI Acquisition Corp.
("HAC"), a corporation organized and existing under the Laws of
the State of North Carolina with its principal office located in
Waynesville, North Carolina and a wholly owned subsidiary of
CSBI.
PREAMBLE
The Boards of Directors of Haywood and CSBI are of the
opinion that the transaction described herein is in the best
interest of the parties and their respective shareholders. This
Agreement provides for the merger of HAC with and into Haywood
such that Haywood will become a wholly owned subsidiary of CSBI
(the "Merger"). At the Effective Time of the Merger, the
outstanding shares of the capital stock of Haywood shall be
converted into the right to receive shares of the common stock
of CSBI (except as provided herein). As a result, shareholders
of Haywood shall become shareholders of CSBI. The transaction
described in this Agreement is subject to the approvals of the
shareholders of Haywood and HAC, applicable Regulatory
Authorities and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties
to this Agreement that the Merger for federal income tax
purposes shall qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code. In connection
with the execution of this Agreement, Haywood and CSBI will
enter into a stock option agreement (the "Stock Option
Agreement") in the form attached hereto as Exhibit A.
Immediately following the Closing of the Merger, Haywood
Savings Bank, Inc., SSB ("Bank"), a North Carolina-chartered
savings bank, Great Smokies Financial Corporation, a North
Carolina corporation, and Great Smokies Insurance Agency, Inc.,
a North Carolina corporation, each a wholly-owned subsidiary of
Haywood, with their main offices located in Waynesville, North
Carolina, will remain in existence under their respective
Articles of Incorporation and Bylaws, as in effect immediately
prior to the Effective Time, as wholly-owned subsidiaries of
Haywood.
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:
<PAGE>
<PAGE>
ARTICLE 1
TRANSACTION AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, HAC shall be merged with and
into Haywood in accordance with the provisions of Section
55-11-05 of the NCBCA and with the effect provided in Section
55-11-06 of the NCBCA. Haywood shall be the Surviving
Corporation resulting from the Merger as a wholly owned
subsidiary of CSBI, and the separate existence of HAC shall
cease. The Merger shall be consummated pursuant to the terms of
this Agreement, which has been approved and adopted by the
respective Boards of Directors of Haywood, HAC and CSBI.
1.2 Time and Place of Closing. The Closing will take
place at 9:30 a.m. on the date that the Effective Time occurs
(or the immediately preceding day if the Effective Time is
earlier than 9:30 a.m.), or at such other time as the Parties,
acting through their Chief Executive Officers, may mutually
agree. The place of Closing shall be at the offices of Troutman
Sanders LLP, Atlanta, Georgia, or such other place as may be
mutually agreed upon by the Parties.
1.3 Effective Time. The Merger contemplated by this
Agreement shall become effective on the date and at the time the
Articles of Merger reflecting the Merger shall become effective
with the Secretary of State of the State of North Carolina.
Subject to the terms and conditions hereof, unless otherwise
mutually agreed upon in writing by the Chief Executive Officers
of each Party, the Parties shall use their reasonable efforts to
cause the Effective Time to occur on the last business day of
the month in which occurs the last to occur of (i) the effective
date (including expiration of any applicable waiting period) of
the last required Consent of any Regulatory Authority having
authority over and approving or exempting the Merger, (ii) the
date on which the shareholders of Haywood approve this
Agreement, or (iii) such later date as may be mutually agreed
upon in writing by the Chief Executive Officers of each Party.
1.4 Execution of Support and Non Competition Agreements.
Immediately prior to the execution of this Agreement and as a
condition hereto, each of the executive officers and directors
of Haywood and Bank listed in Exhibit E is executing and
delivering to CSBI a Support Agreement and Non Competition
Agreement in substantially the form as attached hereto as
Exhibit B.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of
Incorporation of Haywood in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Haywood in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until otherwise amended or repealed.
2.3 Directors and Officers of Haywood and Bank. The
directors of Haywood and Bank in office prior to the Effective
Time may continue, at their discretion, to serve as directors
2
<PAGE>
<PAGE>
of the Surviving Corporation and Bank for a period of the later
of their attaining age 70 or five years after the Closing but in
no event later than any individual's 75th birthday. The
directors will receive directors' fees in the amount of $400 per
month for their combined service to Haywood and Bank. The
officers of Haywood immediately prior to the Effective Time
shall become officers of the Surviving Corporation.
2.4 Directors and Officers of CSBI and HAC. The directors
and officers of CSBI in office immediately prior to the
Effective Time shall serve as the officers and directors of CSBI
from and after the Effective Time in accordance with the Bylaws
of CSBI. The directors of HAC in office immediately prior to
the Effective Time shall become additional directors of the
Surviving Corporation from and after the Effective Time until
their successors shall have been duly elected and qualified or
until their earlier death, resignation or removal in accordance
with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES AND OPTIONS
3.1 Conversion of Shares. Subject to the provisions of
this Agreement, at the Effective Time, by virtue of the Merger
and without any action on the part of the holders thereof, the
shares of the constituent corporations shall be converted as
follows:
(a) Each share of CSBI Common Stock issued and
outstanding immediately prior to the Effective Time shall remain
issued and outstanding from and after the Effective Time.
(b) Subject to adjustment as outlined below and as
set forth in Section 3.4 of this Agreement, the election rights
set forth in Section 3.2 of this Agreement, the allocation
provisions set forth in Section 3.3 of this Agreement and the
conditions set forth herein, each share of Haywood Common Stock
issued and outstanding at the Effective Time shall be converted
into .8874 shares (the "Exchange Ratio") of CSBI Common Stock
(the "Per Share Stock Consideration"), provided, however, that
if (i) the Valuation Period Market Value of CSBI Common Stock is
less than $24.00 per share, then the Exchange Ratio shall be
increased by an amount equal to the product of (A) the Exchange
Ratio multiplied by (B) the quotient of the difference between
$24.00 less the Valuation Period Market Value divided by the
Valuation Period Market Value or (ii) the Valuation Period
Market Value of CSBI Common Stock is greater than $27.00 per
share, then the Exchange Ratio shall be decreased by an amount
equal to the product of (A) the Exchange Ratio multiplied by (B)
the quotient of the difference between the Valuation Period
Market Value less $27.00, divided by the Valuation Period Market
Value.
(c) Subject to adjustment as outlined above and as
set forth in Section 3.4 of this Agreement, the election rights
set forth in Section 3.2 of this Agreement, the allocation
provisions set forth in Section 3.3 of this Agreement and the
conditions set forth herein, each share of Haywood Common Stock
(excluding shares held by CSBI or any of its Subsidiaries or by
Haywood, in each case other than in a fiduciary capacity or as a
result of debts previously contracted) issued and outstanding at
the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive the Per
Share Stock Consideration.
3
<PAGE>
<PAGE>
3.2 Cash Election. Notwithstanding the foregoing, Holders
of Haywood Common Stock who beneficially own less than 100
shares shall receive cash consideration in lieu of receiving
CSBI Common Stock in the Merger. In addition, all other holders
of Haywood Common Stock may elect to receive cash consideration
in lieu of receiving CSBI Common Stock in accordance with the
election procedures set forth below in this Section 3.2.
Holders who are to receive cash in lieu of exchanging their
shares of Haywood Common Stock for CSBI Common Stock as
specified below shall receive an amount in cash (the "Per Share
Cash Consideration") in respect of each share of Haywood Common
Stock that is so converted equal to the Exchange Ratio (subject
to adjustment of the Exchange Ratio as set forth in Section
3.1(b) of this Agreement) and the product of the Valuation
Period Market Value. For purposes of this Agreement:
(i) "Valuation Period Market Value" shall mean the
average of the closing sales prices for CSBI Common Stock as
reported on the NASDAQ (as reported in The Wall Street Journal
or, in the absence thereof, by another authoritative source)
during the Valuation Period; and
(ii) "Valuation Period" shall mean the 20 consecutive
trading day period during which the shares of CSBI Common Stock
are traded on the NASDAQ ending on the 10th calendar day
immediately prior to the anticipated Effective Time.
An election form and other appropriate and customary
transmittal materials ("Election Form") (which shall specify
that delivery shall be effected, and risk of loss and title to
the certificates theretofore representing Haywood Common Stock
("Old Certificates")) shall pass, only upon proper delivery of
such Old Certificates to an exchange agent designated by CSBI
(the "Exchange Agent") shall be mailed together with the Proxy
Statement on such date as Haywood and CSBI shall mutually agree
("Mailing Date") to each holder of record of Haywood Common
Stock as of the record date for eligibility to vote at the
Special Meeting.
Each Election Form shall permit a holder (or the beneficial
owner through appropriate and customary documentation and
instructions) of Haywood Common Stock to elect to receive cash
with respect to all or a portion of such holder's Haywood Common
Stock (shares as to which the election is made being "Cash
Election Shares"). The "Cash Election Amount" shall be equal to
the Per Share Cash Consideration multiplied by the total number
of Cash Election Shares. Shares as to which the holder (or
beneficial owner elects to receive the Per Share Stock
Consideration (if eligible to so elect) are referred to herein
as "Stock Election Shares."
Any share of Haywood Common Stock with respect to which the
holder (or the beneficial owner, as the case may be) shall not
have submitted to the Exchange Agent an effective, properly
completed Election Form on or before 5:00 p.m. on the 20th day
following the Mailing Date (the "Election Deadline") shall be
converted either into the Per Share Stock consideration or the
Per Share Cash Consideration at the election of CSBI (such
shares being "No Election Shares") with the exception that
shares held by a holder of less than 100 shares shall be deemed
to be Cash Election Shares.
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CSBI shall make available one or more Election Forms as may
be reasonably requested by all persons who become holders (or
beneficial owners) of Haywood Common Stock between the Mailing
Date and the close of business on the business day prior to the
Election Deadline, and Haywood shall provide to the Exchange
Agent all information reasonably necessary for it to perform as
specified herein.
Any such election shall have been properly made only if the
Exchange Agent shall have actually received a properly completed
Election Form by the Election Deadline. An Election Form shall
be deemed properly completed only if accompanied by one or more
certificates (or customary affidavits and indemnification
regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all
shares of Haywood Common Stock covered by such Election Form,
together with duly executed transmittal materials included in
the Election Form. Any Election Form may be revoked or changed
by the person submitting such Election Form at or prior to the
Election Deadline. In the event an Election Form is revoked
prior to the Election Deadline, the shares of Haywood Common
Stock represented by such Election Form shall become No Election
Shares and CSBI shall cause the certificates representing
Haywood Common Stock to be promptly returned without charge to
the person submitting the Election Form upon written request to
that effect from the person who submitted the Election Form.
Subject to the terms of this Agreement and of the Election Form,
the Exchange Agent shall have reasonable discretion to determine
whether any election, revocation or change has been properly or
timely made and to disregard immaterial defects in the Election
Forms, and any good faith decisions of the Exchange Agent
regarding such matters shall be binding and conclusive. Neither
CSBI nor the Exchange Agent shall be under any obligation to
notify any person of any defect in an Election Form.
3.3 Allocation. Within five business days after the
Election Deadline, unless the Effective Time has not yet
occurred, in which case as soon thereafter as practicable, CSBI
shall cause the Exchange Agent to effect the allocation among
the holders of Haywood Common Stock so that 50% of the aggregate
consideration paid in exchange for shares of Haywood Common
Stock in the Merger (the "Total Merger Consideration") shall be
paid in CSBI Common Stock (the "Stock Amount") and 50% of the
Total Merger Consideration shall be paid in cash (the "Cash
Amount"). The allocation shall be effected by the Exchange
Agent as follows:
(i) If the Cash Amount is greater than the Cash
Election Amount, then:
(a) each Cash Election Share shall be converted
into the right to receive an amount of cash equal to the Per
Share Cash Consideration;
(b) the Exchange Agent will select, on a pro
rata basis, first from among the holders of No Election Shares
and then, if necessary, from among the holders of Stock Election
Shares, a sufficient number of such shares ("Cash Designee
Shares") such that the sum of Cash Designee Shares and Cash
Election Shares multiplied by the Per Share Cash Consideration
equals as closely as practicable the Cash Amount (each Cash
Designee Share shall be converted into the right to receive an
amount of cash equal to the Per Share Cash Consideration); and
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(c) any Stock Election Shares and any No
Election Shares, in each case, not so selected as Cash Designee
Shares shall be converted into the right to receive the Per
Share Stock Consideration.
(ii) If the Cash Amount is less than the Cash Election
Amount, then:
(a) each Stock Election Share and each No
Election Share shall be converted into the right to receive the
Per Share Stock Consideration;
(b) the Exchange Agent will select, on a pro
rata basis from among the holders of Cash Election Shares, a
sufficient number of such shares ("Stock Designee Shares") such
that the number of Stock Designee Shares multiplied by the Per
Share Cash Consideration equals as closely as practicable the
difference between the Cash Election Amount and the Cash Amount
(the Stock Designee Shares shall be converted into the right to
receive the Per Share Stock Consideration); and
(c) any Cash Election Shares not so selected
as Stock Designee Shares shall be converted into the right to
receive an amount of cash equal to the Per Share Cash
Consideration.
In the event that the Exchange Agent is required pursuant
to this Section 3.3 to designate from among all Stock Election
Shares the Cash Designee Shares to receive cash, each holder of
Stock Election Shares shall be allocated a pro rata portion of
the remainder of the total Cash Designee Share less the number
of No Election Shares which are Cash Designee Shares. Such
proration shall reflect the proportion that the number of Stock
Election Shares of each holder of Stock Election Shares bears to
the total number of Stock Election Shares. In the event the
Exchange Agent is required pursuant to this Section 3.3 to
designate from among all holders of Cash Election Shares the
Stock Designee Shares to receive the Per Share Stock
Consideration, each holder of Cash Election Shares shall be
allocated a pro rata portion of the total Stock Designee Shares.
Such proration shall reflect the proportion that the number of
Cash Election Shares of each holder of Cash Election Shares
bears to the total number of Cash Election Shares.
Notwithstanding anything to the contrary contained in this
Section 3.3, CSBI may at CSBI's sole discretion, waive the
maintenance of the Cash Amount if the difference between the
Cash Amount and the aggregate amount of cash elected by holders
of Haywood Common Stock, including the cash paid for fractional
shares is less than 10% of the Cash Amount.
3.4 Adjustment to Exchange Ratio. In the event that
Haywood's consolidated shareholders' equity (as determined
below) is less than $21,000,000, there shall be an adjustment to
the Exchange Ratio. In such event, the Exchange Ratio shall be
adjusted by multiplying it by a fraction the numerator of which
is Haywood's consolidated shareholders' equity (as determined
below) and the denominator of which is $21,000,000. The
determination of Haywood's consolidated shareholders' equity, as
adjusted, shall be based on Haywood's consolidated balance sheet
prepared in accordance with GAAP dated as of the end of the
month immediately preceding the Effective Time, including (i)
all normal and recurring adjustments necessary in accordance
with GAAP; (ii) all adjustments necessary to record obligations
with respect to
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benefit obligations of Haywood or any of its subsidiaries under
its employment agreements, deferred compensation agreements,
directors' retirement plan, severance plan, and retention bonus
plan assuming a change in control triggering event; (iii) all
adjustments necessary to record estimated obligations payable by
Haywood or any of its subsidiaries upon the termination of its
defined benefit
pension plan; and (iv) all accruals and liabilities for fees and
expenses of consultants, attorneys, accountants and the like in
connection with the Merger and the due diligence conducted by
Haywood in regard to the Merger other than (x) the fees to be
paid to Trident , (y) the direct costs associated with printing
and mailing of the Proxy Statement, and (z) any costs, fees and
expenses reasonably and directly incurred by Haywood and Bank in
connection with any charter conversion by Bank.
3.5 Anti-Dilution Provisions. In the event Haywood or
CSBI changes the number of shares of Haywood Common Stock or
CSBI Common Stock, respectively, issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend
or similar recapitalization with respect to such stock and the
record date therefor (in the case of a stock dividend) or the
effective date therefor (in the case of a stock split or similar
recapitalization) shall be prior to the Effective Time, the
Total Merger Consideration shall be proportionately adjusted.
3.6 Shares Held by Haywood or CSBI. Each of the shares of
Haywood Common Stock held by Haywood or by any CSBI Companies,
in each case other than in a fiduciary capacity or as a result
of debts previously contracted, shall be canceled and retired at
the Effective Time, and no consideration shall be issued in
exchange therefor.
3.7 Fractional Shares. Notwithstanding any other
provision of this Agreement, each holder of shares of Haywood
Common Stock exchanged pursuant to the Merger, who would
otherwise have been entitled to receive a fraction of a share of
CSBI Common Stock (after taking into account all Old
Certificates delivered by such holder), shall receive, in lieu
thereof, cash (without interest) in an amount equal to such
fractional part of a share of Haywood Common Stock multiplied by
the market value of one share of CSBI Common Stock at the
Effective Time. The market value of one share of CSBI Common
Stock at the Effective Time shall be the last sales price of the
CSBI Common Stock on NASDAQ on the last business day preceding
the Effective Time. No such holder will be entitled to
dividends, voting rights or any other rights as a shareholder in
respect of any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. (a) Immediately prior to the
Effective Time, CSBI shall deposit, or shall cause to be
deposited, with the Exchange Agent, for the benefit of the
holders of Old Certificates for exchange in accordance with this
Article 4, certificates representing the shares of CSBI Common
Stock ("New Certificates") and an estimated amount of cash (such
cash and New Certificates, together with any dividends or
distributions with respect thereto (without any interest
thereon), being hereinafter referred to as the "Exchange Fund")
to be paid pursuant to this Article 4 in exchange for
outstanding shares of Haywood Common Stock.
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(b) Within 20 days after the Effective Date, CSBI
shall send or cause to be sent to each former holder of record
of shares (other than Cash Election Shares or Treasury Shares)
of Haywood Common Stock immediately prior to the Effective Time
transmittal materials for use in exchanging such shareholder's
Old Certificates for the consideration set forth in this Article
3. CSBI shall cause the New Certificates into which shares of a
shareholder's Haywood Common Stock are converted on the
Effective Date and/or any check in respect of the Per Share Cash
Consideration and any fractional share interests or dividends or
distributions which such person shall be entitled to receive to
be delivered to such shareholders upon delivery to the Exchange
Agent of Old Certificates representing such shares of Haywood
Common Stock (or indemnity reasonably satisfactory to CSBI and
the Exchange Agent, if any of such certificates are lost, stolen
or destroyed) owned by such shareholder. No interest will be
paid on any such cash to be paid pursuant to Article 3 upon such
delivery.
(c) Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to any
former holder of Haywood Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) No dividends or other distributions with respect
to CSBI Common Stock with a record date occurring after the
Effective Time shall be paid to the holder of any unsurrendered
Old Certificate representing shares of Haywood Common Stock
converted in the Merger into shares of such CSBI Common Stock
until the holder thereof shall surrender such Old Certificate in
accordance with this Article 4. After the surrender of an Old
Certificate in accordance with this Article 4, the record holder
thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore
had become payable with respect to shares of CSBI Common Stock
represented by such Old Certificates.
(e) Any portion of the Exchange Fund that remains
unclaimed by the shareholders of Haywood for 12 months after the
Effective Time shall be paid to CSBI. Any shareholders of
Haywood who have not theretofore complied with this Article 4
shall thereafter look only to CSBI for payment of the shares of
CSBI Common Stock, cash in lieu of any fractional shares and
unpaid dividends and distributions on the CSBI Common Stock
deliverable in respect of each share of Haywood Common Stock
such shareholder holds as determined pursuant to this Agreement,
in each case, without any interest thereon.
4.2 Rights of Former Shareholders. At the Effective Time,
the stock transfer books of Haywood shall be closed as to
holders of Haywood Common Stock immediately prior to the
Effective Time, and no transfer of Haywood Common Stock by any
such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of
Section 4.1 of this Agreement, each certificate theretofore
representing shares of Haywood Common Stock (other than shares
to be canceled pursuant to Section 3.6 of this Agreement) shall
from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Sections
3.1 and 3.2 of this Agreement in exchange therefor. To the
extent permitted by Law, former shareholders of record of
Haywood shall be entitled to vote after the Effective Time at
any meeting of CSBI shareholders the number of whole shares
of CSBI Common Stock into which their respective shares of
Haywood Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing
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Haywood Common Stock for certificates representing CSBI Common
Stock in accordance with the provisions of this Agreement.
Whenever a dividend or other distribution is declared by CSBI on
the CSBI Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or
other distributions on all shares issuable pursuant to this
Agreement, but no dividend or other distribution payable to the
holders of record of CSBI Common Stock as of any time subsequent
to the Effective Time shall be delivered to the holder of any
certificate representing shares of Haywood Common Stock issued
and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section
4.1 of this Agreement. However, upon surrender of such Haywood
Common Stock certificate, both the CSBI Common Stock certificate
(together with all such undelivered dividends or other
distributions without interest) and any undelivered cash
payments to be paid for fractional share interests (without
interest) shall be delivered and paid with respect to each share
represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF HAYWOOD
Haywood hereby represents and warrants to CSBI and HAC as
follows:
5.1 Organization, Standing and Power. Haywood is a
corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina and is
duly registered as a bank holding company under the BHC Act.
Haywood has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its
Assets. Neither Haywood nor any Subsidiary owns any property or
conducts any business outside of the State of North Carolina
which would require any of them to be qualified as a foreign
corporation in any jurisdiction except for such jurisdictions in
which the failure to be so qualified is not reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect on Haywood.
5.2 Authority; No Breach By Agreement.
(a) Haywood has the corporate power and authority
necessary to execute, deliver and perform its obligations under
this Agreement and, subject to approval by its stockholders, to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated herein, including the Merger,
have been duly and validly authorized by all necessary corporate
action in respect thereof on the part of Haywood, subject to the
approval of this Agreement by the holders of at least a majority
of the outstanding shares of Haywood Common Stock, which is the
only shareholder vote required for approval of this Agreement
and consummation of the Merger by Haywood. Subject to such
requisite shareholder approval and Consents of applicable
Regulatory Authorities, this Agreement represents a legal, valid
and binding obligation of Haywood, enforceable against Haywood
in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting
the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific performance
or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
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(b) Except as Previously Disclosed, neither the
execution and delivery of this Agreement by Haywood nor the
consummation by Haywood of the transactions contemplated hereby,
nor compliance by Haywood with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of
Haywood's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on either
Haywood or any Subsidiary or all of them under, any Contract or
Permit of either Haywood or any Subsidiary or all of them, where
such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Haywood, or (iii) subject to receipt
of the requisite approvals referred to in Section 9.1(a) and (b)
of this Agreement, violate any Law or Order applicable to either
Haywood or Bank or both or any of their respective Material
Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate ,
banking and securities Laws and rules of the AMEX, and other
than Consents required from Regulatory Authorities, and other
than notices to or filings with the IRS or the Pension Benefit
Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not
obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
Haywood no notice to, filing with or Consent of, any public body
or authority is necessary for the consummation by Haywood of the
Merger and the other transactions contemplated in this
Agreement.
5.3 Capital Stock and Other Securities.
(a) The authorized capital stock of Haywood consists
of 5,000,000 shares of Haywood Preferred Stock and 10,000,000
shares of Haywood Common Stock. As of the date of this
Agreement, there are no shares of Haywood Preferred Stock
outstanding and 1,250,356 shares of Haywood Common Stock issued
and outstanding. No more than 1,250,356 shares of Haywood Common
Stock will be issued and outstanding at the Effective Time. All
of the issued and outstanding shares of capital stock of Haywood
are duly and validly issued and outstanding and are fully paid
and nonassessable under the NCBCA. None of the outstanding
shares of capital stock of Haywood has been issued in violation
of any preemptive rights of the current or past shareholders of
Haywood. There are no outstanding Haywood Options that have
been granted and are unexercised.
(b) Except as set forth in Section 5.3(a) of this
Agreement or there are no shares of capital stock or other
equity securities of Haywood outstanding and no outstanding
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for,
shares of the capital stock of Haywood or contracts,
commitments, understandings or arrangements by which
Haywood is or may be bound to issue additional shares of its
capital stock or options, warrants or rights to purchase or
acquire any additional shares of its capital stock.
5.4 Haywood's Subsidiaries. Haywood has the following
subsidiaries: (i) Bank; (ii) Great Smokies Financial
Corporation; and (iii) Great Smokies Insurance Agency, Inc.
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5.5 SEC Filings; Financial Statements.
(a) Haywood has filed and made available to CSBI all
forms, reports and documents required to be filed by Haywood
with the SEC since December 31, 1995 (collectively, the "Haywood
SEC Reports"). The Haywood SEC Reports (i) at the time filed,
complied in all Material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may
be, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of
a Material fact or omit to state a Material fact required to be
stated in such Haywood SEC Reports or necessary in order to make
the statements in such Haywood SEC Reports, in light of the
circumstances under which they were made, not misleading. Except
for Haywood Subsidiaries that are registered as a broker, dealer
or investment advisor or filings due to fiduciary holdings of
the Haywood Subsidiaries, none of the Haywood Subsidiaries is
required to file any forms, reports or other documents with the
SEC;
(b) Haywood has Previously Disclosed, and delivered
to CSBI prior to the execution of this Agreement, copies of all
Haywood Financial Statements for periods ended prior to the date
hereof and will deliver to CSBI copies of all Haywood Financial
Statements prepared subsequent to the date hereof. The Haywood
Financial Statements (as of the dates thereof and for the
periods covered thereby) (i) are or will be, if dated after the
date of this Agreement, in accordance with the books and records
of Haywood, which are or will be, materially complete and
correct and which have been or will have been maintained in
accordance with good business practices, and (ii) present or
will present fairly the financial position of Haywood as of the
dates indicated and the results of operations, changes in
shareholders' equity and cash flows of Haywood for the periods
indicated, in accordance with GAAP (subject to any exceptions as
to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements,
to normal recurring year-end adjustments that are not Material).
5.6 Absence of Undisclosed Liabilities. Neither Haywood
nor any Subsidiary has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on Haywood, except Liabilities which are accrued
or reserved against in the consolidated balance sheets of
Haywood as of December 31, 1998 and June 30, 1999 included in
the Haywood Financial Statements or reflected in the notes
thereto. Neither Haywood nor any Subsidiary has incurred or
paid any Liability since June 30, 1999, except for (i) such
Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Haywood, or (ii) in connection with
the transaction contemplated by this Agreement.
5.7 Absence of Certain Changes or Events. Since June 30,
1999, (i) there have been no events, changes or occurrences
which have had, or are reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Haywood, (ii)
neither Haywood nor any Subsidiary has taken any action, or
failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this
Agreement, would represent or result in a Material breach or
violation of any of the covenants and agreements of Haywood
provided in Article 7 of this Agreement, and (iii) Haywood and
each Subsidiary have conducted their
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respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this
Agreement and the transactions contemplated hereby).
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on
behalf of Haywood or any Subsidiary have been timely filed or
requests for extensions have been timely filed, granted and have
not expired for periods ended on or before December 31, 1998,
and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent
that all such failures to file, taken together, are not
reasonably likely to have a Material Adverse Effect on Haywood,
and all Tax Returns filed are complete and accurate in all
Material respects to the Knowledge of Haywood. All Taxes shown
on filed returns have been paid as of the date of this
Agreement, and there is no audit examination, deficiency, or
refund Litigation with respect to any Taxes that is reasonably
likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on
Haywood, except as reserved against in the Haywood Financial
Statements delivered prior to the date of this Agreement.
All Taxes and other Liabilities due with respect to completed
and settled examinations or concluded Litigation have been paid.
(b) Neither Haywood nor any Subsidiary has executed
an extension or waiver of any statute of limitations on the
assessment or collection of any Tax due that is currently in
effect, and no unpaid Tax deficiency has been asserted in
writing against or with respect to Haywood or any Subsidiary,
which deficiency is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Haywood.
(c) Adequate provision for any Taxes due or to become
due by Haywood or Bank for the period or periods through and
including the date of the respective Haywood Financial
Statements has been made and is reflected on such Haywood
Financial Statements.
(d) Deferred Taxes of Haywood and its Subsidiaries
have been provided for in accordance with GAAP. Effective
January 1, 1994, Haywood adopted Financial Accounting Standards
Board Statement 109, "Accounting for Income Taxes."
(e) Haywood and its Subsidiaries are in compliance
with, and their respective records contain all information and
documents (including, without limitation, properly completed
IRS Forms W-9) necessary to comply with, all applicable
information reporting and Tax withholding requirements under
federal, state and local Tax Laws, and such records identify
with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such
instances of noncompliance and such omissions as are not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Haywood and its Subsidiaries.
(f) Except as set forth in Schedule 5.8(f) attached
hereto, neither Haywood nor any Subsidiary has made any
payments, is obligated to make any payments or is a party to any
contract, agreement or other arrangement that could obligate it
to make any payments that would be disallowed as a deduction
under Section 280G or 162(m) of the Internal Revenue Code.
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(g) There are no Material Liens with respect to Taxes
upon any of the Assets of either Haywood or any of its
Subsidiaries except for liens for Taxes not yet due or being
contested in good faith and for which adequate provision thereof
has been made.
(h) There has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of either
Haywood or any of its Subsidiaries that occurred during or after
any Taxable Period in which either Haywood or any of it
Subsidiaries incurred a net operating loss that carries over to
any Taxable Period ending after December 31, 1996.
(i) Neither Haywood nor any of its Subsidiaries has
filed any consent under Section 341(f) of the Internal Revenue
Code concerning collapsible corporations.
(j) After the date of this Agreement, no Material
election with respect to Taxes will be made by Haywood or any of
its Subsidiaries without the prior consent of CSBI, which
consent will not be unreasonably withheld.
(k) Neither Haywood nor any of its Subsidiaries has
or has had a permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention between the
United States and such foreign country.
5.9 Allowance. The Allowance shown on the consolidated
balance sheets of Haywood included in the most recent Haywood
Financial Statements dated prior to the date of this Agreement
was, and the Allowance shown on the consolidated balance sheets
of Haywood included in the Haywood Financial Statements as of
dates subsequent to the execution of this Agreement will be, as
of the dates thereof, adequate (within the meaning of GAAP and
applicable regulatory requirements or guidelines) to provide for
losses relating to or inherent in the loan and lease portfolios
(including accrued interest receivables) of any Subsidiary and
other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by any Subsidiary as
of the dates thereof, except where the failure of such Allowance
to be so adequate is not reasonably likely to have a Material
Adverse Effect on Haywood.
5.10 Assets. Except as Previously Disclosed or as
disclosed or reserved against in the Haywood Financial
Statements, Haywood and its Subsidiaries each has good and
marketable title, free and clear of all Liens, to all of their
respective Assets. Except as set forth in Schedule 5.10
attached hereto, all Material tangible properties used in the
business of Haywood and its Subsidiaries are in good condition,
reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with Haywood's and each
Subsidiaries' past practices. All Assets which are Material to
Haywood's and its Subsidiaries' respective businesses held under
leases or subleases by either Haywood or its Subsidiaries, are
held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceedings may
be brought), and each such Contract is in full force and effect.
The policies of fire, theft, liability and other insurance
maintained with respect to the Assets or businesses of
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either Haywood or its Subsidiaries provide adequate coverage
under current industry practices against loss or Liability, and
the fidelity and blanket bonds in effect as to which any
Subsidiary is a named insured are reasonably sufficient.
Neither Haywood nor any Subsidiary has received notice from any
insurance carrier that (i) such insurance will be canceled or
that coverage thereunder will
be reduced or eliminated or (ii) premium costs with respect to
such policies of insurance will be substantially increased. The
Assets of each Subsidiary include all assets required to operate
the business of such Subsidiary as presently conducted.
5.11 Environmental Matters.
(a) To the Knowledge of Haywood, Haywood, and its
Subsidiaries, their respective Participation Facilities and Loan
Properties are, and have been, in full compliance with all
Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Haywood.
(b) There is no Litigation pending or, to the
Knowledge of Haywood, threatened before any court, governmental
agency, board, authority or other forum in which either Haywood
or any Subsidiary or any of their respective Participation
Facilities and Loan Properties has been or, with respect to
threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or
(ii) relating to the release into the environment of any
Hazardous Material, whether or not occurring at, on, under or
involving a site owned, leased or operated by either
Haywood or any Subsidiary or any of their respective
Participation Facilities and Loan Properties, except for such
Litigation pending or threatened which is not likely to have,
individually or in the aggregate, a Material Adverse Effect on
Haywood.
(c) To the Knowledge of Haywood, there is no
reasonable basis for any Litigation of a type described in
subsection (b), except such as is not likely to have,
individually or in the aggregate, a Material Adverse Effect on
Haywood.
(d) To the Knowledge of Haywood, there have been no
releases, spills or discharges of Hazardous Material or other
conditions involving Hazardous Materials in, on, under or
affecting any Participation Facility or Loan Property, except
such as are not likely to have, individually or in the
aggregate, a Material Adverse Effect on Haywood.
5.12 Compliance with Laws. Haywood is duly registered as
a bank holding company under the BHC Act. Bank is duly
chartered as a state savings bank under applicable Laws and is
an "insured depository institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and
its deposits are insured up to applicable limits by the Savings
Association Insurance Fund. Bank and its Subsidiaries have in
effect all Permits necessary for them to own, lease or operate
their respective Assets and to carry on their respective
businesses as now conducted, except for those Permits the
absence of which are not likely to have, individually or in the
aggregate, a Material Adverse Effect on Haywood or its
Subsidiaries, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect on Haywood or its Subsidiaries. Neither Haywood nor any
Subsidiary:
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(a) is in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business,
except for violations which are not likely to have, individually
or in the aggregate, a Material Adverse Effect on Haywood; and
(b) except as set forth on Schedule 5.12(b) attached
hereto, has received any notification or communication from any
agency or department of federal, state or local government or
any Regulatory Authority or the staff thereof (i) asserting that
either Haywood or Bank is not in compliance with any of the Laws
or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on either Haywood or any Subsidiary, (ii)
threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on either Haywood or any Subsidiary, or
(iii) requiring Haywood or any Subsidiary to enter into or
consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding,
or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its businesses, or in any
manner relates to their respective capital adequacy, credit or
reserve policies, management or the payment of dividends.
5.13 Labor Relations. Neither Haywood nor its Subsidiaries
is the subject of any Litigation asserting that either of them
has committed an unfair labor practice (within the meaning of
the National Labor Relations Act or comparable state Law) or
seeking to compel Haywood or its Subsidiaries to bargain with
any labor organization as to wages or conditions of employment,
nor is Haywood or its Subsidiaries a party to or bound by any
collective bargaining agreement, Contract or other agreement or
understanding with a labor union or labor organization, nor is
there any strike or other labor dispute involving either of
them, pending or threatened, nor to their respective Knowledge,
is there any activity involving Haywood's or its Subsidiaries'
employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 Employee Benefit Plans.
(a) Schedule 5.14(a) attached hereto sets forth
correct and complete copies in each case of all pension,
retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus or
other incentive plans, all other written employee programs,
arrangements or agreements, all medical, vision, dental or other
health plans, all life insurance plans and all other employee
benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in
Section 3(3) of ERISA currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by Haywood
or any Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other
beneficiaries and under which such persons are eligible to
participate (collectively, the "Haywood Benefit Plans"). Any of
the Haywood Benefit Plans which is an "employee welfare benefit
plan," as that term is defined in Section 3(l) of ERISA, or an
"employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "Haywood ERISA
Plan." Each Haywood ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code
or
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Section 3(35) of ERISA) is referred to herein as a "Haywood
Pension Plan." No Haywood Pension Plan is or has been a
"multi-employer plan" within the meaning of Section 3(37) of
ERISA. Except as set forth on Schedule 5.14(a) attached hereto,
Haywood does not, and may not ever, participate in either a
multi-employer plan or a multiple employer plan.
(b) Haywood has delivered or made available to CSBI
prior to the execution of this Agreement correct and complete
copies of the following documents: (i) all trust agreements or
other funding arrangements for such Haywood Benefit Plans
(including insurance contracts), and all amendments thereto,
(ii) with respect to any such Haywood Benefit Plans or
amendments, all determination letters, Material rulings,
Material opinion letters, Material information letters or
Material advisory opinions issued by the IRS, the United States
Department of Labor or the Pension Benefit Guaranty Corporation
after December 31, 1994, (iii) annual reports or returns,
audited or unaudited financial statements, actuarial valuations
and reports and summary annual reports prepared for any Haywood
Benefit Plan with respect to the most recent plan year, and (iv)
the most recent summary plan descriptions and any Material
modifications thereto.
(c) All Haywood Benefit Plans are in compliance with
the applicable terms of ERISA, the Internal Revenue Code, and
any other applicable Laws, the breach or violation of which are
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Haywood. Each Haywood ERISA Plan
which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination
letter from the IRS, and Haywood is not aware of any
circumstances which will or could reasonably result in
revocation of any such favorable determination letter or failure
of an Haywood ERISA Plan intended to satisfy Internal Revenue
Code Section 401 to satisfy the Tax qualification provisions of
the Internal Revenue Code applicable thereto. Neither Haywood
nor Bank has engaged in a transaction with respect to any
Haywood Benefit Plan that, assuming the Taxable Period of such
transaction expired as of the date hereof, would subject Haywood
or Bank to a Material Tax or penalty imposed by either Section
4975 of the Internal Revenue Code or Section 502(i) of ERISA in
amounts which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Haywood.
(d) Except as set forth on Schedule 5.14(d) attached
hereto, no Haywood Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of
ERISA, based on actuarial assumptions set forth for such plan's
most recent actuarial valuation, and the fair market value of
the assets of any such plan exceeds the plan's "benefit
liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal
requirements. Since the date of the most recent actuarial
valuation, there has been (i) no Material change in the
financial position or funded status of any Haywood Pension Plan,
(ii) no change in the actuarial assumptions with respect to any
Haywood Pension Plan, and (iii) no increase in benefits under
any Haywood Pension Plan as a result of plan amendments or
changes in applicable Law, any of which is reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect on Haywood or materially affect the funding status of any
such plan. Neither any Haywood Pension Plan nor any
"single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by
Haywood, or the
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single-employer plan of any entity which is considered one
employer with Haywood under Section 4001 of ERISA or Section 414
of the Internal Revenue Code or Section 302 of ERISA (whether or
not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, which is reasonably likely
to have a Material Adverse Effect on Haywood. Haywood has not
provided, and is not required to provide, security to a Haywood
Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Internal Revenue
Code. All premiums required to be paid under ERISA Section 4006
have been timely paid by Haywood, except to the extent any
failure to do so would not have a Material Adverse Effect on
Haywood.
(e) Within the six-year period preceding the
Effective Time, no Liability under Subtitle C or D of Title IV
of ERISA has been or is expected to be incurred by Haywood with
respect to any ongoing, frozen or terminated single-employer
plan or the single-employer plan of any ERISA Affiliate, which
Liability is reasonably likely to have a Material Adverse Effect
on Haywood. Except as Previously Disclosed, Haywood has not
incurred any withdrawal Liability with respect to a
multi-employer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA
Affiliate), which Liability is reasonably likely to have a
Material Adverse Effect on Haywood. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has
been required to be filed for any Haywood Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date
hereof.
(f) Except as set forth on Schedule 5.14(f) attached
hereto or as required under Title I, Part 6 of ERISA and
Internal Revenue Code Section 4980B, neither Haywood nor Bank
has any obligations to provide health and life benefits under
any of the Haywood Benefit Plans to former employees, and there
are no restrictions on the rights of Haywood to amend or
terminate any such plan without incurring any Liability
thereunder, which Liability is reasonably likely to have a
Material Adverse Effect on Haywood.
(g) Except as set forth on Schedule 5.14(g) attached
hereto, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will
(i) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute or
otherwise) becoming due to any officer, director or any employee
of Haywood from Haywood or its Subsidiaries under any Haywood
Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any Haywood Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such
benefit.
(h) Except as set forth on Schedule 5.14(h) attached
hereto, the actuarial present values of all accrued deferred
compensation entitlements (including, without limitation,
entitlements under any executive compensation, supplemental
retirement, or employment agreement) of employees and former
employees of Haywood and its respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans
subject to the provisions of Section 412 of the Internal Revenue
Code or Section 302 of ERISA, have been fully reflected on the
Haywood Financial Statements to the extent required by and in
accordance with GAAP.
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5.15 Material Contracts. Except as set forth on Schedule
5.15 attached hereto or otherwise reflected in the Haywood
Financial Statements, neither Haywood, its Subsidiaries nor any
of their respective Assets, businesses or operations, is a party
to, or is bound or affected by, or receives benefits under, (i)
any employment, severance, termination, consulting or retirement
Contract providing for aggregate payments to any Person in any
calendar year in excess of $50,000, (ii) any Contract relating
to the borrowing of money by Haywood or any Subsidiary or the
guarantee by Haywood or any Subsidiary of any such obligation
(other than Contracts evidencing deposit liabilities, purchases
of federal funds, fully-secured repurchase agreements, trade
payables, Federal Home Loan Bank advances and Contracts relating
to borrowings or guarantees made in the ordinary course of
business), and (iii) any other Contract or amendment thereto
would be required to be filed as an exhibit to a Form 10-K filed
by Haywood with the SEC as of the date of this Agreement that
has not been filed by Haywood with the SEC or incorporated by
reference as an exhibit to Haywood's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 (together with all
Contracts referred to in Sections 5.10 and 5.14(a) of this
Agreement, the "Haywood Contracts"). With respect to each
Haywood Contract, (i) the Contract is in full force and effect,
(ii) neither Haywood nor Bank is in Default thereunder, other
than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
Haywood, (iii) neither Haywood nor its Subsidiaries has
repudiated or waived any material provision of any such
Contract, and (iv) no other party to any such Contract is, to
the knowledge of Haywood, in Default in any respect, other than
Defaults which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Haywood, or
has repudiated or waived any Material provision thereunder.
Except as set forth on Schedule 5.15 attached hereto, all of the
indebtedness of Haywood or any Subsidiary for money borrowed is
prepayable at any time by Haywood or any Subsidiary without
penalty or premium.
5.16 Legal Proceedings. There is no Litigation pending,
or, to the Knowledge of Haywood, threatened against either
Haywood or any Subsidiary, or against any of their Assets,
employee benefit plans, interests or rights that is reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on Haywood, nor are there any Orders of any
Regulatory Authorities, other governmental authorities or
arbitrators outstanding against either Haywood or any
Subsidiary, that are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Haywood.
5.17 Reports. Except as set forth on Schedule 5.17
attached hereto, since December 31, 1994, Haywood and its
Subsidiaries have timely filed all reports and statements,
together with any amendments required to be made with respect
thereto, that they were required to file with Regulatory
Authorities and any applicable state securities or banking
authorities, except failures to file which are not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on Haywood or its Subsidiaries. As of their
respective dates, each of such reports and documents, including
the financial statements, exhibits and schedules thereto,
complied in all material respects with all applicable Laws. As
of their respective dates, each such report and document did not
contain any untrue statement of a Material fact or omit to state
a Material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances
under which they were made, not misleading.
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5.18 Statements True and Correct. No statement,
certificate, instrument or other writing furnished or to be
furnished by Haywood or any Subsidiary or any Affiliate thereof
to CSBI pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will
contain any untrue statement of Material fact or will omit to
state a Material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading. None of the information supplied or to be supplied
by Haywood or any Subsidiary or any Affiliate thereof for
inclusion in the Registration Statement to be filed by CSBI with
the SEC will, when the Registration Statement becomes effective,
be false or misleading with respect to any Material fact, or
omit to state any Material fact necessary to make the statements
therein not misleading. None of the information supplied or to
be supplied by Haywood or any Subsidiary or any Affiliate
thereof for inclusion in the Proxy Statement to be mailed to
Haywood's shareholders in connection with the Haywood Meeting,
and any other documents to be filed by Haywood or any Affiliate
thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at
the respective time such documents are filed, and with respect
to the Proxy Statement, when first mailed to the shareholders of
Haywood, be false or misleading with respect to any Material
fact, or omit to state any Material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the
time of the Haywood Meeting be false or misleading with respect
to any Material fact, or omit to state any Material fact
necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Haywood
Meeting. All documents that Haywood or any Affiliate thereof is
responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply
as to form in all Material respects with the provisions of
applicable Law.
5.19 Tax and Regulatory Matters. Neither Haywood, nor any
Subsidiary nor any Affiliate thereof has taken any action or has
any Knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of
a condition or restriction of the type referred to in the second
sentence of such Section. To the Knowledge of Haywood, there
exists no fact, circumstance or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement cannot
be received in a timely manner without the imposition of any
condition or restriction of the type described in the second
sentence of such Section 9.1(b) other than with respect to
anti-trust or competitive effects issues.
5.20 State Takeover Laws. Haywood has taken all necessary
action to exempt the transactions contemplated by this Agreement
from any applicable "moratorium," "control share," "fair price,"
"business combination" or other state takeover Law.
5.21 Articles of Incorporation Provisions. Haywood has
taken all actions so that the entering into of this Agreement
and the consummation of the Merger contemplated hereby do not
and will not result in the grant of any rights to any Person
under the Articles of Incorporation, Bylaws or other governing
instruments of Haywood (other than voting, dissenters' rights of
appraisal or other similar rights) or restrict or impair the
ability of CSBI or any of its Subsidiaries
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to vote, or otherwise to exercise the rights of a shareholder
with respect to, shares of Haywood Common Stock that may be
acquired or controlled by it.
5.22 Derivatives. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts and other
similar risk management arrangements, whether entered into for
Haywood's own account, or for the account of Bank or its
customers, were entered into (i) in accordance with prudent
business practices and all applicable Laws, and (ii) with
counterparties believed to be financially responsible.
5.23 Year 2000. To the Knowledge of Haywood, all computer
software and hardware necessary for the conduct of business by
Haywood (the "Haywood Software") is designed to be used before,
on, and after January 1, 2000 and the Haywood Software will
operate during each such time period without error relating to
the year 2000, specifically including any error relating to, or
the product of, any date data representing or referring to any
particular date. As used in this Section 5.23, "operate"
further includes, but is not limited to, accepting input of
dates without ambiguity, outputting all dates without ambiguity,
and performing calculations, comparisons, extractions, sorting
and any other processing or taking actions or making decisions
using dates or time periods without suffering any abends,
aborts, invalid or incorrect results or other interruptions,
whether before, on, or after January 1, 2000. Haywood has
received all year 2000 examinations and certifications as
required by applicable Law and will, within ten business days of
this Agreement, make available for CSBI's review all (i) such
examinations and certifications, (ii) contingency plans in the
event the Software fails to operate, and (iii) costs associated
with or related to the Haywood Software.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CSBI AND HAC
CSBI and HAC, jointly and severally, hereby represent and
warrant to Haywood as follows:
6.1 Organization, Standing and Power. CSBI is a
corporation duly organized, validly existing and in good
standing under the Laws of the State of Georgia and is duly
registered as a bank holding company under the BHC Act. HAC is
a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina. CSBI
has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. CSBI
is duly qualified or licensed to transact business as a foreign
corporation in good standing in the states of the United States
and foreign jurisdictions where the character of its Assets or
the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which
the failure to be so qualified or licensed is not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on CSBI.
6.2 Authority, No Breach By Agreement.
(a) CSBI and HAC each have the corporate power and
authority necessary to execute, deliver and perform their
respective obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated herein, including the
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Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of CSBI and HAC.
Subject to the Consents of Regulatory Authorities, this
Agreement represents a legal, valid, and binding obligation of
CSBI and HAC, enforceable against CSBI and HAC in accordance
with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which
any proceeding may be brought).
(b) Neither the execution and delivery of this
Agreement by either CSBI or HAC, nor the consummation by either
CSBI or HAC of the transactions contemplated hereby, nor
compliance by either CSBI or HAC with any of the provisions
hereof, will (i) conflict with or result in a breach of any
provision of CSBI's or HAC's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of
any Lien on any Asset of any CSBI Companies under, any Contract
or Permit of any CSBI Companies, where such Default or Lien, or
any failure to obtain such Consent, is reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect on CSBI, or (iii) subject to receipt of the
requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any CSBI
Companies or any of their respective Material Assets.
(c) No notice to, filing with or Consent of any
public body or authority is necessary for the consummation by
either CSBI or HAC of the Merger and the other transactions
contemplated in this Agreement other than (i) in connection or
compliance with the provisions of the Securities Laws,
applicable state corporate and securities Laws and rules of the
NASD, (ii) Consents required from Regulatory Authorities, (iii)
notices to or filings with the IRS or the Pension Benefit
Guaranty Corporation with respect to any employee benefit plans,
and (iv) Consents, filings or notifications which, if not
obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CSBI.
6.3 Capital Stock.
(a) The authorized capital stock of CSBI consists of
30,000,000 shares of CSBI Common Stock. As of June 30, 1999,
there were 11,754,156 shares of CSBI Common Stock issued and
outstanding. CSBI is authorized to issue one or more series of
preferred stock with such powers, preferences and rights as may
be established by CSBI's Board of Directors. As of the date of
this Agreement, no preferred stock has been issued. As of June
30, 1999, 500,000 shares of CSBI Common Stock were reserved for
issuance upon the exercise of issued and outstanding stock
options under the 1994 Incentive Stock Option Plan and 500,000
shares of CSBI Common Stock were reserved under the 1998 Century
South Banks, Inc. Executive Stock Plan (collectively, the "CSBI
Option Plans"). All of the issued and outstanding shares of
CSBI Common Stock are, and all of the shares of CSBI Common
Stock to be issued in exchange for shares of Haywood Common
Stock upon consummation of the Merger, when issued in accordance
with the terms of this Agreement, will be, duly and validly
issued and outstanding and fully paid and nonassessable under
the GBCC. None of the outstanding shares of CSBI Common Stock
has been, and none of the shares of CSBI Common Stock to be
issued in
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exchange for shares of Haywood Common Stock upon consummation of
the Merger will be, issued in violation of any preemptive rights
of the current or past shareholders of CSBI.
(b) Except as set forth in Section 6.3(a) of this
Agreement, or as provided pursuant to the CSBI Option Plans, or
as Previously Disclosed, as of the date of this Agreement, there
are no shares of capital stock or other equity securities of
CSBI outstanding and no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of the capital stock of CSBI or
contracts, commitments, understandings or arrangements by which
CSBI is or may be bound to issue additional shares of its
capital stock or options, warrants or rights to purchase or
acquire any additional shares of its capital stock.
(c) At the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the
Haywood Meeting, the CSBI Common Stock shall either be listed on
a national securities exchange or held of record by at least
2,000 shareholders.
6.4 SEC Filings; Financial Statements.
(a) CSBI has filed and made available to Haywood all
forms, reports and documents required to be filed by CSBI with
the SEC since December 31, 1994 (collectively, the "CSBI SEC
Reports"). The CSBI SEC Reports (i) at the time filed, complied
in all Material respects with the applicable requirements of the
1933 Act and the 1934 Act, as the case may be, and (ii) did not
at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a Material fact or
omit to state a Material fact required to be stated in such CSBI
SEC Reports or necessary in order to make the statements in such
CSBI SEC Reports, in light of the circumstances under which they
were made, not misleading. Except for CSBI Subsidiaries that are
registered as a broker, dealer or investment advisor or filings
due to fiduciary holdings of the CSBI Subsidiaries, none of the
CSBI Subsidiaries is required to file any forms, reports or
other documents with the SEC;
(b) CSBI has Previously Disclosed and delivered to
Haywood prior to the execution of this Agreement copies of all
CSBI Financial Statements for periods ended prior to the date
hereof and will deliver to Haywood copies of all CSBI Financial
Statements prepared subsequent to the date hereof. The CSBI
Financial Statements (as of the dates thereof and the periods
covered thereby) (i) are or, if dated after the date of this
Agreement, will be in accordance with the books and records of
the CSBI Companies, which are or will be, materially complete
and correct and which have been or will have been, maintained in
accordance with good business practices, and (ii) present or
will present fairly the consolidated financial position of the
CSBI Companies as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity and cash
flows of the CSBI Companies for the periods indicated, in
accordance with GAAP (subject to exceptions as to consistency
specified therein or as may be indicated in the notes thereto
or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not Material).
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6.5 Absence of Undisclosed Liabilities. None of the CSBI
Companies have any Liabilities that are reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect on CSBI, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of CSBI as of
December 31, 1998 and June 30, 1999 included in the CSBI
Financial Statements or reflected in the notes thereto. No CSBI
Company has incurred or paid any Liability since March 31, 1999,
except for (i) such Liabilities incurred or paid in the ordinary
course of business consistent with past business practice and
which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI, or (ii) in
connection with the transactions contemplated by this Agreement.
6.6 Absence of Certain Changes or Events. Since June 30,
1999, except as Previously Disclosed, (i) there have been no
events, changes or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on CSBI, and (ii) the CSBI Companies have not
taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after
the date of this Agreement, would represent or result in a
Material breach or violation of any of the covenants and
agreements of CSBI provided in Article 7 of this Agreement.
6.7 Compliance with Laws. CSBI is duly registered as a
bank holding company under the BHC Act. Each of the CSBI
Companies has in effect all permits necessary 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 CSBI, and there has occurred no
Default under any such Permit, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CSBI. None of the CSBI Companies:
(a) is in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business,
except for violations which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CSBI; and
(b) except as Previously Disclosed, has received any
notification or communication from any agency or department of
federal, state or local government or any Regulatory Authority
or the staff thereof (i) asserting that any of the CSBI
Companies are not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority
enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CSBI, (ii) threatening to revoke any Permits, the revocation of
which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CSBI, or (iii) requiring
any CSBI Companies to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment
or memorandum of understanding, or to adopt any Board resolution
or similar undertaking, which restricts materially the conduct
of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management or the
payment of dividends.
6.8 Legal Proceedings. There is no Litigation instituted
or pending, or, to the Knowledge of CSBI, threatened against any
CSBI Companies, or against any Asset, interest or right of any
of them, that is reasonably likely to have, individually or in
the aggregate, a Material
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Adverse Effect on CSBI, nor are there any Orders of any
Regulatory Authorities, other governmental authorities or
arbitrators outstanding against any CSBI Companies, that are
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CSBI.
6.9 Statements True and Correct. No statement,
certificate, instrument or other writing furnished or to be
furnished by any CSBI Companies or any Affiliate thereof to
Haywood pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will
contain any untrue statement of Material fact or will omit to
state a Material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading. None of the information supplied or to be supplied
by any CSBI Companies or any Affiliate thereof for inclusion in
the Registration Statement to be filed by CSBI with the SEC,
will, when the Registration Statement becomes effective, be
false or misleading with respect to any Material fact, or omit
to state any Material fact necessary to make the statements
therein not misleading. None of the information supplied or to
be supplied by any CSBI Companies or any Affiliate thereof for
inclusion in the Proxy Statement to be mailed to Haywood
shareholders in connection with the Haywood Meeting, and any
other documents to be filed by any CSBI Companies or any
Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will,
at the respective time such documents are filed, and with
respect to the Proxy Statement, when first mailed to the
shareholders of Haywood, be false or misleading with respect to
any Material fact, or omit to state any Material fact necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Haywood Meeting, be false or
misleading with respect to any Material fact, or omit to state
any Material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any
proxy for the Haywood Meeting. All documents that any CSBI
Companies or any Affiliate thereof is responsible for filing
with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all
Material respects with the provisions of applicable Law.
6.10 Tax and Regulatory Matters. No CSBI Company or any
Affiliate thereof has taken any action or has any Knowledge of
any fact or circumstance that is reasonably likely to (i)
prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code, or
(ii) materially impede or delay receipt of any Consents of
Regulatory Authorities referred to in Section 9.1(b) of this
Agreement or result in the imposition of a condition or
restriction of the type referred to in the second sentence of
such Section 9.1(b). To the Knowledge of CSBI, there exists no
fact, circumstance or reason why the requisite Consents referred
to in Section 9.1(b) of this Agreement cannot be received in a
timely manner without the imposition of any condition or
restriction of the type described in the second sentence of such
Section 9.1(b) other than with respect to anti-trust or
competitive effects issues.
6.11 Reports. Except as Previously Disclosed, since
December 31, 1994, CSBI and its Subsidiaries have timely filed
all reports and statements, together with any amendments
required to be made with respect thereto (or have obtained
written waivers from the applicable Regulatory Authority waiving
all consequences from the failure to timely file), that they
were required to file with Regulatory Authorities and any
applicable state securities or banking authorities, except
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failure to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CSBI or its Subsidiaries. As of their respective dates, each of
such reports and documents, including the financial statements,
exhibits and schedules thereto, complied in all material
respects with all applicable Laws. As of their respective
dates, each such report and document did not contain any
untrue statement of a Material fact required to be stated
therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
6.12 Year 2000. To the Knowledge of CSBI, all computer
software and hardware necessary for the conduct of business by
CSBI (the "CSBI Software") is designed to be used before, on,
and after January 1, 2000 and the CSBI Software will operate
during each such time period without error relating to the Year
2000, specifically including any error relating to, or the
product of, any date data representing or referring to any
particular date. As used in this Section 6.12, "operate"
further includes, but is not limited to, accepting input of
dates without ambiguity, outputting all dates without ambiguity,
and performing calculations, comparisons, extractions, sorting
and any other processing or taking actions or making decisions
using dates or time periods without suffering any abends,
aborts, invalid or incorrect results or other interruptions,
whether before, on, or after January 1, 2000. CSBI has received
all Year 2000 examinations and certifications as required by
applicable Law and will, within ten business days of this
Agreement, make available for Haywood's review all (i) such
examinations and certifications, (ii) contingency plans in the
event the software fails to operate, and (iii) costs associated
with or related to the CSBI Software.
6.13 Merger Consideration. CSBI has unissued shares of
CSBI Common Stock that are not reserved for any other purposes
and are sufficient to provide the aggregate number of shares of
CSBI Common Stock to be issued in the Merger and has available
to it sources of funds sufficient to provide the aggregate Per
Share Cash Consideration. The shares of CSBI Common Stock to be
issued in the Merger have been duly authorized and when issued
pursuant to the Merger will be validly issued, fully paid and
non-assessable with the same rights as each other outstanding
shares of CSBI Common Stock.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Haywood. From the date of
this Agreement until the earlier of the Effective Time or the
termination of this Agreement unless the prior written consent
of CSBI shall have been obtained, and except as otherwise
contemplated herein, Haywood agrees: (i) to operate its business
and cause each Subsidiary to operate its business in the usual,
regular and ordinary course; (ii) to preserve intact its
business organizations and Assets and maintain its rights and
franchises; (iii) to use its reasonable efforts to cause its
representations and warranties to be correct at all times; (iv)
to use its reasonable efforts to ensure, to the extent
consistent with the Board of Directors' exercise of its
fiduciary duties, that the aggregate Merger-related
expenses it incurs are reasonable; (v) to take all steps
necessary to terminate the Haywood Benefit Plans (or obtain
waivers of claims against Haywood from the beneficiaries
thereunder as approved by CSBI in its sole discretion) as of the
Effective Time; and (vi) to take no action which would (a)
adversely affect the ability of any Party to obtain any
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Consents required for the transactions contemplated hereby
without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) of this
Agreement or (b) adversely affect in any Material respect the
ability of either Party to perform its covenants and agreements
under this Agreement.
7.2 Negative Covenants of Haywood. From the date of this
Agreement until the earlier of the Effective Time or the
termination of this Agreement, Haywood covenants and agrees that
it and each Subsidiary will not do or agree or commit to do, any
of the following without the prior written consent of the Chief
Executive Officer of CSBI, which consent shall not be
unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or
other governing instruments of Haywood or the Charter, Bylaws or
other governing instruments of each Subsidiary; or
(b) incur any additional debt obligation or other
obligation for borrowed money in excess of an aggregate of
$50,000 except in the ordinary course of the business of Haywood
and each Subsidiary consistent with past practices (which shall
include creation of deposit liabilities, purchases of federal
funds, advances from the Federal Home Loan Bank and entry into
repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any share
of stock of each Subsidiary held by Haywood of any Lien or
permit any such Lien to exist (other than in connection with
deposits, repurchase agreements, bankers' acceptances,
"treasury, tax and loan" accounts established in the ordinary
course of business and Liens in effect as of the date hereof
that are Previously Disclosed); or
(c) repurchase, redeem or otherwise acquire or
exchange (other than exchanges in the ordinary course under
employee benefit plans), directly or indirectly, any shares, or
any securities convertible into any shares, of the capital stock
of Haywood, or declare or pay any dividend or make any other
distribution in respect of Haywood capital stock provided that
Haywood may, in its sole discretion (to the extent legally and
contractually permitted to do so), but shall not be obligated
to, declare and pay quarterly cash dividends at a rate not to
exceed sixteen cents ($0.16) per share consistent with past
practices to its shareholders; or
(d) except for this Agreement or in connection with
the exercise of any option pursuant to the Stock Option
Agreement, issue or sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge,
encumber or authorize the issuance of, or otherwise permit to
become outstanding, any additional shares of Haywood Common
Stock, or any stock appreciation rights, or any option, warrant,
conversion or other right to acquire any such stock; or
(e) adjust, split, combine or reclassify any capital
stock of Haywood or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of either
Haywood Common Stock or each Subsidiary's common stock or buy,
sell, lease, mortgage or otherwise dispose of or otherwise
encumber any Asset having a book value in excess of $10,000 or
that exceed in the aggregate the sum of $100,000 during the term
of this Agreement (other than in the ordinary course of business
for reasonable and adequate consideration); or
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(f) acquire direct or indirect control over any real
property, other than in connection with (i) foreclosures in the
ordinary course of business, or (ii) acquisitions of control by
Haywood in its fiduciary capacity; or
(g) except for purchases of U.S. Treasury securities
or U.S. Government agency securities, which in either case have
maturities of three years or less, and purchases of investment
grade bonds issued by municipalities located within the State of
North Carolina with a maturity of five years or less, purchase
any bonds or securities or make any Material investment, either
by purchase of stock, bonds or securities, contributions to
capital, Asset transfers or purchase of any Assets, in any
Person other than Bank, or otherwise acquire direct or indirect
control over any Person, other than in connection with (i)
foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary
in its fiduciary capacity, or (iii) the creation of new,
wholly-owned Subsidiaries organized to conduct or continue
activities otherwise permitted by this Agreement; or
(h) grant any increase in compensation or benefits
to the employees or officers of Haywood or any Subsidiary
(including such discretionary increases as may be contemplated
by existing employment agreements), except in accordance with
past practice Previously Disclosed or as required by Law, pay
any bonus, enter into or amend any severance agreements with
officers of either Haywood or any Subsidiary, grant any increase
in fees or other increases in compensation or other benefits to
directors of either Haywood or any Subsidiary except in
accordance with past practice Previously Disclosed; or
(i) enter into or amend any employment Contract
between Haywood or any Subsidiary and any Person (unless such
amendment is required by Law) that Haywood or any Subsidiary, as
the case may be, does not have the unconditional right to
terminate without Liability (other than Liability for services
already rendered), at any time on or after the Effective Time;
or
(j) adopt any new employee benefit plan of Haywood
or any Subsidiary or make any Material change in or to any
existing employee benefit plans of Haywood or any Subsidiary
other than any such change that is required by Law or that, in
the opinion of counsel, is necessary or advisable to maintain
the tax qualified status of any such plan; or
(k) make any significant change in any Tax or
accounting methods or systems of internal accounting controls,
except as may be appropriate to conform to changes in regulatory
accounting requirements or GAAP; or
(l) commence any Litigation other than in accordance
with past practice, settle any Litigation involving any
Liability of Haywood or any Subsidiary for money damages in
excess of $25,000 or Material restrictions upon the operations
of Haywood or Subsidiary; or
(m) except in the ordinary course of business,
modify, amend or terminate any Material Contract or waive,
release, compromise or assign any Material rights or claims; or
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(n) extend credit to any borrower which requires the
approval of Haywood's Board of Directors.
7.3 Covenants of CSBI and HAC.
(a) From the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement,
unless the prior written consent of Haywood shall have been
obtained, CSBI and HAC, jointly and severally, covenant and
agree that each of them shall (i)
continue to conduct their respective businesses and the business
of its Subsidiaries in a manner designed in their respective
reasonable judgment to enhance the long-term value of the CSBI
Common Stock and the business prospects of the CSBI Companies,
(ii) to the extent consistent therewith, use all reasonable
efforts to preserve intact the CSBI Companies' core businesses
and goodwill with their respective employees and the communities
they serve, (iii) use their respective reasonable efforts to
cause their respective representations and warranties to be
correct at all times, and (iv) take no action which would (a)
adversely affect the ability of any Party to obtain any Consents
required for the transaction contemplated hereby without
imposition of a condition or restriction of the type referred to
in the last sentence of Section 9.1(b) of this Agreement, or (b)
adversely affect in any Material respect the ability of any
Party to perform its covenants and agreements under this
Agreement.
(b) CSBI shall take all action necessary to approve,
in accordance with Rule 16b-3 of the 1934 Act, the acquisition
of shares of the common stock of CSBI and CSBI stock options by
Haywood shareholders who will become Section 16 insiders of CSBI
upon consummation of the Merger.
7.4 Adverse Changes in Condition. Each Party agrees to
give written notice promptly to the other Party upon becoming
aware of the occurrence or impending occurrence of any event or
circumstance relating to it or any of its Subsidiaries which (i)
is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on it or (ii) is reasonably likely to
cause or constitute a Material breach of any of its
representations, warranties or covenants contained herein and to
use its reasonable efforts to prevent or promptly to remedy the
same.
7.5 Reports. Each Party and its Subsidiaries shall file
all reports required to be filed by it with Regulatory
Authorities between the date of this Agreement and the Effective
Time and shall deliver to the other Party copies of all such
reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC,
such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of
the dates indicated and the consolidated results of operations,
changes in shareholders' equity and cash flows for the periods
then ended in accordance with GAAP (subject in the case of
interim financial statements to normal recurring year-end
adjustments that are not Material). As of their respective
dates, such reports filed with the SEC will comply in
all Material respects with the Securities Laws and will not
contain any untrue statement of a Material fact or omit to state
a Material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any
financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws
applicable to such reports.
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ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Shareholder Approval. Haywood shall take, in
accordance with applicable Law and its Articles of Incorporation
and Bylaws, all action necessary to convene the Haywood Meeting
to consider and vote upon the approval of this Agreement and any
other matters required to be approved by Haywood shareholders
for consummation of the Merger (including any adjournment or
postponement thereof), as promptly as practicable after the
Registration Statement is declared effective. The Board of
Directors of Haywood shall (subject to compliance with its
fiduciary duties as advised by counsel and the receipt from
Trident of a letter dated not more than three days prior to the
date of the mailing of the Proxy Statement to the effect that
the consideration to be received in the merger by the holders of
Haywood Common Stock is fair, from a financial point of view, to
such holders) recommend such approval, and Haywood (subject to
the direction of the Haywood Board acting in compliance with its
fiduciary duties as advised by counsel) shall take all
reasonable lawful action to solicit such approval by its
shareholders. CSBI, as sole shareholder of HAC, will vote its
HAC Common Stock in favor of the Merger.
8.2 Registration Statement.
(a) Each of CSBI and Haywood agrees to cooperate in
the preparation of a Registration Statement to be filed by CSBI
with the SEC in connection with the issuance of CSBI Common
Stock in the Merger (including the Proxy Statement and all
related documents). Provided Haywood has cooperated as required
above, CSBI agrees to file the Registration Statement with the
SEC as promptly as practicable, but in no event later than 90
days after the date of this Agreement. Each of Haywood and CSBI
agrees to use all reasonable efforts to cause the Registration
Statement to be declared effective under the 1933 Act as
promptly as reasonably practicable after filing thereof. CSBI
also agrees to use all reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by
this Agreement. Haywood agrees to furnish CSBI all information
concerning Haywood, Bank and their respective officers,
directors and shareholders as may be reasonably requested in
connection with the foregoing.
(b) Each of Haywood and CSBI agrees, as to itself and
its Subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time the
Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the 1933 Act, contain any untrue
statement of a Material fact or omit to state any Material fact
required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Proxy Statement
and any amendment or supplement thereto will, at the date of
mailing to Haywood shareholders and at the time of the Haywood
Meeting, contain any untrue statement of a Material fact or omit
to state any Material fact required to be stated therein or
necessary to make the statements therein not misleading with
respect to any Material fact, or which will omit to state any
Material fact necessary in order to make the statements therein
not false or misleading or necessary to correct any statement in
any earlier statement in the Proxy Statement or any amendment or
supplement thereto. Each of Haywood and CSBI further agrees
that if it shall become aware prior to the
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Effective Date of any information that would cause any of the
statements in the Proxy Statement to be false or misleading with
respect to any Material fact, or to omit to state any Material
fact necessary to make the statements therein not false or
misleading, to promptly inform the other Party thereof and to
take the necessary steps to correct the Proxy Statement.
(c) In the case of CSBI, CSBI will advise Haywood,
promptly after CSBI receives notice thereof, of the time when
the Registration Statement has become effective or any
supplement or amendment has been filed, or of the issuance of
any stop order or the suspension of the qualification of the
CSBI Common Stock for offering or sale in any jurisdiction, of
the initiation or threat of any proceeding for any such purpose,
or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.
(d) Nothing in this Section 8.2 or elsewhere in this
Agreement shall prohibit accurate disclosure by Haywood of
information that is required to be disclosed in the Registration
Statement of the Proxy Statement or in any other document
required to be filed with the SEC (including, without
limitation, a Solicitation/Recommendation Statement on Schedule
14D-9) or otherwise required to be publicly disclosed by
applicable Law or the regulations and rules of the AMEX.
8.3 Applications. CSBI shall promptly prepare and file,
Haywood and each Subsidiary shall cooperate in the preparation
and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this
Agreement. CSBI shall permit Haywood to review (and approve
with respect to information relating to Haywood) such
applications prior to filing same.
8.4 Filings with State Offices. Upon the terms and
subject to the conditions of this Agreement, Haywood shall
execute and file the Articles of Merger with the Secretary of
State of the State of North Carolina and the Savings Institution
Division of the State of North Carolina in connection with the
Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the
terms and conditions of this Agreement, each Party agrees to use
its reasonable efforts to take all actions, and to do all things
necessary, proper or advisable under applicable Laws, as
promptly as practicable so as to permit consummation of the
Merger at the earliest possible date and to otherwise enable
consummation of the transactions contemplated hereby and shall
cooperate fully with the other Party hereto to that end (it
being understood that any amendments to the Registration
Statement filed by CSBI in connection with the CSBI Common Stock
to be issued in the Merger or a resolicitation of proxies as a
consequence of an acquisition agreement by CSBI or any of its
Subsidiaries shall not violate this covenant provided CSBI
agrees to pay all direct expenses associated with any such
resolicitation), including, without limitation, using
its reasonable efforts to lift or rescind any Order adversely
affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its
rights under this Agreement. Each Party shall use, and shall
cause each of its Subsidiaries to use, its
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reasonable efforts to obtain all Consents necessary or desirable
for the consummation of the transactions contemplated by this
Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party will keep
the other Party advised of all Material developments relevant to
its business and to consummation of the Merger and shall permit
the other Party to make or cause to be made such investigation
of the business and properties of it and its Subsidiaries and of
their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation
shall be reasonably related to the transaction contemplated
hereby and shall not interfere unnecessarily with normal
operations. No investigation by a Party shall affect the
representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential
information furnished to it by any other Party concerning its
and its Subsidiaries' businesses, operations and financial
condition except in furtherance of the transactions contemplated
by this Agreement. In the event that a Party is required by
applicable Law or valid court process to disclose any such
confidential information, then such Party shall provide the
other Party with prompt written notice of any such requirement
so that the other Party may seek a protective order or other
appropriate remedy and/or waive compliance with this Section
8.6. If in the absence of a protective order or other remedy or
the receipt of a waiver by the other Party, a Party is
nonetheless, in the written opinion of counsel, legally
compelled to disclose any such confidential information to any
tribunal or else stand liable for contempt or suffer other
censure or penalty, a Party may, without liability hereunder,
disclose to such tribunal only that portion of the confidential
information which such counsel advises such Party is legally
required to be disclosed; provided that such disclosing Party
use its best efforts to preserve the confidentiality of such
confidential information, including without limitation, by
cooperating with the other Party to obtain an appropriate
protective order or other reliable assurance that confidential
treatment will be accorded such confidential information by such
tribunal. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return all documents
and copies thereof and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice
as soon as practicable after any determination by it of any fact
or occurrence relating to the other Party which it has
discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a
Material breach of any representation, warranty, covenant or
agreement of the other Party or which has had or is reasonably
likely to have a Material Adverse Effect on the other Party.
(d) Neither Party nor any of their respective
Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would
violate or prejudice the rights of its customers, jeopardize the
attorney-client or similar privilege with respect to such
information or contravene any Law, rule, regulation, Order,
judgment, decree, fiduciary duty or agreement entered into
prior to the date of this Agreement. The Parties will use
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their reasonable efforts to make appropriate substitute
disclosure arrangements, to the extent practicable, in
circumstances in which the restrictions of the preceding
sentence apply.
8.7 Press Releases. Prior to the Effective Time, Haywood
and CSBI shall consult with each other as to the form and
substance of any press release or other public disclosure
materially related to this Agreement or any other transaction
contemplated hereby; provided, however, that nothing in this
Section 8.7 shall be deemed to prohibit any Party from making
any disclosure which its counsel deems necessary or advisable in
order to satisfy such Party's disclosure obligations imposed by
Law.
8.8 Certain Actions. Except with respect to this
Agreement and the transactions contemplated hereby, neither
Haywood nor any Affiliate thereof nor any investment banker,
attorney, accountant or other representative (collectively, the
"Representatives") retained by Haywood or Bank shall directly or
indirectly solicit any Acquisition Proposed by any Person.
Except to the extent necessary to comply with the fiduciary
duties of Haywood Board of Directors as determined by the
Haywood Board of Directors after consulting with and considering
the advice of counsel, neither Haywood nor any Affiliate or
Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with
respect to, or enter into any Contract with respect to, any
Acquisition Proposal, but Haywood may communicate information
about such an Acquisition Proposal to its shareholders if and to
the extent that it is required to do so in order to comply with
its legal obligations as advised by counsel; provided that
Haywood shall promptly advise CSBI verbally and in writing
following the receipt of any Acquisition Proposal and the
Material details thereof. Haywood shall (i) immediately cease
and cause to be terminated any existing activities, discussions
or negotiations with any Persons conducted heretofore with
respect to any of the foregoing and (ii) subject to its
fiduciary duties, direct and use its reasonable efforts to cause
all of its Representatives not to engage in any of the
foregoing.
8.9 Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to
take no action which would cause the Merger not to qualify for
treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax
purposes.
8.10 State Takeover Laws. Haywood and each Subsidiary shall
take all reasonable steps to exempt the transactions
contemplated by this Agreement from, or if necessary challenge
the validity or applicability of, any applicable state takeover
Law.
8.11 Articles of Incorporation Provisions. Haywood and each
Subsidiary shall take all necessary action to ensure that the
entering into of this Agreement and the consummation of the
Merger does not and will not result in the grant of any rights
to any Person under the Articles, Bylaws or other governing
instruments of Haywood or any Subsidiary (other than voting,
dissenters' rights of appraisal or other similar rights) or
restrict or impair the ability of CSBI or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of Haywood or any Subsidiary
that may be acquired or controlled by it.
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8.12 Agreement of Affiliates. Haywood has Previously
Disclosed all Persons whom it reasonably believes is an
"affiliate" of Haywood for purposes of Rule 145 under the 1933
Act. Haywood shall use its reasonable efforts to cause each such
Person to deliver to CSBI not later than 30 days after the date
of this Agreement, a written agreement, substantially in the
form of Exhibit C, providing that such Person will not sell,
pledge, transfer or otherwise dispose of the shares of Haywood
Common Stock held by such Person except as contemplated by such
agreement or by this Agreement and will not sell, pledge,
transfer or otherwise dispose of the shares of CSBI Common Stock
to be received by such Person upon consummation of the Merger
except in compliance with applicable provisions of the 1933 Act
and the rules and regulations thereunder. CSBI shall not be
required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of CSBI
Common Stock by such affiliates.
8.13 Employee Benefits and Contract. Following the
Effective Time, CSBI shall provide generally to officers and
employees of Haywood, who at or after the Effective Time become
employees of a CSBI Company, employee benefits under employee
benefit plans including severance plans set forth herein on
terms and conditions which when taken as a whole are
substantially similar to those currently provided by the CSBI
Companies to their similarly situated officers and employees.
CSBI shall waive any pre-existing condition exclusion under any
employee health plan for which any employees and/or officers and
dependents covered by Haywood Benefit Plans as of Closing shall
become eligible by virtue of the preceding sentence, to the
extent (i) such pre-existing condition was covered under the
Haywood Benefit Plans and (ii) the individual affected by the
pre-existing condition was covered by the Haywood Entity's
corresponding plan on the date which immediately precedes the
Effective Time. For purposes of participation, vesting and
benefit accrual under all qualified benefit plans, the service
of the employees of Haywood or Bank prior to the Effective Time
shall be treated as service with the CSBI Companies
participating in all qualified benefit plans. Bank will enter
into an employment contract acceptable to CSBI with Larry R.
Ammons as of the date of Closing to the extent he is available
and agrees to such employment.
8.14 Exchange Listing. CSBI shall use its reasonable
efforts to list, prior to the Effective Time, on the NASDAQ,
subject to official notice of issuance, the shares of CSBI
Common Stock to be issued to the holders of Haywood Common Stock
pursuant to the Merger.
8.15 D&O Coverage. At the Effective Time, CSBI will
provide directors and officers insurance coverage for Haywood's
directors and officers either, at CSBI's election, (i) by
purchasing continuation coverage under Haywood's current policy
for directors and officers for a period not less than three
years after the Effective Time, or (ii) obtain coverage under
CSBI's current directors' and officers' policy to provide
coverage for Haywood's directors and officers on a prior acts
basis for a period not less than three years prior to the
Effective Time.
8.16 Indemnification. CSBI shall cause Haywood to
continue to, indemnify, defend and hold harmless the present and
former directors, officers, employees and agents of the Haywood
Companies (each, an "Indemnified Party") against all Liabilities
arising out of actions or omissions arising out of the
Indemnified Party's service or services as directors, officers,
employees or agents of Haywood or, at Haywood's request, of
another corporation, partnership,
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joint venture, trust or other enterprise occurring at or prior
to the Effective Time (including the transactions contemplated
by this Agreement) to the extent currently provided by Haywood's
Articles of Incorporation and bylaws as in effect as of the date
hereof, including any provisions relating to advances of
expenses incurred in the defense of any Litigation.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The
respective obligations of each Party to perform this Agreement
and to consummate the Merger are subject to the satisfaction of
the following conditions, unless waived by both Parties pursuant
to Section 11.6 of this Agreement:
(a) Shareholder Approval. The shareholders of
--------------------
Haywood shall have approved this Agreement and the consummation
of the Merger as and to the extent required by Law and by the
provisions of any of its governing instruments and by the rules
of the AMEX.
(b) Regulatory Approvals. All Consents of, filings
--------------------
and registrations with, and notifications to, all Regulatory
Authorities required for consummation of the Merger shall have
been obtained or made and shall be in full force and effect and
all waiting periods required by Law shall have expired. No
Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner (including,
without limitation, requirements relating to the raising of
additional capital or the disposition of Assets or deposits)
which in the reasonable judgment of the Board of Directors of
CSBI would so materially adversely impact the economic or
business benefits of the transactions contemplated by this
Agreement so as to render inadvisable the consummation of the
Merger.
(c) Consents and Approvals. Each Party shall have
----------------------
obtained any and all Consents required for consummation of the
Merger (other than those referred to in Section 9.1(b) of this
Agreement) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made,
is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on such Party. No Consent obtained
which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in
the reasonable judgment of the Board of Directors of CSBI would
so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement so as to
render inadvisable the consummation of the Merger.
(d) Legal Proceedings. No court or governmental or
-----------------
Regulatory Authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any Law or
Order (whether temporary, preliminary or permanent) or taken any
other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration
----------------------
Statement shall be effective under the 1933 Act, no stop orders
suspending the effectiveness of the Registration Statement shall
have been issued, no action, suit, proceeding or investigation
by the SEC to suspend the
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effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or
trading of the shares of CSBI Common Stock issuable pursuant to
the Merger shall have been received.
(f) Tax Matters. Haywood and CSBI shall have
-----------
received a written opinion of counsel from Troutman Sanders LLP
in form reasonably satisfactory to each of them (the "Tax
Opinion"), substantially to the effect that for federal income
tax purposes (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of Haywood Common Stock
solely for CSBI Common Stock will not give rise to gain or loss
to the shareholders of Haywood with respect to such exchange
(except to the extent of any cash received), and (iii) neither
of Haywood nor CSBI will recognize gain or loss as a consequence
of the Merger except for income and deferred gain recognized
pursuant to Treasury regulations issued under Section 1502 of
the Internal Revenue Code. In rendering such Tax Opinion,
Troutman Sanders LLP shall be entitled to rely upon
representations of officers of Haywood, CSBI and HAC reasonably
satisfactory in form and substance to such counsel.
(g) Employment Agreement. Haywood and Bank shall
--------------------
have offered Larry R. Ammons the employment agreement in
substantially the form set forth in Exhibit D to this Agreement.
9.2 Conditions to Obligations of CSBI. The obligations of
CSBI to perform this Agreement and to consummate the Merger and
the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by CSBI
pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. The
------------------------------
representations and warranties of Haywood set forth or referred
to in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such
representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of
such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other
than the representations and warranties set forth in Section 5.3
of this Agreement, which shall be true and correct in all
Material respects) the inaccuracies of which relate to matters
that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Haywood.
(b) Performance of Agreements and Covenants. Each
---------------------------------------
and all of the agreements and covenants of Haywood to be
performed and complied with pursuant to this Agreement and the
other agreements contemplated hereby prior to the Effective Time
shall have been duly performed and complied with in all Material
respects.
(c) Certificates. Haywood shall have delivered to
------------
CSBI (i) a certificate, dated as of the Effective Time and
signed on its behalf by its Chief Executive Officer and Chief
Financial Officer, to the effect that the conditions of its
obligations set forth in Section 9.2(a) and 9.2(b) of this
Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted
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by the Haywood Board of Directors and shareholders evidencing
the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in
such reasonable detail as CSBI and its counsel shall request.
(d) Opinion of Counsel. CSBI shall have received a
------------------
written opinion from Housley Kantarian & Bronstein, P.C.,
counsel to Haywood, dated as of the Closing, in form reasonably
satisfactory to CSBI, as to the matters set forth in Exhibit F
hereto.
(e) Accountant's Letters. CSBI shall have received
--------------------
from KPMG LLP letters dated not more than five (5) days prior to
(i) the date of the Proxy Statement and (ii) the Effective Time,
with respect to certain financial information regarding Haywood
and Bank, in form and substance reasonably satisfactory to CSBI,
which letters shall be based upon customary specified procedures
undertaken by such firm.
(f) Affiliate Agreements. CSBI shall have received
--------------------
from each affiliate of Haywood the affiliate agreement referred
to in Section 8.12 hereof, in substantially the form attached
hereto as Exhibit C.
(g) Support Agreements. Each of the executive
------------------
officers and directors of Haywood listed in Exhibit E shall have
executed and delivered to CSBI a Support Agreement in
substantially the form attached hereto as Exhibit B.
9.3 Conditions to Obligations of Haywood. The obligations
------------------------------------
of Haywood to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to
the satisfaction of the following conditions, unless waived by
Haywood pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. The
------------------------------
representations and warranties of CSBI set forth or referred to
in this Agreement shall be true and correct in all Material
respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such
representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of
such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other
than the representations and warranties set forth in Section 6.3
of this Agreement, which shall be true and correct in all
Material respects) the inaccuracies of which relate to matters
that are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on CSBI.
(b) Performance of Agreements and Covenants. Each
---------------------------------------
and all of the agreements and covenants of CSBI to be performed
and complied with pursuant to this Agreement and the other
agreements contemplated hereby prior to the Effective Time shall
have been duly performed and complied with in all Material
respects.
(c) Certificates. CSBI shall have delivered to
------------
Haywood (i) a certificate, dated as of the Effective Time and
signed on its behalf by its Chief Executive Officer and its
Chief
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Financial Officer, to the effect that the conditions of its
obligations set forth in Section 9.3(a) and 9.3(b) of this
Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by CSBI's Board of Directors evidencing
the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in
such reasonable detail as Haywood and its counsel shall request.
(d) Opinion of Counsel. Haywood shall have received
------------------
an opinion of Troutman Sanders LLP, counsel to CSBI, dated as of
the Effective Time, in form reasonably satisfactory to Haywood,
as to matters set forth in Exhibit G hereto.
(e) Share Listing. The shares of CSBI Common Stock
-------------
issuable pursuant to the Merger shall have been approved for
listing on NASDAQ.
(f) Fairness Opinion. Haywood shall have received
----------------
from Trident a letter dated not more than three days prior to
the mailing of the Proxy Statement to the effect that, in the
opinion of such firm, the consideration to be received by
Haywood Shareholders in connection with the Merger is fair from
a financial point of view to such shareholders.
(g) Exchange Agent Certificate. The Exchange Agent
--------------------------
shall have delivered to Haywood a certificate, dated as of the
Effective Time, to the effect that the Exchange Agent has
received from CSBI certificates for the required number of whole
shares of CSBI Common Stock to be issued in the Merger and cash
to cover fractional shares and the Cash Amount.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of
this Agreement, and notwithstanding the approval of this
Agreement by the shareholders of Haywood, this Agreement may be
terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) By mutual consent of the respective Boards of
Directors of CSBI and Haywood; or
(b) By the Board of Directors of either Party
(provided that the terminating Party is not then in Material
breach of any representation, warranty, covenant or other
agreement contained in this Agreement) in the event of a breach
by the other Parties of any representation or warranty contained
in this Agreement which cannot be or has not been cured within
30 days after the giving of written notice to the breaching
Party of such breach and which breach would provide the
non-breaching party the ability to refuse to consummate the
Merger under the standard set forth in Section 9.2(a) of this
Agreement in the case of CSBI and Section 9.3(a) of this
Agreement in the case of Haywood; or
(c) By the Board of Directors of either Party
(provided that the terminating Party is not then in Material
breach of any representation, warranty, covenant or other
agreement contained in this Agreement) in the event (i) any
Consent of any Regulatory Authority required
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for consummation of the Merger shall have been denied by final
nonappealable action of such authority or if any action taken by
such authority is not appealed within the time limit for appeal,
or (ii) the shareholders of Haywood fail to vote their approval
of this Agreement and the transaction contemplated hereby at the
Haywood Meeting where the transaction was presented to such
shareholders for approval and voted upon; or
(d) By the Board of Directors of either Party in the
event that the Merger shall not have been consummated by March
31, 2000, but only if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate
pursuant to this Section 10.1(d); or
(e) By the Board of Directors of either Party
(provided that the terminating Party is not then in Material
breach of any representation, warranty, covenant or other
agreement contained in this Agreement) in the event that any of
the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the
date specified in Section 10.1(d) of this Agreement; or
(f) By CSBI in the event that the Board of Directors
of Haywood shall have failed to reaffirm, following a written
request by CSBI for such reaffirmation after Haywood shall have
received any inquiry or proposal with respect to an Acquisition
Proposal, its approval of the Merger (to the exclusion of any
other Acquisition Proposal), or shall have resolved not to
reaffirm the Merger.
10.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to
Section 10.1 of this Agreement, this Agreement shall become void
and have no effect, except that (i) the provisions of this
Section 10.2 and Article 11 and Section 8.6(b) of this Agreement
shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 10.1(b) or 10.1(e) of this
Agreement shall not relieve the breaching Party from Liability
for an uncured willful breach of a representation, warranty,
covenant or agreement giving rise to such termination; provided
that such Liability shall be determined solely in accordance
with the effect of Section 11.2(b) of this Agreement.
10.3 Non-Survival of Representations and Covenants. The
respective representations, warranties, obligations, covenants
and agreements of the Parties shall not survive the Effective
Time except for this Section 10.3 and Articles 2, 3, 4, and 11
and Section 8.12 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. Except as otherwise provided herein, the
capitalized terms set forth below (in their singular and plural
forms as applicable) shall have the following meanings:
"AMEX" shall mean the American Stock Exchange.
"ACQUISITION PROPOSAL" with respect to a Party shall mean
any tender offer or exchange offer or any proposal for a merger,
acquisition of all of the stock or Assets of, or other business
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<PAGE>
combination involving such Party or any of its Subsidiaries or
the acquisition of a substantial equity interest in, or a
substantial portion of the Assets of, such Party or any of its
Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such
Person, (ii) any officer, director, partner, employer or direct
or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person or (iii) any other Person for
which a Person described in clause (ii) acts in any such
capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and
incorporated herein by reference.
"ALLOWANCE" shall mean the allowance for possible loan or
credit losses for the periods set forth in Section 5.9 of this
Agreement.
"ARTICLES OF MERGER" shall mean the Articles of Merger to
be executed by CSBI, HAC and Haywood and filed with the
Secretary of State of the State of North Carolina relating to
the Merger as contemplated by Section 1.1 of this Agreement.
"ASSETS" of a Person shall mean all of the assets,
properties, businesses and rights of such Person of every kind,
nature, character and description, whether real, personal or
mixed, tangible or intangible, accrued or contingent, or
otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not
carried on the books and records of such Person, and whether or
not owned in the name of such Person or any Affiliate of such
Person and wherever located.
"BANK" shall have the meaning set forth in the Preamble of
this Agreement.
"BHC ACT" shall mean the federal Bank Holding Company Act
of 1956, as amended.
"CASH AMOUNT" shall have the meaning set forth in Section
3.3 of this Agreement.
"CASH ELECTION SHARES" shall have the meaning set forth in
Section 3.2 of this Agreement.
"CLOSING" shall mean the closing of the transaction
contemplated hereby, as described in Section 1.2 of this
Agreement.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver or similar affirmation by any
Person pursuant to any Contract, Law, Order or Permit.
"CONTRACT" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice, restriction,
understanding or undertaking of any kind or character or other
document to which any Person is a party or that is binding on
any Person or its capital stock, Assets or business.
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<PAGE>
"CSBI COMMON STOCK" shall mean the One Dollar ($1.00) par
value per share common stock of CSBI.
"CSBI COMPANIES" shall mean, collectively, CSBI and all
CSBI Subsidiaries.
"CSBI FINANCIAL STATEMENTS" shall mean (i) the consolidated
statements of condition (including related notes and schedules,
if any) of CSBI as of June 30, 1999, and as of December 31,
1998, 1997, 1996 and 1995, and the related statements of income,
changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) for the three months ended
June 30, 1999, and for each of the four years ended December 31,
1998, 1997, 1996 and 1995, as filed by CSBI in SEC Documents and
(ii) the consolidated statements of condition of CSBI (including
related notes and schedules, if any) and related statements of
income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to
December 31, 1998.
"CSBI OPTION PLANS" shall have the meaning set forth in
Section 6.3 of this Agreement.
"CSBI SUBSIDIARIES" shall mean the subsidiaries of CSBI
including HAC.
"DEFAULT" shall mean (i) any breach or violation of or
default under any Contract, Order or Permit, (ii) any occurrence
of any event that with the passage of time or the giving of
control or both would constitute a breach or violation of or
default under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate
or revoke, change the current terms of, or renegotiate, or to
accelerate, increase or impose any Liability under, any
Contract, Order or Permit.
"EFFECTIVE TIME" shall mean the date and time at which the
Articles of Merger reflecting the Merger shall become effective
with the Secretary of State of the State of North Carolina.
"ELECTION DEADLINE" shall have the meaning set forth in
Section 3.2 of this Agreement.
"ELECTION FORM" shall have the meaning set forth in Section
3.2 of this Agreement.
"ENVIRONMENTAL LAWS" shall mean all federal, state,
municipal and local laws, statutes, orders, regulations,
decrees, resolutions, proclamations, permits, licenses,
approvals, authorizations, consents, judgments, judicial
decisions and other governmental requirements, limitations and
standards relating to the environment, health and safety issues,
including, without limitation, the manufacture, generation, use,
processing, treatment, recycling, storage, handling, "Release"
(as hereinafter defined), investigation, removal, remediation
and cleanup of or other corrective action for "Hazardous
Materials" (as hereinafter defined), exposure to Hazardous
Materials and personal injury, natural resource damage, property
damage and interference with the use of property caused by or
resulting from Hazardous Materials.
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<PAGE>
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA AFFILIATE" shall have the meaning provided in
Section 5.14 of this Agreement.
"ERISA PLAN" shall have the meaning provided in Section
5.14 of this Agreement.
"EXCHANGE AGENT" shall have the meaning set forth in
Section 3.2 of this Agreement.
"EXCHANGE RATIO" shall mean the ratio formed by the number
of shares of CSBI Common Stock Haywood shareholders will receive
for each share of Haywood Common Stock as set forth herein to
one.
"EXHIBITS" A through G, inclusive, shall mean the Exhibits
so marked, copies of which are attached to this Agreement. Such
Exhibits are hereby incorporated by reference herein and made a
part hereof, and may be referred to in this Agreement and any
other related instrument or document without being attached
hereto.
"FICG" shall mean the Financial Institutions Code of
Georgia.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"HAYWOOD BENEFIT PLANS" shall have the meaning set forth in
Section 5.14 of this Agreement.
"HAYWOOD COMMON STOCK" shall mean the One Dollar ($1.00)
par value per share common stock of Haywood.
"HAYWOOD FINANCIAL STATEMENTS" shall mean (i) the
consolidated balance sheets (including related notes and
schedules, if any) of Haywood as of June 30, 1999, and as
of December 31, 1998, 1997, 1996 and 1995, and the related
statements of income, changes in shareholders' equity and cash
flows (including related notes and schedules, if any) for the
three and six months ended June 30, 1999, and for each of the
four fiscal years ended December 31, 1998, 1997, 1996 and 1995,
and (ii) the consolidated balance sheets of Haywood (including
related notes and schedules, if any) and related statements of
income, changes in shareholders' equity and cash flows
(including related notes and schedules, if any) with respect to
periods ended subsequent to June 30, 1999, with related
prior year comparable financial statements.
"HAYWOOD MEETING" shall mean the special meeting of the
shareholders of Haywood or any adjournment or postponement
thereof to vote on the matters set forth in the Proxy Statement.
"HAYWOOD PREFERRED STOCK" shall mean the One Dollar ($1.00)
par value per share serial preferred stock of Haywood.
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<PAGE>
"HAZARDOUS MATERIALS" shall mean all hazardous, toxic,
explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic and volatile substances, materials,
compounds, chemicals and waste, and all other industrial waste,
sanitary waste, pollutants and contaminants, and all
constituents thereof, including, without limitation, petroleum
hydrocarbons, asbestos-containing materials, lead-based paints
and all substances, materials, wastes, chemicals, compounds,
contaminants and pollutants regulated or addressed by
Environmental Laws.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue
Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"KNOWLEDGE" as used with respect to a Person shall mean the
knowledge, after all appropriate due inquiry, of the Chairman,
President, Chief Executive Officer, Chief Financial Officer,
Chief Accounting Officer, Chief Credit Officer, General Counsel,
or any Senior or Executive Vice President or Manager of such
Person.
"LAW" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule or statute and all
Environmental Laws applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those
promulgated, interpreted or enforced by any of the Regulatory
Authorities.
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or
expense (including, without limitation, costs of investigation,
collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of
notes, bills, checks and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether
accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured or otherwise.
"LIEN" shall mean any conditional sale agreement, default
of title, easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation, restriction,
security interest, title retention or other security
arrangement, or any adverse right or interest, charge or claim
of any nature whatsoever of, on or with respect to any property
or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institution
Subsidiaries of a Party, pledges to secure deposits and other
Liens incurred in the ordinary course of the banking business,
(iii) Liens which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on a
Party; and (iv) Liens which have been Previously Disclosed.
"LITIGATION" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, demand letter,
governmental or other examination or investigation, request for
information, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or
affecting a Party, its business, its Assets (including, without
limitation, Contracts related to it) or the
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transactions contemplated by this Agreement, but shall not
include regular, periodic examinations of depository
institutions and their Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned, leased or
operated by the Party in question or by any of its Subsidiaries
or in which such Party or Subsidiary holds a security or other
interest (including an interest in a fiduciary capacity), and,
where required by the context, includes the owner or operator of
such property, but only with respect to such property.
"MAILING DATE" shall have the meaning set forth in Section
3.2 of this Agreement.
"MATERIAL" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter
in question; provided that any specific monetary amount stated
in this Agreement shall determine materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event,
change, condition or occurrence which has a Material adverse
impact on (i) the financial position, business or results of
operations of such Party and its Subsidiaries, taken as a whole,
or (ii) the ability of such Party to perform its obligations
under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement; provided that
"Material Adverse Effect" shall not be deemed to include the
impact of (x) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or
governmental authorities, (y) changes in GAAP or regulatory
accounting principles generally applicable to banks and their
holding companies, and (z) actions and omissions of a Party (or
any of its Subsidiaries) taken with the prior written consent of
the other Parties to the Agreement and the direct effects of
compliance with this Agreement on the operating performance of
the Party, including expenses incurred by such Party in
consummating the transactions contemplated by this Agreement.
"MERGER" shall mean the merger of Haywood with and into
CSBI referred to in the Preamble of this Agreement.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
"NCBCA" shall mean the North Carolina Business Corporation
Act.
"NO ELECTION SHARES" shall have the meaning set forth in
Section 3.2 of this Agreement.
"1933 ACT" shall mean the Securities Act of 1933, as
amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"ORDER" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or
award, ruling or writ of any federal, state, local or foreign or
other court, arbitrator, mediator, tribunal, administrative
agency or Regulatory Authority.
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"PARTICIPATION FACILITY" shall mean any facility or
property in which the Party in question or any of its
Subsidiaries participates in the management (including, but not
limited to, any property or facility held in a joint venture)
and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to
such facility or property.
"PARTY" shall mean either Haywood, HAC or CSBI, and
"Parties"shall mean Haywood, HAC and CSBI.
"PER SHARE CASH CONSIDERATION" shall have the same meaning
set forth in Section 3.2 of this Agreement.
"PER SHARE STOCK CONSIDERATION" shall have the same meaning
set forth in Section 3.1(b) of this Agreement.
"PERMIT" shall mean any federal, state, local and foreign
governmental approval, authorization, certificate, easement,
filing, franchise, license, notice, permit or right to which any
Person is a party or that is or may be binding upon or inure to
the benefit of any Person or its capital stock, Assets,
Liabilities or business.
"PERSON" shall mean a natural person or any legal,
commercial or governmental entity, such as, but not limited to,
a corporation, general partnership, joint venture, limited
partnership, limited liability company, trust, business
association, group acting in concert or any person acting in a
representative capacity.
"PREVIOUSLY DISCLOSED" shall mean information delivered in
writing prior to the date specified in Section 10.1(h) of this
Agreement in the manner and to the Party or counsel or both
described in Section 11.8 of this Agreement and entitled
"Previously Disclosed Information Delivered Pursuant to the
Agreement and Plan of Merger" describing in reasonable detail
the matters contained therein or identifying the information
disclosed; provided that in the case of Subsidiaries acquired
after the date of this Agreement, such information may be so
delivered by the acquiring Party to the other Party prior to the
date of such acquisition.
"PROXY STATEMENT" shall mean the proxy statement used by
Haywood to solicit the approval of its shareholders of the
transactions contemplated by this Agreement and shall include
the prospectus of CSBI relating to shares of CSBI Common Stock
to be issued to the shareholders of Haywood and other proxy
solicitation materials of Haywood consisting of a part thereof.
"REGISTRATION STATEMENT" shall mean the Registration
Statement on Form S-4, or other appropriate form, including any
pre-effective or post-effective amendments or supplements
thereto, filed with the SEC by CSBI under the 1933 Act in
connection with the transactions contemplated by this Agreement.
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"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 Department of Banking and Finance, the FDIC, the
NASD and the SEC, all state regulatory agencies having
jurisdiction over the Parties and their respective Subsidiaries.
"RELEASE" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, abandonment or disposing into or migration
within the environment.
"REPRESENTATIVES" shall have the meaning set forth in
Section 8.8 of this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements,
reports, registration statements, schedules and other documents
filed, or required to be filed, by a Party or any of its
Subsidiaries with any Regulatory Authority pursuant to the
Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act,
the Investment Company Act of 1940, as amended, the Investment
Advisors Act of 1940, as amended, the Trust Indenture Act of
1939, as amended, and the rules and regulations of any
Regulatory Authority promulgated thereunder.
"STOCK DESIGNEES" shall have the meaning set forth in
Section 3.2 of this Agreement.
"STOCK OPTION AGREEMENT" shall have the meaning set forth
in the Preamble of this Agreement.
"SUBSIDIARIES" shall mean all those corporations, banks,
association, or other entities of which the entity in question
owns or controls 5% or more of the outstanding equity securities
either directly or through an unbroken chain of entities as to
each of which 5% or more of the outstanding equity securities is
owned directly or indirectly by its parent; provided, however,
there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of which
are owned or controlled in a fiduciary capacity.
"SURVIVING CORPORATION" shall mean Haywood as the surviving
corporation resulting from the Merger.
"TAX" OR "TAXES" shall mean all federal, state, county,
local and foreign taxes, charges, fees, levies, imposts, duties
or other assessments, including income, gross receipts, excise,
employment, sales, use, transfer, license, payroll, franchise,
severance, stamp, occupation, windfall profits, environmental,
federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security,
single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated or other tax or
governmental fee of any kind whatsoever, imposed or required to
be withheld by the United States or any state, local, or foreign
government or subdivision or agency thereof, including interest
and penalties thereon or additions with respect
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thereto.
"TAXABLE PERIOD" shall mean any period prescribed by any
governmental authority, including the United States or any
state, local or foreign government or subdivision or agency
thereof for which a Tax Return required to be filed or Tax is
required to be paid.
"TAX RETURN" shall mean any report, return or other
information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or
combined or unitary group that includes a Party or its
Subsidiaries.
"TOTAL MERGER CONSIDERATION" shall have the meaning set
forth in Section 3.3 of this Agreement.
"TRIDENT" shall mean Trident Securities, a division of
McDonald Investments Inc., Haywood's investment banker.
"VALUATION PERIOD" shall have the meaning set forth in
Section 3.2 of this Agreement.
"VALUATION PERIOD MARKET VALUE" shall have the meaning set
forth in Section 3.2 of this Agreement.
11.2 Expenses.
(a) General. Except as otherwise provided in this
-------
Section 11.2 of this Agreement, each of the Parties shall bear
and pay all direct costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees,
printing fees and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel
except that CSBI shall bear and pay the filing fees payable in
connection with the Registration Statement and the Proxy
Statement and one-half of the printing costs incurred in
connection with the printing of the Registration Statement and
the Proxy Statement.
(b) Breach by either Party. In addition to the
----------------------
foregoing, if prior to the Effective Time, this Agreement is
terminated by either Party as a result of the other Party's
breach of such Party's representations, warranties or agreements
set forth herein of this Agreement, such Party shall pay to the
non-breaching Party as its sole and exclusive remedy resulting
from such termination, an amount in cash equal to the sum of:
(i) the reasonable direct costs and expenses
incurred by or on behalf of the non-breaching Party in
connection with the transactions contemplated by this Agreement,
plus
(ii) the sum of $100,000,
which sum represents compensation for the non-breaching Party's
loss as the result of the transactions contemplated by this
Agreement not being consummated.
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11.3 Brokers and Finders. Haywood represents and warrants
-------------------
that neither it nor any of its officers, directors, employees or
Affiliates has employed any broker or finder or incurred any
Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions or finders' fees in connection
with this Agreement or the transactions contemplated hereby
except Haywood has engaged Trident to render financial advisory
services. In the event of a claim by any broker or finder based
upon his or its representing or being retained by or allegedly
representing or being retained by Haywood, Haywood shall
indemnify and hold CSBI harmless of and from any Liability in
respect of any such claim and reduce the Total Merger
Consideration by an amount equal to such claim as determined by
CSBI.
11.4 Entire Agreement. Except as otherwise expressly
provided herein or as set forth in that certain letter agreement
between the parties of even date herewith, this Agreement
(including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with
respect to the transaction contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto,
written or oral. Nothing in this Agreement expressed or
implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
11.5 Amendments. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each
of the Parties upon the approval of the Boards of Directors of
each of the Parties; whether before or after shareholder
approval of the Merger has been obtained provided, however, that
after any such approval by the holders of Haywood Common Stock,
there shall be made no amendment decreasing the consideration to
be received by Haywood shareholders without the further approval
of such shareholders.
11.6 Waivers.
(a) Prior to or at the Effective Time, CSBI, acting
through its Board of Directors, Chief Executive Officer or other
authorized officer, shall have the right to waive any Default in
the performance of any term of this Agreement by Haywood, to
waive or extend the time for the compliance or fulfillment by
Haywood of any and all of its obligations under this Agreement
and to waive any or all of the conditions precedent to the
obligations of CSBI under this Agreement, except any condition
which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of CSBI.
(b) Prior to or at the Effective Time, Haywood, shall
have the right to waive any Default in the performance of any
term of this Agreement by CSBI, to waive or extend the time for
the compliance or fulfillment by CSBI of any and all of its
obligations under this Agreement and to waive any or all of
the conditions precedent to the obligations of Haywood under
this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall
be effective unless in writing signed by a duly authorized
officer of Haywood.
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(c) The failure of any Party at any time or times to
require performance of any provision hereof shall in no manner
affect the right of such Party at a later time to enforce the
same or any other provision of this Agreement. No waiver of any
condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or
construed as a further or continuing waiver of such condition or
breach or a waiver of any other condition or of the breach of
any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior
written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the Parties and their
respective successors and assigns.
11.8 Notices. All notices or other communications which
are required or permitted hereunder shall be in writing and
sufficient if delivered by hand, by facsimile transmission, by
registered or certified mail, postage pre-paid, or by courier or
overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder),
and shall be deemed to have been delivered as of the date so
delivered:
CSBI and HAC: Century South Banks, Inc.
60 Main Street West - Third Floor
Dahlonega, Georgia 30533
706/864-7966 - FAX
Attn: James A. Faulkner, Vice Chairman
and Chief Executive Officer
Copy to Counsel: Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308-2218
404/962-6658 - FAX
Attn: Thomas O. Powell, Esquire
Haywood and Bank: Haywood Bancshares, Inc.
370 North Main Street
Waynesville, North Carolina 28786
Attn: Larry R. Ammons, President and Chief
Executive Officer
Copy to Counsel: Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
202/822-0140 - FAX
Attn: James C. Stewart, Esquire
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11.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of
Georgia, without regard to any applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
11.11 Captions. The captions contained in this Agreement
are for reference purposes only and are not part of this
Agreement.
11.12 Enforcement of Agreement. The Parties hereto
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement was not performed in
accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to
an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to
which they are entitled at Law or in equity.
11.13 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any the
terms or provisions of this Agreement in any other jurisdiction.
If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
11.14 Interpretation of Agreement. The Parties hereto
acknowledge and agree that each Party has participated in the
drafting of this Agreement and that this document has been
reviewed, negotiated and accepted by all parties and their
respective counsel, and the normal rule of construction to the
effect that any ambiguities are to be resolved against the
drafting party shall not be applied to the interpretation of
this Agreement. No inference in favor, or against, any party
shall be drawn from the fact that one party has drafted any
portion hereof.
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IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed on its behalf and its corporate seal to
be hereunto affixed and attested by officers thereunto as of the
day and year first above written.
"HAYWOOD"
ATTEST: HAYWOOD BANCSHARES, INC.
/s/ Paul W. Trantham /s/ Larry R. Ammons
_____________________________ _____________________________
Paul W. Trantham, Secretary Larry R. Ammons, President
and Chief Executive Officer
(CORPORATE SEAL)
"CSBI"
ATTEST: CENTURY SOUTH BANKS, INC.
/s/ Susan F. Anderson /s/ James A. Faulkner
_____________________________ _____________________________
Suan F. Anderson, Secretary James A. Faulkner, Vice-
Chairman and Chief Executive
Officer
(CORPORATE SEAL)
"HAC"
ATTEST: HBI ACQUISITION CORP.
/s/ Susan F. Anderson /s/ James A. Faulkner
_____________________________ _____________________________
Suan F. Anderson, Secretary James A. Faulkner, Vice-
Chairman and Chief Executive
Officer
(CORPORATE SEAL)
<PAGE>
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LIST OF EXHIBITS
Exhibit A Stock Option Agreement
Exhibit B Form of Support and Non Competition Agreement
Exhibit C Form of Affiliates Agreement
Exhibit D Form of Employment Agreement for Larry R. Ammons
Exhibit E List of Haywood Executive Officers and Directors
to execute Support and Non Competition
Agreement
Exhibit F Matters to which Housley Kantarian & Bronstein,
P.C. will opine
Exhibit G Matters to which Troutman Sanders LLP will opine
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EXHIBIT A
________________________________________________________________
STOCK OPTION AGREEMENT
DATED AS OF AUGUST 5, 1999
BETWEEN
HAYWOOD BANCSHARES, INC., AS ISSUER,
AND CENTURY SOUTH BANKS, INC., AS GRANTEE
________________________________________________________________
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THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of August 5, 1999, between
Haywood Bancshares, Inc., a North Carolina corporation
("Issuer") and Century South Banks, Inc., a Georgia corporation
("Grantee"),
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger of even date herewith (the "Merger
Agreement"), which agreement has been executed by the parties
hereto immediately prior to this Stock Option Agreement (the
"Agreement"); and
WHEREAS, as a condition to Grantee's entering into the
Merger Agreement and in consideration therefor, Issuer has
agreed to grant Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the
Merger Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase, subject to the terms hereof,
up to 249,946 fully paid and non-assessable shares of Issuer's
Common Stock, $1.00 par value ("Common Stock"), at a price of
$16.30 per share (the "Option Price"); provided, however, that
in no event shall the number of shares of Common Stock for which
this Option is exercisable exceed 19.99% of the Issuer's issued
and outstanding shares of Common Stock without giving effect to
any shares subject to or issued pursuant to the Option. The
number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common
Stock are either (i) issued or otherwise become outstanding
after the date of this Agreement (other than pursuant to this
Agreement) or (ii) redeemed, repurchased, retired or otherwise
cease to be outstanding after the date of the Agreement, the
number of shares of Common Stock subject to the Option shall be
increased or decreased, as appropriate, so that, after such
issuance, such number equals 19.99% of the number of shares of
Common Stock then issued and outstanding without giving effect
to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement
shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
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2. Provided that (i) Grantee shall not have materially
breached its representations or warranties and cure rights
thereto expired as contained in this Agreement or in the Merger
Agreement, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction shall then be in
effect, (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only
if, both an Initial Triggering Event (as hereinafter defined)
and a Subsequent Triggering Event (as hereinafter defined) shall
have occurred prior to the occurrence of an Exercise Termination
Event (as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within 90 days following such
Subsequent Triggering Event. Each of the following shall be an
"Exercise Termination Event": (i) the Effective Time (as defined
in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial
Triggering Event except a termination by Grantee pursuant to
Section 10.1(b) of the Merger Agreement; or (iii) the passage of
12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering
Event or is a termination by Grantee pursuant to Section 10.1(b)
of the Merger Agreement (provided that if an Initial Triggering
Event continues or occurs beyond such termination and prior to
the passage of such 12-month period, the Exercise Termination
Event shall be 12 months from the expiration of the Last
Triggering Event but in no event more than 18 months after such
termination). The "Last Triggering Event" shall mean the
last Initial Triggering Event to expire. The term "Holder" shall
mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its Subsidiaries (each an
"Issuer Subsidiary"), without having received Grantee's
prior written consent, shall have entered into an agreement
to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of
this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition
Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or
other acquisition or assumption of all or a substantial
portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other
acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 10%
or more of the voting power of Issuer, or (z) any
substantially similar transaction; provided, however, that
in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or
more of its Subsidiaries or involving only any two or more
of such Subsidiaries, be deemed to be an Acquisition
Transaction, provided that any such transaction is not
entered into in violation of the terms of the Merger
Agreement;
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(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have
authorized, recommended, proposed or publicly announced its
intention to authorize, recommend or propose, to engage in
an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or the Board of Directors
of Issuer shall have publicly withdrawn or modified, or
publicly announced its intention to withdraw or modify, in
any manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the transactions
contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary
capacity in the ordinary course of its business shall have
acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder) other than any person who has the
beneficial ownership of 10% or more of the outstanding
common stock on the date hereof;
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer
or its stockholders by public announcement or written
communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to
Issuer or its stockholders to engage in an Acquisition
Transaction, Issuer shall have breached any covenant or
obligation contained in the Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger
Agreement and (y) shall not have been cured prior to the
Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall
have filed an application or notice with the Federal
Reserve Board or other federal or state regulatory
authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean
either of the following events or transactions occurring after
the date hereof:
(i) The acquisition by any person of beneficial
ownership of 25% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (b) of this
Section 2, except that the percentage referred to in clause
(y) shall be 25%.
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(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent
Triggering Event of which it has notice (together, a "Triggering
Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice
Date") specifying (i) the total number of shares it will
purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 45 business days
from the Notice Date for the closing of such purchase (the
"Closing Date"); provided that if prior notification to or
approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder
shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period
of time that otherwise would run pursuant to this sentence shall
run instead from the date on which any required notification
periods have expired or been terminated or such approvals have
been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur
on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase
price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of
this Section 2, Issuer shall deliver to the Holder a certificate
or certificates representing the number of shares of Common
Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of
the Holder thereof to purchase the balance of the shares
purchasable hereunder, and the Holder shall deliver to Issuer a
copy of this Agreement and a letter agreeing that the Holder
will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended
(the "1933 Act"), in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if
the Holder shall have delivered to Issuer a copy
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of a letter from the staff of the SEC, or an opinion of counsel,
in form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the 1933
Act; (ii) the reference to the provisions of this Agreement in
the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection
(e) of this Section 2 and the tender of the applicable purchase
price in immediately available funds, the Holder shall be deemed
to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that
certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with
the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it will not, by charter
amendment or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act,
avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or
performed hereunder by Issuer: (ii) promptly to take all action
as may from time to time be required (including (x) complying
with all premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank
Holding Company Act of 1956, as amended (the "BHCA"), or the
Change in Bank Control Act of 1978, as amended, or any state
banking law, prior approval of or notice to the Federal Reserve
Board or to any state regulatory authority is necessary before
the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such
information to the Federal Reserve Board or such state
regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto;
(iii) that if both an Initial Triggering Event and a Subsequent
Triggering Event shall have occurred prior to the occurrence of
an Exercise Termination Event, the Issuer shall use its best
efforts to obtain additional authorized but unissued shares
which are free of preemptive rights so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock and (iv)
promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions
as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the
Option granted hereby) may
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be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor
and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of
Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any
time be enforceable by anyone.
5. In addition to the adjustment in the number of shares
of Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as
provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock
dividends, splitups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on
or in respect of the Common Stock that would be prohibited under
the terms of the Merger Agreement, or the like, the type and
number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in
such manner as shall fully preserve the economic benefits
provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such
proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within 90 days of
such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf
registration statement under the 1933 Act covering this Option
and any shares issued and issuable pursuant to this Option and
shall use its reasonable best efforts to cause such registration
statement to become effective and remain current in order to
permit the sale or other disposition of this Option and any
shares of Common Stock issued upon total or partial exercise of
this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable
best efforts to cause such registration statement first to
become effective and then to remain effective for such
period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such registrations.
Notwithstanding the foregoing, if, at the time of any request by
the Holder for registration of Option Shares as provided above,
Issuer is in registration with respect to an underwritten public
offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such
offering the inclusion of the Holder's Option or Option Shares
would interfere with the successful marketing of the shares of
Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided further, however,
that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical
and no reduction shall thereafter occur. Each such Holder shall
provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder.
If requested by any such Holder in connection with such
registration, Issuer shall become a party to any
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underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof
to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no
event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 6 by reason of the fact
that there shall be more than one Grantee as a result of any
assignment or division of this Agreement.
7. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate
with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding voting shares and voting share equivalents of
the merged company, or (iii) to sell or otherwise transfer all
or substantially all of its assets to any person, other than
Grantee or one of its Subsidiaries, then, and in each such case,
the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any
such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y)
any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing surviving person,
and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i)
the price per share of Common Stock at which a tender offer
or exchange offer therefor has been made, (ii) the
price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the
six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or
the owner of the Option Shares (the "Owner") gives notice
of the required repurchase of Option Shares, as the case
may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the
price paid in such sale for such assets and the current
market value of the remaining assets of Issuer
as determined
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by a nationally recognized investment banking firm selected
by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Assigned Value,
the value of consideration other than cash shall be
determined by a nationally recognized investment banking
firm selected by the Holder or the Owner, as the case may
be, and reasonably acceptable to the Issuer.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation, merger or
sale in question, but in no event lower than the closing
price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person,
as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less
advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form
as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common
Stock for which the Option is then exercisable, divided by the
Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the
Option Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the
Option is then exercisable and the denominator of which shall be
the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.99% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than 19.99%
of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this clause (e). This
difference in value shall be determined by a nationally
recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
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(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 7 unless the Acquiring
Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
8. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder"), the Substitute Option
Issuer shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option
Repurchase Price") equal to (x) the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the
exercise price of the Substitute Option, multiplied by the
number of shares of Substitute Common Stock for which the
Substitute Option may then be exercised plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously
reimbursed), and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute
Share Repurchase Price") equal to (x) the Highest Closing Price
multiplied by the number of Substitute Shares so designated plus
(y) Grantee's reasonable Out-of-Pocket Expenses (to the extent
not previously reimbursed). The term "Highest Closing Price"
shall mean the highest closing price for shares of Substitute
Stock within the six-month period immediately preceding the date
the Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute
Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to
require the Substitute Option Issuer to repurchase the
Substitute Option and the Substitute Shares pursuant to this
Section 8 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a
copy of this Agreement) and certificates for Substitute Shares
accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to
repurchase the Substitute Option and/or the Substitute Shares in
accordance with the provisions of this Section 8. As promptly as
practicable, and in any event within five business days after
the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer
shall deliver or cause to be delivered to the Substitute Option
Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable
law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing
the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer following a request for
repurchase pursuant to this Section 8 shall immediately so
notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time
to time, to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited
from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at
any time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 8 prohibited under applicable law
or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the
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Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to obtain all required
regulatory and legal approvals, in each case as promptly as
practicable in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, the Substitute
Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the
Substitute Option Issuer is not prohibited from delivering, and
(ii) deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right of
the Substitute Option Holder to purchase that number of shares
of the Substitute Common Stock obtained by multiplying the
number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of
delivery of the notice of repurchase by a fraction, the
numerator of which is the Substitute Option Repurchase Price
less the portion thereof theretofore delivered to the Substitute
Option Holder and the denominator of which is the Substitute
Option Repurchase Price, or (B) to the Substitute Share Owner, a
certificate for the Substitute Common Shares it is then so
prohibited from repurchasing.
9. The 60-day period for exercise of certain rights under
Sections 2, 6, and 12 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
10. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer.
(b) Subject to Section 3, Issuer has taken all necessary
corporate action to authorize and reserve and to permit it to
issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time and from time to time
issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued fully paid,
nonassessable, and will be delivered free and clear of all
claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
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11. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been
duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common
Stock or other securities acquired by Grantee upon exercise of
the Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
12. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express
written consent of the other party, except that in the event a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 60 days following such Subsequent
Triggering Event (or such later period as provided in Section
9); provided, however, that until the date 15 days following the
date on which the Federal Reserve Board approves an application
by Grantee under the BHCA to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely
dispersed public distribution on Grantee's behalf, or (iv)
any other manner approved by the Federal Reserve Board or any
other regulatory authority having appropriate jurisdiction.
13. Each of Grantee and Issuer will use its best efforts
to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation applying to the Federal Reserve
Board under the BHCA or any other governmental authority for
approval to acquire the shares issuable hereunder, but Grantee
shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to
do so.
14. The parties hereto acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either
party hereto and that the obligations of the parties hereto
shall be enforceable by either party hereto through injunctive
or other equitable relief.
15. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid
void or unenforceable, the remainder of the terms, provisions
and covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court
or regulatory agency determines that the Holder is not
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permitted to acquire the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section
1(b) or 5 hereof), it is the express intention of Issuer to
allow the Holder to acquire or to require Issuer to repurchase
such lesser number of shares as may be permissible, without any
amendment or modification hereof.
16. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram, telecopy or telex,
or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, regardless of
the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
18. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers,
accountants and counsel.
20. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire
agreement between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as
expressly provided herein.
21. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
CENTURY SOUTH BANKS, INC.
ATTEST:
/s/ Susan F. Anderson /s/ James A. Faulkner
__________________________ ________________________________
Susan F. Anderson Secretary James A. Faulkner, Vice-Chairman
and Chief Executive Officer
(CORPORATE SEAL)
HAYWOOD BANCSHARES, INC.
ATTEST:
/s/ Paul W. Trantham /s/ Larry R. Ammons
__________________________ ________________________________
Paul W. Trantham, Secretary Larry R. Ammons, President and
Chief Executive Officer
(CORPORATE SEAL)
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EXHIBIT B
FORM OF SUPPORT AND NON COMPETITION AGREEMENT
THIS SUPPORT AND NON COMPETITION AGREEMENT (this "Agreement")
is made and entered into as of the 5th day of August, 1999, by
and between the undersigned, ___________________________, a
resident of _______________, North Carolina, and Century South
Banks, Inc., a corporation organized and existing under the laws
of the State of Georgia ("CSBI").
CSBI, HBI Acquisition Corp., a corporation organized and
existing under the laws of the State of North Carolina ("HAC")
and a wholly owned subsidiary of CSBI and Haywood Bancshares,
Inc., a corporation organized and existing under the laws of the
State of North Carolina ("Haywood"), have entered into an
Agreement and Plan of Merger, dated as of August 5, 1999 (the
"Merger Agreement"). The Merger Agreement generally provides
for the merger of HAC into Haywood (the "Merger") and the
conversion of the issued and outstanding shares of the $1.00 par
value common stock of Haywood (the "Haywood Common Stock") into
shares of the $1.00 par value common stock of CSBI (the "CSBI
Common Stock") or cash or both. The Merger Agreement is subject
to the affirmative vote of the holders of a majority of the
outstanding shares of Haywood Common Stock, the receipt of
certain regulatory approvals and the satisfaction of other
conditions.
The undersigned is a member of the Board of Directors of
Haywood and is the owner of _______ shares Haywood Common Stock
(collectively, the "Shares"). In order to induce CSBI to enter
into the Merger Agreement, the undersigned is entering into this
Agreement with CSBI to set forth certain terms and conditions
governing the actions to be taken by the undersigned solely in
his capacity as a shareholder of Haywood with respect to the
Shares until consummation of the Merger.
NOW, THEREFORE, in consideration of the transactions
contemplated by the Merger Agreement and the mutual promises and
covenants contained herein, the parties agree as follows:
1. Without the prior written consent of CSBI, which
consent shall not be unreasonably withheld, the undersigned
shall not transfer, sell, assign, convey or encumber (except for
such encumbrances that are made with recourse) any of the Shares
during the term of this Agreement except for transfers (i) by
operation of law, by order of a court of competent jurisdiction,
by will or pursuant to the laws of descent and distribution,
(ii) in which the transferee shall agree in writing to be bound
by the provisions of paragraphs 1, 2 and 3 of this Agreement as
fully as the undersigned, (iii) by a bona fide gift to a family
member or charitable organization, or (iv) to CSBI pursuant to
the terms of the Merger Agreement. Without limiting the
generality of the foregoing, the undersigned shall not grant to
any party any option or right to purchase the Shares or any
interest therein.
2. The undersigned intends to, and will, vote (or cause to
be voted) all of the Shares over which the undersigned has
voting authority (other than in a fiduciary capacity) in favor
of the
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Merger Agreement and the Merger at any meeting of shareholders
of Haywood called to vote on the Merger Agreement or the Merger
or the adjournment thereof or in any other circumstance upon
which a vote, or other approval with respect to the Merger
Agreement or the Merger is sought. Further, the undersigned
intends to, and will, surrender the certificate or certificates
representing the Shares over which the undersigned has
dispositive authority to CSBI upon consummation of the Merger as
described in the Merger Agreement and hereby waives any rights
of appraisal, or rights to dissent from the Merger, that the
undersigned may have.
3. Except as otherwise provided in this Agreement, at any
meeting of shareholders of Haywood or at any adjournment thereof
or any other circumstances upon which their vote, consent or
other approval is sought, the undersigned will vote (or cause to
be voted) all of the Shares over which the undersigned has
voting authority (other than in a fiduciary capacity) against
(i) any merger agreement, share exchange or merger (other than
the Merger Agreement and the Merger), consolidation,
combination, sale of substantial assets, merger,
recapitalization, dissolution, liquidation or winding-up of or
by Haywood or (ii) any amendment of Haywood's Articles of
Incorporation or Bylaws or other proposal or transaction
involving Haywood or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement
or any of the other transactions contemplated thereby.
4. The undersigned covenants and agrees with CSBI that for
a period of two years after the effective time of the Merger,
the undersigned shall not, without the prior written consent of
CSBI, directly or indirectly serve as a consultant to, serve as
a management official of, or be or become a major shareholder of
any financial institution having an office in an area within a
circle having a 50 mile radius from any location where Haywood
maintains an office as of the date of this Agreement other than
serving as a management official of Haywood. For purposes of
the covenants contained in this paragraph 4, the following terms
shall have the following respective meanings:
(a) The term "management official" shall refer to
service of any type which gives the undersigned
the authority to participate, directly or
indirectly, in policy-making functions of the
financial institution. This includes, but is
not limited to, service as an organizer,
officer, director or advisory director of the
financial institution. It is expressly
understood that the undersigned may be deemed a
management official of the financial institution
whether or not the undersigned holds any
official, elected or appointed position with
such financial institution.
(b) The term "financial institution" shall refer to
any bank, bank holding company, savings and loan
association, savings and loan holding company,
or any other similar financial institution which
engages in the business of accepting deposits
and making loans or which owns or controls a
company which engages in the business of
accepting deposits and making loans. It is
expressly understood that the term financial
institution shall include any financial
institution as defined herein that after the date
of this Agreement makes application to an
appropriate
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<PAGE>
<PAGE>
federal or state regulatory authority for
approval to organize.
(c) The term "major shareholder" shall refer to the
beneficial ownership of 10% or more of any class
of voting securities of such company or the
ownership of 10% or more the total equity
interest in such company, however denominated.
The provisions of this paragraph 4 shall be of no further
force and effect if the undersigned is not offered employment as
a director or advisory or honorary director of one of CSBI's
subsidiaries at the effective time of the Merger or if after the
Effective Time, Haywood or Haywood Savings Bank, Inc., SSB is
merged with another CSBI subsidiary and the undersigned ceases
service as a director or management official or such individual
is removed or is not renominated as a director or advisory
director at any point prior to the termination of this
Agreement.
5. The undersigned acknowledges and agrees that CSBI could
not be made whole by monetary damages in the event of any
default by the undersigned of the terms and conditions set forth
in this Agreement. It is accordingly agreed and understood that
CSBI, in addition to any other remedy which it may have at law
or in equity, shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement and specifically to
enforce the terms and provisions hereof in any action instituted
in any state or federal court having appropriate jurisdiction
located in Georgia.
6. 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.
7. Except with respect to the covenants contained in
paragraph 4 of this Agreement, which shall be governed by the
terms set forth therein and shall be effective only upon
consummation of the Merger, the covenants and obligations set
forth in this Agreement shall expire and be of no further force
and effect on the earlier of: (i) March 31, 2000 or such date
to which the Merger Agreement is extended; or (ii) the date on
which the Merger Agreement is terminated under Section 10.1
thereof.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the undersigned as of the day and year first
above written.
As to the undersigned, signed in the presence of:
___________________________ _____________________________
Name:________________________
(Please print or type)
CENTURY SOUTH BANKS, INC.
By: ________________________
James A. Faulkner, Vice-
Chairman and Chief
Executive Officer
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<PAGE>
<PAGE>
EXHIBIT C
FORM OF AFFILIATE AGREEMENT
__________________
Century South Banks, Inc.
60 Main Street West - Third Floor
Dahlonega, Georgia 30533
Attention: James A. Faulkner, Vice Chairman and Chief Executive
Officer
Ladies and Gentlemen:
The undersigned is a shareholder of Haywood Bancshares, Inc.
("Haywood"), a bank holding company organized under the laws of
the State of North Carolina and located in Waynesville, North
Carolina, and will become a shareholder of Century South Banks,
Inc. ("CSBI"), a bank holding company organized under the laws
of the State of Georgia and located in Dahlonega, Georgia,
pursuant to the transactions described in the Agreement and Plan
of Merger, dated as of August 5, 1999 (the "Agreement"), by and
among Haywood, CSBI and HBI Acquisition Corp. ("HAC"). Pursuant
to the terms of the Agreement, HAC will be merged with and into
Haywood (the "Merger"), and the shares of the $1.00 par value
common stock of Haywood (the "Haywood Common Stock") will be
converted into and exchanged for shares of the $1.00 par value
common stock of CSBI (the "CSBI Common Stock"). This Affiliate
Agreement represents an agreement between the undersigned and
CSBI regarding certain rights and obligations of the undersigned
in connection with the shares of CSBI Common Stock to be
received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants
contained herein, the undersigned and CSBI hereby agree as
follows:
1. Affiliate Status. The undersigned understands and
agrees that as to Haywood, the undersigned may be deemed to be
an "affiliate" under Rule 145(c) as defined in Rule 405 of the
rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and the
undersigned anticipates that he may be deemed an "affiliate" at
the time of the Merger; provided that execution of this
Affiliate Agreement should not be construed as an admission by
the undersigned that the undersigned is an "affiliate" of
Haywood as described in this Affiliate Agreement or as a waiver
of any rights the undersigned may have to object to any claim
that the undersigned is such an affiliate on or after the
date of the Affiliate Agreement.
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<PAGE>
2. Covenants and Warranties of Undersigned. The
undersigned represents, warrants and agrees that:
(a) The CSBI Common Stock received by the undersigned
as a result of the Merger will be taken for his own account and
not for others, directly, or indirectly, in whole or in part.
(b) CSBI has informed the undersigned that any
distribution by the undersigned of CSBI Common Stock has not
been registered under the 1933 Act and that shares of CSBI
Common Stock received pursuant to the Merger can only be sold by
the undersigned (i following registration under the 1933 Act, or
(ii) 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 (iii) to the extent some other
exemption from registration under the 1933 Act might be
available. THE UNDERSIGNED UNDERSTANDS THAT CSBI IS UNDER NO
OBLIGATION TO FILE A REGISTRATION STATEMENT WITH THE SEC
COVERING THE DISPOSITION OF THE UNDERSIGNED'S SHARES OF
CSBI COMMON STOCK OR TO TAKE ANY OTHER ACTION NECESSARY TO MAKE
COMPLIANCE WITH AN EXEMPTION FROM SUCH REGISTRATION AVAILABLE.
3. Restrictions on Transfer. The undersigned understands
and agrees that stop transfer instructions with respect to the
shares of CSBI Common Stock received by the undersigned pursuant
to the Merger will be given to CSBI's transfer agent and that
there will be placed on the certificates for such shares, or
shares issued in substitution thereof, a legend stating in
substance:
"The shares represented by this certificate were
issued pursuant to a business combination and may
not be sold, transferred or otherwise disposed of
except or unless (1) covered by an effective
registration statement under the Securities Act
of 1933, as amended, (2) in accordance with (i)
Rule 145(d) (in the case of shares issued to an
individual who is not an affiliate of Century
South Banks, Inc. ("CSBI")) or (ii) Rule 144 (in
the case of shares issued to an individual who is
an affiliate of CSBI) of the Rules and
Regulations of such Act, or (3) in accordance
with a legal opinion satisfactory to counsel for
CSBI that such sale or transfer is otherwise
exempt from the registration requirements of the
Act."
Such legend will also be placed on any certificate representing
CSBI securities issued subsequent to the original issuance of
the CSBI Common Stock pursuant to the Merger as a result of any
stock dividend, stock split or other recapitalization as long as
the CSBI Common Stock issued to the undersigned pursuant to the
Merger has not been transferred in such a manner as to justify
the removal of the legend therefrom. In addition, if the
provisions of Rules 144 and 145 are amended to eliminate
restrictions applicable to the CSBI Common Stock received by the
undersigned pursuant to the Merger, or at the expiration of the
restrictive period set forth in Rule 145(d), CSBI, upon the
request of the undersigned, will cause the certificates
representing the shares of CSBI Common Stock issued to the
undersigned in connection with the Merger to the reissued free
of any legend relating to the restrictions set forth in Rules
144 and 145(d) upon
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<PAGE>
receipt by CSBI of an opinion of its counsel to the effect that
such legend may be removed.
4. Understanding of Restrictions on Dispositions. The
undersigned has carefully read the Agreement and this Affiliate
Agreement and discussed the requirements of such documents and
other applicable limitations upon his ability to sell, transfer
or otherwise dispose of the shares of CSBI Common Stock received
by the undersigned, to the extent he believes necessary, with
his counsel or counsel for Haywood.
5. Filing of Reports by CSBI. CSBI agrees, for a period
of two 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
(the "1934 Act"), so that the public information provisions of
Rule 145(d) promulgated by the SEC, as the same are presently in
effect, will be satisfied in the event the undersigned desires
to transfer any shares of CSBI Common Stock issued to the
undersigned pursuant to the Merger.
6. Transfer Under Rule 145(d). If the undersigned
desires to sell or otherwise transfer the shares of CSBI Common
Stock received by him in connection with the Merger at any time
during the restrictive period set forth in Rule 145(d), the
undersigned will provide the necessary representation letter to
the transfer agent for CSBI Common Stock together with such
additional information as the transfer agent may reasonably
request. If CSBI's counsel concludes that such proposed sale or
transfer complies with the requirements of Rule 145(d), CSBI
shall cause such counsel to provide such opinions as may be
necessary to CSBI's transfer agent so that the undersigned may
complete the proposed sale or transfer.
7. Acknowledgments. The undersigned recognizes and
agrees that the foregoing provisions also apply to all shares of
the Capital Stock of Haywood and CSBI that are deemed to be
beneficially owned by the undersigned pursuant to applicable
federal securities laws, which the undersigned agrees may
include, without limitation, shares owned or held in the name
of, (i) the undersigned's spouse, (ii) any relative of the
undersigned or of the undersigned's spouse who has the same home
as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse and any such relative
collectively own at least 10% beneficial interest or of which
any of the foregoing serves as trustee, executor or in any
similar capacity, and (iv) any corporation or other organization
in which the undersigned, the undersigned's spouse and any such
relative collectively own at least 10% of any class of equity
securities or of the equity interest. The undersigned further
recognizes that, in the event that the undersigned is a director
or executive officer of CSBI or becomes a director or executive
officer of CSBI upon consummation of the Merger, among other
things, any sale of CSBI Common Stock by the undersigned within
a period of less than six months following the effective time
of the Merger may subject the undersigned to liability pursuant
to Section 16(b) of the 1934 Act. In such event, the Board of
Directors of CSBI will adopt such resolutions as advised by its
counsel to provide appropriate exemption to such director or
executive officer from Section 16(b) of the 1934 Act.
8. Miscellaneous. This Affiliate Agreement is the
complete agreement between CSBI and the undersigned concerning
the subject matter hereof. Any notice required to be sent
to any party hereunder shall be sent by registered or certified
mail, return receipt requested, using the addresses set forth
herein or such other address as shall be furnished in writing by
the parties.
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<PAGE>
<PAGE>
This Affiliate Agreement shall be governed by the laws of the
State of Georgia.
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the undersigned as of the day and year first
above written.
Very truly yours,
________________________________
Signature
________________________________
Print Name
________________________________
________________________________
________________________________
Address
AGREED TO AND ACCEPTED as of
____________________
CENTURY SOUTH BANKS, INC.
By:________________________________
James A. Faulkner, Vice Chairman
and Chief Executive Officer
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<PAGE>
EXHIBIT D
FORM OF EMPLOYMENT AGREEMENT FOR LARRY R. AMMONS
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, entered into this ______ day of
______________, 1999, between HAYWOOD SAVINGS BANK, INC., SSB
(the "Bank"), CENTURY SOUTH BANKS, INC. (the "Company") and
LARRY R.AMMONS (the "Executive"), an individual residing in the
State of North Carolina, hereby replaces the Employment
Agreement between the Bank, Haywood Bancshares, Inc. and
Executive dated _____________, 199_.
WHEREAS, the Bank and the Company wish to be assured of the
services of Executive for the period provided in this Agreement,
and Executive is willing to serve in their employ on a full-time
basis for said period; and
WHEREAS, the Board of Directors of the Bank (the "Bank
Board") and the Board of Directors of the Company (the "Company
Board") have determined that the best interests of the Bank and
the Company would be served by providing the Executive with
protection and special benefits following the acquisition of
Haywood Bancshares, Inc. by the Company;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereby agree as follows:
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<PAGE>
1. Employment. The Bank and the Company agree to
----------
continue Executive in their employ, and Executive agrees to
remain in their employ, for the period stated in paragraph 3
hereof and upon the other terms and conditions herein provided.
2. Position and Responsibilities. The Bank employs
-----------------------------
Executive and Executive agrees to serve as Chairman of the Board
of Directors of the Bank for the term and on the conditions
hereinafter set forth. Executive agrees to perform such
services not inconsistent with his position as shall from time
to time be assigned to him by the Bank Board.
3. Term and Duties.
---------------
(a) Term of Employment. The period of Executive's
employment under this Agreement shall be deemed to have
commenced as of ____________ __, 1999, and shall continue for a
period of sixty (60) full calendar months thereafter and any
extensions thereafter.
(b) Duties. During the period of his employment
hereunder and except for illnesses, reasonable vacation periods,
and reasonable leaves of absence, Executive shall devote his
business time, attention, skill, and efforts to the faithful
performance of his duties hereunder; provided, however, that
with the approval of the Bank Board, the Executive may serve, or
continue to serve, on the boards of directors of, and hold any
other offices or positions in,
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companies or organizations, which, in such Board's judgment,
will not present any material conflict of interest with the
Bank or any of its subsidiaries or affiliates or divisions, or
unfavorably affect the performance of Executive's duties
pursuant to this Agreement, or will not violate any
applicable statute or regulation.
4. Compensation and Reimbursement of Expenses.
------------------------------------------
(a) Compensation. The Bank agrees to pay the
------------
Executive during the term of this Agreement a salary at the rate
of $133,400 per annum; provided, that the rate of such salary
shall be reviewed by the Bank Board not less often than annually
and any increase in salary will take into account the Bank's
current financial condition, results of operations and the Bank
Board's evaluation of the performance of the Executive. Such
rate of salary, or increased rate of salary, if any, as the case
may be, may be further increased (but not decreased) from time
to time in such amounts as the Bank Board in its discretion may
decide. Such salary shall be payable in accordance with the
customary payroll practices of the Bank, but in no event less
frequently than monthly, and any bonus shall be payable in the
manner specified by the Bank Board at the time any such bonus is
awarded. Any such bonus shall take into account the Bank's
current financial condition, results of operations, and the Bank
Board's evaluation of the performance of the Executive.
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<PAGE>
(b) Reimbursement of Expenses. The Bank shall pay
-------------------------
or reimburse Executive for all reasonable travel and other
expenses incurred by Executive in the performance of his
services under this Agreement.
(c) Consideration from Company: Joint and Several
---------------------------------------------
Liability.
- --------- In lieu of paying the Executive a base salary during
the term of this Agreement, the Company hereby agrees that to
the extent permitted by law, it shall be jointly and severally
liable with the Bank for the payment of all amounts due under
this Agreement. Nevertheless, the Company Board may in its
discretion at any time during the term of this Agreement direct
the Company to pay the Employee a base salary for the remaining
term of this Agreement. If the Company Board directs such
payment, the Company Board shall thereafter review, not less
often than annually, the rate of the Employee's salary, and in
its sole discretion may decide to increase his salary.
5. Participation in Benefit Plans. Except as otherwise
------------------------------
provided in Section 8(c) of the Agreement, the payments provided
in paragraphs 4, 7, and 8 hereof are in addition to but not as a
reduction of all other benefits to which Executive may be, or
may become, entitled under any group hospitalization, health,
dental care, or sick leave plan, life or other insurance or
death benefit plan, or workmen's compensation, disability or
social security, travel or accident insurance, or executive
contingent compensation plan, including, without limitation,
capital accumulation and termination pay programs, restricted or
stock purchase plan, stock option plan,
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<PAGE>
retirement income, qualified pension plan, supplemental pension
plan (excess benefit plan), or other present or future group
employee benefit plan or program of the Bank or of the Company
for which executives are or shall become eligible, and Executive
shall be eligible to receive during the period of his employment
under this Agreement, and during any subsequent period for which
he shall be entitled to receive payments from the Bank or from
the Company under paragraph 7 or paragraph 8 of this Agreement,
all benefits and emoluments for which executives are eligible
under every such plan or program to the extent permissible under
the general terms and provisions of such plans or programs and
in accordance with the provisions thereof.
6. Vacation and Sick Leave. At such reasonable times as
-----------------------
the Bank Board shall in its discretion permit, Executive shall
be entitled, without loss of pay, to absent himself voluntarily
from the performance of his employment under this Agreement, all
such voluntary absences to count as vacation time; provided
that:
(a) Executive shall be entitled to an annual vacation
in accordance with the policies as periodically established by
the Bank Board for senior management officials of the Bank,
which shall in no event be less than three weeks per annum.
(b) Executive shall not be entitled to receive any
additional compensation from the Bank on account of his failure
to take a vacation; nor shall he be entitled to accumulate
unused
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<PAGE>
vacation from one fiscal year to the next, except to the extent
authorized by the Bank Board for senior management officials of
the Bank.
(c) In addition to the aforesaid paid vacations,
Executive shall be entitled, without loss of pay, to absent
himself voluntarily from the performance of his employment with
the Bank for such additional periods of time and for such valid
and legitimate reasons as the Bank Board in its discretion may
determine. Further, the Bank Board shall be entitled to grant
to Executive a leave or leaves of absence with or without pay at
such time or times and upon such terms and conditions as the
Bank Board in its discretion may determine.
(d) In addition, Executive shall be entitled to an
annual sick leave as established by the Bank Board for senior
management officials of the Bank, but in no event in an amount
less than that provided for pursuant to the policy currently in
effect as of the date of this Agreement. In the event any sick
leave time shall not have been used during any year, such leave
shall accrue to subsequent years only to the extent authorized
by the Bank Board. Upon termination of his employment,
Executive shall not be entitled to receive any additional
compensation from the Bank for unused sick leave.
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<PAGE>
7. Benefits Payable Upon Disability.
--------------------------------
(a) Primary Disability Benefits. In the event of the
---------------------------
Disability (as hereinafter defined) of Executive, the Bank shall
continue to pay Executive the monthly compensation provided in
paragraph 4 hereof during the period of his disability provided,
however, that in the event Executive is disabled for a
continuous period exceeding three (3) calendar months, the Bank
may, at its election, terminate the Agreement, in which event
Executive shall be entitled to receive the benefits described in
paragraph 8(b).
As used in this Agreement, the term "disability"
shall mean the complete inability of Executive to perform his
duties under this Agreement as determined by an independent
physician selected with the approval of the Bank and Executive.
(b) Services During Disability. During the period
--------------------------
Executive is entitled to receive payments under paragraphs 7(a),
the Executive shall, to the extent that he is physically and
mentally able to do so, furnish information and assistance to
the Bank, and, in addition, upon reasonable request in writing
on behalf of the Bank Board, or an executive officer designated
by such Board, from time to time, make himself available to the
Bank to undertake reasonable assignments consistent with his
physical and mental health. During such period of service,
Executive shall be responsible and report to, and be subject to
the supervision of, the Bank Board
D-7
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<PAGE>
or an executive officer designated by the Bank Board, as to the
method and manner in which he shall perform such assignments,
subject always to the provisions of this paragraph 7(b), and
shall keep such Board, or such executive officer, appropriately
informed of his progress in each such assignment.
8. Payments to Executive Upon Termination of Employment.
----------------------------------------------------
(a) Event of Termination. Upon the occurrence of an
--------------------
Event of Termination (as hereinafter defined) during the period
of Executive's employment under this Agreement, the provisions
of this paragraph 8 shall apply. As used in this Agreement, an
"Event of Termination" shall mean the termination of Executive's
employment hereunder for any reason.
(b) Compensation upon Event of Termination. Upon the
--------------------------------------
occurrence of an Event of Termination, the Bank shall pay to the
Executive and provide the Executive, or to his beneficiaries,
dependents and estate, as the case may be, with the following:
(i) If the Event of Termination is during the
first 24 months of the term of this Agreement, the Bank shall
promptly pay to the Executive an amount (the "280G Maximum")
equal to the difference between (i) the product of 2.99 times
his "base amount" as defined in Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code") and
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<PAGE>
regulations promulgated thereunder, and (ii) the sum of any
other parachute payments (as defined under Section 280G(b)(2) of
the Code) that the Executive receives on account of the change
in control. Said sum shall be paid in one lump sum within ten
(10) days of such termination. If the Event of Termination is
after the first 24 months of the term of this Agreement, the
Bank shall promptly pay the Executive an amount equal to the
280G Maximum multiplied by a fraction, where the denominator of
such fraction equals thirty-six (36) and the numerator equals
the number of whole calendar months remaining in the term of
this Agreement. Said sum shall be paid in one lump sum
within ten (10) days of such termination. Notwithstanding the
foregoing, any amount due under this paragraph 8(b)(i) shall be
paid in the manner selected by the Executive in a duly executed
election in the form attached hereto as Exhibit "A"; provided
that such an election will be honored and given effect only if
it is properly made and delivered to the Bank more than 180 days
before the date on which the Event of Termination occurs.
Deferred amounts shall bear interest, from the date on which
they would otherwise be paid in a lump sum until the date paid,
at a rate equal to 120% of the applicable federal rate,
compounded semiannually, as determined under Code Section
1274(d) and the regulations thereunder.
(ii) During the period of thirty-six (36)
calendar months beginning with the Event of Termination, the
Executive, his dependents, beneficiaries and estate shall
continue to be covered under all employee benefit plans of the
Bank, including, without limitation, the
D-9
<PAGE>
<PAGE>
Bank's pension plan, life insurance and health insurance as if
the Executive was still employed during such period under this
Agreement.
(iii) If and to the extent that benefits or
service credit for benefits provided by paragraph 8(c)(ii) shall
not be payable or provided under any such plans to the
Executive, his dependents, beneficiaries and estate, by reason
of his no longer being an employee of the Bank, the Bank shall
itself pay or provide for payment of such benefits and service
credit for benefits to the Executive, his dependents,
beneficiaries and estate. Any such payment relating to
retirement shall commence on a date selected by the Executive
which must be a date on which payments under the Bank's
qualified pension plan or successor plan may commence.
(iv) If the Executive elects to have benefits
commence prior to the normal retirement age under the qualified
pension plan or any successor plan maintained by the Bank and
thereby incurs an actuarial reduction in his monthly benefits
under such plan, the Bank shall itself pay or provide for
payment to the Executive of the difference between the amount
that would have been paid if the benefits commenced at normal
retirement age and the actuarially reduced amount paid upon the
early commencement of benefits.
(v) The Bank shall pay all legal fees and
expenses which the Executive may incur as a result of the Bank
or the Company contesting the validity or enforceability of this
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<PAGE>
Agreement and the Executive shall be entitled to receive
interest thereon for the period of any delay in payment from the
date such payment was due at the rate determined by adding two
hundred basis points to the six month Treasury Bill rate.
(vi) The Executive shall not be required to
mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise nor shall any
amounts received from other employment or otherwise by the
Executive offset in any manner the obligations of the Bank
hereunder.
(vii) For a period of two years after the Event
of Termination, the Executive shall not, without prior consent
of the Company, directly or indirectly serve as a consultant to,
management official of, or be or become a 10% or greater
shareholder of any financial institution having an office in an
area within a 50 mile radius from any location where Bank
maintains an office as of the date of this Agreement.
(c) Suspension and Special Regulatory Rules.
---------------------------------------
(i) If the Executive is removed and/or
permanently prohibited from participating in the conduct of the
Bank's affairs by an order issued under Sections 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C.
1818(e)(4) and (g)(1)), all
D-11
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<PAGE>
obligations of the Bank and the Company under this Agreement
shall terminate, as of the effective date of the order, but
vested rights of the parties shall not be affected.
(ii) If the Bank is in default (as defined in
Section 3(x)(1) of FDIA), all obligations under this Agreement
shall terminate as of the date of default; however, this
Paragraph shall not affect the vested rights of the parties.
(iii) All obligations under this Agreement shall
terminate, except to the extent that continuation of this
Agreement is necessary for the continued operation of the Bank:
(i) by the Administrator of the Savings Institution Division of
the Department of Economic and Community Development of the
State of North Carolina (the "Administrator") or his or her
designee, at the time that the Federal Deposit Insurance
Corporation ("FDIC") enters into an agreement to provide
assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of FDIA; or (ii) by the
Administrator, or his or her designee, at the time that the
Administrator, or his or her designee approves a supervisory
merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Administrator to be in an
unsafe or unsound condition. Such action shall not affect any
vested rights of the parties.
(iv) If a notice served under Section 8(e)(3) or
(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends
and/or temporarily prohibits the Executive from participating in
the
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<PAGE>
conduct of the Bank's affairs, the Bank's obligations under this
Agreement shall be suspended as of the date of such service,
unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Bank shall (i) pay the Employee all or
part of the compensation withheld while its contract obligations
were suspended, and (ii) reinstate (in whole or in part) any of
its obligations which were suspended.
(v) Any payments made to the Employee pursuant to
this Agreement, or otherwise, are subject to and conditioned
upon their compliance with 12 U.S.C. Section 1828(k) and any
regulations promulgated thereunder.
(d) Power of the Board of Directors to Terminate the
------------------------------------------------
Executive or of the Executive to Terminate Employment.
- -----------------------------------------------------
The Bank Board may terminate the Executive at any time; in the
event of such termination the provisions of this paragraph 8
shall fully apply. The Executive may terminate his service
under this Agreement at any time upon three (3) months written
notice to the Bank without prejudice to any other benefits as to
which the Executive is vested.
(e) Post-termination Health Insurance. If the
---------------------------------
Executive's employment with the Bank or the Company terminates
for any reason other than for cause, the Executive shall be
entitled to purchase from the Bank, at his own expense which
shall not exceed applicable COBRA
D-13
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<PAGE>
rates, family medical insurance under any group health plan that
the Bank or the Company maintains for its employees. This
right shall be (i) in addition to, and not in lieu of, any other
rights that the Executive has under this Agreement, and (ii)
shall continue until the Executive first becomes entitled to
Medicare coverage.
9. Source of Payments. All payments provided in
------------------
paragraphs 4, 7 and 8 shall be paid in cash from the general
funds of the Bank or the Company, and no special or separate
fund shall be established and no other segregation of assets
shall be made to assure payment. Executive shall have no right,
title, or interest whatever in or to any investments which the
Bank or the Company may make to aid in meeting their obligations
hereunder.
10. Confidential Information. Executive shall not, to the
------------------------
detriment of the Bank, knowingly disclose or reveal to any
unauthorized person any confidential information relating to the
Bank, its subsidiaries or affiliates, or to any of the
businesses operated by them, and Executive confirms that such
information constitutes the exclusive property of the Bank.
Executive shall not otherwise knowingly act or conduct himself
(i) to the material detriment of the Bank, its subsidiaries, or
affiliates, or (ii) in a manner which is inimical or contrary to
the interests thereof.
D-14
<PAGE>
<PAGE>
11. Federal Income Tax Withholding. The Bank may withhold
------------------------------
from any benefits payable under this Agreement all federal,
state, city or other taxes as shall be required pursuant to any
law or governmental regulation or ruling.
12. Effect of Prior Agreements. This Agreement contains
--------------------------
the entire understanding between the parties hereto and
supersedes any prior employment agreement between the Bank or
any predecessor of the Bank and Executive.
13. Consolidation, Merger, or Sale of Assets. Nothing in
----------------------------------------
this Agreement shall preclude the Bank or the Company from
consolidating or merging into or with, or transferring all or
substantially all of its assets to another corporation which
assumes this Agreement and all obligations and undertakings of
the Bank and the Company hereunder. Upon such a consolidation,
merger, or transfer of assets and assumption, the terms "the
Bank" and "the Company" as used herein shall continue in full
force and effect.
14. General Provisions.
------------------
(a) Nonassignability. Neither this Agreement nor any
----------------
right or interest hereunder shall be assignable by Executive,
his beneficiaries, or legal representatives without the Bank's
prior written consent; provided, however, that nothing in this
paragraph 14(a) shall
D-15
<PAGE>
<PAGE>
preclude (i) Executive from designating a beneficiary to receive
any benefits payable hereunder upon his death, or (ii) the
executors, administrators, or other legal representatives of
Executive or his estate from assigning any rights hereunder to
the person or persons entitled thereto.
(b) No Attachment. Except as required by law, no
-------------
right to receive payments under this Agreement shall be subject
to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process of assignment by operation
of law, and any attempt, voluntary or involuntary, to effect any
such action shall be null, void and of no effect.
(c) Binding Agreement. This Agreement shall be
-----------------
binding upon, and inure to the benefit of, Executive, the Bank,
and the Company and their respective permitted successors and
assigns.
15. Modification and Waiver.
-----------------------
(a) Amendment of Agreement. This Agreement may not
----------------------
be modified or amended except by an instrument in writing signed
by the parties hereto.
D-16
<PAGE>
<PAGE>
(b) Waiver. No term or condition of this Agreement
------
shall be deemed to have been waived, nor shall there be an
estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein,
and each waiver shall operate only as to the specific term or
condition waived and shall not constitute a waiver of such term
or condition for the future or as to any act other than the
specifically waived.
16. Severability. If, for any reason, any provision of
------------
this Agreement is held invalid, such invalidity shall not affect
any other provision of this Agreement not held so invalid, and
each such other provision shall to the full extent consistent
with law continue in full force and effect. If any provision of
this Agreement shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision and together
with all other provisions of this Agreement, shall to the full
extent consistent with law continue in full force and effect.
If this Agreement is held invalid or cannot be enforced, then to
the full extent permitted by law, any prior agreement between
the Bank (or any predecessor thereof) and Executive shall be
deemed reinstated as if this Agreement had not been executed.
D-17
<PAGE>
<PAGE>
17. Headings. The headings of paragraphs herein are
--------
included solely for convenience of reference and shall not
control the meaning or interpretation of any of the provisions
of this Agreement.
18. Governing Law. This Agreement has been executed and
-------------
delivered in the State of North Carolina, and its validity,
interpretation, performance, and enforcement shall be governed
under the laws of said State, except to the extent Federal law
is governing.
D-18
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Bank and the Company have caused
this Agreement to be executed and their seals to be affixed
hereunto by a member of their respective Boards of Directors
duly authorized, and Executive has signed this Agreement, all as
of the day and year first above written.
ATTEST: HAYWOOD SAVINGS BANK, INC. SSB
________________________ BY: ______________________________
ATTEST: CENTURY SOUTH BANKS, INC.
________________________ BY: ______________________________
WITNESS: LARRY R. AMMONS, EXECUTIVE
________________________ BY: ______________________________
D-19
<PAGE>
<PAGE>
Exhibit "A"
CENTURY SOUTH BANKS, INC.
HAYWOOD SAVINGS BANK, INC., SSB
EMPLOYMENT AGREEMENT
_______________________________
DEFERRED PAYMENT ELECTION FORM
_______________________________
AGREEMENT, made this ____ day of ________, 19__, by and
between _________ (the "Employee") and ______________ (the
"Bank") with respect to payment of severance compensation to the
Employee pursuant to Section 8 of his employment agreement
("Agreement") with the Bank dated _______, 199__.
NOW THEREFORE, it is mutually agreed as follows:
1. Form of Payment. The Employee, by the execution
---------------
hereof, in accordance with Section 8 of the Agreement, elects to
have his severance benefits (plus earnings thereon) distributed
in cash as follows in substantially equal annual payments over a
period of _____ years (no more than 10).
2. In the event of the Employee's death, his benefits
shall be distributed --
[ ] in one lump sum payment.
[ ] in accordance with the payment schedule selected
in paragraph 1 hereof (with payments made as though the Employee
survived to collect all benefits, and as though the Employee
terminated service on the date of his death, if payments had
not already begun).
3. Designation of Beneficiary. In the event of the
--------------------------
Employee's death before he has collected all of the benefits
payable pursuant to the Agreement and this election, any such
benefits payable shall be distributed to the beneficiary or
beneficiaries designated under subparagraphs a and b of this
paragraph 3 in the manner elected pursuant to paragraph 2 above:
a. Primary Beneficiary. The Employee hereby designates
-------------------
the person(s) named below to be his primary beneficiary and to
receive the balance of any unpaid benefits under the Agreement:
D-20
<PAGE>
<PAGE>
Name of Percentage of
Primary Beneficiary Mailing Address Death Benefit
- ------------------- --------------- -------------
%
%
b. Contingent Beneficiary. In the event that the primary
----------------------
beneficiary or beneficiaries named above are not living at the
time of the Employee's death, the Employee hereby designates the
following person(s) to be his contingent beneficiary for
purposes of the Agreement:
Name of Percentage of
Contingent Beneficiary Mailing Address Death Benefit
- ---------------------- --------------- -------------
%
%
4. Effect of Election. The elections made in paragraph 1
------------------
hereof shall be irrevocable. The Employee may, by submitting an
effective superseding Deferred Payment Election Form at any time
and from time to time, prospectively change the beneficiary
designation and the manner of payment to a beneficiary. Such
elections shall, however, become irrevocable upon the Employee's
death.
5. Commitments. The Bank agrees to make payment of all
-----------
amounts due the Employee in accordance with the terms of the
Agreement and the elections made by the Employee herein.
D-21
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands the day and year first above-written.
WITNESS: EMPLOYEE
_____________________ _______________________
Larry R. Ammons
ATTEST: BANK
_____________________
Secretary
By _____________________
Its _______________
D-22
<PAGE>
<PAGE>
EXHIBIT E
LIST OF HAYWOOD EXECUTIVE OFFICERS AND DIRECTORS
TO EXECUTE NON COMPETITION AGREEMENT
Term of Non Competition
-----------------------
Name Agreement
- ---- ---------
Larry R. Ammons 2 years
Glenn W. Brown 2 years
G.D. Stovall, Jr. 2 years
William P. Burgin 2 years
R. Neal Ensley 2 years
Joseph E. Taylor, Jr. 2 years
C. Leon Turner 2 years
Philip S. Dooly 2 years
C. Jeff Reece, Jr. 2 years
R. Bruce Norman 2 years
E-1
<PAGE>
<PAGE>
EXHIBIT F
MATTERS TO WHICH
HOUSLEY KANTARIAN & BRONSTEIN, P.C. WILL OPINE
Capitalized terms used in this Exhibit shall have the
meaning set forth in the Agreement
1. Haywood is a bank holding company duly incorporated,
validly existing and in good standing under the North Carolina
Business Corporation Act with the corporate power and authority
to conduct its business as such business is described in
Haywood's Annual Report on Form 10-K for the year ended December
31, 1998.
2. Bank is a state savings bank duly incorporated, validly
existing and in good standing under Chapter 54L of the North
Carolina General Statutes.
3. The deposits of Bank are insured by the Federal Deposit
Insurance Corporation to the extent provided by law.
4. To our actual Knowledge, based solely upon the Haywood
Officers' Certificate, Haywood's authorized capital stock
consists of 10,000,000 shares of Haywood Common Stock and
5,000,000 shares of Haywood Preferred Stock. To our actual
Knowledge, based solely upon the Haywood Officers' Certificate,
the currently outstanding shares of Haywood Common Stock have
been duly authorized and validly issued, were not issued in
violation of any statutory preemptive rights of shareholders and
are fully paid and nonassessable.
5. The execution and delivery by Haywood of the Agreement
do not violate or contravene any provision of the Articles of
Incorporation or Bylaws of Haywood or, to our actual Knowledge,
based solely upon the Haywood Officers' Certificate, result in
any breach of, or default or acceleration under any mortgage,
agreement, lease, indenture or other instrument, order, judgment
or decree to which either Haywood or Bank or either of them is a
party or by which either is bound.
6. In accordance with the North Carolina Business
Corporation Act, the Articles of Incorporation and the Bylaws of
Haywood and pursuant to resolutions duly adopted by its Board of
Directors and shareholders, the Agreement has been duly adopted
and approved by the Board of Directors of Haywood and by the
shareholders of Haywood at the Haywood Shareholders Meeting.
7. The Agreement has been duly and validly executed and
delivered by Haywood, and, assuming valid authorization,
execution and delivery by CSBI and HAC, constitutes a valid and
binding agreement of Haywood.
* * *
Counsel may expressly exclude any opinions as to choice of law
and anti-trust matters and may add any other qualifications and
explanations of the basis of its opinions as are consistent with
the Legal Opinion Accord prepared by the Section of Business Law
of the American Bar Association.
F-1
<PAGE>
<PAGE>
EXHIBIT G
MATTERS TO WHICH
TROUTMAN SANDERS LLP
WILL OPINE
Capitalized terms used in this Exhibit shall have the
meaning set forth in the Agreement.
1. CSBI is a bank holding company duly incorporated,
validly existing and in good standing under the Georgia Business
Corporation Code and the Bank Holding Company Act of 1956, as
currently in effect, with the corporate power and authority to
conduct its business as such business is described in CSBI's
Annual Report on Form 10-K for the year ended December 31, 1998.
2. HAC is a corporation duly incorporated, validly
existing and in good standing under the North Carolina Business
Corporation Act with the corporate power and authority to
conduct its business and to own and use its Assets.
3. The execution and delivery by CSBI and HAC of the
Agreement do not violate or contravene any provision of the
Articles of Incorporation or Bylaws of either CSBI or HAC or, to
our actual Knowledge, based solely upon the CSBI Officers'
Certificate, result in any breach of, or default or acceleration
under any mortgage, agreement, lease, indenture or other
instrument, order, judgment or decree to which either CSBI or
HAC or either of them is a party or by which either is bound.
3. The Agreement has been duly and validly executed and
delivered by CSBI and HAC, and assuming valid authorization,
execution and delivery by Haywood, constitutes a valid and
binding agreement of CSBI and HAC.
4. The shares of CSBI Common Stock to be issued to the
shareholders of Haywood as contemplated in the Agreement have
been registered under the Securities Act of 1933, as amended,
have been duly authorized and, when issued and delivered
pursuant to the Merger, will be validly issued and not in
violation of any preemptive rights and will be fully paid and
nonassessable under the Georgia Business Corporation Code. To
our actual Knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued by the Securities
and Exchange Commission, or proceedings therefor initiated or,
to our actual Knowledge, threatened. At the time the
Registration Statement became effective, the Registration
Statement (other than the financial and statistical data
contained therein as to which counsel need express no opinion)
complied as to form in all material respects with the Securities
Act of 1933, as currently in effect, and the regulations
promulgated thereunder.
5. To our actual Knowledge, based solely upon the CSBI
Officers' Certificate, CSBI has authorized ______ shares of CSBI
Common Stock. To our actual Knowledge, based solely upon the
CSBI Officers' Certificate, the currently outstanding shares of
CSBI Common Stock have been duly authorized and validly issued,
were not issued in violation of any statutory preemptive rights
of shareholders and are fully paid and nonassessable.
G-1
<PAGE>
<PAGE>
* * *
Counsel may expressly exclude any opinions as to choice of law
and anti-trust matters and may add any other qualifications and
explanations of the basis of its opinions as are consistent with
the Legal Opinion Accord prepared by the Section of Business Law
of the American Bar Association. As to matters of North
Carolina law, counsel is entitled to rely on counsel admitted to
practice law in the State of North Carolina as may be determined
and selected in counsel's sole discretion.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,956,742
<INT-BEARING-DEPOSITS> 267,541
<FED-FUNDS-SOLD> 1,348,733
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,794,602
<INVESTMENTS-CARRYING> 17,125,468
<INVESTMENTS-MARKET> 16,906,037
<LOANS> 109,663,119
<ALLOWANCE> 778,547
<TOTAL-ASSETS> 149,224,376
<DEPOSITS> 118,274,816
<SHORT-TERM> 7,000,000
<LIABILITIES-OTHER> 2,071,474
<LONG-TERM> 0
0
0
<COMMON> 1,250,356
<OTHER-SE> 20,627,730
<TOTAL-LIABILITIES-AND-EQUITY> 149,224,376
<INTEREST-LOAN> 4,384,843
<INTEREST-INVEST> 776,442
<INTEREST-OTHER> 48,364
<INTEREST-TOTAL> 5,284,003
<INTEREST-DEPOSIT> 2,536,557
<INTEREST-EXPENSE> 2,741,211
<INTEREST-INCOME-NET> 2,542,792
<LOAN-LOSSES> 20,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,646,014
<INCOME-PRETAX> 1,292,956
<INCOME-PRE-EXTRAORDINARY> 807,956
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 807,956
<EPS-BASIC> .65
<EPS-DILUTED> .65
<YIELD-ACTUAL> 3.56
<LOANS-NON> 712,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 758,547
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 778,547
<ALLOWANCE-DOMESTIC> 778,547
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
FOR IMMEDIATE RELEASE
Century South Banks, Inc.
P.O. Box 1000
Dahlonega, Georgia 30533
P.O. Box 14099
Macon, Georgia 31203
Contact James A Faulkner Larry Ammons
(706) 864-3915 (826) 456-9092
Joe Evans Susan Anderson
(912) 475-4340 (706) 864-1111
CENTURY SOUTH BANKS, INC. TO ACQUIRE
HAYWOOD BANCSHARES, INC.
DAHLONEGA, GA/WAYNESVILLE, N.C. Century South Banks, Inc.
(Nasdaq NMS:CSBI) and Haywood Bancshares, Inc. (AMEX:HBS) today
announced that they have entered into an Agreement and Plan of
Merger whereby Haywood would be merged with a wholly-owned
subsidiary of Century South and Haywood's shareholders would
receive approximately $21.30 for each share of Haywood's common
stock based on the current value of Century South stock.
Subject to certain limitations, Haywood shareholders will
have the right to elect to receive the merger consideration in
cash or in shares of Century South common stock with cash paid
in lieu of fractional shares.
In connection with the agreement, Haywood has granted
Century South an option to acquire up to 249,946 shares of
Haywood's common stock (equal to approximately 19.9% of
Haywood's shares outstanding). The option will only be
exercisable following in the event of a termination or in
certain other limited events.
The merger is subject to customary terms and conditions
including shareholder and regulatory approvals and is expected
to close in the first quarter of 2000. The merger will be
accounted for as a purchase.
"Century South is pleased to bring Haywood into our family
of community banks," stated James A. Faulkner, Vice-Chairman and
Chief Executive Officer of Century South. "Under the leadership
of President and Chief Executive Officer Larry Ammons, Haywood
has established a rich heritage of outstanding customer service.
We look forward to continuing that tradition and providing
several new services to Haywood's customer. Western North
Carolina is a natural complement to our current market and we
are very excited at the prospect of building a significant
market presence for Century South in this area.
"We are extremely excited about the prospect of joining
with Century South." Larry Ammons, the President and Chief
Executive Officer of Haywood stated. "The Board of Directors
believes that Century South's community bank philosophy mirrors
our approach to banking and will result in greater convenience
and service to our customers. At the present time, Haywood will
continue to operate under its current name and in its current
locations."
Haywood is a one-banking company with $150 million in
assets as of June 30, 1999 and with branches located in
Waynesville, Murphy, Andrews and Sylva, North Carolina. Century
South is a $1.2 billion multi-bank, multi-state holding company
with eleven affiliate banks; Bank of Dahlonega, GA; The Bank of
Ellijay, Ellijay, GA; First Bank of Polk County, Copperhill, TN;
Georgia First Bank, N.A., Gainesville, GA; Fannin County Bank,
N.A., Blue Ridge, GA; First Community Bank of Dawsonville,
Dawsonville, GA; Peoples Bank, Lavonia, GA; Bank of
Danielsville, Danielsville, GA; AmeriBank, N.A., Savannah, GA;
and First South Bank, N.A., Macon, GA; and The Independent Bank
of Oxford, Oxford, AL.
