Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e) (2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c)
Community Savings Bankshares, Inc.
- ------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
(2) Aggregate number of securities to which transaction applies: 8,660,254
shares and 696,333 options
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):Each
of the 8,660,254 issued and outstanding shares of Common Stock
will, upon consummation of the merger, be converted into the right to
receive $19.00 in cash. With respect to the 696,333 options to
purchase Registrant's common stock, holders thereof will receive,
in consideration for the cancellation thereof, an amount
per option share in cash equal to $19.00 less the exercise price
(which exercise prices range from $5.44 per share to $12.375 per
share).
(4) Proposed maximum aggregate value of transaction: $170,376,741.10
(5) Total fee paid: $34,075.35
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:_________________________________
(2) Form, schedule or registration statement no.:___________
(3) Filing party:___________________________________________
(4) Date filed:_____________________________________________
[Community Savings Bankshares letterhead]
November 9, 2001
Dear Fellow Shareholder:
We cordially invite you to attend a special meeting of the shareholders
of Community Savings Bankshares, Inc. The meeting will be held at The Embassy
Suites PGA, 4350 PGA Boulevard, Palm Beach Gardens, Florida, on Monday,
December 17, 2001, at 1:30 p.m., Eastern Time.
At the special meeting, you will be asked to approve a merger agreement
which provides for the merger of Community Savings Bankshares, Inc. and a
subsidiary of BankAtlantic Bancorp, Inc. If the merger is completed, you will
be entitled to receive a cash payment of $19.00 for each share of Community
Savings Bankshares stock that you own. Upon completion of the merger, you
will not own any stock or other interest in Community Savings Bankshares nor
will you receive, as a result of the merger, any stock of BankAtlantic Bancorp
or any of its subsidiaries.
Your exchange of shares of community savings bankshares stock for cash
generally will cause you to recognize a taxable gain or loss for federal, and
possibly for state and local, income tax purposes. You should consult your
personal tax advisor for a full understanding of the tax consequences of the
merger to you.
Completion of the merger is subject to certain conditions, including
receipt of various regulatory approvals and approval of the merger agreement
by the affirmative vote of a majority of our outstanding shares of common
stock entitled to vote. As of October 31, 2001, the directors and executive
officers and their affiliates of Community Savings Bankshares beneficially
owned 9.2% of the shares of Community Savings Bankshares stock, excluding
stock options. Our directors and executive officers have agreed to vote all
the shares they beneficially own in favor of the merger.
We urge you to read the attached proxy statement carefully. It
describes the merger agreement in detail and includes a copy of the merger
agreement as Appendix A.
Your Board of Directors has unanimously adopted the merger agreement
and recommends that you vote "FOR" approval of the merger agreement because
the Board believes it to be in the best interests of our shareholders.
It is very important that your shares be represented at the special
meeting. Whether or not you plan to attend the special meeting, please
complete, date and sign the enclosed proxy card and return it promptly in the
postage-paid envelope provided.
On behalf of the Board of Directors, I thank you for your prompt
attention to this important matter.
Sincerely,
/s/ James B. Pittard, Jr.
James B. Pittard, Jr.
President and Chief Executive Officer
Community Savings Bankshares, Inc.
660 U. S. Highway One
North Palm Beach, Florida 33408
(561) 881-2212
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON December 17, 2001
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of
Community Savings Bankshares, Inc. will be held at The Embassy Suites PGA,
4350 PGA Boulevard, Palm Beach Gardens, Florida, on Monday, December 17, 2001
at 1:30 p.m., Eastern Time.
A proxy form and a proxy statement for the special meeting are enclosed.
The meeting is for the purpose of considering and acting upon:
1. The approval of the Agreement and Plan of Merger, dated September
9, 2001, among BankAtlantic Bancorp, Inc., CSB Merger Sub, Inc. and Community
Savings Bankshares, Inc. Under the terms of the merger agreement, we will be
merged with a wholly owned subsidiary of BankAtlantic Bancorp and will become
a wholly owned subsidiary of BankAtlantic Bancorp. You will be entitled to
receive $19.00 in cash for each share of our common stock that you own. A
copy of the merger agreement is included as Appendix A to the accompanying
proxy statement;
2. The potential adjournment of the special meeting of shareholders if
necessary to solicit additional proxies; and
3. Such other matters as may properly come before the special meeting
or any adjournments or postponements thereof. We are not aware of any other
business to come before the special meeting.
Our shareholders of record at the close of business on October 31, 2001 are
entitled to vote at the special meeting, and any adjournments or postponements
of the special meeting. The accompanying proxy statement and proxy form are
being sent to shareholders on or about November 9, 2001.
You are cordially invited to attend the special meeting of shareholders.
However, to ensure your representation at the special meeting, please
complete, sign, date and promptly mail your proxy card in the enclosed
postage-paid envelope. The proxy card will not be used if you attend and vote
at the special meeting in person. If you are a shareholder whose shares are
not registered in your name, you will need additional documentation from the
holder of record of your shares to vote in person at the meeting. The prompt
return of your proxy will save us the expense of further requests for proxies.
By Order of the Board of Directors,
/s/ Deborah M. Rousseau
Deborah M. Rousseau
Vice President and Secretary
North Palm Beach, Florida
November 9, 2001
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
TABLE OF CONTENTS
Page
Questions and Answers About Voting Procedures for the Special Meeting. . 1
Summary Term Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Selected Consolidated Financial and Other Information About Us . . . . . 5
Where You Can Find More Information. . . . . . . . . . . . . . . . . . . 6
The Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Place, Time and Date. . . . . . . . . . . . . . . . . . . . . . . . . 7
Matters to Be Considered. . . . . . . . . . . . . . . . . . . . . . . 7
Record Date; Vote Required. . . . . . . . . . . . . . . . . . . . . . 7
Beneficial Ownership of Community Savings Bankshares Common Stock . . 8
Community Savings Bankshares Common Stock . . . . . . . . . . . . . . 8
Proxies. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Background of the Merger. . . . . . . . . . . . . . . . . . . . . . . 10
Our Reasons for the Merger; Recommendation of Your Board of
Directors . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 11
The Consideration is Fair According to Friedman, Billings, Ramsey
& Co., Inc., Our Financial Advisor . . . . . . . . . . . . . . . . 12
You Will Receive Cash for Your Shares of Community Savings
Bankshares Stock. . .. . . . . . . . . . . . . . . . . . . . . . . 19
Treatment of Options and Restricted Shares. . . . . . . . . . . . . . 19
Procedure for Surrendering Your Certificates. . . . . . . . . . . . . 19
Representations and Warranties Made by Us and BankAtlantic Bancorp. . 20
Conditions to the Merger. . . . . . . . . . . . . . . . . . . . . . . 21
Conduct of Business Prior to the Completion of the Merger . . . . . . 23
Approvals Needed to Complete the Merger . . . . . . . . . . . . . . . 27
Waiver and Amendment of the Merger Agreement. . . . . . . . . . . . . 28
Termination of the Merger Agreement . . . . . . . . . . . . . . . . . 29
Interests of Directors and Officers in the Merger that are Different
from Your Interests. . . . . . . . . . . . . . . . . . . . . . . . 31
Employees and Benefit Plans . . . . . . . . . . . . . . . . . . . . . 33
You Have Dissenters' Rights of Appraisal. . . . . . . . . . . . . . . 34
Federal Income Tax Consequences of the Merger to You. . . . . . . . . 37
Accounting Treatment of the Merger. . . . . . . . . . . . . . . . . . 38
Who Pays for What . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Certain Related Agreements . . . . . . . . . . . . . . . . . . . . . . . 38
Bank Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . 38
Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Adjournment of the Special Meeting . . . . . . . . . . . . . . . . . . . 38
Beneficial Ownership of Community Savings Bankshares Common Stock. . . . 40
Shareholder Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . 43
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Appendix A -- Agreement and Plan of Merger (excluding the exhibits
thereto) . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Appendix B -- Opinion of Our Financial Advisor . . . . . . . . . . . . . B-1
Appendix C -- Section 262 of the Delaware General Corporation Law. . . . C-1
i
QUESTIONS AND ANSWERS
ABOUT VOTING PROCEDURES OF THE SPECIAL MEETING
Q: What do I need to do now? Q: Can I change my vote?
A: After you have carefully read A: Yes. If you have not voted
this proxy statement, indicate on through your broker or other
your proxy form how you want your nominee, there are three ways
shares to be voted. Then sign, you can change your vote after
date and mail your proxy form in you have sent in your proxy
the enclosed prepaid return form.
envelope as soon as possible.
This will enable your shares to * First, you may send a
be represented and voted at the written notice to the
special meeting. person to whom you submitted
your proxy stating that you
Q: Why is my vote important? would like to revoke your
proxy. For proxies returned
A: The merger agreement must be to Community Savings
approved by a majority of the Bankshares, the notice
outstanding shares of our common should be submitted to our
stock entitled to vote. If you Secretary.
do not return your proxy form or
vote in person at the special * Second, you may complete and
meeting, it will have the same submit a new proxy form. Any
effect as a vote against the earlier proxies will be
merger agreement. revoked automatically.
Q: If my shares are held in street * Third, you may attend the
name by my broker, will my broker special meeting and vote in
automatically vote my shares for person. Any earlier proxy
me? will be revoked. However,
simply attending the special
A: No. Your broker will not be able meeting without voting in
to vote your shares without person will not revoke your
instructions from you. You proxy.
should instruct your broker to
vote your shares, following the If you have instructed a broker
directions your broker provides. or other nominee to vote your
shares, you must follow
Q: What if I fail to instruct my directions you receive from
broker? your broker or other nominee to
change your vote.
A: If you fail to instruct your
broker to vote your shares, it Q: Should I send in my stock
will have the same effect as a certificates now?
vote against the merger
agreement. A: No. You should not send in
your stock certificates at this
Q: Can I attend the meeting and vote time.
my shares in person?
Instructions for surrendering
A: Yes. All shareholders are your Community Savings
invited to attend the special Bankshares stock certificates
meeting. Shareholders of record in exchange for $19.00 per
can vote in person at the special share in cash will be sent to
meeting. If your shares are held you after we complete the
in street name, then you are not merger.
the shareholder of record and you
must ask your broker or other Q: Whom should I call with
nominee how you can vote at the questions?
special meeting.
A: You should call either Deborah
M. Rousseau, Secretary,
Community Savings Bankshares at
(561) 881-2212 or Morrow &
Co., Inc. our proxy solicitor,
at (800) 607-0088.
SUMMARY TERM SHEET
This summary term sheet highlights selected information from this proxy
statement. It does not contain all the information that may be important to
you. We urge you to read carefully the entire document and the other
documents to which we refer, including the merger agreement, to fully
understand the merger.
You Will be Entitled to Receive BankAtlantic, a Federal Savings
$19.00 in Cash Per Share of Bank, with BankAtlantic as the
Community Savings Bankshares Common surviving bank (see pages 9-10).
Stock (see page 19).
* The merger cannot occur unless
When the merger is completed, you our shareholders approve the
will be entitled to receive $19.00 merger agreement by the
in cash for each share of Community affirmative vote of a majority
Savings Bankshares common stock that of the outstanding shares of
you own. For example, if you own 50 our common stock and approvals
shares of our common stock, you will from banking regulators are
be entitled to receive $950.00 upon received. Each of our
the surrender of your certificate directors and executive officers
for those shares. and certain shareholders of
Community Savings Bankshares
Our Reasons for the Merger (see entered into a voting agreement
pages 11-12). with BankAtlantic Bancorp. Each
party to the voting agreements
Our Board of Directors believes agreed, among other things, to
that the merger is in the best vote the shares of Community
interests of Community Savings Savings Bankshares common stock
Bankshares and our shareholders and they beneficially own in favor
recommends that shareholders vote of the merger. Such persons
"FOR" the approval of the merger beneficially owned approximately
agreement. The Board of Directors 1.7 million or 20.1% of the
believes that the merger will enable outstanding shares as of October
our shareholders to realize 31, 2001(see pages 7 and 27-28).
significant value on their
investment in Community Savings * If the merger is not completed
Bankshares. In reaching its on or before June 30, 2002, the
decision to adopt the merger merger may be terminated by
agreement, our Board considered either BankAtlantic Bancorp or
various factors which are discussed us, unless failure to complete
in detail in this proxy statement. the merger is due to a breach of
the party seeking to terminate
Some Material Terms of the Merger (see page 29).
Agreement.
* We have agreed not to solicit or
* As currently structured, we will encourage a competing
merge with a newly formed, wholly transaction to acquire us or
owned subsidiary of BankAtlantic Community Savings, except where
Bancorp and will become a failure to do so would cause
subsidiary of BankAtlantic our Board of Directors to
Bancorp (see pages 9-10). breach its fiduciary duties
(see page 27).
* Immediately following the merger,
Community Savings, F. A. will * We will pay BankAtlantic Bancorp
merge with a termination fee of $6.0
million upon the
2
occurrence of certain of View to Our Shareholders (see
events (see pages 29-31). pages 12-19).
* We and BankAtlantic Bancorp have Our financial advisor, Friedman,
each agreed to pay the other Billings, Ramsey & Co., Inc., has
party's merger expenses up to given our Board of Directors a
$1.5 million under certain written opinion dated September 9,
circumstances (see pages 31 and 2001 and updated as of November 9,
38). 2001 that states the cash
consideration to be paid to our
* We and Community Savings have shareholders is fair from a financial
agreed to conduct our business point of view. A copy of the updated
according to particular opinion is attached to this proxy
requirements (see pages 23-27). statement as Appendix B. You should
read it completely to understand the
* The completion of the merger assumptions made, matters considered
depends on a number of conditions and limitations on the review
being satisfied or waived (see performed by our financial advisor
pages 21-23). in issuing its opinion. We have
agreed to pay FBR a fee of
The Merger Will be Taxable to Our approximately $1.89 million, plus
Shareholders (see pages 37-38). certain expenses, or approximately
1.13% of the total merger
Our shareholders will recognize consideration. Of this amount,
gain or loss for federal, and $472,725 has been paid. Neither the
possibly state and local, income tax payment to FBR nor the payment of
purposes, on the exchange of their other expenses incurred in
Community Savings Bankshares shares connection with the merger will
for cash. You will recognize gain reduce the merger consideration
or loss equal to the difference being paid to shareholders.
between the amount of cash you
receive and your tax basis in your
Community Savings Bankshares shares. You Have Dissenters' Rights (see
You should determine the actual tax pages 34-37).
consequences of the merger to you,
which will depend on your specific
situation and factors not within our Under Delaware law, you have
control. You should consult your dissenters' appraisal rights with
personal tax advisor for a full respect to your Community Savings
understanding of the merger's Bankshares shares. If you do not
specific tax consequences to you. wish to accept the $19.00 per share
merger consideration, you can
Our Board of Directors Unanimously dissent from the merger and instead
Recommends Shareholder Approval (see choose to have the fair value of
pages 11-12). your shares judicially determined
and paid to you in cash. However,
Our Board of Directors believes in order to exercise your rights,
that the merger is in the best you must follow specific procedures.
interests of Community Savings You should carefully read Section
Bankshares and our shareholders and 262 of the Delaware General
has adopted the merger agreement. Corporation Law which is included as
Our Board unanimously recommends Appendix C.
that our shareholders vote "FOR"
approval of the merger agreement. The Merger Is Expected to be
Completed in the First Quarter of
Our Financial Advisor Says the 2002 (see page 23).
Merger Consideration is Fair from a
Financial Point The merger will only occur after
all the conditions to its completion
have been satisfied or waived.
Currently, we anticipate that the
3
merger will be completed in the occurred before the merger and
first quarter of 2002. to provide directors' and
officers' insurance coverage
Financial Interests of Our Officers for a period of six years after
and Directors in the Merger (see the merger.
pages 31-33).
* It is expected that James B.
Our directors and executive Pittard, Jr., our President
officers have interests in the and Chief Executive Officer,
merger as individuals in addition will enter into a consulting
to, or different from, their agreement with BankAtlantic
interests as shareholders, such as Bancorp.
receiving consulting and severance
payments, indemnification and Our Board of Directors was aware
insurance coverage, and other of these interests and considered
benefits. them in its decision to adopt the
merger agreement.
* Eight officers (including all six
of our executive officers) of
Community Savings are entitled to
severance payments pursuant to
change in control severance
agreements entered into by each
of them and Community Savings
Bankshares and Community Savings.
* Certain designated officers and
employees (but not including
currently any executive officers)
selected by BankAtlantic Bancorp
who remain employed until
completion of the merger and for
a certain amount of time after
completion will be eligible to
receive bonuses from BankAtlantic
Bancorp.
* Three executive officers and one
former executive officer of
Community Savings will receive
cash payments for their individual
interests in our supplemental
retirement income plan, which
payments can be either in a lump
sum or on an installment basis.
* Under the terms of the merger
agreement, each outstanding
option, whether vested or not,
will be converted into the right
to receive a cash payment equal
to the difference between the
merger consideration and the
exercise price. In addition,
each unvested share of restricted
stock granted pursuant to our
recognition and retention plans
will vest upon completion of the
merger.
* BankAtlantic Bancorp has agreed
to indemnify our officers and
directors and those of our
subsidiaries for events that
4
SELECTED CONSOLIDATED FINANCIAL AND OTHER
INFORMATION ABOUT US
The following tables set forth selected historical consolidated
financial and other data about Community Savings Bankshares at the dates and
for the periods shown. The historical consolidated financial data for the six
months ended June 30, 2001 and 2000 are derived from unaudited consolidated
financial statements. However, in the opinion of management, all adjustments
consisting of normal recurring accruals, necessary for a fair presentation at
June 30, 2001 and for such interim periods have been made. Operating results
for the six months ended June 30, 2001 are not necessarily indicative of the
results that may be expected for any other interim period or for the entire
year ended December 31, 2001. The financial information for the five years
ended December 31, 2000 of Community Savings Bankshares is based on, and
qualified in its entirety by, our consolidated financial statements, including
the notes thereto, which have been filed previously with the Securities and
Exchange Commission. See "Where You Can Find More Information."
At June 30, At December 31,
-----------------------------------------------------
2001 2000 1999 1998 1997 1996
Selected Consolidated Financial Condition Data: (Dollars in thousands)
<s> <c> <c> <c> <c> <c> <c>
Total assets . . . . . . . . . . . . . . . $948,347 $962,705 $892,974 $844,041 $720,133 $655,209
Loans receivable, net . . . . . . . . . . 690,118 691,294 608,369 538,204 451,709 389,040
Cash and cash equivalents. . . . . . . . . 52,531 45,118 45,239 117,015 25,954 42,442
Securities held to maturity. . . . . . . . 30,428 34,025 38,802 52,619 67,801 75,544
Securities available-for-sale. . . . . . . 111,106 131,418 144,840 95,151 142,269 123,152
Real estate owned. . . . . . . . . . . . . 10 170 494 522 592 1,455
Deposits . . . . . . . . . . . . . . . . . 669,800 681,069 613,943 594,400 550,708 513,709
Borrowed funds . . . . . . . . . . . . . . 148,292 160,296 154,694 107,350 75,098 53,908
Shareholders' equity . . . . . . . . . . . 115,940 112,463 115,701 133,286 81,259 76,119
For the Six Months
Ended June 30, For the Year Ended December 31,
------------------ -----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- -------- ---------- -------- -------- -------- -------
Selected Operating Data: (Dollars in thousands, except per share data)
<s> <c> <c> <c> <c> <c> <c> <c>
Interest income. . . . . . . $33,693 $31,564 $65,660 $58,464 $54,489 $50,316 $45,580
Interest expense . . . . . . 19,724 17,286 37,502 29,535 30,159 27,390 23,888
------ ------ ------ ------ ------ ------ ------
Net interest income . . . . 13,969 14,278 28,158 28,929 24,330 22,926 21,692
Provision for loan losses. . 180 225 376 905 622 264 311
------ ------ ------ ------ ------ ------ ------
Net interest income after
provision for loan losses. 13,789 14,053 27,782 28,024 23,708 22,662 21,381
Other income . . . . . . . . 2,426 2,637 4,264 3,838 4,065 4,444 3,489
Operating expense. . . . . . 12,163 11,372 22,533 22,985 20,672 18,820 20,054
------ ------ ------ ------ ------ ------ ------
Income before income taxes . 4,052 5,318 9,513 8,877 7,101 8,286 4,814
Provision for income taxes . 1,263 1,711 3,101 2,343 2,107 2,930 790
------ ------ ------ ------ ------ ------ ------
Net income. . . . . . . . . $ 2,789 $ 3,607 $ 6,412 $ 6,534 $ 4,994 $ 5,356 $ 4,024
====== ====== ====== ====== ====== ====== ======
Basic earnings per share . . $ 0.35 $ 0.42 $ 0.76 $ 0.67 $ 0.49 $ 0.53 $ 0.41
Diluted earnings per share . $ 0.34 $ 0.41 $ 0.74 $ 0.65 $ 0.48 $ 0.52 $ 0.40
5
At or For the Six
Months Ended
June 30, At or For the Year Ended December 31,
------------------ -----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- -------- ---------- -------- -------- -------- -------
Selected Operating Ratios and Other Data(1):
Performance Ratios:
<s> <c> <c> <c> <c> <c> <c> <c>
Return on average assets. . . . . . . . 0.58% 0.79% 0.69% 0.76% 0.65% 0.77% 0.64%
Return on average equity. . . . . . . . 4.87 6.23 5.58 5.02 5.74 6.80 5.34
Net interest rate spread. . . . . . . . 2.84 3.10 2.95 3.19 3.04 3.13 3.24
Net interest margin . . . . . . . . . . 3.14 3.39 3.26 3.62 3.37 3.51 3.64
Non-interest income to average assets . 0.51 0.58 0.46 0.45 0.53 0.64 0.58
Non-interest expenses to average
assets . . . . . . . . . . . . . . . . 2.53 2.49 2.42 2.68 2.68 2.72 3.18
Dividend payout ratio . . . . . . . . . 66.73 56.73 58.70 62.98 53.54 38.69 39.57
Asset Quality Ratios:
Nonperforming loans to net loans
receivable . . . . . . . . . . . . . . 0.41 0.14 0.48 0.17 0.31 0.31 0.42
Nonperforming assets to total assets. . 0.30 0.15 0.36 0.17 0.26 0.27 0.47
Allowance for loan losses to
nonperforming loans. . . . . . . . . . 150.25 416.27 116.86 377.57 189.45 193.04 155.86
Allowance for loan losses to loans
receivable . . . . . . . . . . . . . . 0.62 0.58 0.56 0.64 0.58 0.59 0.65
Capital Ratios:
Shareholders' equity to total
assets, at period end. . . . . . . . . 12.23 12.46 11.68 12.96 15.79 11.28 11.62
Average equity to average assets. . . . 11.93 12.69 12.31 15.15 11.26 11.37 11.94
Other Data:
Number of offices . . . . . . . . . . . 21 21 21 21 21 21 18
____________
(1) Annualized where appropriate.
WHERE YOU CAN FIND MORE INFORMATION
As a public company, we are required to file annual, quarterly and
current reports, proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information that we file at the
SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, our public filings
are available to the public from commercial document retrieval services and on
the SEC's Internet website located at "http://www.sec.gov."
6
THE SPECIAL MEETING
Place, Time and Date
The special meeting is scheduled to be held at 1:30 p.m., Eastern Time,
on Monday, December 17, 2001, at The Embassy Suites PGA, 4350 PGA Boulevard,
Palm Beach Gardens, Florida.
Matters to Be Considered
At the special meeting, you will be asked to approve a proposal to
approve the merger agreement, a proposal to adjourn the special meeting if
necessary to solicit additional proxies and such other matters as are properly
brought before the special meeting. As of November 9, 2001, we do not know of
any business that will be presented for consideration at the special meeting
other than the approval of the merger agreement and the proposal to possibly
adjourn the special meeting.
Record Date; Vote Required
Only our shareholders of record at the close of business on October 31, 2001
are entitled to notice of and to vote at the special meeting. As of October
31, 2001, there were 8,660,254 shares of our common stock outstanding and
entitled to vote at the special meeting.
Each outstanding share of our common stock will be entitled to cast one
vote per share at the special meeting. You may vote in person or by
submitting a properly executed proxy or by using a toll-free telephone number.
Check your proxy card or the information forwarded by your broker or other
holder of record to see which options are available to you. The telephone
voting facilities will close at 4:00 p.m. on December 14, 2001. The telephone
voting procedure is designed to authenticate shareholders by use of a control
number and to allow shareholders to confirm that their instructions have been
properly recorded.
The presence, in person or by properly executed proxies, of the holders
of a majority of the outstanding shares entitled to vote at the special
meeting will constitute a quorum. Abstentions and broker non-votes will be
treated as shares present at the special meeting for purposes of determining
the presence of a quorum. A broker non-vote is an unvoted proxy submitted by
a broker. Under applicable rules, brokers or other nominees who hold shares
in street name for customers who are the beneficial owners of such shares may
not vote those shares with respect to the merger agreement unless they have
received specific instructions from their customers.
To approve and adopt the merger agreement, the holders of a majority of
the outstanding shares of our common stock entitled to vote must vote in favor
of the approval of the merger agreement. Consequently, a failure to vote, an
abstention or a broker non-vote will have the same effect as voting against
the merger agreement. In addition, a majority of the votes present in person
or by proxy at the special meeting must vote in favor of the proposal to
adjourn the special meeting for the proposal to be approved. As a result,
abstentions will have the same effect as voting against the proposal to
adjourn the special meeting. Broker non-votes will have no effect on this
proposal.
Approval of the merger agreement by our shareholders is one of the
conditions that must be satisfied to complete the merger. See "The Merger -
Conditions to the Merger."
7
Beneficial Ownership of Community Savings Bankshares Common Stock
As of October 31, 2001, our directors and executive officers and their
affiliates beneficially owned in the aggregate 797,130 shares (excluding
stock options), or 9.2%, of our outstanding shares of common stock entitled
to vote at the special meeting. Each of our directors and executive officers
has entered into a voting agreement with BankAtlantic Bancorp agreeing to vote
his or her shares of Community Savings Bankshares common stock in favor of the
approval of the merger agreement. In addition, certain shareholders
beneficially owning an aggregate of 950,152 shares, or 11.0%, of Community
Savings Bankshares common stock have agreed to vote such shares in favor of
the merger agreement. See "Certain Related Agreements - Voting Agreements."
As of October 31, 2001, BankAtlantic Bancorp did not own any shares of our
common stock.
Community Savings Bankshares Common Stock
Our common stock is traded on The Nasdaq Stock Market, Inc. under the
symbol "CMSV". On September 7, 2001, the last trading day prior to the joint
announcement by us and BankAtlantic Bancorp that we had entered into the
merger agreement, the closing price per share of our common stock was $14.50.
On November 1, 2001, which is the last practicable date prior to printing this
proxy statement, the closing price per share of our common stock was $18.70.
Proxies
The enclosed proxy card is being solicited by our Board of Directors.
Shares of our common stock represented by properly executed proxies received
prior to or at the special meeting will, unless they have been revoked, be
voted at the special meeting in accordance with the instructions indicated in
the proxies. If no instructions are indicated on a properly executed proxy,
the shares will be voted "FOR" the approval of the merger agreement.
You should complete and return the proxy card accompanying this proxy
statement or vote by telephone to ensure that your vote is counted at the
special meeting, regardless of whether you plan to attend the special meeting.
If you are the record holder of your shares, you can revoke your proxy at any
time before the vote is taken at the special meeting by:
* submitting written notice of revocation to the Secretary of
Community Savings Bankshares,
* submitting a properly executed proxy of a later date, or
* voting in person at the special meeting, but simply attending the
special meeting without voting will not revoke an earlier proxy.
Written notice of revocation and other communications about revoking
your proxy should be addressed to:
Community Savings Bankshares, Inc.
660 U. S. Highway One
North Palm Beach, Florida 33408
Attention: Deborah M. Rousseau, Secretary
8
If any other matters are properly presented at the special meeting for
consideration, the proxy holders will have discretion to vote on such matters
in accordance with their best judgment. As of November 9, 2001, we know of
no other matters to be presented at the meeting.
Certain material events or changes in circumstances, including a material
amendment to the merger agreement or a material revision of the fairness
opinion issued by FBR, may result in a resolicitation of your vote. Under
those circumstances, we will provide you with supplemental information about
the material event or change in circumstances and give you an opportunity to
recast your vote.
If your Community Savings Bankshares common stock is held in street
name, you will receive instructions from your broker, bank or other nominee
that you must follow to have your shares voted. Your broker, bank or other
nominee may allow you to deliver your voting instructions via telephone or the
Internet. Please see your instruction form provided by your broker, bank or
other nominee that accompanies this proxy statement.
In addition to solicitation by mail, our directors, officers and
employees, who will not receive additional compensation for such services, may
solicit proxies from our shareholders, personally or by telephone, telegram or
other forms of communication. We have retained Morrow & Co., Inc., a
professional proxy solicitation firm, to assist in the solicitation of
proxies. We will pay Morrow a fee of $4,000, plus expenses. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to
forward soliciting materials to beneficial owners and will be reimbursed for
their reasonable expenses incurred in sending proxy material to beneficial
owners. We will bear our own expenses in connection with the solicitation of
proxies for the special meeting.
You are requested to complete, date and sign the accompanying proxy card
and to return it promptly in the enclosed postage-paid envelope.
YOU SHOULD NOT FORWARD STOCK CERTIFICATES WITH YOUR PROXY CARD.
THE MERGER
The information in this proxy statement concerning the terms of the
merger is qualified in its entirety by reference to the full text of the
merger agreement, which is attached as Appendix A and incorporated by
reference herein. All shareholders are urged to read the merger agreement in
its entirety, as well as the opinion of our financial advisor attached as
Appendix B.
General
As soon as possible after the conditions to consummation of the merger
described below have been satisfied or waived, and unless the merger agreement
has been terminated as discussed below, Community Savings Bankshares will be
merged with a subsidiary of BankAtlantic Bancorp in accordance with Delaware
law. Community Savings Bankshares will be the surviving corporation of the
merger and will become a subsidiary of BankAtlantic Bancorp. Upon completion
of the merger, our
9
shareholders will be entitled to receive $19.00 in cash for each share of
Community Savings Bankshares common stock they hold and will cease to be
shareholders of Community Savings Bankshares. Immediately after the merger
is completed, Community Savings, F.A. will merge with and into BankAtlantic.
BankAtlantic will be the surviving bank.
The Companies
Community Savings Bankshares, Inc.
660 U.S. Highway One
North Palm Beach, Florida 33408
(561) 881-2212
Community Savings Bankshares is a Delaware corporation and the parent
unitary thrift holding company of Community Savings, a federally chartered
savings association headquartered in North Palm Beach, Florida. Community
Savings operates 21 branch offices located in Palm Beach, Martin, St. Lucie
and Indian River counties, Florida.
BankAtlantic Bancorp, Inc.
1750 East Sunrise Boulevard
Fort Lauderdale, Florida 33304
(954) 760-5000
BankAtlantic Bancorp is a Florida corporation and financial services
holding company for BankAtlantic, Levitt Corporation and Ryan Beck & Co.
BankAtlantic is a federally chartered savings bank which is headquartered in
Fort Lauderdale, Florida. BankAtlantic operates 61 branch offices in Florida
located in Miami-Dade, Broward and Palm Beach counties and in the Tampa Bay
area. Levitt Corporation is a Florida corporation and engages in real estate
development and real estate investment activities in Florida. Ryan, Beck & Co.
is a New Jersey limited liability company and engages in investment banking
activities.
Background of the Merger
Over the last several years, the financial services industry has become
increasingly more competitive and has undergone industry-wide consolidation.
The market in which Community Savings Bankshares operates has been affected by
this trend, experiencing a period of rapid acquisition and consolidation that
has affected many of the banks and thrift institutions in our market area. In
addition, large financial institutions have entered the market through
acquisitions of local financial institutions. In response to these
developments, our Board of Directors has, on an ongoing basis, considered
strategic options for increasing shareholder value, including potential
acquisitions by other institutions.
As a result of such consideration, the Board engaged FBR in June 2001.
After a thorough analysis by FBR of Community Savings Bankshares' strategic
options, the Board authorized FBR to explore the market in order to assess the
potential interest of other institutions in an acquisition of Community Savings
Bankshares. FBR contacted 28 bank or thrift holding companies, including
BankAtlantic Bancorp, which were deemed to be reasonably likely to have some
interest in an acquisition transaction with Community Savings Bankshares.
Fourteen companies executed
10
confidentiality agreements and received confidential information concerning
the business and operations of Community Savings Bankshares.
Of the 14 companies, eight (including BankAtlantic Bancorp) submitted
preliminary acquisition proposals. Due to market conditions and concerns about
the value of financial institution stock, including the value of the stock of
certain interested parties, Community Savings Bankshares encouraged bidders to
submit bids consisting of all cash, as well as a combination of stock and cash.
After careful review and analysis of the proposals with FBR, on July 27, 2001
our Board authorized the three bidders (other than BankAtlantic Bancorp) whose
proposals were considered the most favorable to our shareholders to conduct
additional due diligence regarding Community Savings Bankshares. In light of
Community Savings Bankshares' interest in receiving an all cash proposal from
BankAtlantic Bancorp, a revised proposal was submitted by BankAtlantic Bancorp
on an all cash basis. As a result of the revised proposal, the Board
authorized BankAtlantic Bancorp to conduct due diligence. Upon completion of
the due diligence process, each of the four companies, including BankAtlantic
Bancorp, submitted revised offers, all of which provided for the merger
consideration to consist solely of cash. FBR discussed with each bidder the
terms of their respective bids and any issues presented by such proposals.
On August 22, 2001, the Board met to analyze the four offers. FBR
reviewed the terms of each offer and any issues that such offers presented,
including price and structure. Upon review, BankAtlantic Bancorp's offer
provided for the highest merger consideration and was not subject to any
contingencies other than customary conditions to closing. Consequently, our
Board authorized management to negotiate the terms of the merger agreement
with BankAtlantic Bancorp.
Preparation and negotiation of the merger agreement continued over the next
two weeks. On September 6, 2001, our Board met to review, with the assistance
of counsel, and discuss a draft of the merger agreement. FBR again reviewed
BankAtlantic Bancorp's proposal with the Board and stated to the Board its oral
opinion that the merger consideration proposed by BankAtlantic Bancorp was fair,
from a financial point of view, to Community Savings Bankshares' shareholders.
At such time, BankAtlantic Bancorp was in the process of completing its review
of the disclosure schedules prepared by Community Savings Bankshares in
connection with the negotiation of the merger agreement. On September 9,
2001, the Board reconvened its meeting of September 6th and after additional
discussion of the merits of the transaction proposed in the merger agreement
and upon consideration of FBR's oral opinion as to the fairness of the merger
consideration, which opinion was reaffirmed at that time, unanimously approved
the merger agreement and authorized its execution. Community Savings Bankshares
and BankAtlantic Bancorp executed the merger agreement the evening of September
9th. A joint press release was issued before the stock markets opened on the
morning of September 10, 2001.
Our Reasons for the Merger; Recommendation of Your Board of Directors
Our Board of Directors believes that the terms of the merger agreement,
which are the product of arm's length negotiations between Community Savings
Bankshares and BankAtlantic Bancorp, are in the best interests of our
shareholders. In the course of reaching its determination, our Board of
Directors considered the following factors:
* the merger consideration to be paid to our shareholders in
relation to the market value, book value and earnings per share of
our common stock,
11
* information concerning our financial condition, results of
operations, capital levels, asset quality and prospects,
* industry and economic conditions,
* our assessment of BankAtlantic Bancorp's ability to pay the
aggregate merger consideration,
* the opinion of our financial advisor as to the fairness of the
merger consideration from a financial point of view to our
shareholders,
* the extensive process that our Board of Directors and our financial
advisor followed in obtaining proposals for the merger or acquisition
of Community Savings Bankshares,
* the general structure of the transaction,
* the greater resources and product offerings that BankAtlantic
Bancorp will have after the merger than we currently have,
* the impact of the merger on the depositors, employees, customers
and communities served by us through expanded commercial, consumer
and retail banking products and services,
* the results of our due diligence investigation of BankAtlantic
Bancorp, including the likelihood of receiving the requisite
regulatory approvals in a timely manner,
* the ability of BankAtlantic Bancorp after the merger to compete in
relevant banking and non-banking markets, and
* our strategic alternatives to the merger, including our assessment
of our prospects if we continue the operation of Community Savings
as an independent financial institution.
In making its determination, our Board of Directors did not ascribe any
relative or specific weights to the factors which it considered. The
foregoing discussion of the factors considered by our Board is not intended to
be exhaustive, but it does include the material factors considered by our
Board.
Our Board of Directors believes that the merger is in the best interests
of Community Savings Bankshares and our shareholders. The Board of Directors
unanimously recommends that our shareholders vote FOR the approval of the
merger agreement.
The Consideration is Fair According to Friedman, Billings, Ramsey & Co., Inc.,
Our Financial Advisor
Pursuant to a letter agreement dated as of June 8, 2001, we retained FBR
to act as our financial advisor in connection with evaluating Community
Savings Bankshares' strategic alternatives, including a sale of all or
substantially all of our assets and/or liabilities or capital stock. At the
meeting of our Board of Directors held on September 9, 2001 to consider and
approve the merger agreement, FBR delivered its
12
oral opinion (subsequently confirmed in writing by delivering a written opinion
to the Community Savings Bankshares' Board dated September 9, 2001) that as of
the date of such opinion, $19.00 in cash per each share of Community Savings
Bankshares common stock pursuant to the merger agreement, was fair, from a
financial point of view, to the holders of Community Savings Bankshares common
stock.
The full text of FBR's updated opinion, which sets forth the assumptions
made, procedures followed, matters considered and limits on the review
undertaken, is attached as Appendix B to this proxy statement and is
incorporated herein by reference. No limitations were imposed by the
Community Savings Bankshares' Board upon FBR with respect to the
investigations made or procedures followed by FBR in rendering its opinion.
The description of FBR's updated opinion set forth herein is qualified in
its entirety by reference to Appendix B. You are urged to read the FBR opinion
in its entirety. FBR's opinion is addressed only to Community Savings
Bankshares' Board of Directors and directed only to the consideration to be
received in the merger by the holders of Community Savings Bankshares' common
stock and does not constitute a recommendation to any shareholder as to how such
shareholder should vote at the special meeting.
FBR is a nationally recognized investment banking firm and was selected
by Community Savings Bankshares' Board based on the firm's reputation and
experience in investment banking in general, its recognized expertise in the
valuation of banking businesses and because of its familiarity with Community
Savings Bankshares. FBR, as part of its investment banking business, is
frequently engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes.
In connection with rendering the opinion dated September 9, 2001, FBR,
among other things: (i) reviewed the merger agreement; (ii) reviewed the
Community Savings Bankshares Annual Report to Shareholders for the fiscal year
ended December 31, 2000 and the Community Savings Bankshares Annual Report on
Form 10-K filed with the SEC for the fiscal years ended December 31, 2000 and
1999; reviewed the Community Savings Bankshares proxy statement dated March
26, 2001; reviewed the Community Savings Bankshares Quarterly Reports on Form
10-Q filed with the SEC for the quarters ended March 31, 2001 and June 30,
2001; (iii) reviewed the BankAtlantic Bancorp Annual Report on Form 10-K filed
with the SEC for the fiscal years ended December 31, 2000 and 1999; reviewed
the BankAtlantic Bancorp annual proxy statement dated April 23, 2001; reviewed
the BankAtlantic Bancorp Quarterly Reports on Form 10-Q filed with the SEC for
the quarters ended March 31, 2001 and June 30, 2001; (iv) reviewed Community
Savings Bankshares' unaudited financial results for the one and four months
ended July 31, 2001 with the management of Community Savings Bankshares; (v)
reviewed and discussed BankAtlantic Bancorp's pro forma regulatory capital
ratio computation provided by the management of BankAtlantic Bancorp; (vi)
reviewed and discussed BankAtlantic Bancorp's regulatory compliance with
management of BankAtlantic Bancorp, including safety and soundness and
Community Reinvestment Act ratings; (vii) reviewed the reported market prices
and trading activity for Community Savings Bankshares common stock for the
period July 1, 1996 through September 7, 2001; (viii) discussed the financial
condition, results of operations, earnings projections, business and prospects
of Community Savings Bankshares and BankAtlantic Bancorp with the managements
of Community Savings Bankshares and BankAtlantic Bancorp; (ix) compared the
results of operations and financial condition of Community Savings Bankshares
with those of certain publicly-traded financial institutions (or their holding
companies) that FBR deemed to be reasonably comparable to Community Savings
Bankshares, as the case may be; (x) participated in discussions and
negotiations among representatives of
13
Community Savings Bankshares and representatives of BankAtlantic Bancorp; (xi)
reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions that FBR deemed to be reasonably comparable to the
merger; (xii) reviewed the financial terms, to the extent publicly available,
of certain acquisition transactions entered into by BankAtlantic Bancorp; and
(xiii) performed such other analyses and reviewed and analyzed such other
information as FBR deemed appropriate.
In connection with rendering its opinion, FBR assumed and relied upon,
without independent verification, the accuracy and completeness of all the
financial information, analyses and other information reviewed by and
discussed with it, and did not make an independent evaluation or appraisal of
the specific assets, the collateral securing assets or the liabilities of
Community Savings Bankshares or BankAtlantic Bancorp or any of their
subsidiaries, or the collectibility of any such assets (relying, where
relevant, on the analyses and estimates of Community Savings Bankshares or
BankAtlantic Bancorp). With respect to the financial projections reviewed
with Community Savings Bankshares' management, FBR assumed that they reflected
the best then currently available estimates and judgments of management of the
future financial performances of Community Savings Bankshares and that such
performance will be achieved. FBR discussed with management of BankAtlantic
Bancorp its beliefs regarding BankAtlantic Bancorp's earnings for the third
and fourth quarters of 2001 as it related to the capital projections for the
combined company. FBR assumed that the information it reviewed is based on
reasonable judgements of management of the future financial performance of
BankAtlantic Bancorp and of the combined company. FBR also assumed that there
has been no material change in BankAtlantic Bancorp's or Community Savings
Bankshares' assets, financial condition, results of operations, business or
prospects since the date of the last financial statements noted above. In
addition, FBR assumed, without independent verification, that the aggregate
consolidated allowances for loan losses for Community Savings Bankshares and
BankAtlantic Bancorp were adequate to cover such losses, and that the
conditions precedent in the merger agreement are not waived.
The forecasts and projections furnished to FBR for Community Savings
Bankshares' were prepared by the management of Community Savings Bankshares.
As a matter of policy, Community Savings Bankshares does not publicly disclose
internal management forecasts, projections or estimates of the type furnished
to FBR in connection with its analysis of the merger, and such forecasts,
projections and estimates were not prepared with a view towards public
disclosure. These forecasts, projections and estimates were based on numerous
variables and assumptions which are inherently uncertain and which may not be
within the control of management, including, without limitation, general
economic, regulatory and competitive conditions. Accordingly, actual results
could vary materially from those set forth in such forecasts, projections and
estimates.
In connection with rendering such fairness opinion to our Board of
Directors, FBR performed a variety of financial analyses. The following is a
summary of the material financial analyses performed by FBR, but does not
purport to be a complete description of its analyses or presentations at the
September 6, 2001 and September 9, 2001 meetings of Community Savings
Bankshares' Board. FBR believes that its analyses must be considered as a
whole and that selecting portions of such analyses and the factors considered
therein, without considering all factors and analyses, could create an
incomplete view of the analyses and the processes underlying FBR's opinion.
The preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to partial analyses or
summary description. In its analyses, FBR made numerous assumptions with
respect to industry performance, business and economic conditions and various
other matters, many of which are beyond the control of Community Savings
Bankshares and BankAtlantic Bancorp. Any estimates contained in FBR's analyses
14
are not necessarily indicative of future results or values, which may be
significantly more or less favorable than such estimates. Estimates of values
of companies do not purport to be appraisals or necessarily reflect the prices
at which the companies or their securities may actually be sold.
Summary of Terms of Proposed Transactions. FBR reviewed the terms of
the proposed merger, including the aggregate amount of merger consideration,
the form of consideration being proposed, and the percentage of premium to the
current market price. The merger consideration is $19.00 in cash per share of
Community Savings Bankshares common stock or approximately $170.4 million in
aggregate merger consideration (including the value of the cancellation of
outstanding stock options held by directors and employees of Community Savings
Bankshares).
FBR stated that the merger consideration as of September 9, 2001
represented a multiple of (i) 28.4 times Community Savings Bankshares'
earnings per share for the twelve months ended June 30, 2001, (ii) 144% of
Community Savings Bankshares' book value per share as of June 30, 2001 and
(iii) 144% of June 30, 2001 tangible book value per share. The merger
consideration also represented a premium over tangible book value as a
percentage of deposits equal to 8.13% based on the amount of deposits and
tangible book value per share at June 30, 2001.
Comparable Transaction Analysis. FBR analyzed comparable transactions
involving the sale of thrifts from January 1, 2000 through August 27, 2001.
The following table shows the average and median statistics for price/book
value, price/tangible book value, price/latest twelve months earnings and the
deposit premium for four comparable groups. The comparable groups are as
follows: (i) 93 thrift acquisitions nationwide, (ii) nine thrift
acquisitions involving sellers headquartered in Alabama, Florida, Georgia,
Mississippi, North Carolina and South Carolina, (iii) 16 thrift acquisitions
involving sellers with tangible equity to assets ratio of between 11.0% and
14.0%, and (iv) 18 acquisitions involving thrifts with total assets between
$500 million and $2.0 billion. FBR compared the median and average statistics
associated with the selected transactions groups with the price/book,
price/tangible book, price/last twelve months earnings and deposit premium
ratios in the merger of 144%, 144%, 28.4x and 8.13%, respectively, and found
that the ratios associated with the merger were comparable or higher than the
median and/or average price/book, price/tangible book, price/last twelve
months earnings and deposit premium ratios for the selected transactions. The
merger consideration to be received by Community Savings Bankshares'
shareholders compares favorably to the pricing multiples received by the
companies included in the selected transactions groups.
15
Announced Thrift Acquisition Transactions January 1, 2000 to August 27, 2001
Announced
--------------------------------------------------------------------------------
Seller Aggregate
Tangible Merger Price/Last Twelve
Equity/ Consideration Price/Book Price/Tangible Months Premium/Core
Assets(%) ($M) (%) Book (%) EPS (x) Deposits (%)
-------- ------------- ---------- -------------- ----------------- ------------
<s> <c> <c> <c> <c> <c> <c> <c>
Nationwide
- ----------
93 Transactions Average 10.98 147.9 147.41 153.93 23.0 9.59
Median 8.95 29.7 137.51 138.57 19.6 7.44
Regional
- --------
(AL, FL, GA, MS, NC, SC)
9 Transactions
Average 13.93 56.9 141.94 141.94 22.9 15.95
Median 12.17 37.9 138.06 138.06 21.1 9.42
Tangible Equity/Assets
(11.0% to 14.0%)
- ----------------------
16 Transactions
Average 12.62 39.5 131.39 131.39 24.4 7.64
Median 12.72 31.5 138.92 138.92 24.1 8.17
Total Assets
($500 million to $2.0
billion)
- ---------------------
18 Transactions
Average 7.95 145.9 166.46 175.34 15.8 11.36
Median 7.36 133.4 154.33 154.33 15.2 10.58
Community-
BankAtlantic
Transaction 12.23 170.4 144.14 144.14 28.4 8.13
16
No company or transaction used in the above analyses, as a comparison, is
identical to BankAtlantic Bancorp, Community Savings Bankshares or the merger.
Accordingly, an analysis of the results of the foregoing is not mathematical;
rather, it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the companies and
other facts that could affect the public trading value of the companies to
which they are being compared.
Discounted Earnings Stream and Terminal Value Analysis. Using a
discounted earnings stream and terminal value analysis, FBR estimated the
future stream of earnings flows that Community Savings Bankshares could be
expected to produce through the year 2005, under various circumstances,
assuming Community Savings Bankshares performed in accordance with the
earnings forecasts of Community Savings Bankshares' management. To
approximate the terminal value of the Community Savings Bankshares common
stock at the end of a four-year period (December 31, 2005), FBR applied price
to earnings multiples ranging from 17.0 to 22.0. The net income streams and
terminal values were then discounted to present values using a discount rate
of 12. This analysis assumed that Community Savings Bankshares will continue
its 65% dividend payout ratio and indicated a total reference range of between
$13.88 and $17.77 per share of Community Savings Bankshares common stock. The
merger consideration to be received in the merger compares favorably with the
results of the discounted earnings stream and terminal value analysis. FBR
stated that the discounted earnings stream and terminal value analysis is a
widely used valuation methodology but noted that it relies on numerous
assumptions, including asset and earnings growth rates, terminal values and
discount rates. The analysis did not purport to be indicative of the actual
values or expected values of Community Savings Bankshares common stock.
Pro Forma Merger Analysis. FBR performed pro forma merger analyses
that combined Community Savings Bankshares' and BankAtlantic Bancorp's current
and projected income statements and balance sheets based on earnings forecasts
of Community Savings Bankshares and BankAtlantic Bancorp, respectively.
Assumptions and analyses of the accounting treatment, acquisition adjustments,
operating efficiencies and other adjustments were made to arrive at a base
case pro forma analysis to determine the effect of the transaction on both
Community Saving Bankshares and BankAtlantic Bancorp. The actual results
achieved by the combined company will vary from the projected results and such
variations may be material.
Analysis of Selected Publicly Traded Companies. In preparing its
presentation, FBR used publicly available information to compare selected
financial and market trading information, including capital levels, earnings
performance, asset quality ratios, and profitability, for Community Savings
Bankshares and selected other publicly traded thrifts. This peer group
consisted of publicly traded thrifts with total assets between $500 million
and $2 billion. This analysis showed, among other things, that Community
Savings Bankshares has a higher tangible equity/tangible assets ratio and
trades at a higher price/earnings ratio than the comparable group.
17
Selected Financial and Market Data for Publicly Traded Thrifts Between $500
million and $2 billion in assets as of September 6, 2001
Price to
-----------------------------------
Assets Tangible Equity/ LTM LTM LTM Book Dividend
($000) Tangible Assets ROAA ROAE EPS Value Yield
--------- ---------------- ---- ---- --- ----- ---------
<s> <c> <c> <c> <c> <c> <c> <c>
Community Savings
Bankshares $ 948,347 12.23% 0.58% 4.89% 23.66 x 113.8% 2.78%
Average $ 1,010,587 9.24% 0.81% 9.12% 17.68 x 121.8% 2.40%
Median $ 883,673 8.29% 0.75% 9.10% 13.81 x 114.9% 2.48%
Analysis of Stock Trading History. FBR reviewed the history of the
reported trading prices and volume of Community Savings Bankshares common
stock and the relationship between the movements in the prices of Community
Savings Bankshares common stock to movements in certain stock indices,
including the FBR Large Thrift Index, the Nasdaq Bank Index, the S&P 500 and
the median performance of the regional group (as described above). During the
one year period ended September 7, 2001, Community Savings Bankshares common
stock outperformed the S&P 500 and performed approximately on par with the
Nasdaq Bank Index but did not perform as well as both the regional group and
the FBR Large Thrift Index.
Performance from
9/7/00- 9/7/01
----------------
Community Savings Bankshares 17.17%
FBR Large Thrift Index 44.92%
Regional Group 35.17%
Nasdaq Bank Index 17.18%
S & P 500 -27.74%
In connection with rendering its updated opinion, FBR confirmed the
appropriateness of its reliance on the analyses used to render its September
9, 2001 opinion by performing procedures to update certain of such analyses
and by reviewing the assumptions upon which such analyses were based and the
factors considered in connection therewith. FBR's opinion is based, necessarily
on economic, market and other conditions as in effect on, and the information
made available to it as of, the date of such opinion. Events occurring after
the date of the updated opinion could materially affect the assumptions used
in preparing such opinion.
Pursuant to the terms of FBR's engagement, FBR will receive an
incentive-based fee based upon the aggregate consideration to be paid to the
Community Savings Bankshares shareholders. For its services as financial
advisor to Community Savings Bankshares in connection with the merger, FBR
will receive a transaction fee of $1,890,899. Twenty-five percent (25%) of
such fee, or $472,725, was paid upon the signing of the merger agreement and
the remaining portion is payable at the closing of the merger. The remaining
portion of the transaction fee payable to FBR upon closing will be
approximately $1,418,174. Community Savings Bankshares also has agreed to
reimburse FBR for its reasonable documented out-of-pocket expenses in
connection with its engagement and to indemnify FBR and its affiliates and
their respective partners, directors, officers, employees, agents and
controlling persons against certain expenses and liabilities, including
liabilities under securities laws. The payment of the fees to FBR will not
reduce the merger consideration being paid to shareholders.
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In the past, FBR has provided investment banking and financial services
to Community Savings Bankshares unrelated to the merger, for which services
FBR has received compensation. In addition, in the past, FBR also has
provided, and may in the future provide, investment banking and financial
services to BankAtlantic Bancorp, for which services FBR has received, and
expects to receive, compensation. FBR's previous services to BankAtlantic
Bancorp were unrelated to the merger. In July 2001, FBR acted as co-lead
underwriter and financial advisor to BankAtlantic Bancorp in a capital raising
transaction. In addition, FBR may assist BankAtlantic Bancorp in connection
with a proposed financing transaction which is expected to be undertaken in
connection with the acquisition of Community Savings Bankshares. The final
terms of any such financing transaction have not been determined as of the date
hereof. FBR has advised Community Savings Bankshares that, in the ordinary
course of its business as a full-service securities firm, FBR may, subject to
certain restrictions, actively trade the equity securities of Community Savings
Bankshares and/or BankAtlantic Bancorp for its own account or for the accounts
of its customers, and, accordingly, may at any time hold a long or short
position in such securities.
You Will Receive Cash for Your Shares of Community Savings Bankshares Stock
Upon completion of the merger, each outstanding share of Community
Savings Bankshares common stock (other than shares as to which dissenters'
rights have been asserted and perfected in accordance with Delaware law or any
shares owned by us, our subsidiaries, BankAtlantic Bancorp or its
subsidiaries) will be converted into and represent the right to receive $19.00
in cash without any interest thereon. The aggregate amount of the cash
payment represents the merger consideration. The merger consideration to be
paid in connection with the merger is expected to be approximately $170.4
million, including payment for the cancellation of all outstanding Community
Savings Bankshares stock options, assuming none of such options are exercised.
Treatment of Options and Restricted Shares
At the effective time of the merger, each stock option to purchase
Community Savings Bankshares common stock issued pursuant to the Community
Savings Bankshares Amended and Restated 1995 Stock Option Plan and the Amended
and Restated 1999 Stock Option Plan that has not been exercised or terminated
will be converted into the right to receive a cash payment equal to $19.00
less the exercise price per share of the stock option, multiplied by the
number of shares of Community Savings Bankshares common stock subject to the
stock option, less any required tax withholding.
At the effective time of the merger, each holder of unvested restricted
shares granted pursuant to the Community Savings Bankshares Amended and
Restated 1995 Recognition and Retention Plan for Employees and Outside
Directors and the 1999 Recognition and Retention Plan and Trust Agreement will
be entitled to receive the merger consideration multiplied by the number of
unvested restricted shares held by them, less any required tax withholding.
There are an aggregate of 111,746 unvested restricted shares as of the date of
this document.
Procedure for Surrendering Your Certificates
As of the effective time of the merger, BankAtlantic Bancorp will
deliver to the exchange agent an amount of cash equal to the aggregate merger
consideration. The exchange agent will act as paying agent for the benefit of
the holders of certificates and options of Community Savings Bankshares common
stock in exchange for the merger consideration. Each holder of Community
Savings Bankshares common stock who surrenders his or her Community Savings
Bankshares shares to the exchange agent, together with a properly executed
letter of transmittal, will be entitled to receive a cash
19
payment of $19.00 per share of Community Savings Bankshares common stock upon
acceptance of the shares by the exchange agent. Each holder of Community
Savings Bankshares stock options who surrenders a properly executed letter of
transmittal will be entitled to receive a cash payment equal to the difference
between the exercise price of the option and $19.00, less any required tax
withholding.
As soon as practicable after the effective time but in no event later
than five business days after the effective time, a letter of transmittal will
be mailed by the exchange agent to Community Savings Bankshares shareholders
and option holders. The letter of transmittal will contain detailed
instructions for surrendering your stock certificates and options to purchase
Community Savings Bankshares common stock, as applicable.
You should NOT return your Community Savings Bankshares common stock
certificates with the enclosed proxy card, and you should NOT send your stock
certificates to the exchange agent until you receive the letter of
transmittal.
If a certificate for Community Savings Bankshares common stock has been
lost, stolen or destroyed, the exchange agent is not obligated to deliver
payment until the holder of the shares delivers:
* an appropriate affidavit of loss, and
* an indemnity agreement and/or bond, as may be required by the
exchange agent.
At any time following the six-month period after the effective time of
the merger, BankAtlantic Bancorp may require the exchange agent to deliver any
funds not claimed by former Community Savings Bankshares shareholders and
option holders. Thereafter, the payment obligation for any certificate or
option representing Community Savings Bankshares common stock which has not
been satisfied will become the responsibility of BankAtlantic Bancorp.
Neither BankAtlantic Bancorp nor the exchange agent will be liable to
any former holder of Community Savings Bankshares common stock or option for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or other similar laws.
Representations and Warranties Made by Us and BankAtlantic Bancorp
The merger agreement contains representations and warranties made by us
and BankAtlantic Bancorp which are customary for this type of merger
transaction, including, among others, representations and warranties
concerning:
* the organization of Community Savings Bankshares and BankAtlantic
Bancorp;
* the due authorization, execution, delivery and performance of the
merger agreement;
* the absence of violations, conflicts or breaches of our and
BankAtlantic Bancorp's governing documents, agreements, orders and
applicable laws as a result of the merger agreement, except as
previously disclosed;
* governmental approvals required for the completion of the merger;
* the financial statements of BankAtlantic Bancorp and Community
Savings Bankshares;
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* the regulatory reports filed by Community Savings Bankshares and
BankAtlantic Bancorp;
* the absence of certain changes or events affecting Community
Savings Bankshares and BankAtlantic Bancorp which would result in
a material adverse effect; and
* the accuracy of the information in this proxy statement.
We made certain additional representations and warranties (which we
believe are also customary), among others, regarding our capital stock, our
subsidiaries, our financial statements, the absence of any broker's and
finder's fees other than those owed FBR, our material contacts, employee
benefit plans, our compliance with laws (including the Community Reinvestment
Act), our regulatory reports, litigation and investigations involving us or
our subsidiaries, environmental matters, the adequacy of our insurance
coverage, labor matters, our loans and deposit accounts, derivative contracts,
the status of our investment portfolio, the adequacy of our allowance for
loan losses, the absence of certain regulatory actions, our customer lists,
tax matters, real estate owned or leased by us, our fiduciary activities, our
personal and intangible property, related party transactions, the liquidation
account created in our conversion, receipt of a fairness opinion and the
accuracy of our disclosures. In addition to the representations noted above,
BankAtlantic Bancorp has represented that it will have sufficient funds to pay
the merger consideration required of it under the merger agreement and is not
party to any legal proceeding which would result in a material adverse effect
on it. BankAtlantic Bancorp expects to engage in a financing transaction in
connection with the acquisition of Community Savings Bankshares. However, the
final terms of such transaction have not been determined as of the date hereof.
Furthermore, successful completion of any such financing transaction is not a
condition to BankAtlantic Bancorp's obligation to complete the merger.
Some of the representations and warranties made by us are qualified by
materiality. The representations, warranties, agreements and covenants in the
merger agreement will expire at the effective time of the merger, except for
agreements and covenants that by their terms are to be performed after the
effective time of the merger. If the merger agreement is terminated, there
will be no liability on the part of either us or BankAtlantic Bancorp other
than the possible payment of a termination fee to BankAtlantic Bancorp or the
payment of the other party's merger expenses under certain circumstances as
discussed below under "-Termination of the Merger Agreement." In addition, no
party will be relieved or released from any liability arising out of a willful
or intentional breach by it of any covenants, agreements, representations or
warranties in the merger agreement.
Conditions to the Merger
The respective obligations of BankAtlantic Bancorp and Community Savings
Bankshares to effect the merger are subject to the satisfaction or waiver of
the following conditions specified in the merger agreement:
* approval of the merger agreement by our shareholders;
* the accuracy of the other party's representations and warranties
in all material respects, except where the failure of any
Community Savings Bankshares representation and warranty to be
true, individually or in the aggregate, without giving any effect
to materiality, does not or could not reasonably be expected to
result in a material adverse effect (as discussed below) on
Community Savings Bankshares;
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* the performance by the other party of its obligations contained in
the merger agreement in all material respects;
* there is no event or condition which has caused or is reasonably
likely to cause a material adverse effect on Community Savings
Bankshares or its subsidiaries or BankAtlantic Bancorp;
* the receipt of all required regulatory and third party approvals,
consents or waivers and the expiration of all statutory and
regulatory waiting periods; provided that none of the approvals or
consents contain any terms or conditions that, in the reasonable
opinion of BankAtlantic Bancorp, are unduly burdensome or would
materially reduce the value of the merger to BankAtlantic Bancorp
and that the regulatory approvals do not contain any terms or
conditions that would materially adversely affect the terms of the
merger relating to our shareholders; for purposes of the merger
agreement, no term or condition contained in such regulatory
approval with respect to (1) any required increase in capital
levels, (2) limitations on growth or (3) limitations of business
activities shall be deemed unduly burdensome or to materially
reduce the value of the merger to BankAtlantic Bancorp;
* the absence of any:
* law, order, judgment or decree that would prevent the merger;
* suit or other proceeding pending or threatened by any
governmental body which is sought to restrain or prohibit
the merger; and
* suit or other proceeding pending before any court or
governmental agency which is sought to restrain the merger
or obtain other substantial monetary or other relief against
one or more of the parties to the merger and which either
Community Savings Bankshares or BankAtlantic Bancorp
determines in good faith, based upon advice of counsel,
makes it inadvisable to proceed with the merger; and
* the receipt of certain certificates.
For Community Savings Bankshares and its subsidiaries, the term
"material adverse effect" is defined in the merger agreement to mean any
effect that (A) is material and adverse to the financial condition, results of
operations, assets, business or prospects of Community Savings Bankshares and
its subsidiaries considered as one enterprise or (B) materially impairs the
ability of Community Savings Bankshares to consummate the transactions
contemplated by the merger agreement; provided, however, that the term
"material adverse effect" will not be deemed to include (1) the impact of
changes in (a) laws, regulations, or policies of any federal or state court,
administrative agency, commission or other governmental authority or
interpretations thereof; or (b) generally accepted accounting principles that
are generally applicable to the banking industry; (2) actions taken or to be
taken by Community Savings Bankshares upon the written request of BankAtlantic
Bancorp or pursuant to the merger agreement; (3) changes in the general level
of market interest rates; or (4) expenses incurred in connection with the
merger agreement and the transactions contemplated thereby. For BankAtlantic
Bancorp, the term "material adverse effect" is defined in the merger agreement
to mean any effect that materially impairs the ability of it to make payment
at the effective time of the merger consideration or otherwise materially
22
impairs its or BankAtlantic's ability to consummate any of the transactions
contemplated by the merger agreement.
BankAtlantic Bancorp's obligation to effect the merger also is subject
to the satisfaction or waiver of the following additional conditions:
* all action required by our Board of Directors and our shareholders
to authorize the execution, delivery and performance of the merger
agreement, and the transactions contemplated by the merger
agreement, will have been taken;
* no court decision awarding substantial damages or penalty against
any party in connection with the merger has been rendered; and
* no more than 15% of our outstanding shares of common stock has
exercised, or remain entitled to exercise, dissenters' appraisal
rights in connection with the merger.
Our obligation to effect the merger is subject to the condition that no
law or order will have been proposed, promulgated or enacted by any
governmental or regulatory agency or court of competent jurisdiction that
prevents or restricts or could prevent or restrict the merger.
There can be no assurance that the conditions to consummation of the
merger will be satisfied or waived. The merger will become effective when the
certificate of merger is filed with Secretary of State of the State of
Delaware. It is currently anticipated that the effective time of the merger
will occur in the first quarter of 2002.
Conduct of Business Prior to the Completion of the Merger
BankAtlantic Bancorp and we have agreed that during the period from the
date of the merger agreement to the effective time of the merger, we and our
subsidiaries will do the following, except as otherwise required by the merger
agreement or requested or agreed to in writing by BankAtlantic Bancorp:
* carry on our business only in the ordinary course and consistent
with our policies, procedures and practices in substantially the
same manner as our past practice;
* keep in full force and effect, and without default, all of our
material contracts and agreements, except as they may terminate in
accordance with their terms or the terms of the merger agreement;
* use our best efforts to keep in full force and effect our
insurance coverage to the extent that such insurance continues to
be reasonably available;
* maintain, renew, keep in full force and effect and preserve our
material rights, franchises, permits and licenses and use our best
efforts to preserve our business organization, retain our present
employee force and maintain our relationships with other financial
institutions and our customers; and
* comply in all material respects with all laws and orders
applicable to us and to the conduct of our business.
23
We also have agreed that we and our subsidiaries will not do any of the
following, except with the prior written consent of BankAtlantic Bancorp:
* originate or issue any commitment for any new construction loan or
make any disbursement under any existing construction loan (unless
we are legally obligated to)
other than in accordance with certain criteria and standards as
agreed to by BankAtlantic Bancorp and us;
* incur or agree to incur any obligation or liability other than the
taking of deposits and other liabilities incurred in the ordinary
course of business and consistent with prior practice and
liabilities relating to the consummation of the merger agreement;
* make or permit any amendment or termination of any of our material
contracts or agreements which would materially adversely affect us;
* acquire any corporation, partnership or other business
organization or a substantial part of any business;
* sell or otherwise dispose of our assets or acquire any assets or
deposits except in the ordinary course of our business, with
certain exceptions;
* enter into, dispose of or divest any of our subsidiaries or joint
ventures, or cause any business entity to become a subsidiary or
affiliate;
* sell or otherwise dispose of any of our or our subsidiaries' real
property, except for sales to non-affiliated third parties in the
ordinary course of business;
* enhance, expand, modify, replace or alter any of our computer or
data processing systems, with certain exceptions;
* make, originate or otherwise acquire any loan, loan commitment or
line of credit in excess of $1 million, with certain exceptions;
* acquire any interest or participation in loans originated by other
financial institutions or brokers;
* enter into any material contract or agreement or make any capital
expenditure in excess of $50,000, with certain exceptions;
* issue (other than upon the exercise of existing stock options),
sell, redeem or acquire any of our or our subsidiaries' shares of
capital stock or other ownership interests or declare, issue or
pay any dividend or other distribution of assets, except for our
regular quarterly cash dividend and dividends by Community Savings
to us to pay our ordinary operating expenses and accrued liabilities;
* amend our certificate of incorporation or bylaws;
24
* split, combine or reclassify any shares of our capital stock;
* grant any increase in compensation or benefits to our employees or
officers, other than increases granted in the ordinary course of
business consistent with past practice and in no event in excess
of an individual increase of 5% annually; pay any bonus other than
bonuses paid in the ordinary course of business consistent with
past practice; enter into any severance agreements or arrangements
with our officers; and grant any material increase in fees,
compensation or other benefits to any of our directors;
* effect any change in retirement benefits for any of our employees
or officers, unless required by law, with certain exceptions;
* amend any existing employment contract or enter into any new
employment contract unless we have the unconditional right to
terminate without penalty at any time;
* adopt any new employee benefit plan or make any material change to
any existing employee benefit plan, unless required by law;
* enter into any transactions other than in the ordinary course of
business or mortgage, pledge or subject to any lien any of our
properties or assets or change the terms of any such mortgages,
pledges or liens;
* compromise, appeal, adjust or otherwise settle any assertion or
claim of a tax deficiency, or file any tax return before
furnishing a copy to BankAtlantic Bancorp, subject to certain
exceptions;
* enter into any related party transaction, except for transactions
relating to deposit relationships or loans made in the ordinary
course by Community Savings consistent with its policies and
procedures and applicable regulations;
* make or commit to make any loans outside of our geographic lending
area or which are not in compliance with Community Savings' loan
underwriting policies and procedures, unless required by existing
commitments; advance or commit to advance any new funds to
customers who presently have a classified loan; make or commit to
make any new loan to a borrower which is a corporation,
partnership or other non-natural person, which is not personally
guaranteed by the principals of the borrower; convert any loan to
develop or construct residential housing to a permanent loan
unless contractually obligated to do so;
* open, or file an application to open, any office, branch or
banking facility, or the acquisition or establishment of any
additional banking or nonbanking facility or close any of our
existing offices or branches;
* purchase any investment securities other than federal funds,
government securities with maturities of less than one year or
Federal Home Loan Bank overnight accounts or make any material
change to our current pricing strategy for our deposit accounts;
25
* take any action which could reasonably be expected to adversely
affect obtaining regulatory approval of the merger or the
performance of the covenants and agreements in the merger agreement;
* make any of Community Savings' credit policies or procedures less
restrictive or enter into any new lending or leasing programs;
* make any change in our accounting methods or practices other than
those required by generally accepted accounting principles,
directed by governmental authorities or pursuant to the terms of
the merger agreement;
* take, cause or permit the occurrence of any change or event which
would render any of our representations and warranties untrue; or
* enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
In addition, we have agreed to:
* promptly notify BankAtlantic Bancorp:
* of any event that materially adversely affects our or our
subsidiaries' financial condition, operations, business,
assets or prospects;
* of any breach of any of our representations, warranties, or
covenants; or
* if we are unable to fulfill any of the conditions to the
performance of BankAtlantic Bancorp of the merger;
* pay or discharge our current liabilities in the ordinary course of
business when they become due and payable, except for such
liabilities as may be subject to a good faith dispute or
counterclaim;
* not enter into any transaction which will create goodwill on our
books and records under generally accepted accounting principles;
* not increase the level of our operating expenses in excess of 5%
on an annualized basis based on the results of operations for the
twelve months ended June 30, 2001, excluding any expenses incurred
in connection with the merger and at the direction of BankAtlantic
Bancorp, with certain exceptions; or
* not exceed $2.75 million in merger expenses, not including any
fees and expenses incurred in connection with: (i) any challenges
or protests by any third parties to any applications or
submissions filed in connection with the merger, (ii) any
competing transaction to acquire us, (iii) any legal proceedings
related to the merger agreement or the transactions contemplated
by the merger agreement, or (iv) any proxy contest in connection
with the submission of the merger agreement to our shareholders.
26
We also have agreed that neither we nor any of our subsidiaries nor any
of our officers, directors, employees, agents, subsidiaries, advisors or other
representatives (including those of any of our subsidiaries) will solicit,
initiate, participate in, encourage or knowingly facilitate any inquiries or
negotiations with respect to or furnish any information relating to, any
proposal to enter into a competing transaction with any person other than
BankAtlantic Bancorp or disclose any information about our or our subsidiaries'
business to any person in connection with a competing transaction. A
competing transaction, as defined in the merger agreement, is:
* a merger, consolidation, share exchange, business combination or
other similar transaction involving us or Community Savings;
* any sale, lease, exchange, transfer or other disposition of 50% or
more of our or Community Savings' assets;
* a tender offer or exchange offer for 20% or more of our
outstanding voting stock; or
* any solicitation in opposition to the approval of the merger by
our shareholders.
We are permitted, however, to furnish information to or engage in
discussions or negotiations with third parties in connection with an
unsolicited competing transaction if: (i) our Board of Directors determines
in good faith, after consultation with our financial advisors, that the
competing transaction is reasonably likely to be completed and will result in
a superior proposal (as defined below), (ii) our Board believes, after
consultation with legal counsel, that such action is required for our Board
to fulfill its fiduciary duties to our shareholders and (iii) we obtain a
confidentiality and standstill agreement from the third party no less
favorable than that entered into with BankAtlantic Bancorp, unless the Board
believes, after consultation with legal counsel, complying with such
requirement would violate its fiduciary duties to shareholders. Under the
merger agreement, a "superior proposal" is defined as a competing transaction
that our Board of Directors concludes, based upon the written advice of our
financial advisors, provides for greater consideration than is being offered
in the merger.
We have agreed to recommend approval of the merger agreement to our
shareholders. We also have agreed to use our best efforts to solicit our
shareholders' approval of the merger. Our Board of Directors is not
obligated, however, to recommend or solicit shareholder approval of the merger
if we have received an unsolicited superior proposal and our Board
determines, after consultation with our financial and legal advisors, that
making the recommendation to our shareholders would breach its fiduciary
duties to our shareholders.
Approvals Needed to Complete the Merger
In addition to the approval of the merger agreement by our shareholders,
completion of the merger and the transactions contemplated by the merger
agreement are subject to the prior approval of the Office of Thrift
Supervision under the Home Owners' Loan Act, the Bank Merger Act and the OTS'
conversion regulations. The required applications for these approvals have not
yet been filed. In reviewing applications under the Bank Merger Act, the OTS
must consider, among other factors, the financial and managerial resources and
future prospects of the existing and resulting institutions, and the convenience
and needs of the communities to be served. In addition, the OTS may not
approve a transaction if it will result in a monopoly or otherwise be anti-
competitive.
27
Under the Community Reinvestment Act of 1977, the OTS must take into
account the record of performance of BankAtlantic and Community Savings in
meeting the credit needs of the entire community, including low- and moderate-
income neighborhoods, served by each institution. As part of the review
process, the banking agencies frequently receive comments and protests from
community groups and others. BankAtlantic and Community Savings each received
a "satisfactory" rating during their respective last Community Reinvestment
Act examinations.
In addition, a period of up to 30 days must expire following approval by
the OTS, within which period the United States Department of Justice may file
objections to the merger under the federal anti-trust laws. However, if the
Department of Justice does not object to or provide comments with regard to
the merger during the first 15 days of the period, Community Savings
Bankshares and BankAtlantic Bancorp can proceed to complete the merger at that
time. Although we believe that the likelihood of such action by the
Department of Justice is remote in this merger, there can be no assurance that
the Department of Justice will not initiate such proceeding. If such
proceeding is instituted or challenge is made, we cannot ensure a favorable
result.
We are not aware of any other regulatory approvals required for
completion of the merger, except as described above. Should any other
approvals be required, it is presently contemplated that such approvals would
be sought. There can be no assurance that any other approvals, if required,
will be obtained.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which does not include review of the merger
from the standpoint of the adequacy of the consideration to be received by
Community Savings Bankshares' shareholders. Furthermore, regulatory approvals
do not constitute an endorsement or recommendation of the merger.
There can be no assurances that the requisite regulatory approvals will
be received in a timely manner, in which event the consummation of the merger
may be delayed. If the merger is not consummated on or before June 30, 2002,
the merger agreement may be terminated by either BankAtlantic Bancorp or us.
It is a condition to the consummation of the merger that the regulatory
approvals of the merger be obtained without any terms or conditions that, in
the reasonable opinion of BankAtlantic Bancorp, are unduly burdensome or would
materially reduce the value of the merger transactions to BankAtlantic
Bancorp. However, under the terms of the merger agreement, no term or
condition contained in such approvals with respect to any required increase in
capital levels, limitations on future growth or business activities will be
deemed to be unduly burdensome or to materially reduce the value of the merger
to BankAtlantic Bancorp. No assurance can be provided that any of the
regulatory approvals will not contain conditions which fail to satisfy this
condition of the merger.
Waiver and Amendment of the Merger Agreement
The merger agreement may be amended or modified at any time only in
writing signed by both BankAtlantic Bancorp and Community Savings Bankshares.
Any term, condition or provision of the merger agreement may be waived in
writing by the party entitled to such term, condition or provision.
28
Termination of the Merger Agreement
The merger agreement may be terminated prior to the effective time of
the merger by:
* the mutual written consent of the Boards of Directors of Community
Savings Bankshares and BankAtlantic Bancorp;
* Community Savings Bankshares or BankAtlantic Bancorp:
* after June 30, 2002, provided that the party seeking to
terminate is not otherwise in material breach of its
representations, warranties or obligations under the merger
agreement;
* if the other party has materially breached its
representations and warranties or defaulted in the
performance of any of its covenants and agreements contained
in the merger agreement and such breach or default is
expected to result in a material adverse effect and is not
cured within 20 days after written notice;
* in the event any governmental authority approval required
for consummation of the merger is denied by final
nonappealable action or is not timely appealed; or
* if our shareholders fail to adopt the merger agreement;
* BankAtlantic Bancorp, if our Board of Directors:
* withdraws, modifies or changes its recommendation of the
merger agreement and the merger, or resolves to do so;
* approves or recommends a competing transaction to our
shareholders or it takes no position with respect to a
competing transaction, or resolves to do so;
* fails to recommend against or takes no position with respect
to a tender offer or exchange offer for 20% or more of our
outstanding common stock; or
* fails to publicly reaffirm its recommendation of the merger
to our shareholders upon written request from BankAtlantic
Bancorp; or
* Community Savings Bankshares, if our Board of Directors determines
to approve, endorse or recommend a superior proposal to our
shareholders, after receipt of advice of legal counsel that
failure to do so would breach its fiduciary duties to our
shareholders; provided, that, we cannot effect the termination
until two business days after we give written notice to
BankAtlantic Bancorp of our intent to terminate and pay the
termination fee described below.
In the event that the merger agreement is terminated, no party will have
any further obligations under the merger agreement, except for provisions
relating to confidential treatment, the termination fee and the payment of
expenses.
29
If a termination event (as defined below) occurs prior to the occurrence
of a fee termination event (as defined below), then we will pay BankAtlantic
Bancorp $6.0 million in immediately available funds within five business days
after the occurrence of the termination event.
A termination event is any of the following events:
* Community Savings Bankshares, without BankAtlantic Bancorp's prior
written consent, enters into an agreement to engage in a competing
transaction with a third party, or our Board of Directors approves
or recommends that our shareholders approve or accept any
competing transaction or we shall have consummated a competing
transaction; or
* a third party acquires beneficial ownership or the right to
acquire beneficial ownership of 20% or more of the outstanding
shares of Community Savings Bankshares common stock.
The term "competing transaction" is defined in the merger agreement as
described above (see "-Conduct of Business Prior to the Completion of the
Merger").
A fee termination event consists of any of the following: (1) completion
of the merger; (2) 12 months after termination of the merger agreement in
accordance with its terms following the occurrence of a preliminary
termination event (as defined below); (3) termination of the merger agreement
in accordance with its terms, if the termination occurs before the occurrence
of a termination event or a preliminary termination event, other than
termination by BankAtlantic Bancorp due to our material breach or default of
the merger agreement; or (4) 12 months after termination of the merger
agreement by BankAtlantic Bancorp due to our material breach or default of the
merger agreement resulting from a willful or intentional breach of any of our
representations, warranties, covenants or agreements.
A preliminary termination event is any of the following events:
* any third party commences, or files a registration statement with
the SEC with respect to, a tender offer or exchange offer to
purchase any shares of Community Savings Bankshares and upon
consummation of such offer the third party would control 20% or
more of Community Savings Bankshares outstanding common stock;
* our shareholders do not approve the merger agreement at the
special meeting of shareholders;
* the special meeting of shareholders is not held or is cancelled
prior to termination of the merger agreement;
* our Board of Directors withdraws, modifies or changes its
recommendation of the merger agreement and merger so that it is
not in favor of the merger, in each case after a third party has:
* publicly announced a proposal, or an intention to make
a proposal, to Community Savings Bankshares or our
shareholders to engage in a competing transaction;
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* commenced a tender offer or filed a registration
statement with the SEC with respect to an exchange
offer for 20% or more of our outstanding common stock; or
* filed an application or given notice with the
appropriate regulatory authorities for approval to
engage in a competing transaction; or
* we willfully breach any representation, warranty, covenant or
obligation in the merger agreement and such breach would entitle
BankAtlantic Bancorp to terminate the merger agreement, after any
person has:
* made, or indicated an intention to make, a proposal to
Community Savings Bankshares or our shareholders to
engage in a competing transaction;
* commenced a tender offer or filed a registration
statement with the SEC with respect to an exchange
offer for 20% or more of our outstanding common stock; or
* filed an application or given notice with regulatory
authorities for approval to engage in a competing
transaction.
If we or BankAtlantic Bancorp terminates the merger agreement due to our
shareholders failing to approve the merger and at or before the special
meeting of shareholders was held there was no public announcement of a
proposal to us or our shareholders to engage in a competing transaction, then
we will pay BankAtlantic Bancorp's merger expenses, not to exceed $1.5 million
in the aggregate. In the event BankAtlantic Bancorp subsequently is entitled
to receive the termination fee described above, the $1.5 million already paid,
if any, will be updated towards the amount of the termination fee. We are not
required, however, to reimburse BankAtlantic Bancorp's merger expenses if at
the time of termination it had materially breached its representations,
warranties or covenants in the merger agreement.
If the merger agreement is terminated because BankAtlantic Bancorp
failed to receive all approvals, waivers and authorizations of the appropriate
governmental authorities required to complete the merger, then it will pay our
merger expenses, not to exceed $1.5 million in the aggregate. BankAtlantic
Bancorp is not required, however, to reimburse our merger expenses if at the
time of termination we have materially breached our representations,
warranties or covenants in the merger agreement or if the failure to obtain
the required governmental approvals is the result of facts or circumstances
relating to us or our subsidiaries.
Interests of Directors and Officers in the Merger that are Different from Your
Interests
Some members of our management and Board of Directors may have interests
in the merger that are in addition to or different from the interests of our
shareholders. Our Board was aware of these interests and considered them in
approving the merger agreement.
Community Savings Bankshares Stock Options. As of October 31, 2001, our
directors and executive officers held options to purchase in the aggregate
300,179 shares of Community Savings
31
Bankshares common stock under our stock option plans. Under the terms of the
merger agreement, each director and executive officer will receive payment for
their stock options as described earlier in this proxy statement. The aggregate
value of the payout for unexercised stock options (both vested and unvested)
to our directors and executive officers will be approximately $2.5 million.
See "-Treatment of Option and Restricted Shares."
Community Savings Bankshares Restricted Stock Awards. As of October 31,
2001, an aggregate of 57,198 shares of our common stock have been awarded to
our directors and executive officers pursuant to the Community Savings
Bankshares recognition plans and remain unvested. As a result of the merger,
the restricted shares will become fully vested. Each director and executive
officer will receive payment for his or her unvested restricted shares as
described earlier in this proxy statement. The aggregate value of the
payment for unvested restricted shares to our directors and executive officers
will be approximately $1.1 million. See "-Treatment of Options and Restricted
Shares."
Community Savings Bankshares Employee Stock Ownership Plan. As of
October 31, 2001, our ESOP held 413,765 shares of our common stock which had not
yet been allocated to participants and which were pledged as collateral for
the remaining aggregate $3.6 million due on the loan to the ESOP. Approximately
63,641 of these shares will be allocated effective as of December 31, 2001.
The ESOP will be terminated upon completion of the merger, at which time the
loan will be repaid with the cash received by the ESOP in the merger. Based
on the estimated number of unallocated shares and the estimated loan balance at
December 31, 2001, the ESOP will have approximately $3.2 million in cash
remaining after repayment of the ESOP loan, which cash will be allocated to
the participants in accordance with the terms of the ESOP and distributed to
participants in the ESOP following receipt of a favorable determination letter
from the Internal Revenue Service.
Consulting Agreement. In connection with the completion of the merger,
it is expected that Mr. Pittard will enter into a consulting agreement with
BankAtlantic Bancorp. The consulting agreement is currently expected to have a
term of one year from the effective time of the merger. The agreement will
require Mr. Pittard to perform consulting services as may be reasonably
requested by BankAtlantic Bancorp, but not in excess of 50 hours in any one
month. Such services include providing advice and information on the operations
and customer relationships of BankAtlantic Bancorp. As compensation for Mr.
Pittard's consulting services, he is currently expected to receive an annual fee
of approximately $300,000 payable in equal monthly installments.
Change in Control Severance Agreements. Community Savings Bankshares
and Community Savings entered into change in control severance agreements with
Mr. Pittard and seven of our officers, five of whom are executive officers,
including Messrs. Baker and Howard. The agreements provide for a payment to
each officer equal to the officer's annual compensation (three times annual
compensation for Mr. Pittard) and the continuation of certain benefits upon
the officer's termination of employment after a change in control by us, other
than for cause, disability, retirement or death, or by the officer for good
reason. For purposes of the change in control severance agreements, the
merger will constitute a "change in control." Under the terms of the merger
agreement, however, each officer will receive his or her severance payment
regardless of whether or not the officer continues his or her employment with
BankAtlantic Bancorp or any of its subsidiaries. The change in control
severance agreements also provide that in the event the severance benefits due
under the agreement when combined with other benefits being received by the
officer as a result of the termination would result in the imposition of
excise taxes, the amount due under the agreement will be reduced to an amount
that will not cause the
32
imposition of such taxes. Because Mr. Pittard's severance payment, together
with other benefits, would result in the imposition of excise taxes, it is
currently estimated that his severance payment will be reduced by approximately
$375,000. As adjusted, Mr. Pittard's severance payment is estimated to amount
to approximately $512,000. Messrs. Baker and Howard will receive payments
estimated to total approximately $158,000 and $184,000, respectively, under
their change in control severance agreements. The estimated aggregate value of
the payout to the five other officers under their change in control severance
agreements is approximately $477,000.
Bonus Payments. Certain of our officers and employees selected by
BankAtlantic Bancorp who continue their employment until completion of the
merger and for a certain amount of time after completion of the merger will be
eligible to receive cash bonuses from BankAtlantic Bancorp. As of the date
hereof, it has not been determined whether any of our executive officers will
be selected to receive any such bonuses.
Supplemental Retirement Income Plan. Messrs. Pittard, Baker and Howard
are participants in our supplemental retirement income plan. The plan
compensates the participants whose benefits under Community Savings'
retirement plan are limited by the Internal Revenue Code. Under the terms of
the plan, each participant becomes fully vested and entitled to receive his
benefits upon a change of control. For purposes of the plan, the merger
constitutes a "change in control". Messrs. Pittard, Baker and Howard may
chose to receive their retirement benefits under the plan in a lump sum
payment or in quarterly installment payments over fifteen years. Each officer
has indicated that he expects to elect the lump sum payment option. Assuming
a lump sum payment is made for their interests in the plan, Messrs. Pittard,
Baker and Howard will receive payments estimated to be approximately $1.2
million, $401,000 and $566,000, respectively. In addition, Mr. Teed, our
Chairman of the Board is also a participant as a result of his service as an
officer of Community Savings. If he elects to receive his remaining benefits
in a lump sum, his payment is estimated to be approximately $94,000.
Protection of Directors, Officers and Employees Against Claims. In the
merger agreement, BankAtlantic Bancorp has agreed to indemnify our directors
and officers as well as those of our subsidiaries after the completion of the
merger to the fullest extent permitted under our or our subsidiaries'
certificate of incorporation, charter or bylaws. BankAtlantic Bancorp also
has agreed to maintain, for a period of six years after the effective time of
the merger, our current directors' and officers' liability insurance policies,
provided that BankAtlantic Bancorp may substitute insurance policies of at
least the same coverage and amount containing terms and conditions which are
not substantially less advantageous than our current insurance policies, or
BankAtlantic Bancorp may purchase tail coverage for the six-year period.
Employees and Benefit Plans
BankAtlantic Bancorp has agreed that full-time employees of Community
Savings Bankshares and Community Savings who become employed by BankAtlantic
Bancorp after the completion of the merger are eligible to participate in the
benefit plans of BankAtlantic Bancorp and its subsidiaries that are generally
available to their full-time employees. Continuing employees will receive
credit for years of service with us and our subsidiaries for purposes of
determining eligibility for participation, vesting and entitlement to vacation
time and sick pay (but not for purposes of accrual or restoration of benefits
under any existing benefit plan of BankAtlantic Bancorp or its subsidiaries
where benefits are calculated on an actuarial basis). Contributions by
continuing employees to the benefit plans of BankAtlantic Bancorp
33
and its subsidiaries will only relate to compensation earned by the continuing
employees after completion of the merger. BankAtlantic Bancorp will use its
best efforts to cause any and all pre-existing condition limitations (to the
extent such limitations did not apply under the Community Savings plan) and
eligibility waiting periods under BankAtlantic Bancorp's group health plans
to be waived with respect to such continuing employees and their eligible
dependents.
As previously described, the Community Savings Bankshares ESOP will be
terminated in connection with the completion of the merger. Following the
receipt of a favorable determination letter from the Internal Revenue Service,
the account balances in the Community Savings Bankshares ESOP will be
distributed to participants and beneficiaries or transferred to an eligible
individual retirement account as directed by the participant or beneficiary.
In addition, our 401(k) plan will be terminated upon completion of the merger.
Following receipt of a favorable determination letter from the Internal
Revenue Service, the account balances in the 401(k) plan will be distributed
to participants and beneficiaries or transferred to an eligible individual
retirement plan or a qualified defined contribution plan as directed by the
participant or beneficiary.
Under the terms of the merger agreement, if a full-time employee of
Community Savings Bankshares or one of its subsidiaries is involuntarily
terminated (other than for cause) within six months of completion of the
merger, then the terminated employee will receive a cash payment, subject to
certain conditions. The cash payment will be equal to the sum of the
employee's weekly salary multiplied by the total number of whole years of his
or her employment at Community Savings Bankshares or one of its subsidiaries,
plus the employee's accrued but unused vacation and personal days. The
minimum severance for those employed at least one full year at the date of
completion of the acquisition is two weeks salary and the maximum severance is
26 weeks salary.
You Have Dissenters' Rights of Appraisal
Under Delaware law, if you do not wish to accept the cash payment
provided for in the merger agreement, you have the right to dissent from the
merger and to have an appraisal of the fair value of your shares conducted by
the Delaware Court of Chancery. Shareholders electing to exercise dissenters'
rights must strictly comply with the provisions of Section 262 of the Delaware
General Corporation Law to perfect their rights. A copy of Section 262 is
attached as Appendix C.
The following is intended as a brief summary of the material provisions
of the Delaware statutory procedures required to dissent from the merger and
perfect a shareholder's dissenters' rights. This summary, however, is not a
complete statement of all applicable requirements and is qualified in its
entirety by reference to Section 262 of the Delaware General Corporation Law.
Section 262 requires that shareholders be notified not less than 20 days
before the special meeting to vote on the merger that dissenters' appraisal
rights will be available. A copy of Section 262 must be included with such
notice. This proxy statement constitutes our notice to you of the
availability of dissenters' rights in connection with the merger. If you wish
to consider exercising your dissenters' rights you should carefully review the
text of Section 262 contained in Appendix C because failure to timely and
properly comply with the requirements of Section 262 will result in the loss
of your dissenters' rights under Delaware law.
If you elect to demand appraisal of your shares, you must satisfy all of
the following conditions:
34
* You must deliver to us a written demand for appraisal of your
shares before the vote with respect to the merger is taken. This
written demand for appraisal must be in addition to and separate
from any proxy or vote abstaining from or against the merger.
Voting against or failing to vote for the merger by itself does
not constitute a demand for appraisal within the meaning of
Section 262.
* You must not vote in favor of the merger. An abstention or
failure to vote will satisfy this requirement, but a vote in favor
of the merger, by proxy or in person, will constitute a waiver of
your dissenters' rights in respect of the shares so voted and will
nullify any previously filed written demands for appraisal.
* You must continuously hold your shares of Community Savings
Bankshares common stock through the effective time of the merger.
If you fail to comply with these conditions and the merger is completed,
you will be entitled to receive the cash payment for any shares of Community
Savings Bankshares common stock you hold as of the effective time of the
merger as provided for in the merger agreement but will have no dissenters'
rights of appraisal for your shares of Community Savings Bankshares common
stock.
All demands for appraisal should be addressed to the Corporate
Secretary, Community Savings Bankshares, Inc., 660 U. S. Highway One, North
Palm Beach, Florida 33408, before the vote on the merger is taken at the
special meeting, and should be executed by, or on behalf of, the record holder
of the shares of Community Savings Bankshares common stock. The demand must
reasonably inform us of the identity of the shareholder and the intention of
the shareholder to demand appraisal of his or her shares.
To be effective, a demand for appraisal by a holder of Community Savings
Bankshares common stock must be made by or in the name of such registered
shareholder, fully and correctly, as the shareholder's name appears on his or
her stock certificate(s) and cannot be made by the beneficial owner if he or
she does not also hold the shares of record. The beneficial holder must, in
such cases, have the registered owner submit the required demand in respect of
such shares.
If shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of a demand for appraisal should be
made in such capacity. If the shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand should be
executed by or for all joint owners. An authorized agent, including one of
two or more joint owners, may execute the demand for appraisal for a
shareholder of record. However, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, he or
she is acting as agent for the record owner. A record owner, such as a
broker, who holds shares as a nominee for others, may exercise his or her
right of appraisal with respect to the shares held for one or more beneficial
owners, while not exercising this right for other beneficial owners. In such
case, the written demand should state the number of shares as to which
appraisal is sought. Where no number of shares is expressly mentioned, the
demand will be presumed to cover all shares held in the name of such record
owner.
If you hold your shares of Community Savings Bankshares common stock in
a brokerage account or in other nominee form and you wish to exercise
appraisal rights, you should consult with your broker
35
or such other nominee to determine the appropriate procedures for the making
of a demand for appraisal by such nominee.
Within ten days after the effective date of the merger, BankAtlantic
Bancorp must give written notice that the merger has become effective to each
Community Savings Bankshares shareholder who has properly filed a written
demand for appraisal and who did not vote in favor of the merger. Within 120
days after the effective date, either BankAtlantic Bancorp or any shareholder
who has complied with the requirements of Section 262 may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
the shares held by all shareholders entitled to appraisal. A dissenting
shareholder may request from BankAtlantic Bancorp during this 120 day period a
statement setting forth (a) the aggregate number of shares not voted in favor
of the merger and with respect to which demands for appraisal have been
received, and (b) the aggregate number of holders of such shares. We have
been informed that BankAtlantic Bancorp does not presently intend to file such
a petition in the event there are dissenting shareholders and has no
obligation to do so. Accordingly, your failure to timely file a petition
could nullify your demand for appraisal.
At any time within 60 days after the effective date of the merger, any
shareholder who has demanded an appraisal has the right to withdraw the demand
and to accept the cash payment specified by the merger agreement for his or
her shares of Community Savings Bankshares common stock. If a petition for
appraisal is duly filed by a shareholder and a copy of the petition is
delivered to BankAtlantic Bancorp, BankAtlantic Bancorp will then be obligated
within 20 days after receiving service of a copy of the petition to provide
the Chancery Court with a duly verified list containing the names and
addresses of all shareholders who have demanded an appraisal of their shares.
After notice to dissenting shareholders, the Chancery Court is empowered to
conduct a hearing upon the petition, to determine those shareholders who have
complied with Section 262 and who have become entitled to the appraisal rights
provided thereby. The Chancery Court may require the shareholders who have
demanded payment for their shares to submit their stock certificates to the
Register in Chancery for notation thereon of the pendency of the appraisal
proceedings; and if any shareholder fails to comply with such direction, the
court may dismiss the proceedings as to such shareholder.
After determination of the shareholders entitled to appraisal of their
shares of Community Savings Bankshares common stock, the Chancery Court will
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest, if any. When the value is determined, the court
will direct the payment of such value, with interest thereon accrued during
the pendency of the proceeding if the Chancery Court so determines, to the
shareholders entitled to receive the same, upon surrender by such holders of
the certificates representing such shares.
In determining fair value, the Chancery Court is required to take into
account all relevant factors. You should be aware that the fair value of the
shares as determined under Section 262 could be more, the same, or less than
the value that you are entitled to receive pursuant to the merger agreement.
Costs of the appraisal proceeding may be imposed upon BankAtlantic
Bancorp and the shareholders participating in the appraisal proceeding by the
Chancery Court as the court deems equitable in the circumstances. Upon the
application of a shareholder, the Chancery Court may order all or a portion of
the expenses incurred by any shareholder in connection with the appraisal
proceeding,
36
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, to be charged pro rata against the value of all shares
entitled to appraisal.
Any shareholder who demands appraisal rights will not, after the
effective date, be entitled to vote shares subject to such demand for any
purpose or to receive payments of dividends or any other distribution with
respect to such shares, other than with respect to payment as of a record date
prior to the effective date; however, if no petition for appraisal is filed
within 120 days after the effective date, or if such shareholder delivers a
written withdrawal of his or her demand for appraisal and an acceptance of the
merger within 60 days after the effective date, then the right of such
shareholder to appraisal will cease and such shareholder will be entitled to
receive the cash payment for shares of his or her Community Savings Bankshares
common stock pursuant to the merger agreement. Any withdrawal of a demand for
appraisal made more than 60 days after the effective date of the merger may
only be made with the written approval of the surviving corporation.
In view of the complexity of Section 262, Community Savings Bankshares'
shareholders who may wish to dissent from the merger and pursue appraisal
rights should consult their legal advisors.
Federal Income Tax Consequences of the Merger to You
The exchange of our common stock for cash pursuant to the terms of the
merger agreement will be a taxable transaction for federal income tax purposes
under the Internal Revenue Code, and may also be a taxable transaction under
state, local and other tax laws. Community Savings Bankshares' shareholders
will recognize gain or loss equal to the difference between the amount of cash
received by them pursuant to the merger and the tax basis in the Community
Savings Bankshares common stock exchanged by such shareholder pursuant to the
merger. Gain or loss must be determined separately for each block of
Community Savings Bankshares common stock surrendered pursuant to the merger.
For purposes of federal tax law, a block consists of shares of Community
Savings Bankshares common stock acquired by the shareholder at the same time
and price.
Gain or loss recognized by the shareholder exchanging his or her
Community Savings Bankshares common stock pursuant to the merger will be
capital gain or loss if such Community Savings Bankshares common stock is a
capital asset in the hands of the shareholder. If the Community Savings
Bankshares common stock has been held for more than one year, the gain or loss
will be long-term. Capital gains recognized by an exchanging individual
shareholder generally will be subject to federal income tax at capital gain
rates applicable to the shareholder (up to a maximum blended rate of 39.1% for
short-term capital gains and 20% for long-term capital gains), and capital
gains recognized by an exchanging corporate shareholder generally will be
subject to federal income tax at a maximum rate of 35%.
Neither we nor BankAtlantic Bancorp have requested or will request a
ruling from the Internal Revenue Service as to any of the tax effects to
Community Savings Bankshares' shareholders of the transactions discussed in
this proxy statement, and no opinion of counsel has been or will be rendered
to our shareholders with respect to any of the tax effects of the merger to
shareholders.
The federal income tax discussion set forth above is based upon current
law and is intended for general information only. You are urged to consult
your tax advisor concerning the specific tax
37
consequences of the merger to you, including the applicability and effect of
state, local or other tax laws and of any proposed changes in those tax laws
and the Internal Revenue Code.
Accounting Treatment of the Merger
The merger will be accounted for under the purchase method of
accounting. Under this method of accounting, BankAtlantic Bancorp and
Community Savings Bankshares will be treated as one company as of the date of
the merger, and BankAtlantic Bancorp will record the fair market value of our
assets less liabilities on its consolidated financial statements. Acquisition
costs in excess of the fair value of the net assets acquired, if any, will be
recorded as an intangible asset for financial accounting purposes. The
reported consolidated income of BankAtlantic Bancorp will include our
operations after the completion of the merger.
Who Pays for What
All fees and expenses incurred in connection with the merger (including,
but not limited to, counsel and investment banking fees) will be paid by the
party incurring such costs, subject to possible reimbursement of up to $1.5
million in the event of the termination of the merger agreement in certain
events.
CERTAIN RELATED AGREEMENTS
Bank Merger Agreement
After the merger, Community Savings and BankAtlantic will be merged,
with BankAtlantic being the surviving institution. The bank merger agreement
provides that it may be terminated by mutual consent of the parties at any
time and will be terminated automatically if the merger agreement is
terminated.
Voting Agreements
As an inducement for BankAtlantic Bancorp to enter into the merger
agreement, each of our executive officers and directors and Josiah T. Austin
(on behalf of himself and certain entities and trusts which he controls)
entered into voting agreements with BankAtlantic Bancorp. Pursuant to the
voting agreements, our executive officers and directors and Mr. Austin
agreed to vote or cause to be voted the shares of Community Savings Bankshares
common stock beneficially owned by them, among other things, in favor of the
merger and any other related matter and against any competing transaction. In
addition, our executive officers and directors and Mr. Austin have agreed not
to sell or transfer his or her shares of Community Savings Bankshares common
stock until the completion of the merger, or until the merger agreement is
terminated.
ADJOURNMENT OF THE SPECIAL MEETING
Each proxy solicited requests authority to vote for an adjournment of
the special meeting, if an adjournment is deemed to be necessary. We may seek
an adjournment of the special meeting so that we can solicit additional votes
in favor of the merger agreement if the merger proposal has not received the
requisite vote of shareholders at the special meeting and has not received the
negative votes of the holders
38
of a majority of our stock. If we desire to adjourn the meeting, we will
request a motion that the meeting be adjourned for up to 29 days with respect
to the merger proposal (and solely with respect to the merger proposal,
provided that a quorum is present at the special meeting), and no vote will
be taken on the merger proposal at the originally scheduled special meeting.
Each proxy solicited, if properly signed and returned to us and not revoked
prior to its use, will be voted on any motion for adjournment in accordance
with the instructions contained therein. If no contrary instructions are
given, each proxy received will be voted in favor of any motion to adjourn
the meeting. Unless revoked prior to its use, any proxy solicited for the
special meeting will continue to be valid for any adjourned meeting, and will
be voted in accordance with instructions contained therein, and if no contrary
instructions are given, for the proposal in question.
Any adjournment will permit us to solicit additional proxies and will
permit a greater expression of our shareholders' views with respect to the
merger proposal. The adjournment would be disadvantageous to shareholders who
are against the merger agreement because an adjournment will give us
additional time to solicit favorable votes and thus increase the chances of
passing the merger proposal.
If a quorum is not present at the special meeting, no proposal will be
acted upon and our Board of Directors will adjourn the special meeting to a
later date to solicit additional proxies on each of the proposals being
submitted to shareholders.
An adjournment for up to 29 days will not require either the setting of
a new record date or notice of the adjourned meeting as in the case of an
original meeting. We have no reason to believe that an adjournment of the
special meeting will be necessary at this time.
Because the Board of Directors recommends that shareholders vote "FOR"
the proposed merger agreement, the Board of Directors also recommends that
shareholders vote "FOR" the possible adjournment of the special meeting on the
merger proposal. Approval of the proposal to adjourn the special meeting on
the merger proposal requires the approval of a majority of the votes cast on
the adjournment proposal.
39
BENEFICIAL OWNERSHIP OF COMMUNITY SAVINGS BANKSHARES COMMON STOCK
Shareholders of record as of the close of business on October 31, 2001
will be entitled to one vote for each share of our common stock then held. As
of that date, we had 8,660,254 shares of common stock issued and outstanding.
The following table sets forth information regarding the share ownership of:
* each holder of more than 5% of our outstanding common stock,
including our employee stock ownership plan,
* each member of our Board of Directors and each executive officer
who is not a director, and
* all of our directors and executive officers as a group.
Amount and Nature of Beneficial
Name of Beneficial Owner or Ownership as of Percent of
Number of Persons in Group October 31, 2001 (1)(2)(3)(4)(5) Common Stock
- --------------------------- ------------------------------- ------------
Josiah T. Austin
El Coronado Holdings, L.L.C.
12626 E. Turkey Creek Road
Pearce, Arizona 85625-6166 950,152(6) 11.0%
Capital Guardian Trust Company
Capital Group
International, Inc.
11100 Santa Monica Boulevard
Los Angeles, California 90025-3384 836,664(7) 9.7%
J. Sheldon Clark
146 Gomez Road
Hobe Sound, Florida 33455 524,850(8) 6.1%
Community Savings Bankshares, Inc.
Employee Stock Ownership Plan
660 U.S. Highway One
North Palm Beach, Florida 33408 763,110(9) 8.8%
Directors:
Frederick A. Teed 69,189 *
James B. Pittard, Jr. 91,627(10) 1.1%
J. Sheldon Clark 524,850(8) 6.1%
Robert F. Cromwell, Esq. 76,220 *
Ronald P. Jaworski, Esq.,CPA 2,019(11) *
Executive Officers:
Larry J. Baker, CPA 74,072(12) *
Cecil F. Howard, Jr. 41,566(13) *
Feriel G. Hughes 2,677(14) *
Michael E. Reinhardt 51,457(15) *
Cindy L. Sheppard 22,410(16) *
All directors and executive
officers as a group (10 persons) 956,087(17) 10.8%
(Footnotes on following page)
40
__________________________
* Represents less than 1% of the outstanding common stock.
(1) Based upon filings made pursuant to the Securities Exchange Act of 1934
and information furnished by the respective individuals and entities.
Under SEC rules, shares of Community Savings Bankshares common stock are
deemed to be beneficially owned by a person if he or she directly or
indirectly has or shares (i) voting power, which includes the power to
vote or to direct the voting of the shares, or (ii) investment power,
which includes the power to dispose or to direct the disposition of the
shares. Unless otherwise indicated, the named beneficial owner has sole
voting and dispositive power with respect to the shares.
(2) For shares, grants and options owned or made prior to December 15, 1998,
the data presented reflect an adjustment made to account for the share
exchange ratio applied in connection with the reorganization of
Community Savings into a stock savings bank and wholly owned subsidiary
of Community Savings Bankshares.
(3) Under applicable SEC regulations, a person is deemed to have beneficial
ownership of any shares of Community Savings Bankshares common stock
which may be acquired within 60 days of the date shown pursuant to the
exercise of outstanding stock options. Shares of Community Savings
Bankshares common stock subject to stock options are deemed to be
outstanding for the purpose of computing the percentage of outstanding
common stock owned by such person or group but not deemed outstanding
for the purpose of computing the percentage of common stock owned by any
other person or group.
(4) Includes, with respect to each of Messrs. Teed and Cromwell, 6,564
shares granted pursuant to our recognition and retention plans.
Includes with respect to Messrs. Pittard, Baker, Howard and Reinhardt
and Ms. Sheppard amounts totaling 15,403, 7,971, 6,867, 8,559 and 5,269
shares, respectively, awarded pursuant to our recognition and retention
plans. Such shares may be voted by such persons although such shares
have neither vested nor been distributed. The awards vest at the rate
of 20% per year from the date of grant.
(5) Includes shares totaling 35,169, 24,680, 82, 35,169, 19, 12,775, 16,116,
24,455 and 10,492 which may be acquired upon the exercise of options
exercisable within 60 days of the date shown granted to Messrs. Teed,
Pittard, Clark, Cromwell, Jaworski, Baker, Howard, Reinhardt and Ms.
Sheppard, respectively, pursuant to our stock option plans.
(6) Reflects 896,863 shares held by El Coronado Holdings, L.L.C. of which Mr.
Austin is the sole managing member. Also includes 35,000 shares owned
by Mr. Austin as well as 3,900 shares owned by the Christina E. Lowery
Trust, 3,900 shares owned by the Matthew Austin Lowery Trust, 2,100
shares owned by the Valerie A. Gordon Trust and 8,389 shares owned by
the Austin-Clark Insurance Trust. Mr. Austin serves as trustee of each
of the four trusts.
(7) Reflects shares held by Capital Group International, Inc., the parent
holding company of Capital Guardian Trust Company. Capital Guardian
Trust Company is a Bank (as defined under Section 3(a)6 of the
Securities Exchange Act). Capital International Research and
Management, Inc., dba Capital International, Inc., is an Investment
Advisor registered under Section 203 of the Investment Advisor Act of
1940 and is a wholly owned subsidiary of Capital Group International,
Inc., which is wholly owned by The Capital Group Companies, Inc.
Neither Capital Guardian Trust Company nor Capital International, Inc.
owns shares for its own account. The shares are deemed to be
beneficially owned by them in their capacities as investment manager and
investment advisor, respectively, for various investment companies
and/or institutional accounts, as the case may be.
(Footnotes continued on following page)
41
______________________________
(8) Includes 75,044 shares owned by Mr. Clark's spouse. Also includes
101,928 shares held by three trusts entitled "Trust under the Will of
Charles M. Clark, Jr." of which Mr. Clark is trustee. In addition,
includes 66,979 shares owned by the Clark Family Foundation of which Mr.
Clark is President.
(9) Does not include 36,784 shares allocated to or deemed beneficially owned
pursuant to our employee stock ownership plan by the executive officers,
or such officers' spouses, as the case may be, listed below, which
shares are reflected in such individuals' beneficial ownership.
(10) Includes 1,118 shares allocated to Mr. Pittard's wife, a former employee
of Community Savings, pursuant its employee stock ownership plan, 126
shares owned by Mr. Pittard's children, 6,689 shares allocated to
Mr. Pittard pursuant to our employee stock ownership plan and 43,611
shares owned jointly with Mr. Pittard's wife.
(11) Shares are held jointly with Mr. Jaworski's spouse.
(12) Includes 7,407 shares allocated to Mr. Baker pursuant to our employee
stock ownership plan.
(13) Includes 9,598 shares allocated to Mr. Howard pursuant to our employee
stock ownership plan and 196 shares owned by Mr. Howard's wife.
(14) Includes 2,577 shares allocated to Ms. Hughes pursuant to the our
employee stock ownership plan.
(15) Includes 12,759 shares owned jointly with Mr. Reinhardt's wife and 5,684
shares allocated to Mr. Reinhardt pursuant to our employee stock
ownership plan.
(16) Includes 3,711 shares allocated to Ms. Sheppard pursuant to the our
employee stock ownership plan.
(17) Includes 57,197 shares granted pursuant to our recognition and
retention plans which may be voted by directors and executive officers
pending vesting and distribution, 36,784 shares allocated to executive
officers and their spouses, as the case may be, pursuant to our employee
stock ownership plan and 158,957 shares which may be acquired by
directors and executive officers upon the exercise of stock options
exercisable within 60 days of the date shown.
42
SHAREHOLDER PROPOSALS
If the merger is not consummated prior to the next regularly scheduled
annual meeting of our shareholders, any proposal which a shareholder wishes to
have included in our proxy materials for the next annual meeting of
shareholders must be received at our main office located at 660 U.S. Highway
One, North Palm Beach, Florida 33408, Attention: Deborah M. Rousseau,
Secretary, no later than November 26, 2001. Otherwise, any shareholder
proposal to take action at the next annual meeting requires the shareholder to
provide notice to us which must be received at the address listed above not
less than 120 days prior to the mailing of proxy materials for the immediately
preceding year's annual meeting. Accordingly, shareholder proposals which are
not submitted for inclusion in our proxy statement must be delivered to our
main office at the above address no later than November 26, 2001. The
shareholder's notice must include certain information as specified in our
bylaws. Nothing in this paragraph shall be deemed to require us to include in
our proxy statement or the proxy relating to any annual meeting any
shareholder proposal which does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received. In
addition, all shareholder proposals must comply with our certificate of
incorporation, bylaws and Delaware law.
OTHER MATTERS
Each proxy solicited also confers discretionary authority on our Board
of Directors to vote the proxy with respect to matters incident to the conduct
of the meeting and upon such other matters as may properly come before the
special meeting. Our Board of Directors is not aware of any business to come
before the special meeting other than those matters described above in this
proxy statement. However, if any other matter should properly come before the
special meeting, it is intended that proxy holders will act in accordance with
their best judgment.
43
Appendix A
AGREEMENT AND PLAN OF MERGER
by and between
BANKATLANTIC BANCORP, INC.,
CSB MERGER SUB, INC.
and
COMMUNITY SAVINGS BANKSHARES, INC.
TABLE OF CONTENTS
ARTICLE I
THE MERGER.................................................. A-1
1.1 Merger.............................................. A-1
1.2 Consummation of the Merger; Effective Time.......... A-2
1.3 Effect of the Merger................................ A-2
1.4 Certificate of Incorporation and By-laws............ A-2
1.5 Board of Directors.................................. A-2
1.6 Officers............................................ A-2
1.7 The Bank Merger..................................... A-2
1.8 Prior Approvals..................................... A-3
ARTICLE II
CONVERSION OF SHARES; PURCHASE PRICE........................ A-3
2.1 Purchase Price...................................... A-3
2.2 Conversion of Community Bankshares Common Stock
and Options......................................... A-3
2.3 Effect of Conversion of Shares and Options.......... A-3
2.4 Procedures for Exchange of Community Bankshares
Common Stock and Options............................ A-4
2.5 Dissenters' Rights.................................. A-6
2.6 Conversion of Merger Sub Common Stock............... A-6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BBC....................... A-6
3.1 Organization and Good Standing...................... A-6
3.2 Authorization and No Violation...................... A-6
3.3 Governmental Consents............................... A-7
3.4 BBC SEC Reports..................................... A-7
3.5 BBC Financial Statements............................ A-7
3.6 Information in Proxy Statement...................... A-8
3.7 Merger Sub.......................................... A-8
3.8 Ability to Pay Merger Consideration................. A-8
3.9 Absence of Certain Changes or Events................ A-8
3.10 Legal Proceedings................................... A-8
3.11 Full Disclosure..................................... A-9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMMUNITY BANKSHARES...... A-9
4.1 Organization, Good Standing......................... A-9
4.2 Capital Stock....................................... A-9
4.3 Authorization; No Violation......................... A-10
A-i
4.4 Subsidiaries........................................ A-11
4.5 Broker's and Finder's Fees.......................... A-12
4.6 Governmental Consents............................... A-12
4.7 Reports............................................. A-12
4.8 Taxes............................................... A-13
4.9 Material Contracts.................................. A-15
4.10 Real Properties..................................... A-16
4.11 Real Property Leases................................ A-16
4.12 Personal Property................................... A-17
4.13 Investigations, Litigation.......................... A-17
4.14 Insurance........................................... A-18
4.15 Compliance with Laws, Regulations................... A-18
4.16 Employee Benefit Plans.............................. A-19
4.17 Labor Matters....................................... A-21
4.18 Environmental Liability............................. A-22
4.19 Deposit Accounts.................................... A-23
4.20 Loans............................................... A-25
4.21 Derivatives Contracts............................... A-26
4.22 Absence of Certain Changes.......................... A-27
4.23 Investment Portfolio................................ A-27
4.24 Related Party Transactions.......................... A-27
4.25 Fiduciary Activities................................ A-27
4.26 Intangible Property................................. A-27
4.27 Absence of Regulatory Actions....................... A-28
4.28 Customer Lists and Information...................... A-28
4.29 FDIC Status; Liquidation Account.................... A-28
4.30 Community Reinvestment Act Compliance............... A-29
4.31 Information in Proxy Statement...................... A-29
4.32 State Takeover Laws; Certificate of Incorporation... A-29
4.33 Opinion of Financial Advisor........................ A-29
4.34 Full Disclosure..................................... A-30
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME............. A-30
5.1 Ordinary Course, Insurance, Preservation of Business A-30
5.2 Prohibited Action Without Approval.................. A-31
5.3 Notice.............................................. A-34
5.4 Liabilities......................................... A-34
5.5 Goodwill............................................ A-34
5.6 Operating Expenses.................................. A-34
5.7 Transaction Costs................................... A-34
A-ii
ARTICLE VI
ADDITIONAL COVENANTS OF COMMUNITY BANKSHARES................ A-35
6.1 Access to Information............................... A-35
6.2 Confidential Treatment of Information............... A-35
6.3 Management Reports and Risk Management.............. A-35
6.4 Fiserv and Other Vendor Agreements.................. A-36
6.5 Loan Loss Allowance................................. A-36
6.6 Acquisition Proposals............................... A-36
6.7 Approval by Community Bankshares? Shareholders;
Proxy Statement..................................... A-38
6.8 Consents and Approvals by Third Parties............. A-39
ARTICLE VII
ADDITIONAL COVENANTS OF BBC AND COMMUNITY BANKSHARES........ A-39
7.1 Regulatory Approvals................................ A-39
7.2 SEC Filings and Offering Materials.................. A-39
7.3 Publicity and Reports............................... A-39
7.4 Employees and Employee Benefit Plans................ A-40
7.5 Indemnification..................................... A-43
7.6 Further Assurances.................................. A-44
7.7 Tax Treatment....................................... A-45
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BBC.................. A-45
8.1 Status as of Effective Time......................... A-45
8.2 Required Action..................................... A-46
8.3 Consents, Waivers................................... A-46
8.4 Regulatory Approval................................. A-46
8.5 No Action to Prevent Consummation................... A-46
8.6 No Action to Prevent or Restrict Merger............. A-46
8.7 Dissenters' Rights.................................. A-47
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF COMMUNITY BANKSHARES A-47
9.1 Representations, Warranties and Covenants........... A-47
9.2 Consents, Waivers................................... A-47
9.3 No Material Adverse Effect.......................... A-47
9.4 Regulatory Approval................................. A-48
9.5 No Action to Prevent Consummation................... A-48
9.6 No Action to Prevent or Restrict Merger............. A-48
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER........................... A-48
10.1 Termination of Agreement............................ A-48
10.2 Effect of Termination............................... A-50
10.3 Amendment and Waiver................................ A-50
A-iii
ARTICLE XI
SURVIVAL.................................................... A-50
11.1 Survival of the Representations and Warranties...... A-50
ARTICLE XII
MISCELLANEOUS............................................... A-50
12.1 Payment of Expenses................................. A-50
12.2 Binding Effect...................................... A-53
12.3 Law Governing....................................... A-53
12.4 Counterparts........................................ A-53
12.5 Notices............................................. A-53
12.6 Entire Agreement.................................... A-54
12.7 Headings............................................ A-54
12.8 Knowledge of the Parties............................ A-55
12.9 Attorneys' Fees..................................... A-55
12.10No Third Party Beneficiary.......................... A-55
12.11Injunctive Relief................................... A-55
A-iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is
entered into as of the 9th day of September, 2001, by and among
BANKATLANTIC BANCORP, INC., a Florida corporation ("BBC"), CSB
MERGER SUB, INC., a Delaware corporation and a wholly-owned
subsidiary of BBC ("Merger Sub"), and COMMUNITY SAVINGS
BANKSHARES, INC., a Delaware corporation ("Community
Bankshares").
W I T N E S S E T H:
WHEREAS, the parties desire that Community Bankshares be
acquired by BBC through the merger of Merger Sub with and into
Community Bankshares (the "Merger") upon the terms and conditions
contained herein and in accordance with applicable law;
WHEREAS, the Boards of Directors of BBC and Community
Bankshares have each determined that it is in the best interests
of their respective shareholders for BBC to acquire Community
Bankshares in the Merger, and have each adopted a resolution
approving this Agreement and the transactions contemplated
hereby; and
WHEREAS, concurrently with the execution of this Agreement
and as an inducement to BBC to enter into this Agreement, the
directors, executive officers and certain shareholders of
Community Bankshares have entered into a voting agreement (the
"Voting Agreement") pursuant to which such shareholders, among
other things, have agreed to vote the outstanding shares of
Community Bankshares' common stock, par value $1.00 per share
(the "Community Bankshares Common Stock"), owned or controlled by
them in favor of the approval of this Agreement and the Merger
contemplated hereby, upon the terms and subject to the conditions
set forth therein.
NOW, THEREFORE, for and in consideration of the premises and
the mutual agreements, representations, warranties and covenants
herein contained and for the purpose of prescribing the terms and
conditions of the Merger, the parties, intending to be legally
bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. At the Effective Time (as defined in Section
1.2), Merger Sub shall be merged with and into Community
Bankshares and Community Bankshares will be the surviving
corporation of the Merger (the "Surviving Corporation"), in
accordance with the terms, conditions and provisions of this
Agreement and the Certificate of Merger (as defined in Section
1.2).
A-1
1.2 Consummation of the Merger; Effective Time. The
consummation of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Stearns Weaver
Miller Weissler Alhadeff & Sitterson, P.A., 150 West Flagler
Street, Miami, Florida 33130, at such time as shall be fixed by
mutual agreement of BBC and Community Bankshares as promptly as
practicable after the satisfaction or waiver of all of the
conditions set forth in this Agreement. Subject to the
satisfaction or waiver of all conditions precedent to the
consummation of the transactions contemplated by this Agreement,
the parties shall cause the Merger to become effective on the
date of the Closing by executing, acknowledging and filing in
accordance with all applicable regulations, a Certificate of
Merger with respect to the Merger (the "Certificate of Merger")
with the Secretary of State of the State of Delaware which shall
provide that the Merger shall be effective as of the date of
Closing (the date and time of such effectiveness being referred
to herein as the "Effective Time"). The Closing shall be deemed
to occur simultaneously with the Effective Time.
1.3 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions
of the General Corporation Law of the State of Delaware (the
"DGCL"). Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all of the property,
rights, privileges, powers and franchises of Community Bankshares
and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Community Bankshares and Merger
Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificate of Incorporation and By-laws. The
Certificate of Incorporation of Community Bankshares as in effect
immediately prior to the Merger shall be the Certificate of
Incorporation of the Surviving Corporation. The by-laws of
Community Bankshares as in effect immediately prior to the Merger
shall be the by-laws of the Surviving Corporation until
thereafter altered, amended or repealed in accordance with
applicable law.
1.5 Board of Directors. As of the Effective Time, the
Board of Directors of the Surviving Corporation will consist of
the directors of Merger Sub immediately prior to the Effective
Time.
1.6 Officers. As of the Effective Time, the officers of
Merger Sub immediately prior to the Effective Time shall
constitute the officers of the Surviving Corporation until such
time as their respective successors have been elected and
qualified.
1.7 The Bank Merger. Community Bankshares and BBC
acknowledge and agree that immediately following the Merger, BBC
shall cause the merger (the "Bank Merger") of Community Savings,
F. A., a federally chartered stock form savings association and a
wholly-owned subsidiary of Community Bankshares ("Community
Savings"), with and into BankAtlantic, a Federal Savings Bank, a
federally chartered stock form savings bank and a wholly-owned
subsidiary of BBC ("BankAtlantic"), with BankAtlantic as the
surviving bank of the Bank Merger
A-2
and a wholly owned subsidiary of the Surviving Corporation. The
Bank Merger will be effective immediately following the Effective Time
on the same calendar day as the Closing.
1.8 Prior Approvals. The parties hereto acknowledge that
requisite approvals or waivers must be received from or notices
must be given to certain federal and state regulatory agencies.
Such regulatory agencies may include the Office of Thrift
Supervision (the "OTS"), the Federal Deposit Insurance
Corporation (the "FDIC"); and any other governmental agency or
regulatory authorities having jurisdiction over BBC, Community
Bankshares, BankAtlantic or Community Savings, as the case may be
(collectively, the "Applicable Governmental Authorities"). The
transactions contemplated hereby are subject to and conditioned
upon the receipt of all requisite regulatory approvals or
waivers, the filing of all required notices and the expiration of
any required waiting periods and, to the extent received or
accepted, such approvals, waivers or notices shall not contain or
be subject to any terms or conditions (other than those generally
imposed in similar transactions) which BBC reasonably deems to be
burdensome.
ARTICLE II
CONVERSION OF SHARES; PURCHASE PRICE
2.1 Purchase Price. The purchase price to be paid in
exchange for each issued and outstanding share of Community
Bankshares Common Stock shall be an amount equal to $19.00 per
share of Community Bankshares Common Stock (the "Per Share
Amount").
2.2 Conversion of Community Bankshares Common Stock and
Options.
(a) At the Effective Time, each share of Community
Bankshares Common Stock issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares as such term
is defined in Section 2.5 hereof) and other than shares of
Community Bankshares Common Stock then owned by Community
Bankshares (including shares held in treasury), any Subsidiary
(as such term is defined in Section 4.4 hereof) of Community
Bankshares, BBC, or any Subsidiary of BBC (in each case other
than in a fiduciary capacity or as a result of debts previously
contracted) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into and
exchangeable for the right to receive the Per Share Amount.
(b) At the Effective Time, each option to purchase a
share of Community Bankshares Common Stock (each an "Option" and,
collectively, the "Options") outstanding immediately prior to the
Effective Time, shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and
exchangeable for the right to receive in cash an amount equal to
the Per Share Amount minus the price per share of Community
Bankshares Common Stock at which such Option is exercisable (the
"Per Option Amount").
2.3 Effect of Conversion of Shares and Options. After the
Effective Time, and until surrendered for payment, each
outstanding certificate which, prior to the Effective Time,
A-3
represented shares of Community Bankshares Common Stock (each, a
"Certificate"), shall be deemed for all purposes to represent
only the right to receive the Per Share Amount multiplied by the
number of shares of Community Bankshares Common Stock formerly
represented by such Certificate. After the Effective Time, each
Option shall be deemed for all purposes to be canceled and
converted into and represent only the right to receive an amount
of cash equal to the product of the Per Option Amount applicable
to such Option multiplied by the number of shares of Community
Bankshares Common Stock for which such Option is exercisable
immediately prior to the Effective Time. In any matters relating
to such Certificates or Options, BBC may rely conclusively upon
the record of security holders maintained by the registrar and
transfer agent for the Community Bankshares Common Stock or by
Community Bankshares containing the names and addresses of the
holders of record of Community Bankshares Common Stock or Options
at the Effective Time. The aggregate consideration to be paid
for the Community Bankshares Common Stock and Options is referred
to herein as the "Merger Consideration."
2.4 Procedures for Exchange of Community Bankshares Common
Stock and Options.
(a) BBC shall take all steps reasonably necessary on
and as of the Effective Time to deliver to an exchange agent
designated by BBC and reasonably acceptable to Community
Bankshares (the "Exchange Agent"), for the benefit of the holders
of Certificates and the holders of Options, for exchange in
accordance with this Section 2.4, an amount of cash equal to the
aggregate Merger Consideration to be paid in exchange for
outstanding Community Bankshares Common Stock and Options in
accordance with this Agreement (the "Exchange Fund"). The
Exchange Agent shall act as agent on behalf of BBC and record
holders (each a "Record Holder") of Community Bankshares Common
Stock and Options at the Effective Time, other than Community
Bankshares, any Subsidiary of Community Bankshares, BBC, or any
Subsidiary of BBC (in each case other than in a fiduciary
capacity or as a result of debts previously contracted), or any
holder of Dissenting Shares.
(b) As soon as practicable after the Effective Time
but in no event more than five business days after the Effective
Time, the Exchange Agent shall mail to each Record Holder of a
Certificate or an Option a form letter of transmittal which,
among other matters, shall specify how such Record Holder shall
receive payment of the Merger Consideration that such Record
Holder is eligible to receive. After surrender to the Exchange
Agent of a properly executed letter of transmittal and, in the
case of Record Holders of shares of Community Bankshares Common
Stock, the Certificate or Certificates representing such shares
of Community Bankshares Common Stock, the Exchange Agent shall
deliver to the person in whose name such Community Bankshares
Common Stock or Options shall have been registered, the Merger
Consideration to which such Record Holder shall have become
entitled pursuant to the provisions of this Article II. There
shall be no obligation to deliver the Merger Consideration in
respect of any shares of Community Bankshares Common Stock until
(and then only to the extent that) the holder thereof surrenders
its Certificate or Certificates for exchange as provided in this
Section 2.4, or, in lieu thereof, delivers to the Exchange Agent
an appropriate affidavit of loss and an indemnity agreement
and/or a bond as may be required in any such case by the Exchange
Agent. If any payment for shares
A-4
of Community Bankshares Common Stock or Options is to be made in a
name other than that in which the Certificate surrendered for exchange
or the Option, as the case may be, is registered, it shall be a condition
to the payment that, in the case of holders of shares of Community
Bankshares Common Stock, the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and,
in the case of holders of Options, the special instructions in
the letter of transmittal shall have been complied with, and in
each case that the person requesting the payment shall either:
(i) pay to the Exchange Agent any transfer or other taxes
required by reason of the payment to a person other than the
registered holder of the Certificate surrendered or the Option or
(ii) establish to the satisfaction of the Exchange Agent that
such taxes have been paid or are not payable.
(c) From and after the Effective Time, there shall be
no transfers on the stock transfer books of Community Bankshares
of the Community Bankshares Common Stock nor shall there be any
further exercises of Options which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any
Certificates formerly representing such shares or any Options are
presented for transfer or exercise, respectively, to the Exchange
Agent, they shall be exchanged for the Merger Consideration and
canceled as provided in this Article II.
(d) At any time following the six-month period after
the Effective Time, BBC shall be entitled to require the Exchange
Agent to deliver to it any portions of the Exchange Fund which
had been made available to the Exchange Agent and which have not
been disbursed to holders of Certificates or Options (including,
without limitation, all interest and other income received by the
Exchange Agent in respect of all funds made available to it), and
thereafter such holders shall be entitled to look to BBC (subject
to abandoned property, escheat and other similar laws) only as
general creditors thereof with respect to any Merger
Consideration that may be payable with respect to the
Certificates or Options held by them; provided, however, that the
Exchange Agent shall not deliver to BBC any portion of the
Exchange Fund payable to the holders of Certificates who have
theretofore surrendered their Certificates and a duly executed
and completed letter of transmittal to the Exchange Agent.
Notwithstanding the foregoing, neither BBC nor the Exchange Agent
shall be liable to any holder of a Certificate or an Option for
any Merger Consideration delivered in respect of such Certificate
or Option, respectively, to a public official pursuant to any
abandoned property, escheat or other similar law.
(e) The Exchange Agent or BBC shall be entitled to
deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of Certificates
or Options such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended and the rules and regulations
thereunder (the "Code"), or any provision of state, local or
foreign Law (as defined below). To the extent that amounts are
so withheld by the Exchange Agent or BBC, such withheld amounts
shall be treated for all purposes of this Agreement as having
been paid to the holder of the Certificates or Options in respect
of which such deduction and withholding was made.
A-5
2.5 Dissenters' Rights. Notwithstanding anything in this
Agreement to the contrary and unless otherwise provided by
applicable law, each share of Community Bankshares Common Stock
which is issued and outstanding immediately prior to the
Effective Time and which is owned by a shareholder who, pursuant
to Section 262 of the DGCL duly exercises his or her right to
dissent with respect to his or her shares (the "Dissenting
Shares"), shall not be converted into the right to receive, or be
exchangeable for, the Merger Consideration, but, instead, the
holders thereof shall be entitled to payment from the Surviving
Corporation of the appraised value of such Dissenting Shares in
accordance with the provisions of Section 262 of the DGCL. If
any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right of appraisal, each share
of Community Bankshares Common Stock of such holder shall
thereupon no longer be deemed a Dissenting Share and shall
automatically be converted into and shall thereafter be
exchangeable only for the right to receive the Per Share Amount
as provided in this Agreement.
2.6 Conversion of Merger Sub Common Stock. At the
Effective Time, each share of the Common Stock, par value $.01
per share, of Merger Sub ("Merger Sub Common Stock") that is
issued and outstanding at the Effective Time shall thereafter
represent one validly issued, fully paid and non-assessable share
of Common Stock of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BBC
BBC represents and warrants to Community Bankshares as
follows:
3.1 Organization and Good Standing. BBC is a corporation
duly organized and validly existing under the laws of the State
of Florida whose status is active. Merger Sub is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of BBC and Merger Sub has all
necessary corporate power to execute and deliver this Agreement,
to own its respective properties and assets and to carry on its
respective business as now conducted.
3.2 Authorization and No Violation. The execution and
delivery of this Agreement by BBC and Merger Sub and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on
the part of BBC and Merger Sub and, subject to the terms and
conditions of this Agreement, this Agreement constitutes the
legal, valid and binding obligation of BBC and Merger Sub,
enforceable against them in accordance with its terms, except as
limited by (x) bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance laws and other similar laws
affecting creditors' rights generally, and (y) general principles
of equity, regardless of whether asserted in a proceeding in
equity or at law. Neither the execution, delivery and
performance of this Agreement by BBC and Merger Sub, nor the
consummation of the transactions contemplated hereby, nor the
compliance by BBC or Merger Sub with any of the provisions of
this Agreement, will: (i) except as set forth on Schedule 3.2
hereto, violate, conflict with, or result in a breach of any of
the provisions of, or constitute a
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default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration, or the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets
of BBC or BankAtlantic under any of the terms, conditions or provisions
of (a) the Articles or Certificate of Incorporation or by-laws
(or analogous organizational documents) of BBC or BankAtlantic or
(b) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which BBC
or BankAtlantic is a party or by which BBC or BankAtlantic may be
bound, or to which BBC or BankAtlantic or their respective
properties or assets may be subject, or (ii) violate any
judgment, ruling, order, writ, injunction, decree (each an
"Order") or statute, rule, regulation, ordinance or directive
(each a "Law") applicable to BBC or BankAtlantic or any of their
respective properties or assets.
3.3 Governmental Consents. Other than approvals or waivers
from the Applicable Governmental Authorities listed on Schedule
3.3 hereto, the execution and delivery of this Agreement by BBC
and Merger Sub does not, and the performance by BBC and Merger
Sub of their respective obligations hereunder will not, require
any consent, approval, authorization or permit of, or filing by
BBC with or notification by BBC to, any Applicable Governmental
Authority, except where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not have a Material Adverse Effect as
defined in Section 4.1, or prevent or materially delay the
performance by BBC or Merger Sub of its obligations pursuant to
this Agreement. Neither BBC nor Merger Sub have any reason to
believe that any of the required approvals or waivers from any of
the Applicable Governmental Authorities will not be received or
that any such approval or waiver will contain any condition or
requirement deemed unduly burdensome by BBC or Merger Sub.
3.4 BBC SEC Reports. All reports and other documents
filed by BBC with the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including but not limited to proxy statements
and reports on Form 10-K, Form 10-Q and Form 8-K (collectively,
the "BBC SEC Reports"), as of the respective dates they were
filed, complied in all material respects with the rules and
regulations of the SEC and did 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.
3.5 BBC Financial Statements. BBC's audited consolidated
statements of financial condition and the related statements of
operations, changes in shareholders' equity and comprehensive
income, and cash flows as of and for the fiscal years ended
December 31, 1998, 1999 and 2000 (including any notes thereto)
and BBC's unaudited consolidated statement of financial condition
and the related statements of operations, changes in
shareholders' equity and comprehensive income, and cash flows as
of and for the six months ended June 30, 2000 and 2001 (including
any notes thereto), (collectively, the "BBC Financial
Statements"), have been prepared in conformity with United States
generally accepted accounting principles consistently applied
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("GAAP") (except for changes, if any, required by GAAP and
disclosed therein), and the statements of operations present
fairly the results of operations for the respective periods
covered and the statements of condition present fairly the
financial condition of BBC as of their respective dates except
for BBC's interim Financial Statements which are subject to
normal year-end non-material adjustments.
3.6 Information in Proxy Statement. None of the
information supplied or to be supplied by BBC in writing
specifically for inclusion or incorporation by reference in the
proxy statement (the "Proxy Statement") relating to the special
meeting of Community Bankshares' shareholders to be held in
connection with the consideration and approval of this Agreement
and the Merger (the "Special Meeting") will, at the dates mailed
to Community Bankshares' shareholders and at the times of the
Special Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. No
representation is made by BBC with respect to statements made
therein based on information supplied by Community Bankshares for
inclusion in the Proxy Statement.
3.7 Merger Sub. Merger Sub has no material liabilities or
other obligations other than those incurred or entered into in
connection with this Agreement or the transactions contemplated
hereby. The authorized capital stock of Merger Sub consists of
100 shares of Merger Sub Common Stock and all issued and
outstanding shares of Merger Sub Common Stock are owned solely by
BBC.
3.8 Ability to Pay Merger Consideration. BBC will have
available as of the Effective Time sufficient cash to pay the
Merger Consideration as set forth in Section 2.1. BankAtlantic
is and BBC believes that BankAtlantic immediately following the
Effective Time will be and will use all reasonable efforts to be,
deemed a "well-capitalized" institution pursuant to the Home
Owners Loan Act ("HOLA") and the regulations of the OTS.
3.9 Absence of Certain Changes or Events. There has
not been any material adverse change in the business, operations,
prospects, assets or financial condition of BBC since June 30,
2001 and to the best knowledge of BBC, no fact or condition
exists which BBC believes would in the future have a Material
Adverse Effect.
3.10 Legal Proceedings. Neither BBC nor Merger Sub is a
party to any, and there are no pending, or to the best knowledge
of BBC and Merger Sub, threatened legal, administrative,
arbitration or other proceedings, claims, actions or governmental
investigations of any nature against BBC or Merger Sub, except
such proceedings, claims actions or governmental investigations
which in the good faith judgment of BBC and Merger Sub will not
have a Material Adverse Effect. Neither BBC nor Merger Sub is a
party to any order, judgment or decree which would have a
Material Adverse Effect.
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3.11 Full Disclosure. No representation or warranty of BBC
contained in this Agreement, and none of the statements or
information concerning BBC and Merger Sub contained in this
Agreement or the exhibits and the schedules hereto, contains or
will contain any untrue statement of a material fact nor will
such representations, warranties, covenants or statements taken
as a whole omit 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMMUNITY BANKSHARES
Community Bankshares represents and warrants to BBC and
Merger Sub as follows:
4.1 Organization, Good Standing.
(a) Community Bankshares is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. Community Bankshares has all necessary
corporate power to execute and deliver this Agreement, to own its
properties and assets and to carry on its business as now
conducted. Community Bankshares is qualified to conduct business
and in good standing in each jurisdiction in which the nature of
its businesses requires such qualification, and each such
jurisdiction is set forth on Schedule 4.1 hereto, except where
the failure to be duly qualified is not reasonably likely to have
a Material Adverse Effect (as hereinafter defined).
(b) For the purposes of this Agreement, the term
"Material Adverse Effect" shall mean (i) in the case of Community
Bankshares and its Subsidiaries, any effect that (A) is material
and adverse to the financial condition, results of operations,
assets, business or prospects of Community Bankshares and its
Subsidiaries (as hereinafter defined) considered as one
enterprise or (B) materially impairs the ability of Community
Bankshares to consummate the transactions contemplated by this
Agreement, provided, however, that the term "Material Adverse
Effect" shall not be deemed to include (I) the impact of changes
in (a) laws, regulations, or policies of any Federal or state
court, administrative agency, commission or other governmental
authority or interpretations thereof; or (b) GAAP, that in each
case are generally applicable to the banking industry; (II)
actions taken or to be taken by Community Bankshares upon the
written request of BBC or pursuant to this Agreement; (III)
changes in the general level of market interest rates; or (IV)
expenses incurred in connection with this Agreement and the
transactions contemplated thereby; and (ii) in the case of BBC,
any effect that materially impairs the ability of BBC to make
payment at the Effective Time of the Merger Consideration or
otherwise materially impairs the ability of BBC or BankAtlantic
to consummate any of the transactions contemplated by the
Agreement.
4.2 Capital Stock.
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(a) Community Bankshares' authorized capital stock
consists solely of 60,000,000 shares of Community Bankshares
Common Stock and 10,000,000 shares of preferred stock, par value
$1.00 per share (the "Community Bankshares Preferred Stock"). As
of the date hereof, 8,660,254 shares of Community Bankshares
Common Stock and no shares of Community Bankshares Preferred
Stock are issued and outstanding, 696,333 shares of Community
Bankshares Common Stock are reserved for issuance upon exercise
of outstanding Options and 1,910,886 shares of Community
Bankshares Common Stock are held in treasury. Schedule 4.2 sets
forth a list of all outstanding Options and the exercise prices
of such Options.
(b) All of the issued and outstanding shares of
Community Bankshares Common Stock are duly and validly authorized
and issued, fully paid and nonassessable. None of the
outstanding shares of Community Bankshares Common Stock has been
issued in violation of any preemptive rights. The Community
Bankshares Common Stock is the only security of Community
Bankshares with the right to vote on the transactions
contemplated by this Agreement or for the election of directors
of Community Bankshares. Except for the outstanding shares of
Community Bankshares Common Stock, there are no (nor will there
be on the Effective Time) shares of any class of capital stock or
equity securities of Community Bankshares outstanding and, except
for Options outstanding on the date hereof to acquire not more
than 696,333 shares of Community Bankshares Common Stock, there
are no (nor will there be) outstanding or existing Options or
other agreements, commitments or obligations relating to the
issuance of additional shares of any class of capital stock or
other equity securities of Community Bankshares. All outstanding
Options were granted under: (i) Community Bankshares' Amended and
Restated 1995 Stock Option Plan and (ii) Community Bankshares'
Amended and Restated 1999 Stock Option Plan. None of the Options
was issued in violation of applicable Law or the terms of the
plan under which it was granted. Community Bankshares is not a
party to or bound by any contract, agreement or arrangement to
sell or otherwise dispose of or redeem, purchase or otherwise
acquire any of its capital stock. There are no agreements or
understandings with respect to the voting of any shares of
Community Bankshares Common Stock or which restrict the transfer
of such shares to which Community Bankshares is a party, nor does
Community Bankshares have knowledge of any such agreements or
understandings to which Community Bankshares is not a party.
4.3 Authorization; No Violation. The execution and
delivery of this Agreement by Community Bankshares and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on
the part of Community Bankshares (other than the approval of this
Agreement and the Merger by the holders of the Community
Bankshares Common Stock), and, subject to the terms and
conditions of this Agreement, this Agreement constitutes the
legal, valid and binding obligation of Community Bankshares,
enforceable against it in accordance with its terms, except as
limited by (x) bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance laws and other similar laws
affecting creditors' rights generally, and (y) general principles
of equity, regardless of whether asserted in a proceeding in
equity or at law. Neither the execution, delivery and
performance of this Agreement by Community Bankshares, nor the
consummation of the transactions contemplated hereby (including
the Bank Merger), nor the compliance by Community
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Bankshares with any of the provisions of this Agreement, will: (i)
violate, conflict with, or result in a breach of any of the provisions
of, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration, or the creation
of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Community Bankshares or any
Subsidiary of Community Bankshares under any of the terms,
conditions or provisions of (a) the Certificate of Incorporation
or by-laws (or analogous organizational documents) of Community
Bankshares or any of its Subsidiaries or (b) any material note,
bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Community
Bankshares or any of its Subsidiaries is a party or by which
Community Bankshares or any of its Subsidiaries may be bound, or
to which Community Bankshares or any of its Subsidiaries or their
respective properties or assets may be subject, or (ii) violate
any Order or Law applicable to Community Bankshares or any of its
Subsidiaries or any of their respective properties or assets.
4.4 Subsidiaries. Set forth on Schedule 4.4 hereto, is a
list of (i) each corporation, savings association or other
financial institution at least 25% of whose outstanding voting
stock is owned, directly or indirectly, by Community Bankshares
or by one or more of its Subsidiaries, (ii) each partnership,
joint venture, limited liability company or similar entity, at
least 25% of whose outstanding partnership or similar interests
are owned by Community Bankshares, or by one or more of its
Subsidiaries, or over which Community Bankshares or any of its
Subsidiaries, directly or indirectly, has or shares management
control, and (iii) each partnership of which Community Bankshares
or any of its Subsidiaries is a general partner (each of the
foregoing being referred to herein as a "Subsidiary"), including:
(a) its name and jurisdiction of organization, (b) the number of
shares of authorized capital stock of each class of its capital
stock (or other equity interests), (c) the number of issued and
outstanding shares of each class of its capital stock (or other
equity interests), and (d) its directors and officers or general
or managing partners or managers or managing members. Except as
set forth on Schedule 4.4 hereto, Community Bankshares does not
own more than 5% of the capital stock or similar interests in any
entities (including, without limitation, corporations, limited
liability companies, partnerships, joint ventures and inactive
corporations). All outstanding shares of the capital stock or
other ownership interests of each Subsidiary are owned of record
and beneficially by Community Bankshares. Each Subsidiary (other
than Community Savings) is duly organized and validly existing
under the laws of the State of Florida whose status is active and
has all necessary power to own its properties and assets and to
carry on its business as presently conducted, and holds all
necessary licenses and certificates from the United States, the
States of Delaware or Florida, and any other governmental
authority having jurisdiction over the conduct of its business as
it is now being conducted, except where the absence of such
license or certificate would not have a Material Adverse Effect.
Community Savings is duly organized and validly existing as a
federal savings association under the laws of the United States
and continues to hold a valid charter to do business as a federal
savings association. Each Subsidiary is duly qualified to
conduct business and is in good standing in each jurisdiction in
which the nature of the business transacted by it requires such
qualification, except where the absence of such qualification
would not have a Material Adverse Effect.
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4.5 Broker's and Finder's Fees. Except as set forth on
Schedule 4.5 hereto, Community Bankshares has not, directly or
indirectly, incurred any obligation or liability, contingent or
otherwise, for any brokers or finders in respect of the matters
provided for in this Agreement and no broker or finder has acted,
directly or indirectly, on behalf of Community Bankshares in
connection with this Agreement or the transactions contemplated
hereby.
4.6 Governmental Consents. Other than approvals or waivers
from the Applicable Governmental Authorities listed on Schedule
4.6 hereto, the execution and delivery of this Agreement by
Community Bankshares does not, and the performance by Community
Bankshares of its obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing by
Community Bankshares or any of its Subsidiaries with, or
notification by Community Bankshares or any of its Subsidiaries
to, any Applicable Governmental Authority. Community Savings is,
and believes that immediately prior to the Effective Time it will
be, deemed a "well capitalized" institution pursuant to HOLA and
the regulations of the OTS.
4.7 Reports.
(a) Since January 1, 1999, Community Bankshares has
filed all reports and other documents required to be filed by it
with the SEC under the Exchange Act, including but not limited to
proxy statements and reports on Form 10-K, Form 10-Q and Form 8-K
(collectively, the "Community Bankshares SEC Reports"). As of
the respective dates they were filed with the SEC, the Community
Bankshares SEC Reports, including all documents incorporated by
reference into such reports, complied in all material respects
with the rules and regulations of the SEC and did 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.
(b) Community Bankshares and each of its Subsidiaries
has timely filed all reports, registrations and statements,
together with any amendments required to be made with respect
thereto, that were required to be filed with all Applicable
Governmental Authorities. All such reports, registrations and
statements are collectively referred to as the "Community
Reports." As of their respective dates, such Community Reports,
in all material respects (i) were complete and accurate and (ii)
complied with all the statutes, rules and regulations enforced or
promulgated by the Applicable Governmental Authorities with which
they were filed including, but not limited to, any state or
federal securities laws.
(c) Community Bankshares (i) has delivered to BBC (A)
Community Bankshares' audited consolidated statements of
financial condition and the related statements of operations,
changes in shareholders' equity and cash flows as of and for the
fiscal years ended December 31, 1998, 1999 and 2000 (including
any notes thereto) together with reports thereon of Crowe Chizek
and Company LLP, certified public accountants, and (B) Community
Bankshares unaudited consolidated statement of financial
condition and the related statements of operations, changes in
shareholders' equity and cash flows as of and for the six months
ended June 30, 2000 and 2001 (including any notes thereto), and
(ii) will deliver to BBC any further monthly or
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quarterly statements prepared by or for Community Bankshares as soon
as such statements become available (the financial statements
referred to in clauses (i) and (ii) being referred to herein
collectively as the "Community Financial Statements"). All
Community Financial Statements other than monthly reports have
been or will be prepared in conformity with GAAP (except for
changes, if any, required by GAAP and disclosed therein), and the
statements of operations present, or will present, fairly the
results of operations for the respective periods covered and the
statements of condition present, or will present, fairly the
financial condition of Community Bankshares as of their
respective dates except for Community Bankshares' interim
Community Financial Statements which are or will be subject to
normal year-end non-material adjustments. Other than as
disclosed in the balance sheet for the six months ended June 30,
2001 (the "Reference Balance Sheet") contained in the Community
Financial Statements, neither Community Bankshares or its
Subsidiaries has any material liabilities, commitments or
obligations of any nature (whether unaccrued, contingent or
otherwise) and there is no basis for the assertion against
Community Bankshares or any Subsidiary of any such liability,
commitment or obligation, except for liabilities, commitments or
obligations arising in the ordinary course of business.
4.8 Taxes.
(a) Except as set forth on Schedule 4.8 hereto: (i)
all returns and reports ("Returns") in respect of any and all
taxes, fees, levies, duties, tariffs, imposts, and other charges
of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect
thereto) imposed by any government or taxing authority,
including, without limitation, taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment
compensation, or net worth, taxes or other charges in the nature
of excise, withholding, ad valorem, stamp, transfer, value added,
or gains taxes; license, registration and documentation fees; and
customs' duties, tariffs, and similar charges (collectively,
"Taxes") required to be filed with respect to Community
Bankshares and each of its Subsidiaries have been timely filed;
(ii) all Taxes required to be shown on such Returns or otherwise
due, other than extended returns (which are identified on
Schedule 4.8), have been timely paid; (iii) all such Returns are
true, correct and complete in all material respects; (iv) no
adjustment relating to such Returns has been proposed formally or
informally by any Tax authority and no valid basis exists for any
such adjustment and no issue has been raised by any Taxing
authority in any examination which by application of the same or
similar principles, could reasonably be expected to result in a
proposed deficiency for any subsequent Taxable period; (v) there
are no pending or, to the knowledge of Community Bankshares,
threatened actions or proceedings for the assessment or
collection of Taxes against Community Bankshares or any of its
Subsidiaries nor, to Community Bankshares' knowledge, has any Tax
authority raised any issues regarding Taxes or Returns which
could have a material adverse impact upon the Surviving
Corporation or BBC following the consummation of the transactions
contemplated hereby; (vi) there are no liens for Taxes (other
than for current Taxes not yet due and payable) on any assets of
Community Bankshares or any of its Subsidiaries; (vii) the
Community Financial Statements contain and will contain adequate
reserves and balances to satisfy all liabilities for Taxes for
the periods covered thereby; (viii) Community Bankshares and each
of its Subsidiaries has collected all real, personal and
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intangible property Taxes attributable to its assets, all sales,
value-added and similar Taxes, and all payroll and other
withholding Taxes, and have remitted all such Taxes to the proper
Taxing authority on a timely basis and in accordance with
applicable procedures; (ix) Community Bankshares and each of its
Subsidiaries has complied in all material respects with all
information and reporting requirements required by the Code
including, without limitation, the timely filing of all
informational returns and has properly collected and remitted all
applicable "backup" withholding Taxes; (x) Community Bankshares
and each of its Subsidiaries has duly and validly complied in all
material respects with all applicable Laws regarding escheat,
abandoned or unclaimed property or similar Laws; (xi) for federal
income Tax purposes, Community Bankshares and its Subsidiaries
calculate their respective reserves for bad debts in compliance
with the requirements of the Code; (xii) neither Community
Bankshares nor any of its Subsidiaries has any pending ruling
requests, accounting method change requests or applications to
change its taxable year-end pending before any Taxing authority;
(xiii) the conversion of Community Savings from mutual to stock
form was a Tax-free transaction under the Code; and (xiv) neither
Community Bankshares nor any of its Subsidiaries has made any
election under Section 341(d) of the Code (or any corresponding
provision of State, local or foreign Tax Law).
(b) Except as set forth on Schedule 4.8, (i) with
respect to each Taxable period of Community Bankshares and its
Subsidiaries, either such Taxable period has been audited by the
relevant Taxing authority or the time for assessing or collecting
Taxes with respect to each such Taxable period has closed and
such Taxable period is not subject to review by any relevant
Taxing authority; (ii) neither Community Bankshares nor any of
its Subsidiaries has requested or been granted an extension of
time in which any Taxes may be assessed or collected by any
Taxing authority; (iii) neither Community Bankshares nor any of
its Subsidiaries has requested or been granted an extension of
the time for filing any Return to a date later than the date of
the Closing; and (iv) Community Bankshares has made available to
BBC complete copies of all federal, state and foreign income,
franchise and similar Returns, examination reports, and
statements of deficiencies assessed against or agreed to by
Community Bankshares or any of its Subsidiaries, in each case,
relating to taxable periods beginning on or after January 1,
1996.
(c) Neither Community Bankshares nor any of its
Subsidiaries will be required (i) as a result of a change in
method of accounting for a taxable period ending on or prior to
the Effective Time, to include any adjustment under Section
481(c) of the Code (or any corresponding provisions of state,
local or foreign income Tax Law) in Taxable income for any
Taxable period (or portion thereof) beginning after the Effective
Time or (ii) as a result of any "closing agreement," as described
in Section 7121 of the Code (or any corresponding provision of
state, local or foreign income Tax Law), to include any item of
income or exclude any item of deduction from any taxable period
(or portion thereof) beginning after the Effective Time; (iii)
neither Community Bankshares nor any of its Subsidiaries has been
a member of an affiliated group or filed or been included in a
combined, consolidated or unitary income Return; (iv) except as
set forth in Schedule 4.8(c), neither Community Bankshares nor
any of its Subsidiaries is a party to or bound by any Tax
allocation or Tax sharing agreement or has any current or
potential contractual obligation to indemnify any other person
with respect to Taxes; (v) neither Community Bankshares nor any
of its Subsidiaries has made any payments, or is or will become
obligated
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(under any Commitment entered into on or before the Effective
Time) to make any payments, that will be non-deductible
under Sections 162(m) and 280G of the Code (or any corresponding
provision of state, local or foreign income Tax Law); (vi) BBC
will not be required to deduct and withhold any amount pursuant
to Section 1445(a) of the Code upon the consummation of the
Merger; (vii) neither Community Bankshares nor any of its
Subsidiaries has permanent establishment in any foreign country,
as defined in the relevant Tax treaty between the United State of
America and such foreign country; and (viii) no claim has ever
been made by a taxing authority in a jurisdiction where Community
Bankshares or any of its Subsidiaries does not file Returns that
it is or may be subject to Taxes assessed by such jurisdiction.
4.9 Material Contracts. Schedule 4.9 hereto sets forth a
true and complete list of all material contracts, agreements,
arrangements and other instruments to which Community Bankshares
or any of its Subsidiaries is a party or otherwise relating to or
affecting any of their respective assets, properties or
operations (except that no information need be provided with
respect to clauses (ii) and (iii) below with respect to any of
the foregoing which are terminable by Community Bankshares
without penalty upon not more than 30 days written notice),
including, without limitation, all written or oral, express or
implied: (i) contracts, agreements, arrangements and commitments
not made in the ordinary course of business including, without
limitation, any employment, severance or separation agreements or
arrangements and any agreements or arrangements with affiliates
and related persons; (ii) purchase and supply contracts; (iii)
contracts, agreements, arrangements or understandings with
respect to the development, license, sale or use of computer
software programs or applications; (iv) contracts, agreements,
arrangements, relationships, indentures or other instruments
relating to the borrowing of money by Community Bankshares or any
of its Subsidiaries (other than in the ordinary course of the
banking business of Community Savings); (v) agreements and other
arrangements for the sale of any assets other than in the
ordinary course of business or for the grant of any options or
preferential rights to purchase any assets, property or rights;
(vi) documents granting any power of attorney with respect to the
affairs of Community Bankshares or any of its Subsidiaries; (vii)
suretyship contracts, working capital maintenance or other forms
of guaranty agreements by Community Bankshares or any of its
Subsidiaries; (viii) contracts, agreements, arrangements, or
commitments limiting or restraining Community Bankshares or any
of its Subsidiaries from engaging or competing in any lines of
business or with any person, firm, or corporation; (ix) any
contract, agreement, arrangement or commitment which cannot be
terminated by Community Bankshares at will and without penalty
relating to the employment of a consultant or the employment,
election or retention of any present or former director, officer
or employee of Community Bankshares or any of its Subsidiaries;
(x) partnership and joint venture agreements; (xi) any "material
contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC); and (xii) all amendments,
modifications, extensions or renewals of any of the foregoing
(the foregoing contracts, agreements, arrangements and documents
are hereinafter referred to collectively as the "Commitments" and
individually as a "Commitment"). Each Commitment is valid,
binding and enforceable against the parties thereto in accordance
with its terms, and is in full force and effect on the date
hereof. Community Bankshares and each of its Subsidiaries have
performed in all material respects all obligations required to be
performed by such entity to date under, and are not in default in
respect of, any Commitment, and no event has occurred which, with
due notice or
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lapse of time or both, would constitute such a default. Except
as specifically set forth on Schedule 4.9 and identified as such,
no consent of or notice to third parties is required relating to any
Commitment as a consequence of this Agreement or the transactions
contemplated herein. No other party to any Commitment is in default
in respect thereof, and to the knowledge of Community Bankshares no
event has occurred which, with due notice or lapse of time or both,
would constitute such a default. Community Bankshares has made available
to BBC true, correct and complete copies of all the written Commitments
and a brief written summary or description of each oral
Commitment, and no Commitment has been modified in any material
respect since the date it was made available.
4.10 Real Properties. Schedule 4.10 hereto describes all
real estate owned or leased by Community Bankshares or any of its
Subsidiaries, exclusive of "real estate owned" ("REO") acquired
as a result of debts previously contracted and held for resale.
All such real property, if owned by Community Bankshares or any
of its Subsidiaries (the "Real Property"), is owned under good
and marketable title, free and clear of all liens, security
interests, title defects, pledges, claims, charges mortgages or
encumbrances ("Liens"), except statutory Liens securing payments
not yet due. Except as set forth in Schedule 4.10: (i) all of
the Real Property is free from any zoning Laws and from all
special Taxes or assessments, except those generally applicable
to other similarly situated properties in the tax districts in
which such Real Property is located, (ii) Community Bankshares
and each of its Subsidiaries has the exclusive right of
possession of each tract comprising its respective Real Property,
and (iii) the boundaries of each parcel of such Real Property are
contiguous to the rights-of-way of abutting public roads, and
there is ingress and egress to and from all of such Real
Property. All improvements on such Real Property and the
operations therein conducted conform in all material respects to
all applicable health, fire, environmental, safety, zoning and
building Laws. All buildings, structures, improvements and
fixtures owned, leased or used by Community Bankshares or any of
its Subsidiaries in the conduct of their respective businesses
conform in all material respects (or are otherwise exempt from)
all applicable codes and rules adopted by national and local
associations and boards of insurance underwriters; and all such
buildings, structures, improvements and fixtures are in
satisfactory operating condition and repair.
4.11 Real Property Leases. All leases pursuant to which
Community Bankshares or any of its Subsidiaries is lessee or
lessor of any real property (the "Leases") are listed in Schedule
4.11 hereto. All such Leases are valid, legally binding, in full
force and effect, and enforceable in accordance with their terms.
There is not under any of the Leases: (i) any default by
Community Bankshares or any of its Subsidiaries or any claim of
default which with notice or lapse of time, or both, would
constitute a default by Community Bankshares or any of its
Subsidiaries; or (ii) any default or claim of default against any
lessor to or lessee of Community Bankshares or any of its
Subsidiaries, or any event of default or event which with notice
or lapse of time, or both, would constitute a default by any such
lessor or lessee. The consummation of the transactions
contemplated hereby will not result in a breach or default under
any of the Leases, and, except as set forth on Schedule 4.11
hereto and specifically identified as such, no consent of or
notice to any third party is required as a consequence thereof.
Community Bankshares has made available to BBC true, correct and
complete copies of the Leases, and no Lease has been
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modified in any respect since the date it was made available.
Community Bankshares and each of its Subsidiaries owns unencumbered
title in and to the leasehold improvements located upon its leased
properties (but not to the buildings, fixtures or the land upon
which the same are situated) except for statutory Liens securing
payments not yet due. None of the property subject to a Lease is
subject to any sublease, license or other agreement granting to
any person any right to the use, occupancy or enjoyment of such
property or any portion thereof.
4.12 Personal Property. Except as set forth in Schedule
4.12, Community Bankshares and each of its Subsidiaries owns and
has good and merchantable title, free and clear of all Liens
(except for statutory Liens securing payments not yet due) to its
respective Personal Property (as hereinafter defined) shown on
Schedule 4.12 as owned by it and to all the machinery, equipment,
furniture, fixtures, inventory, receivables and other tangible or
intangible personal property (the "Personal Property") reflected
on the consolidated statement of financial condition of Community
Bankshares as of December 31, 2000 (the "Reference Balance
Sheet") and all such property acquired since the date thereof,
except for sales and dispositions in the ordinary course of
business since the date of the Reference Balance Sheet. None of
the Liens, if any, listed on Schedule 4.12 materially adversely
affects the value of any of the items of the Personal Property to
which it relates or interferes with its use in the conduct of
business of Community Bankshares or any of its Subsidiaries.
Community Bankshares and each of its Subsidiaries holds good and
transferable leaseholds in all of their respective Personal
Property which they lease, in each case under valid and
enforceable leases. The consummation of the transactions
contemplated hereby will not result in a breach or default under
any such lease and, except as set forth in Schedule 4.12, no
consent of or notice to any third party is required as a
consequence thereof. Neither Community Bankshares nor any of its
Subsidiaries is in breach of or default under (and no event has
occurred which, with due notice or lapse of time or both, may
constitute such a lapse or default under) any lease of any items
of Personal Property leased by it. The Personal Property and
other personal property now owned, leased or used by Community
Bankshares and each of its Subsidiaries is sufficient and
adequate to carry on their respective businesses as presently
conducted and all items thereof are in good operating condition
and repair, subject only to normal wear and tear.
4.13 Investigations, Litigation. Except as set forth on
Schedule 4.13 hereto, there is and has been no investigation by
any governmental authority or agency during the past five years
or any action, suit, proceeding or claim pending or threatened,
against or adversely affecting Community Bankshares or any of its
Subsidiaries (including, without limitation, any investigation,
action, or proceeding with respect to Taxes), or the assets or
business of Community Bankshares or any of its Subsidiaries.
Except as disclosed on Schedule 4.13: (i) neither Community
Bankshares nor any of its Subsidiaries nor any director, officer,
employee or agent of Community Bankshares or any of its
Subsidiaries (in their respective capacities as such), is a party
to any, and there are no pending or, to the knowledge of
Community Bankshares, threatened, legal, administrative, arbitral
or other proceedings, claims, suits, actions or governmental
investigations of any nature against Community Bankshares or any
of its Subsidiaries, or any director, officer, employee or agent
of Community Bankshares or any of its Subsidiaries (in their
respective capacities as such), or involving any property or
assets of Community Bankshares or any of its Subsidiaries and
(ii) there is no outstanding Order of any court or governmental
authority or
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agency against or affecting Community Bankshares or any of its
Subsidiaries, or any of their respective assets, businesses or
operations.
4.14 Insurance. Community Bankshares and its Subsidiaries
have in effect insurance coverage with reputable insurers, which,
in respect to amounts, types and risks insured, is adequate and
customary for the businesses in which Community Bankshares and
its Subsidiaries are engaged. All of the insurance policies,
binders, bonds and other similar forms of insurance owned, held
or maintained by Community Bankshares or any of its Subsidiaries
are in full force and effect, and all premiums with respect
thereto covering all periods up to and including the date hereof
have been paid (other than retrospective premiums which may be
payable with respect to worker's compensation insurance
policies). Neither Community Bankshares nor any of its
Subsidiaries is in default under any such policy, and no notice
of cancellation or termination has been received with respect to
any of the foregoing, and all claims thereunder have been filed
in due and timely fashion. The insurance policies to which
Community Bankshares or any of its Subsidiaries is a party are
sufficient for compliance with all requirements of Law and, to
the extent applicable, of all Commitments to which Community
Bankshares or any of its Subsidiaries is a party and provide
adequate insurance coverage for the assets and operations of
Community Bankshares and its Subsidiaries. Neither Community
Bankshares nor any of its Subsidiaries has been refused any
insurance with respect to any assets or operations, nor has any
coverage been limited in any material respect to any operations
by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last
five years. Set forth on Schedule 4.14 is a list of all
insurance policies, binders, bonds and other similar forms of
insurance owned, held or maintained by or for the benefit of
Community Bankshares or any of its Subsidiaries.
4.15 Compliance with Laws, Regulations. Community
Bankshares and each of its Subsidiaries have all permits,
licenses, certificates of authority, orders and approvals
("Permits") of, and have made all required filings, applications
and registrations ("Filings") with, all governmental authorities
and agencies necessary to permit them to carry on their business
as presently conducted except where the failure to have such
Permits would not have a Material Adverse Effect. All such
Permits are in full force and effect, and, to the knowledge of
Community Bankshares, no suspension or cancellation of any of
them is pending or has been threatened; and all Filings are
current. Neither Community Bankshares nor any of its
Subsidiaries is in default under any Order or any license,
regulation or demand of any governmental authority or agency.
Except for statutory or regulatory restrictions of general
application, no governmental authority or agency has placed any
restrictions on the business of Community Bankshares or any of
its Subsidiaries. Community Bankshares and each of its
Subsidiaries have in all material respects conducted their
respective businesses in compliance with all applicable federal,
foreign, state and local Laws including, without limitation,
disclosure, usury, equal credit opportunity, equal employment,
fair credit reporting, consumer credit protection, truth in
lending, truth in savings, lender liability, antitrust and other
Laws. The forms, procedures, and practices used by Community
Bankshares and each of its Subsidiaries are in all material
respects in compliance with such Laws, and neither Community
Bankshares nor any of its Subsidiaries has received any
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indication from regulatory authorities that it is not in
compliance or needs to improve its compliance in these areas.
4.16 Employee Benefit Plans.
(a) Each employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), stock purchase plan, stock option
plan, fringe benefit plan, bonus plan and any other deferred
compensation agreement or plan or funding arrangement sponsored,
maintained or to which contributions are made by: (i) Community
Bankshares or any of its Subsidiaries or (ii) any other
organization which is a member of a controlled group of
organizations (within the meaning of Sections 414(b), (c), (m) or
(o) of the Code) of which Community Bankshares or any of its
Subsidiaries is a member (the "Controlled Group"), or (iii) with
respect to which Community Bankshares or any of its Subsidiaries
or any member of the Controlled Group has any liability or
potential liability (each a "Plan") is described on Schedule 4.16
hereto, designating which Plans cover employees or former
employees of Community Bankshares or any of its Subsidiaries and
which defined benefit plans, if any, hold employee contributions.
(b) With respect to each Plan, Community Bankshares
has made available to BBC current, accurate and complete copies
of such Plan (including all other instruments relating thereto)
and Summary Plan Descriptions therefor and, to the extent
applicable, copies of the most recent (i) Internal Revenue
Service determination letter and any outstanding request for a
determination letter; (ii) Form 5500 and, to the extent
applicable, attached Schedule B (including any related actuarial
valuation report) with respect to the last three Plan years for
each Plan; (iii) certified financial statements; (iv) attorney's
response to an auditor's request for information for the last
three Plan years for each Plan; (v) collective bargaining
agreements or other such contracts; (vi) Form S-8 (including any
amendments thereto); (vii) Form 5310 and any related filings with
the Pension Benefit Guaranty Corporation ("PBGC") with respect to
the last six Plan years for each Plan subject to Title IV of
ERISA; (viii) ruling letter and any outstanding request for a
ruling letter with respect to the tax-exempt status of any
voluntary employees' beneficiary association ("VEBA") which is
implementing such Plan; and (ix) in the case of a Plan that is a
"group health plan" as defined in Section 5000(b)(1) of the Code,
(A) general notification to employees of their rights under
Section 4980B of the Code and form of letter(s) distributed upon
the occurrence of a qualifying event described in Section 4980B
of the Code and (B) form of certificate distributed pursuant to
Section 9801 of the Code. Except as set forth on Schedule
4.16(b), none of the Plans or any of the foregoing referred to in
clauses (i) through (ix) above has been modified in any respect
since the date it was made available to BBC.
(c) With respect to each Plan: (i) each such Plan
which is an "employee pension benefit plan" (as such term is
defined in Section 3(2) of ERISA) intended to qualify under
Sections 401(a) and 501(a) of the Code has received a favorable
determination letter as to its qualification under the Code and
nothing has occurred, whether by action or failure to act, which
may cause the loss of such qualification; (ii) each such Plan
which is intended to meet the requirements of Sections 105(h),
125 or 129 of the Code complies with, and has complied with,
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in all material respects, such requirements since inception;
(iii) (A) each VEBA which is intended to implement any Plan has
received a favorable ruling or determination letter as to its Tax-
exempt status and nothing has occurred, whether by action or
failure to act, which would cause the loss of such Tax-exempt
status and (B) the assets of such VEBA are at least equal in
value to the present value of the accrued benefit of the
participants in such VEBA; (iv) the Community Financial
Statements reflect and will reflect all employee benefit
liabilities of Community Bankshares and its Subsidiaries in a
manner satisfying the requirements of GAAP; (v) there are no
actions, suits or claims pending, or to the knowledge of
Community Bankshares, threatened, and there are no facts which
could reasonably give rise to any such actions, suits or claims;
(vi) none of Community Bankshares, nor any of its Subsidiaries,
nor any fiduciary of any Plan, nor any of their respective
employees, officers or directors has, with respect to any such
Plan, engaged in a prohibited transaction, as such term is
defined in Section 4975 of the Code or Section 406 of ERISA,
which would subject Community Bankshares or any other Plan
sponsor to any Taxes, penalties or other liabilities resulting
from prohibited transactions under Section 4975 of the Code or
under Sections 409 or 502(i) of ERISA; (vii) no event has
occurred and no condition exists that would subject Community
Bankshares or any of its Subsidiaries or any other Plan sponsor
to any Tax under Sections 4971, 4972, 4977 or 4979 of the Code or
to a penalty under Sections 502(c) or 502(l) of ERISA; (viii)
Community Bankshares and each of its Subsidiaries and each Plan
sponsor has complied in all material respects with the reporting
and disclosure requirements of ERISA; (ix) all insurance premiums
required to be paid by Community Bankshares or its Subsidiaries
as of the date hereof have been paid and all of them will be paid
or reserved against for all periods prior to the Effective Time;
and (x) neither Community Bankshares nor any of its Subsidiaries
has any "leased employees" (as such term is defined in Section
414(n) of the Code) that must be taken into account with respect
to the requirements set forth under Section 414(n)(3) of the
Code.
(d) With respect to each Plan subject to the minimum
funding requirements of Section 412 of the Code and, if
applicable, Title IV of ERISA: (i) Community Bankshares and each
of its Subsidiaries and each member of the Controlled Group have
or will have, as of the Effective Time, made all contributions or
payments to or under such Plan required by Law or by the terms of
such Plan or any contract or agreement or accrued through the
Effective Time; (ii) Community Bankshares or one of its
Subsidiaries or a member of the Controlled Group has or will
have, as of the Effective Time, made all contributions required
to be made under Section 302 of ERISA and Section 412 of the Code
(whether or not waived); (iii) no provision of such Plan nor any
amendment to such Plan would result in any limitation on the
right of Community Bankshares or any of its Subsidiaries to
receive residual amounts from any such Plan under Section 4044 of
ERISA; (iv) there is no event or condition existing which could
be deemed a "reportable event" within the meaning of Section 4043
of ERISA with respect to which the 30 day notice requirement has
not been waived other than the transactions contemplated by this
Agreement and no condition exists which would subject Community
Bankshares or any of its Subsidiaries to a penalty under Section
4071 of ERISA; (v) as of the Effective Time, Community Bankshares
or one of its Subsidiaries or a member of the Controlled Group
has or will have made all required premium payments, when due, to
the PBGC; (vi) the termination of, or withdrawal from, any such
Plan, on or prior to the Effective Time has not, and will not,
subject Community Bankshares or any of
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its Subsidiaries to any liability (other than routine administrative
expenses) to such Plan, the PBGC or to any other person or party;
and (vii) no amendment to any Plan has occurred which has required or
could require Community Bankshares or any of its Subsidiaries to
provide security to any such Plan under Section 401(a)(29) of the
Code.
(e) With respect to each Plan subject to Title IV of
ERISA, the assets of each such Plan are now and, as of the
Effective Time, will be at least equal in value to the present
value of the benefit liabilities (determined as of the date
hereof or the Effective Time, as applicable) of the participants
in such Plan.
(f) On or after the date hereof, no Plan has been, or
will be, (i) terminated, (ii) amended in any manner which would
directly or indirectly increase the benefits accrued, or which
may be accrued, by any participant thereunder or (iii) amended in
any manner which would materially increase the cost to Community
Bankshares or any of its Subsidiaries or other sponsor of
maintaining such Plan.
(g) Neither Community Bankshares nor any of its
Subsidiaries has maintained or contributed or had an obligation
to contribute to any "multiemployer plan" (within the meaning of
Section 3(37) of ERISA).
(h) With respect to any Plan which is an employee
welfare benefit plan (within the meaning of Section 3(1) of
ERISA) (a "Welfare Plan"): (i) each such Welfare Plan which is
intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of the Code meets such requirements in
all material respects, (ii) there is no disqualified benefit (as
such term is defined in Section 4976(b) of the Code) which would
subject Community Bankshares or any of its Subsidiaries to a Tax
under Section 4976(a) of the Code, (iii) each and every such
Welfare Plan which is a group health plan (as such term is
defined in Section 5000(b)(1) of the Code) complies in all
material respects with the applicable requirements of Sections
4980B and 9801 of the Code and Parts 6 and 7 of Title I of ERISA,
and (iv) each such Welfare Plan (including any such plan covering
former employees of Community Bankshares or any of its
Subsidiaries) may be amended or terminated on or at any time
after the Effective Time without subjecting either BBC, Community
Bankshares or any of its Subsidiaries or such other plan sponsor
to liability therefor.
4.17 Labor Matters.
(a) Neither Community Bankshares nor any of its
Subsidiaries is a party to nor has in effect any organized labor
contract or collective bargaining agreement. No work stoppage
involving Community Bankshares or any of its Subsidiaries is
pending or, to the knowledge of Community Bankshares, threatened,
nor is any of them involved in or, to the knowledge of Community
Bankshares, threatened with any labor dispute, discrimination or
sexual harassment claims, arbitration, lawsuit or administrative
proceeding involving any of its current or former directors,
officers or employees.
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(b) Except as set forth on Schedule 4.17 hereto,
neither Community Bankshares nor any of its Subsidiaries has,
maintains or is a party to any agreement or arrangement which:
(i) provides for the payment of separation, severance,
termination or similar-type benefits to any person, (ii)
obligates Community Bankshares or any of its Subsidiaries to pay
separation, severance, termination or similar-type benefits as a
result of any transaction contemplated by this Agreement, or
(iii) could result, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of
such term under Section 280G of the Code. Schedule 4.17 sets
forth, for each agreement or arrangement listed thereon, the
amount or, if appropriate, the estimated amount, of any payment
provided for pursuant thereto.
4.18 Environmental Liability. "Properties" as used in this
Section 4.18(a)-(c) inclusive, shall include all of the
following: (x) all Real Property owned, leased and/or operated by
Community Bankshares or any of its Subsidiaries, (y) all REO and
(z) all real property which serves as collateral ("Collateral
Property") for any loan or other indebtedness held by Community
Bankshares, provided, however, that the representations and
warranties of Community Bankshares with regard to any Collateral
Property shall be to the knowledge of Community Bankshares.
(a) Community Bankshares and each of its Subsidiaries
have obtained all Permits, which are required with respect to the
operation of its respective business and all Properties under any
Environmental Laws (as hereinafter defined) (such Permits being
hereinafter referred to as "Environmental Permits"), including
all federal, state and local laws relating to pollution or
protection of the environment or human health such as, but not
limited to, laws relating to emissions, discharges, releases or
threatened releases of hazardous, toxic or other pollutants,
contaminants, chemicals or industrial materials including, but
not limited to, ambient air, surface water, ground water, land
survey or subsurface strata or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of hazardous, toxic or other
pollutants, contaminants, chemicals or industrial materials,
substances or wastes (which laws, together with all regulations,
rules, codes, plans, decrees, judgments, injunctions, notices and
demand letters issued, entered, promulgated or approved
thereunder are herein referred to as "Environmental Laws") except
where the failure to obtain such Permits would not have a
Material Adverse Effect. Community Bankshares and each of its
Subsidiaries is in compliance in all material respects with the
terms and conditions of all Environmental Permits required under
the Environmental Laws, and is also in compliance in all material
respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws. Community
Bankshares has made available to BBC true and complete copies of
all notices known to Community Bankshares in whatever form (a
list of such notices, if any, is set forth on Schedule 4.18)
received by any previous owner or operator of any Properties or
any business currently owned or operated by Community Bankshares
or any of its Subsidiaries within the five years preceding the
date of this Agreement alleging noncompliance with any
Environmental Law.
(b) There is no civil, criminal or administrative
action, demand, claim, investigation or proceeding pending or, to
the knowledge of Community Bankshares, threatened
A-22
against Community Bankshares or any of its Subsidiaries with regard
to any Properties, under or relating in any way to the Environmental
Laws.
(c) With regard to any of the Properties, except as
set forth on Schedule 4.18 hereto, there are no past, present or
known future events, conditions, circumstances, or plans which
may interfere with or prevent compliance or continued compliance
in all material respects with the Environmental Laws, or which
may give rise to any common law or other legal liability,
including, but not limited to, liability under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA")
or which otherwise may form the basis of any claim, action,
demand, proceeding, notice of violation or investigation, based
on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling or the
emission, discharge, release or threatened release into the
environment of any pollutant, contaminant, chemical, industrial
toxic or hazardous material, substance or waste. Without in any
way limiting the foregoing, no release, emission or discharge
into the environment of any "hazardous substance" (as that term
is currently defined under CERCLA or any applicable similar state
law) or "petroleum" or "petroleum-based substances" (as those
terms are defined in the Federal Storage Tank Regulations, 40
C.F.R. Part 280) which would give rise to liability under any
Environmental Laws has occurred, is currently occurring or, to
the extent known is probable to occur in the future in connection
with the ownership or operation of any Properties by Community
Bankshares or any of its Subsidiaries and there is no spill,
deposit, or discharge of any such hazardous substance or
petroleum or petroleum-based substance, at, on, into, under or
having originated from any of the Properties. Except as set
forth on Schedule 4.18, to the knowledge of Community Bankshares,
none of the Properties or any other assets of Community
Bankshares or any of its Subsidiaries, include any equipment,
machinery, device, or other apparatus that contains
polychlorinated biphenyls that is now or ever has been leaking;
any asbestos or asbestos-containing material; any wetlands or any
areas subject to any legal requirement or restriction in any way
related to wetlands (including, without limitation, requirements
or restrictions related to buffer or transition areas or open
waters) or, except as set forth on Schedule 4.18 hereto, any
underground tank above ground storage tank, surface impoundment,
septic tank, pit, swamp or lagoon in which hazardous materials,
petroleum or petroleum-based substances are being or have been
treated, stored, or disposed of.
4.19 Deposit Accounts.
(a) Schedule 4.19 sets forth a complete and correct
list, as of the most recent practicable date within fifteen days
prior to the date hereof, with respect to the amounts of demand
deposit accounts, passbook accounts, statement savings accounts,
money market savings accounts, negotiable order of withdrawal
("NOW") accounts; certificates of deposits with principal
balances of less than $100,000; certificates of deposits with
principal balances of $100,000 or more held by natural persons;
certificates of deposit of $100,000 or more held other than by
natural persons; and any other appropriate characterizations for
those deposit accounts. Schedule 4.19 also sets forth: (i) each
deposit account, regardless of amount, beneficially owned by any
foreign person, (ii) deposits where the customer has directed
Community Bankshares or any of its Subsidiaries to not mail
account statements to the customer, and (iii) all payable through
accounts. Schedule 4.19
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further sets forth the approximate rates of interest being paid, the
term of the deposits and the cost of funds within each such deposit
category along with the percentage the total deposits in each such
category represents with respect to all deposit accounts of Community
Savings. The taking and collection of deposits by Community Savings is
and has been done in compliance in all material respects with all
applicable Laws, including without limitation, those relating to suspicious
activity reporting and cash transaction reporting.
(b) Neither Community Bankshares nor any of its
Subsidiaries maintains any office or pays any employee, agent or
independent contractor outside of the United States with respect
to the solicitation, taking, sending or transmitting of loans,
loan payments or deposits.
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4.20 Loans.
(a) All loan commitments of, and all loans held by,
Community Bankshares or any of its Subsidiaries (the "Loans")
represent bona fide, valid and binding arms'-length loan
transactions with the borrowers and all of said Loans are
repayable upon the dates set forth in the respective borrower's
notes and loan agreements. None of the credits entered or given
effect with respect to any Loan was gratuitous or given for a
consideration other than the payment of money to the person to
whom payment was due thereunder. All of the Loans are valid and
enforceable in accordance with their terms, except to the extent
that enforcement of the same may be limited by bankruptcy,
insolvency, reorganization or other laws relating to or affecting
the enforcement of creditors' rights generally and by general
principles of equity and to the knowledge of Community Bankshares
no Loan is subject to any defenses, counterclaims or set offs of
any nature. Neither Community Bankshares nor its Subsidiaries
has waived, compromised or otherwise relinquished any of its
rights under any Loan, including, without limitation, the right
of a lender to foreclosure in respect of a secured Loan. Except
as set forth on Schedule 4.20(a), no Loan is made to or with,
directly or indirectly, any Related Party (as defined in Section
4.24 hereof). Neither Community Bankshares nor its Subsidiaries
has received any notice of any offset, defense or counterclaim
to, right of refund or credit (other than any right of refund or
credit of unearned finance charges or unearned premiums) under,
or any right of rescission with respect to, any payment or other
obligation under any of the Loans. Schedule 4.20(a) hereto also
contains a complete list of all Loans, if any, where a default
has occurred, or with notice or lapse of time, or both, would
render Loans in default. Other than interest reserves
established in the ordinary course of business at the initial
funding of the Loan, except as set forth on Schedule 4.20(a),
neither Community Bankshares nor its Subsidiaries has made any
principal or interest payments in respect of any Loans using its
own funds. Each of the Loans was issued in accordance in all
material respects with all applicable statutes and regulatory
requirements and have been made in the ordinary course of
business and (except as limited by this Agreement) in accordance
with its customary past practices. Schedule 4.20(a) hereto
contains a true and complete list of all outstanding Loans
existing as of the date hereof setting forth for each such Loan:
(a) the name of the lender and borrower, (b) the loan number, (c)
any guarantors, endorsors or co-makers, (d) the term of the Loan,
(e) the original principal amount, (f) the current outstanding
balance, (g) the rate of interest and (h) whether such Loan is
secured and the nature, priority and description (including
location) of the collateral securing such Loan. Documentation
maintained by Community Bankshares and its Subsidiaries in the
loan file with respect to each of its Loans is in accordance with
applicable loan policies and all applicable Laws. Except as
indicated on Schedule 4.20(a), there are no Loans in excess of $1
million that are now characterized as owner-occupied residential
Loans which were originated as development or construction Loans
to builders or developers to finance the construction of the
residence.
(b) Each currently outstanding Loan is evidenced by a
promissory note duly executed by the borrower(s). Each Loan
designated on Schedule 4.20(a) as secured has in effect a
mortgage, security agreement, or other instrument, duly executed
by the borrower(s) and containing enforceable provisions to
protect and assert a secured party's rights and remedies
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thereunder. For each Loan secured under a security agreement,
such security interest is evidenced by a valid filing in
accordance with the Uniform Commercial Code where such a filing
is required, which grants the secured party a perfected security
interest in the collateral described therein; and for each Loan
secured by real property, the related mortgage, deed of trust or
other security agreement has been recorded in the appropriate
local land records and constitutes a perfected security interest
in the real property securing such Loan, and the holder of the
Loan has obtained a mortgage title insurance policy insuring such
mortgage.
(c) Schedule 4.20(c) indicates any Loan which was not
originated directly by Community Savings. Except as specifically
noted on Schedule 4.20(c), Community Bankshares and its
Subsidiaries do not hold any indirect Loans and carry no dealer
reserves and are not a party to any "flow purchase" or other
similar obligations that would obligate them to purchase any
Loans (or participations therein) from any third party.
(d) Except as provided by the standard seller/servicer
agreements of Fannie Mae and Freddie Mac, neither Community
Bankshares nor any Subsidiary has sold any Loans where the
purchaser or subsequent transferee may have recourse against
Community Bankshares or its Subsidiaries or the right to require
Community Bankshares or its Subsidiaries to repurchase any Loans.
(e) Community Bankshares' reserve for possible loan
losses is adequate under GAAP and applicable provisions of the
Office of Thrift Supervision to provide for all losses, net of
recoveries relating to loans previously charged off, on
outstanding Loans. Community Bankshares has no knowledge with
respect to any borrower's inability to repay any Loan which would
require a specific reserve for such Loan or which would cause the
general reserve for loan losses to be inadequate. Such reserve
shall in no event be reduced prior to the Effective Time unless
the failure to reduce such reserve would cause the Community
Financial Statements to violate GAAP.
(f) Except as set forth in Schedule 4.20(f), other
than in connection with required flood insurance, neither
Community Bankshares nor any of its Subsidiaries has advanced any
amounts to obtain force-placed collateral protection insurance
("CPI") and they are not parties to any agreement or arrangement
which would require the placement of CPI with respect to any
Loans.
(g) Schedule 4.20(g) hereto sets forth any Loan
participations and any interests in syndicated Loans held by
Community Bankshares or any of its Subsidiaries.
4.21 Derivatives Contracts. Neither Community Bankshares
nor any of its Subsidiaries is a party to and none of them has
agreed to enter into any exchange-traded or over-the-counter
swap, forward, future, option, cap, floor or collar financial
contract or any other contract not included in the Community
Financial Statements which is a derivatives contract (including
various combinations thereof), and, except as set forth in
Schedule 4.21, it does not own any securities that are identified
in OTS Thrift Bulletin 13a as Complex Securities or Structured
Notes.
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4.22 Absence of Certain Changes. Except as set forth in
Schedule 4.22, since June 30, 2001, (i) Community Bankshares and
its Subsidiaries have conducted their respective businesses in
the ordinary and usual course, consistent with past practices,
and (ii) there has not been any event, occurrence, development or
set of circumstances or facts which (A) has had or could
reasonably be expected to constitute or result in a Material
Adverse Effect on Community Bankshares and its Subsidiaries, or
(B) which would result in a violation of the covenants set forth
in Section 5.2 of this Agreement had such events, occurrences,
development or set of circumstances or facts occurred after the
date hereof.
4.23 Investment Portfolio. Schedule 4.23 sets forth a true
and correct list of all securities held by Community Bankshares
or any of its Subsidiaries and identifies the security, the
maturity and the yield thereon. There are no impediments or
restrictions on the sale or transfer of securities held by
Community Bankshares or any of its Subsidiaries. All United
States treasury securities, obligations of United States
government agencies and corporations, obligations of states and
political subdivisions of the United States and other investment
securities held by Community Bankshares or any of its
Subsidiaries for its own account, as reflected in the Community
Financial Statements, are, and at all times prior to the
Effective Time shall be, carried in accordance with GAAP.
4.24 Related Party Transactions. Except as set forth in
Schedule 4.24, neither Community Bankshares nor any of its
Subsidiaries, has any contract, extension of credit (direct or
indirect), business arrangement, depository relationship or other
relationship with (i) any present or former director or officer
of Community Bankshares or any of its Subsidiaries; (ii) any
stockholder of Community Bankshares beneficially owning five
percent (5%) or more of the outstanding equity securities of
Community Bankshares; or (iii) any affiliate of (i) or (ii) above
(each, a "Related Party"). Except as set forth in Schedule 4.24,
each extension of credit disclosed in Schedule 4.24 has been made
in the ordinary course of business, and on the same terms,
including interest rate and collateral, as those prevailing at
the time for comparable arms'-length transactions, does not
involve more than the normal risk of collectibility or present
other unfavorable features and complies in all respects with the
provisions of Regulation O and all other applicable Laws. Except
as set forth on Schedule 4.24 hereto, no Related Party holds
directly or indirectly any interest in any deposit account listed
on Schedule 4.24 hereto.
4.25 Fiduciary Activities. Except as indicated on Schedule
4.25 hereto, neither Community Bankshares nor any of its
Subsidiaries is directly or indirectly engaged in any fiduciary
or custodial activities.
4.26 Intangible Property. Set forth on Schedule 4.26 hereto
is a list and brief description of all foreign and domestic
trademarks, service marks, trade names, software and copyrights
(whether or not registered and, if applicable, including pending
applications for registration), owned, used, licensed or
controlled by Community Bankshares or any of its Subsidiaries
(collectively, the "Intangible Property"). Except as set forth
on Schedule 4.26: (a) Community Bankshares and each of its
Subsidiaries has the exclusive right and license to use its
respective
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Intangible Property, free and clear of any claim or conflict
with the rights of others; (b) no royalties, honorariums
or fees are payable by Community Bankshares or any of its
Subsidiaries to any person by reason of the ownership, use or
license of any of the Intangible Property; (c) there have been no
claims made against Community Bankshares or any of its
Subsidiaries asserting the invalidity, abuse, misuse, or
unenforceability of any of the Intangible Property or any license
relating thereto, and no grounds for any such claims exist; (d)
neither Community Bankshares nor any of its Subsidiaries has made
any claim of any violation or infringement by others of its
rights in the Intangible Property, and, to Community Bankshares'
knowledge, no grounds for any such claims exist; (e) neither
Community Bankshares nor any of its Subsidiaries has received any
written notice that it is in conflict with or infringing upon the
asserted rights of others in connection with the Intangible
Property and neither the ownership, use or license of the
Intangible Property by Community Bankshares or any of its
Subsidiaries nor the operation of their respective businesses is
infringing or has infringed upon any rights of others; (f) the
consummation of the transactions contemplated hereby will not
alter or impair any of the Intangible Property; and (g) no
interest in any of Community Bankshares' or any of its
Subsidiaries' rights to any Intangible Property has been
assigned, transferred, licensed or sublicensed to third parties.
To the extent any of the Intangible Property constitutes
proprietary or confidential information, Community Bankshares
believes it has adequately safeguarded such information from
disclosure.
4.27 Absence of Regulatory Actions. Except as set forth on
Schedule 4.27, neither Community Bankshares nor any of its
Subsidiaries nor to their knowledge, any of their respective
officers, directors, consultants or employees is or during the
past five years has been a party to any cease and desist order,
consent order, assistance agreement, supervisory agreement or
other written agreement or any memorandum of understanding with,
or a party to any commitment letter or similar written
undertaking to, or is subject to any order or directive by, or is
a recipient of any extraordinary supervisory letter from any
Applicable Governmental Authority nor has it ever been advised by
any Applicable Governmental Authority that it is contemplating
issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar written undertaking.
Neither Community Bankshares nor any of its Subsidiaries has
received any objection from any Applicable Governmental Authority
to any response to any alleged violation, criticism or exception
with respect to any report or statement relating to Community
Bankshares or any of its Subsidiaries.
4.28 Customer Lists and Information. Except as set forth in
Schedule 4.28, neither Community Bankshares nor any of its
Subsidiaries has sold, disclosed or transferred all or part of
any list of the depositors, borrowers or customers of Community
Bankshares or any of its Subsidiaries. All of such information
is held and maintained in accordance in all material respects
with all applicable Laws.
4.29 FDIC Status; Liquidation Account.
(a) Community Savings is an insured depository
institution under the Federal Deposit Insurance Act, the deposit
accounts of which are insured by the FDIC to the maximum
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extent permitted by Law, and Community Savings has paid all premiums
and assessments and filed all reports required in connection
therewith and is in compliance in all material respects with all
Laws and other conditions and requirements of the FDIC for the
maintenance of insurance by the FDIC. The FDIC has not notified
Community Savings that it has nor does Community Bankshares or
Community Savings have any knowledge that the FDIC has commenced
any inquiries, investigations, special audits or other
proceedings relating to Community Savings that could adversely
affect the insurance coverage provided by the FDIC for Community
Savings' deposit accounts.
(b) The liquidation account established by Community
Savings in connection with its conversion from mutual to stock
form has been maintained by it since its establishment in
accordance in all material respects with all applicable Laws and
its records with respect to such account are accurate.
4.30 Community Reinvestment Act Compliance. Community
Savings is in compliance in all material respects with the
applicable provisions of the Community Reinvestment Act of 1977
and the regulations promulgated thereunder, and received a CRA
rating of at least satisfactory as of its last examination.
Community Savings has not been advised in writing by an
Applicable Governmental Authority and is not aware of the
existence of any fact or circumstance or set of facts or
circumstances which, if true, would cause it to fail to be in
compliance with such provisions.
4.31 Information in Proxy Statement. None of the
information included or incorporated by reference in the Proxy
Statement other than information provided by BBC or any of its
Subsidiaries or the agents thereof will, at the dates mailed to
Community Bankshares' shareholders and at the times of Special
Meeting, contain any untrue statement of a material fact or omit
to state any 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.
The Proxy Statement will comply in all material respects with the
provisions of the DGCL and the Exchange Act and the rules and
regulations thereunder. No representation is made by Community
Bankshares with respect to statements made therein based on
information supplied by BBC in writing specifically for inclusion
in the Proxy Statement. The Proxy Statement, including any
amendments thereto, will be distributed to Community Bankshares'
shareholders in accordance with the certificate of incorporation
and by-laws of Community Bankshares, and all applicable Laws,
including, without limitation, the DGCL and the Exchange Act.
4.32 State Takeover Laws; Certificate of Incorporation.
Community Bankshares has taken all action necessary to exempt the
Merger, this Agreement and the transactions contemplated hereby
from, and the Merger, this Agreement and the transactions
contemplated hereby are exempt from (a) any applicable state
takeover Laws and (b) any applicable takeover provisions in the
Community Bankshares' certificate of incorporation or by-laws.
4.33 Opinion of Financial Advisor. Friedman, Billings,
Ramsey and Co., Inc. has delivered to the board of directors of
the Community Bankshares its written opinion to the effect
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that the Merger Consideration is fair to the shareholders of
Community Bankshares from a financial point of view.
4.34 Full Disclosure. No representation or warranty of
Community Bankshares contained in this Agreement, and none of the
statements or information concerning Community Bankshares and its
Subsidiaries contained in this Agreement or the exhibits and the
schedules hereto, contains or will contain any untrue statement
of a material fact nor will such representations, warranties,
covenants or statements taken as a whole omit 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.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
Community Bankshares covenants and agrees with BBC that
Community Bankshares will, from and after the date of this
Agreement and until the Effective Time, act as follows:
5.1 Ordinary Course, Insurance, Preservation of Business.
Community Bankshares shall and shall cause each of its
Subsidiaries to do the following, except as otherwise required by
this Agreement or requested or agreed to in writing in advance by
BBC:
(a) carry on its business only in the ordinary course
and consistent with its policies, procedures and practices in
substantially the same manner as heretofore conducted;
(b) except as they may terminate in accordance with
their terms or in accordance with the terms of this Agreement,
keep in full force and effect, and not cause or permit to exist a
default of any of its obligations under, any Commitments;
(c) use its best efforts to keep in full force and
effect the insurance coverage in effect on the date hereof to the
extent that such insurance continues to be reasonably available;
(d) maintain, renew, keep in full force and effect and
preserve its material rights, franchises, permits and licenses
and use its best efforts to preserve its business organization
and retain its present employee force so that it will be
available to BBC on and after the Effective Time, and to maintain
its existing, or substantially equivalent, relationships with
other banks and financial institutions and to use its best
efforts to maintain the continuance of its general customer
relationships; and
(e) duly comply in all material respects with all Laws
and Orders applicable to it and to the conduct of its business.
The foregoing notwithstanding, and notwithstanding anything
else herein to the contrary, under no circumstances shall
Community Bankshares originate or permit any of its Subsidiaries
(including specifically construction loans to third party
purchasers from Subsidiaries) to originate
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any new construction Loan or issue any commitment in respect of any
new construction Loan or make any disbursement under any existing
construction Loan (unless Community Bankshares or any of its Subsidiaries
is legally obligated to make such disbursement) other than in
accordance with the criteria and standards set forth in Schedule
5.1 hereto without the prior written consent of BBC, which consent BBC
may not unreasonably withhold.
5.2 Prohibited Action Without Approval. Community
Bankshares shall not, and shall cause each of its Subsidiaries
not to, directly or indirectly, do any of the following, except
with the prior written consent of BBC:
(a) incur or agree to incur any obligation or
liability (absolute or contingent), other than the taking of
deposits and other liabilities incurred in the ordinary course of
business and consistent with prior practice and liabilities
arising out of, incurred in connection with, or related to the
consummation of this Agreement; make or permit any amendment or
termination of any Commitment which would materially adversely
affect its rights thereunder, acquire (by merger, consolidation,
or acquisition of stock or assets) any corporation, partnership
or other business organization or division or substantial part
thereof or any branches or deposits thereof; sell or, except as
set forth on Schedule 5.2(a), otherwise dispose of its assets or
acquire any assets or deposits except in the ordinary course of
its business (provided, however that the sale of Loans (other
than sales which have been committed to prior to the date hereof)
shall not be deemed to be in the ordinary course of business);
enter into, dispose or divest itself of any Subsidiary or joint
venture or cause any business entity to become a Subsidiary or
affiliate; sell or otherwise dispose of any Real Property owned
or operated by Community Bankshares or any of its Subsidiaries,
except for the bona fide sale of Real Property and REO to non-
affiliated third parties in the ordinary course of business;
except as set forth in Schedule 5.2(a), enhance, expand, modify,
replace or alter any computer or data processing system owned,
leased or licensed by Community Bankshares or any of its
Subsidiaries (including, without limitation, any software
associated with any such computer or system); make, originate or
otherwise acquire any Loans, or any Loan commitments, or any line
of credit, in an individual amount in excess of $1 million
(provided, however, that Community Bankshares and its
Subsidiaries (i) may extend additional amounts to its existing
borrowers who have loan balances in excess of $1.0 million as of
the date hereof in additional amounts not to exceed an aggregate
of 10% of said borrower's balances on the date hereof and (ii)
may make or acquire new Loans in excess of $1.0 million and up to
$5 million with the approval of two lending officers designated
by BBC who shall use their best efforts to provide within one
business day of a request by the Chief Lending Officer of
Community Savings a decision with respect to such Loans); or
acquire any interest or participation in Loans originated by
other financial institutions or brokers, including, but not
limited to, syndicated Loans; or enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing; or
(b) enter into any Commitment or make any capital
expenditure in excess of $50,000, provided, however, that
additional capital expenditures may be made to the extent and in
the amounts indicated on Schedule 5.2(b) relating to (i) the
Fiserv conversion to the VISION system, (ii) the construction of
the Abacoa branch and (iii) the purchase of the Bluffs office; or
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(c) issue (other than upon the exercise of previously
outstanding Options granted prior to the date hereof), sell,
redeem or acquire for value, any debt securities or any shares of
the capital stock or other equity securities or other ownership
interests of Community Bankshares or any of its Subsidiaries, or
declare, issue or pay any dividend or other distribution of
assets, whether consisting of money, other personal property,
real property or other things of value, to its shareholders
except for (i) Community Bankshares' regular quarterly cash
dividend of $.11 per share declared and payable in a manner
substantially consistent with past practices but only to the
extent that Community Bankshares has consolidated net income
during the prior quarterly period excluding Transaction Costs (as
hereinafter defined) and (ii) dividends by Community Savings to
Community Bankshares in amounts sufficient to enable Community
Bankshares to pay its ordinary operating expenses as they become
due and its accrued liabilities, including, but not limited to,
accounting, legal, printing, investment banking, and regulatory
application fees, expenses and costs relating to the transactions
contemplated by this Agreement; or
(d) (i) amend its certificate of incorporation or
by-laws or any other constitutive, organic or governing document
or (ii) split, combine or reclassify any shares of its capital
stock; or
(e) except as disclosed in Schedule 5.2(e), grant any
increase in compensation or benefits to its employees or to its
officers other than increases granted in the ordinary course of
business consistent with past practice and in no event in excess
of an individual increase of 5% annually; pay any bonus other
than bonuses paid in the ordinary course of business consistent
with past practice; enter into any severance agreements or
arrangements with its officers; grant any material increase in
fees or other increases in compensation or other benefits to any
of its directors; or effect any change in retirement benefits for
any class of its employees or officers (unless such change is
required by applicable law); or
(f) amend any existing employment contract or enter
into any new employment contract that Community Bankshares does
not have the unconditional right to terminate without penalty
(other than liability for services already rendered), at any time
on or after the Effective Time; or
(g) adopt any new Plan or make any material change in
or to any existing Plan other than any such change that is
required by Law; or
(h) enter into any transactions other than in the
ordinary course of business or mortgage, pledge or subject to any
Lien any of its Properties or assets not already subject to a
mortgage, pledge or other Lien as of the date hereof and shall
not increase or modify the terms of any such mortgages, pledges
or Liens; or
(i) compromise or otherwise settle or adjust any
assertion or claim of a deficiency in Taxes (or interest thereon
or penalties in connection therewith) or file any appeal
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from an asserted deficiency, or file any federal or state Return
before furnishing a copy to BBC and affording BBC an opportunity
to comment thereon except to the extent that furnishing a copy to
BBC or awaiting comments would result in such appeal or Return
not being timely filed; or
(j) enter into any Related Party transaction of the
type contemplated by Section 4.24 hereof, except for transactions
relating to deposit relationships or Loans made in the ordinary
course by Community Savings consistent with its policies and
procedures and Regulation O; or
(k) subject to any legally binding commitment or loan
agreement as of the date hereof, make or commit to make any Loans
outside of Community Bankshares' geographic lending area or which
are not in compliance with Community Savings' loan underwriting
policies and procedures; advance or commit to advance any new
funds to customers who presently have a Loan internally or
externally classified; make or commit to make any new Loan to a
borrower which is a corporation, partnership or other non-natural
person, which is not personally guaranteed by the principals of
the borrower; or convert any Loan to develop or construct
residential housing to a permanent Loan unless contractually
obligated to do so; or
(l) open, or file an application with any federal or
other regulatory agency with respect to the opening of any
additional office, branch or banking facility, or the acquisition
or establishment of any additional banking or nonbanking facility
or close any of its existing offices or branches; or
(m) purchase any investment securities other than
federal funds, government securities with maturities of less than
one year or Federal Home Loan Bank overnight accounts or make any
material change to its current pricing strategy relating to its
deposit accounts; or
(n) take any action which: (i) could reasonably be
expected to adversely affect the ability to obtain the necessary
approvals of Applicable Governmental Authorities required for the
transactions contemplated hereby or (ii) could reasonably be
expected to adversely affect the ability to perform the covenants
and agreements under the Agreement; or
(o) make any change in the credit policies or
procedures of Community Savings, the effect of which is to make
any such policy or procedure less restrictive or enter into any
new lending or leasing programs; or
(p) make any change in its accounting methods or
practices other than those required by GAAP, directed by
Applicable Governmental Authorities or pursuant to the terms of
this Agreement; or
(q) take, cause or permit the occurrence of any change
or event which would render any of its representations and
warranties contained herein untrue in any respect at and as of
the Effective Time; or
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(r) enter into any contract, agreement, commitment or
arrangement, whether written or otherwise, with respect to any of
the foregoing.
5.3 Notice. Community Bankshares will promptly notify BBC
(i) of any event of which it obtains knowledge which materially
adversely affects the financial condition, operations, business,
assets or prospects of Community Bankshares or any of its
Subsidiaries, (ii) of any event or circumstance that would cause
or constitute a breach of any of the representations, warranties,
or covenants of Community Bankshares contained herein. Community
Bankshares will promptly notify BBC in the event it determines
that it is unable to fulfill any of the conditions to the
performance of BBC hereunder. Community Bankshares will consult
with BBC regarding any suggestions made by any regulatory
authority.
5.4 Liabilities. Community Bankshares shall, and shall
cause each of its Subsidiaries to, pay or discharge their
respective current liabilities in the ordinary course of business
when the same become due and payable, except for such liabilities
as may be subject to a good faith dispute or counterclaim.
5.5 Goodwill. Community Bankshares shall not nor shall it
permit any of its Subsidiaries to enter into any transaction
which will create goodwill on its books and records under GAAP.
5.6 Operating Expenses. Except as required by law or
regulation as may be necessary to preserve and protect the assets
of Community Bankshares and its Subsidiaries, Community
Bankshares shall not, and shall cause each of its Subsidiaries
not to, increase the level of its operating expenses in excess of
5% on an annualized basis based on the results of operations for
the twelve months ended June 30, 2001, excluding therefrom any
(i) expenses incurred in connection with this Agreement and the
transactions contemplated hereby including, but not limited to,
investment banking fees and expenses, legal fees and expenses,
application fees, accounting fees and printing expenses and (ii)
expenses incurred at the direction of BBC pursuant to the terms
of this Agreement.
5.7 Transaction Costs. The expenses incurred by Community
Bankshares and its Subsidiaries in connection with the
transactions contemplated by this Agreement, including but not
limited to, investment banking fees and expenses, legal fees and
expenses, application fees, accounting fees and printing expenses
(the "Transaction Costs"), shall in no event exceed $2.75
million. Notwithstanding the foregoing, such limitation on
Transaction Costs shall not include any fees and expenses
incurred in connection with (i) any challenges or protests by any
third parties to any applications or submissions filed in
connection with the transactions contemplated hereby, (ii) any
Competing Transaction, (iii) any legal proceedings arising out of
or related to this Agreement or the transactions contemplated
hereby, or (iv) any proxy contest in connection with the
submission of this Agreement to the shareholders of Community
Bankshares, but the foregoing shall not constitute a waiver by
BBC or preclude a determination that there has been a Material
Adverse Effect.
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ARTICLE VI
ADDITIONAL COVENANTS OF COMMUNITY BANKSHARES
Community Bankshares hereby covenants and agrees with BBC
that Community Bankshares will act and will cause its Subsidiaries
to act as follows:
6.1 Access to Information. From the date hereof through
the Effective Time, Community Bankshares shall permit BBC and its
authorized representatives reasonable access during regular
business hours to the properties of Community Bankshares and its
Subsidiaries. Community Bankshares shall and shall cause its
Subsidiaries to make their respective directors, management and
other employees and agents and authorized representatives
(including counsel and independent public accountants) available
to confer with BBC and its authorized representatives at
reasonable times and upon reasonable request, and Community
Bankshares shall disclose and make available to BBC and shall
cause its agents and authorized representatives to disclose and
make available to BBC, all books, papers and records relating to
the assets, properties, operations, obligations and liabilities
of Community Bankshares and its Subsidiaries. BBC may make or
cause to be made such investigation of the records, business and
properties of Community Bankshares and its Subsidiaries as BBC
deems necessary or advisable to familiarize itself and its
advisers with such business, properties, and other matters,
provided that any such investigation shall be reasonably related
to the transactions contemplated hereby and shall not unduly
interfere with the normal operations of Community Bankshares and
its Subsidiaries.
6.2 Confidential Treatment of Information. The parties
hereto and their representatives shall hold in confidence all
data and information obtained with respect to the other parties
or their business, and shall not use such data or information or
disclose the same to others, except such data or information as
is already known to such party or is published or is a matter of
public record, or as otherwise required by Law or as may be
disclosed with the written consent of the other party. In the
event this Agreement is terminated, each party shall upon request
promptly return to the other(s) any statements, documents,
schedules, exhibits or other written information obtained,
reflecting or derived from information provided by them in
connection with this Agreement. Furthermore, the parties hereto
shall not use such information and data for any competitive or
commercial purposes.
6.3 Management Reports and Risk Management.
(a) Community Bankshares will promptly provide to BBC
copies of (i) the reports of management of Community Bankshares
and its Subsidiaries relating to operations, deposit activity,
lending activity, delinquency schedules and additions to loan
loss reserves and such other reports as BBC may reasonably
request, (ii) minutes of all meetings of the Board of Directors
of Community Bankshares and its Subsidiaries and each committee
thereof during the prior month other than any portion of such
minutes that relate to any Competing Transaction (as hereinafter
defined) or the fiduciary duties of such directors with respect
to the transactions contemplated hereby, (iii) the payroll report
for the prior month, and (iv) monthly Community Financial
Statements and reports prepared by or for Community Bankshares
for the preceding
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calendar month, including a statement of financial condition and
an income statement for Community Bankshares and its Subsidiaries.
Throughout the period prior to the Effective Time, Community
Bankshares shall make one of more of its designated representatives
available to confer on a regular and frequent basis with
representatives of BBC and to report on the general status of the
ongoing operations of Community Bankshares and its Subsidiaries.
BBC shall be advised of and shall be permitted to attend as an
observer all management and major loan meetings and shall be provided
with any reports circulated to participants simultaneously with such
circulation. Further, with respect to joint venture activities and the
Loans identified on Schedule 6.3(a), meetings of representatives of the
parties shall be held on a monthly basis to review the status of
the development or Loans, as applicable, and to review and agree
upon plans and advances for the following month.
(b) Community Bankshares agrees that, from the
date hereof through the Effective Time, it shall regularly inform
and consult with BBC concerning Community Savings'
asset/liability and interest rate risk management.
6.4 Fiserv and Other Vendor Agreements. Community
Bankshares shall migrate to the VISION system as required by that
certain Addendum by and between Community Savings and Fiserv so
as to avoid any penalty or liquidated damages upon cancellation
or termination of the Fiserv or VISION system services. BBC and
Community Bankshares shall coordinate the providing of notice of
cancellation or termination of any vendor agreements involving
Community Bankshares or its Subsidiaries if the parties jointly
agree that such termination or cancellation is desirable.
6.5 Loan Loss Allowance. Community Bankshares shall, upon
the request of BBC made at any time prior to Closing, adjust
Community Bankshares' accruals and allowance for loan losses in
an amount determined by BBC in accordance with BBC's practices,
such adjustment to be effective on the day immediately preceding
the Effective Time, provided, however, that Community Bankshares
shall not be required to take such action unless BBC certifies in
writing that all conditions to Closing set forth in Article IX
hereof have been satisfied or waived; that no such action will be
required to be taken more than five business days before Closing
or if such action would be inconsistent with GAAP or regulatory
accounting principles; and no accrual or reserve made by
Community Bankshares or any of its Subsidiaries pursuant to this
subsection, or any litigation or regulatory proceedings arising
out of any such accrual or reserve, shall constitute or be deemed
to be a breach or violation of any representation, warranty,
covenant, condition or other provision of this Agreement or to
constitute an event which permits or requires termination of this
Agreement pursuant to Article X hereof.
6.6 Acquisition Proposals.
(a) Except for the transactions contemplated by this
Agreement, Community Bankshares shall not, directly or
indirectly, and shall cause its and its Subsidiaries' officers,
directors, employees, subsidiaries, agents or advisors or other
representatives not to, directly or indirectly: (i) solicit,
encourage, initiate, participate or knowingly facilitate
(including by way of
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furnishing information) in any negotiations, discussions or
inquiries with respect to any Competing Transaction (as defined
below), or continue any such negotiations or discussions which may
have been initiated prior to the date hereof with any party other
than BBC or (ii) in connection with, or in contemplation of, any
Competing Transaction or any potential Competing Transaction, except
as required by Law, disclose any information to any person concerning
the business and properties of Community Bankshares, afford to any
person (other than BBC and its advisors and agents) access to the
properties, books or records of Community Bankshares or any of
its Subsidiaries or otherwise assist or encourage any person in
connection with any of the foregoing; provided, however, that
nothing in this Section 6.6 shall prohibit the Board of Directors
of Community Bankshares from furnishing information to, or
entering into discussions or negotiations with, any person in
connection with an unsolicited bona fide Competing Transaction
received after the date of this Agreement by such person if
Community Bankshares' Board of Directors determines in good
faith: (i) after consulting with its independent financial
advisors, that such person is reasonably likely to be capable of
completing such Competing Transaction, taking into account the
legal, financial, regulatory and other aspects of such Competing
Transaction, and the person making such Competing Transaction,
and that such Competing Transaction could reasonably be expected
to result in a Superior Proposal (as defined below) and (ii) if,
and only to the extent that: (a) the Board of Directors of
Community Bankshares, after consultation with outside legal
counsel, believes that such action is required for such Board of
Directors to comply with its duties to its shareholders imposed
by Delaware Law and (b) prior to furnishing such information to,
or entering into discussions or negotiations with, such person,
Community Bankshares obtains from such person an executed
confidentiality and standstill agreement on terms no less
favorable to Community Bankshares, as the case may be, than those
contained in that certain Confidentiality Agreement between
Community Bankshares and BBC dated July 11, 2001, unless the
Board of Directors of Community Bankshares, after consultation
with outside legal counsel, believes that such requirement would
violate its duties to its shareholders imposed by Delaware Law.
Community Bankshares shall notify BBC promptly if any proposal or
offer, or any inquiry or contact with any person with respect
thereto, regarding a Competing Transaction is made and provide
BBC in reasonable detail the material terms of any proposal and
shall keep BBC promptly advised of the status of any such
proposal. Each party hereto agrees not to release any third
party from, or waive any provision of, any confidentiality or
standstill agreement to which it is a party.
(b) A "Competing Transaction" means any of the
following involving Community Bankshares, as the case may be
(other than the Merger contemplated by this Agreement): (i) a
merger, consolidation, share exchange, business combination or
other similar transaction involving Community Bankshares or
Community Savings, (ii) any sale, lease, exchange, transfer or
other disposition of 50 percent or more of the assets of
Community Bankshares or Community Savings, (iii) a Tender Offer
or Exchange Offer (as such terms are defined in Section 12.1(d)
hereof) for 20 percent or more of the outstanding voting
securities of Community Bankshares, or (iv) any solicitation
(made in accordance with Rule 14a-3 under the Exchange Act) in
opposition to the approval of the Merger by the shareholders of
Community Bankshares.
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(c) A "Superior Proposal" shall mean any bona fide
Competing Transaction which is on terms that the Board of
Directors of Community Bankshares concludes in its good faith
judgment (based upon the written advice of its independent
financial advisors), provides for consideration which would
exceed the value of the consideration provided for in the Merger,
after taking into account all relevant factors, including without
limitation, any financing conditions, timing of the closing
thereof and the risk of nonconsummation.
6.7 Approval by Community Bankshares' Shareholders; Proxy
Statement.
(a) Community Bankshares shall call the Special
Meeting to be held as promptly as reasonably practicable after
the date of this Agreement for the purpose of voting upon the
Merger, this Agreement and the other transactions contemplated by
this Agreement. Community Bankshares, through its Board of
Directors, shall recommend that Community Bankshares'
shareholders approve the Merger, this Agreement and the other
transactions contemplated by this Agreement, shall include such
recommendation in the Proxy Statement, shall at BBC's request
publicly reaffirm the approval by such Board of Directors and
shall not amend, modify, revoke or withdraw such recommendation;
provided, that such Board of Directors shall not be obligated to
make such recommendation if Community Bankshares shall have
received an unsolicited Superior Proposal and such Board of
Directors determines, in good faith after consultation with its
financial advisors and legal counsel, that the making of such
recommendation would violate the Board of Directors' duties to
its shareholders under Delaware Law; provided, further, that in
no event may the Board of Directors take such action earlier than
the conclusion of the second business day following BBC's receipt
of written notice of the intention of the Board of Directors to
do so. Community Bankshares shall use its best efforts to
solicit from its shareholders proxies in favor of the approval of
this Agreement and the Merger pursuant to the Proxy Statement,
and shall take all other action necessary or advisable to obtain
the vote or consent of shareholders required by the DGCL to
obtain such approval, except to the extent that the Board of
Directors of Community Bankshares has received an unsolicited
Superior Proposal and determines in good faith after consultation
with outside legal counsel that the withdrawal, modification or
change of its recommendation is necessary in order to avoid
violating its fiduciary duties to Community Bankshares'
shareholders under Delaware Law. Community Bankshares may, and,
if requested by BBC, shall, retain a proxy solicitor reasonably
acceptable to BBC in connection with the Special Meeting.
(b) Community Bankshares shall prepare the Proxy
Statement and any amendments or supplements thereto and Community
Bankshares shall file the Proxy Statement and any such amendments
or supplements with the SEC; provided, however, that Community
Bankshares shall not file the Proxy Statement or any such
amendment or supplement with the SEC without the prior consent of
BBC, which consent shall not be unreasonably withheld. Community
Bankshares will advise BBC, prior to distributing the Proxy
Statement to its shareholders, of the time when Community
Bankshares intends to distribute the Proxy Statement, and
Community Bankshares shall not distribute the Proxy Statement
without the prior consent of BBC, which consent shall not be
unreasonably withheld. Community Bankshares shall promptly
notify BBC of the issuance of any Order suspending the use of the
Proxy Statement, of the initiation or threat
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of any proceeding for any such purpose, or of any request by the
SEC for the amendment or supplement of the Proxy Statement for
additional information.
6.8 Consents and Approvals by Third Parties. Community
Bankshares shall use its best efforts to obtain as soon as
practicable all consents and approvals of any third parties
necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
ARTICLE VII
ADDITIONAL COVENANTS OF BBC AND COMMUNITY BANKSHARES
7.1 Regulatory Approvals. As promptly as practicable
following the execution of this Agreement, BBC shall prepare and
BBC and Community Bankshares will submit any necessary
applications to any Applicable Governmental Authorities for
approval of the transactions contemplated hereby, including, but
not limited to, the OTS; provided, however, BBC shall not file
such applications without the prior consent of Community
Bankshares, which consent will not be unreasonably withheld.
Community Bankshares shall cooperate with and shall assist BBC in
the preparation and filing of all such applications. Community
Bankshares shall and shall cause each of its Subsidiaries to
promptly furnish BBC with any information relating to Community
Bankshares or such Subsidiary, as applicable, which is required
under any applicable law or regulation for inclusion in any
filing that BBC is required to make with any Applicable
Governmental Authority in order to consummate the transactions
contemplated by this Agreement. Community Bankshares represents,
warrants and covenants to BBC that all information so furnished
shall be true and correct in all material respects without
omission of any material fact required to be stated to make the
information stated therein not misleading.
7.2 SEC Filings and Offering Materials. If reasonably
requested by BBC, Community Bankshares shall promptly provide BBC
with any information concerning Community Bankshares and its
Subsidiaries in connection with any filing which it may make with
the SEC or with any other document which it may prepare in
connection with an offering of its securities and shall timely
cooperate and assist BBC in connection therewith including in
connection with obtaining its accountants' consent if required in
connection with such filings. Community Bankshares represents,
warrants and covenants to BBC that all information furnished
shall be true and correct in all material respects without
omission of any material fact required to make the information
stated therein not misleading. If any event relating to
Community Bankshares or any of its Subsidiaries should be
discovered which should be set forth in an amendment of, or a
supplement to, any such SEC filing or offering document,
Community Bankshares shall promptly inform BBC and shall furnish
all necessary information to BBC relating to such event.
7.3 Publicity and Reports. BBC and Community Bankshares
shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this
Agreement or the transactions contemplated hereby and shall
provide the other with draft copies of any proposed press
releases and a reasonable opportunity to comment thereon, and
shall not issue any such press release or make any such public
statement before such consultation and
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opportunity to comment, except as may be required by applicable
Law or the rules of the New York Stock Exchange or the Nasdaq Stock
Market.
7.4 Employees and Employee Benefit Plans.
(a) Full-time employees of Community Bankshares and
its Subsidiaries who are employed by BBC or its Subsidiaries
after the Effective Time will be eligible to participate in
benefit plans of BBC and its Subsidiaries that are generally
available to their full-time employees on a uniform and non-
discriminatory basis in accordance with and subject to the terms
and provisions of such benefit plans, with credit for years of
service with Community Bankshares and its Subsidiaries for the
purpose of determining eligibility for participation, vesting and
entitlement to vacation time and sick pay (but not for the
purpose of accrual or restoration of benefits under any existing
or future benefit plan of BBC or any of its Subsidiaries where
benefits are calculated on an actuarial basis, including any
qualified or non-qualified defined benefit plan or restoration
plan). Contributions to (and accrual of benefits, to the extent
applicable, if any, under) benefit plans of BBC and its
Subsidiaries on behalf of continuing full-time employees of
Community Bankshares and its Subsidiaries shall only relate to
qualifying compensation earned by such employees after the
Effective Time subject to the terms and provisions of such
benefit plans. Notwithstanding anything contained above,
continuing full-time employees of Community Bankshares and its
Subsidiaries who meet any applicable age or year of service
requirements shall be eligible to participate in any qualified
plan of BBC or any of its Subsidiaries as of the Effective Time.
BBC shall amend its qualified plans to the extent necessary to
accomplish the foregoing, provided that such amendments are
consistent with the Code and any other applicable Law. BBC shall
use its best efforts to cause any and all pre-existing condition
limitations (to the extent such limitations did not apply to a
pre-existing condition under the corresponding Community Savings
group health plan) and eligibility waiting periods under its
group health plans to be waived with respect to such participants
and their eligible dependents.
(b) General Severance. If the employment of any full-
time employee of Community Bankshares or any of its Subsidiaries
is involuntarily terminated other than for Cause (as hereinafter
defined) within six months following the Effective Time, BBC or
its applicable Subsidiary shall provide severance benefits to
such employee in a lump sum cash amount equal to the sum of (i)
such employee's regular salary for a one-week period (as in
effect immediately prior to the Effective Time) multiplied by the
total number of whole years of such employee's full-time
employment at Community Bankshares and its Subsidiaries (subject
to a minimum severance of two weeks for those employees who have
at least one year of service as of the Effective Time and a
maximum severance of 26 weeks), and (ii) the employee's accrued
but unused vacation and personal emergency days, plus the
continuation of any insurance benefits that the terminated
employee was receiving through the end of the calendar month in
which the employee receives his or her lump sum severance
payment, provided, however, such period of continued coverage
shall be no less than fifteen days. Notwithstanding the
foregoing, however, in no event shall BBC or any of its
Subsidiaries have any obligation to provide severance benefits
pursuant to this Section 7.4(b) to any full-time employee
(i) whose termination of employment occurs due to resignation or
discharge for Cause or (ii) who is entitled to severance benefits
or the equivalent thereof under
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the terms of any employment or change in control severance agreement
with Community Bankshares or its Subsidiaries. "Cause" shall mean
termination because of the employee's (a) conviction of, or plea of
guilty or nolo contendere to, a felony or a crime of falsehood or moral
turpitude, (b) willful misconduct or gross negligence, (c) breach
of fiduciary duty, (d) failure to perform stated duties if such
failure is not cured following written notice to the employee, or
(e) willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease and desist
order.
(c) Employment and Change in Control Severance
Agreements. BBC shall honor all existing employment and change
in control severance agreements (the "Severance Agreements") of
Community Bankshares and its Subsidiaries that are in effect as
of the date of this Agreement, each of which is disclosed on
Schedule 7.4(c), which schedule describes in reasonable detail
the amount of payments and benefits which could become due and
payable to each such person under the agreements as a result of a
termination of employment and/or a change in control of Community
Bankshares. The cash severance and other fringe benefits
provided for by such employment and change in control severance
agreements shall be paid or provided to the respective officers
over the time period following the Effective Time specified in
the agreements (or in a lump sum at the officer's election)
regardless of whether or not the officer is subsequently hired by
BBC or any of its Subsidiaries, with the insurance coverages to
be provided to the respective individual pursuant to their
agreements. Community Bankshares represents and warrants that
the amounts reflected in Schedule 7.4(c) (A) have been calculated
in a manner consistent with, and according to, the provisions of
the Agreements (copies of which have been furnished by Community
Bankshares to BBC), and (B) represent good faith estimates of the
amounts payable as of the future date specified therein based
upon assumptions regarding interest rates, compensation or the
assumed date of Closing, which are disclosed in Schedule 7.4(c),
and (ii) the amounts payable under such Severance Agreements are
good faith estimates subject to change due to changes in interest
rates, compensation or the assumed date of Closing. Provided
that the methodologies used are in accordance with the
requirements of the Severance Agreements, BBC acknowledges that
substantially the same methodologies will be used to calculate
the amounts payable under the Severance Agreements at Closing.
Notwithstanding the foregoing, the present value of the cash
severance, fringe benefits and other parachute amounts (including
any parachute amounts associated with the accelerated vesting of
stock options and restricted stock awards) shall not exceed the
respective officer's limit under Section 280G of the Code. The
employees of Community Bankshares and its subsidiaries who have
Severance Agreements shall also be entitled to receive their
accrued but unused vacation and personal emergency days as of the
Effective Time.
(d) ESOP. Community Bankshares shall take all
necessary action to cause the Community Bankshares ESOP to be
terminated as of the Effective Time. Community Bankshares will
adopt amendments to the ESOP, to the extent necessary, that
provide (i) the Merger Consideration received by the Community
Bankshares ESOP trustee in connection with the Merger with
respect to the unallocated shares of Community Bankshares Common
Stock shall be first applied by the Community Bankshares ESOP
trustee to the full repayment of the Community Bankshares ESOP
loan, (ii) the balance of the Merger Consideration (if any)
received by the
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Community Bankshares ESOP trustee with respect to the unallocated
shares of Community Bankshares Common Stock shall be allocated as
earnings to the accounts of all participants in the Community
Bankshares ESOP who have accounts remaining under the Community
Bankshares ESOP (whether or not such participants are then
actively employed) and beneficiaries in proportion to the
account balances of such participants and beneficiaries as of
the first day of the Community Bankshares ESOP plan year in which
the Effective Time occurs, (iii) the accounts of all participants
and beneficiaries in the Community Bankshares ESOP immediately
prior to the Effective Time shall become fully vested as of the
Effective Time, and (iv) as may be requested by the IRS in
connection with the request for a determination letter as
described below. BBC agrees that for a period of two years
following the Effective Time, BBC will provide to members of the
administrative committee on the date hereof quarterly reports
regarding the status and the administration of the ESOP.
The Merger Consideration received by the Community
Bankshares ESOP Trustee shall be applied as provided for in the
ESOP and as may be required by law. As soon as practicable after
the date hereof, Community Bankshares shall file or cause to be
filed all necessary documents with the IRS, including the
amendments described above, for a determination letter for
termination of the Community Bankshares ESOP as of the Effective
Time. As soon as practicable after the later of the Effective
Time or the receipt of a favorable determination letter for
termination from the IRS, the account balances in the Community
Bankshares ESOP shall be distributed to participants and
beneficiaries in accordance with applicable law and the ESOP.
Prior to the Effective Time, no prepayments shall be made on the
Community Bankshares ESOP loan and contributions to the Community
Bankshares ESOP and payments on the Community Bankshares ESOP
loan shall be made consistent with past practices on the
regularly scheduled payment dates. The termination of the ESOP
shall not subject Community Bankshares or BBC to any obligation
or liability.
(e) 401 (k) Plan. Community Bankshares and its
Subsidiaries shall take all necessary action to cause the
Community Bankshares 401(k) Plan to be terminated as of the
Effective Time. As soon as practicable after the date hereof,
Community Bankshares shall file or cause to be filed all
necessary documents with the IRS for a determination letter for
termination of the Community Bankshares 401(k) Plan as of the
Effective Time. As soon as practicable after receipt of the
favorable determination letter for termination from the IRS, the
account balances in the 401(k) Plan shall be distributed to
participants and beneficiaries in accordance with applicable law
and the 401(k) Plan documents. From the date hereof through the
Closing Date, Community Bankshares and its Subsidiaries shall be
permitted to make employer profit sharing contributions and
401(k) matching contributions to the Community Bankshares 401(k)
Plan on a periodic monthly basis, consistent with past practices.
The termination of the 401(k) shall not subject Community
Bankshares or BBC to any obligation or liability. BBC agrees
that for a period of two years following the Effective Time, BBC
will provide to members of the administrative committee on the
date hereof quarterly reports regarding the status and the
administration of the 401(k) Plan.
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(f) SERP. BBC and its Subsidiaries agree to honor
Community Bankshares' Amended and Restated Supplemental
Retirement Income Plan (the "SERP") and to timely make the
payments to each of the SERP participants set forth on Community
Bankshares Disclosure Schedule 7.4(f). Schedule 7.4(f) details
all amounts payable pursuant to the SERP. BBC and its
Subsidiaries and their respective successors and assigns agree
not to make any changes to the SERP that would adversely affect
the SERP participants in any manner, provided that no additional
benefits will accrue under the SERP after the Effective Time and
provided that nothing herein shall limit BBC's right to terminate
the SERP after payment to the participants pursuant to its terms.
Except as indicated on Schedule 7.4(f), amounts payable under the
SERP are accrued on the Community Financial Statements to the
extent required by GAAP.
(g) Consulting Agreement. Effective as of the
Effective Time, BBC agrees that either it and/or BankAtlantic
Bank will enter into a one-year consulting agreement with James
B. Pittard, Jr. providing for (i) an annual consulting fee of
$300,000 payable in equal monthly installments, (ii) medical and
dental benefits for Mr. Pittard and his eligible dependents for
the term of the agreement to the same extent and at the same cost
provided to BBC executive officers, and (iii) the use of an
office and of the automobile owned by Community Savings, with the
form of the consulting agreement to be substantially in the form
attached as Schedule 7.4(g).
(h) Retention Bonuses. Following execution of this Agreement
in order to insure an orderly Closing and transition period, Community
Bankshares and BBC shall identify individual employees of
Community Bankshares and its Subsidiaries who will be entitled to
receive a "retention" bonus in the event that such employee
remains an employee and satisfactorily fulfills the duties and
responsibilities of his or her position through a designated date
subsequent to the Effective Time.
(j) Enforceability. The obligations of BBC under this
Section 7.4 are intended to be enforceable against BBC directly
by the persons identified in such paragraphs and shall be binding
on any successors and permitted assigns of BBC.
7.5 Indemnification.
(a) After the Effective Time, BankAtlantic shall
indemnify, defend and hold harmless each person who is now, or
who has been at any time before the date hereof or who becomes
before the Effective Time, an officer or director of Community
Bankshares or any of its Subsidiaries (the "Indemnified Parties")
against all losses, claims, damages, costs, expenses (including
attorney's fees), liabilities or judgments or amounts that are
paid in settlement (which settlement shall require the prior
written consent of BBC, which consent shall not be unreasonably
withheld) of or in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, or
administrative (each a "Claim"), in which an Indemnified Party
is, or is threatened to be made, a party based in whole or in
part on or arising in whole or in part out of the fact that such
person is or was a director or officer of Community Bankshares or
any of its Subsidiaries if such Claim pertains to any matter or
fact arising, existing or occurring before the Effective Time
(including, without limitation, the Merger) regardless of whether
such Claim is
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asserted or claimed before, or at or after, the Effective Time
(the "Indemnified Liabilities"), to the fullest extent permitted
under applicable state law or the OTS regulations, whichever is
applicable, in effect as of the date hereof or as amended applicable
to a time before the Effective Time and under the Certificate of
Incorporation, Charter or by-laws or Board of Directors' resolutions
of Community Bankshares or any of its Subsidiaries, whichever is
applicable, as in effect on the date hereof. BBC shall pay expenses
in advance of the final disposition of any such action or proceeding
to each Indemnified Party to the fullest extent permitted by applicable
Law in effect on the date hereof or as amended applicable to a
time before the Effective Time upon receipt of any undertaking
required by applicable Law. Any Indemnified Party wishing to
claim indemnification under this Section 7.5(a), upon learning of
any Claim, shall notify BBC (but the failure so to notify BBC
shall not relieve it from any liability which it may have under
this Section 7.5(a) except to the extent such failure materially
prejudices BBC) and shall deliver to BBC any undertaking required
by applicable Law. BBC shall ensure, to the extent permitted
under applicable Law, whichever is applicable, that all
limitations of liability existing in favor of the Indemnified
Parties as provided in the Certificate of Incorporation, Charter
or by-laws of Community Bankshares or any of its Subsidiaries(as
the case may be), as in effect on the date hereof, or allowed
under applicable Law as in effect on the date hereof or as such
law or regulation may be amended applicable to a time before the
Effective Time, with respect to Indemnified Liabilities shall
survive the consummation of the Transactions.
(b) For a period of six years from and after the
Effective Time, BBC shall cause to be maintained in effect the
current policies of directors' and officers' liability insurance
maintained by Community Bankshares and its Subsidiaries (provided
that BBC may substitute therefor policies from a financially
capable insurer of at least the same coverage and amount
containing terms and conditions which are substantially no less
advantageous, or in the event such coverage is provided through
BBC's insurer it may be on terms and conditions (other than
coverage and amounts) consistent with BBC's current coverage), or
in lieu thereof obtain single limit tail coverage for such period
(which shall be purchased by Community Bankshares immediately
prior to Closing upon the request of BBC), with respect to claims
arising from facts or events which occurred before the Effective
Time.
(c) The obligations of BBC provided under paragraphs
(a) and (b) of this Section 7.5 are intended to be enforceable
against BBC directly by the Indemnified Parties and shall be
binding on all successors and permitted assigns of BBC.
7.6 Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to
use all reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary,
proper or advisable on the part of such party, to consummate and
make effective the transactions contemplated by this Agreement at
the earliest practicable date, including obtaining all required
consents, approvals, waivers, exemptions, amendments and
authorizations, giving all notices, and making or effecting all
filings, registrations, applications, designations and
declarations, including, but not limited to, those described in
the schedules to this Agreement, and each party shall cooperate
fully with the other (including by providing any necessary
information) with respect to the foregoing. In case at any
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time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors
of BBC or Community Bankshares will take all such necessary
action. The parties agree and acknowledge that it may be
necessary to restructure the transactions contemplated herein to
address regulatory concerns or the concerns of tax counsel. The
parties agree to use their best efforts to address any such
concerns and to restructure the transactions as reasonably
necessary to address such concerns provided, however that (i) the
Merger Consideration is not thereby changed in kind or reduced in
amount as a result of such restructuring and (ii) such
modification will not materially delay or jeopardize receipt of
any required approvals of Applicable Governmental Authorities.
7.7 Tax Treatment. The parties hereto acknowledge and
agree to treat the Merger for federal and state income Tax
purposes as a taxable acquisition of the Community Bankshares
Common Stock by BBC. None of the parties hereto shall take any
position on any Return or otherwise inconsistent therewith.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BBC
The obligations of BBC to effect the transactions
contemplated hereby shall be subject to the fulfillment at or
prior to the Effective Time of each of the following conditions
(any one or more of which may be waived by BBC, but only in
writing):
8.1 Status as of Effective Time. At and as of the Effective Time:
(a) the representations and warranties of Community
Bankshares contained in this Agreement shall have been true and
correct in all material respects (except for representations and
warranties qualified by materiality which shall have been true
and correct in all respects) on the date of this Agreement and
shall continue to be true and correct in all material respects
(except for representations and warranties qualified by
materiality which shall continue to be true and correct in all
respects) as though made at and as of the Effective Time except
for (i)representations and warranties relating to a time or times
other than the Effective Time that were or will be true, correct
and complete at such other time or times and (ii) where the
failure or failures of such representations and warranties to be
so true, correct, and complete, individually or in the aggregate,
without giving effect to any materiality qualifications or
references to materiality therein, does not result or could not
reasonably be expected to result in a Material Adverse Effect on
Community Bankshares;
(b) Community Bankshares shall have in all material
respects performed and satisfied or otherwise complied with, or
caused such performance and satisfaction of and compliance with,
all covenants, terms and conditions required by this Agreement to
be performed and satisfied or otherwise complied with by it on or
prior to the Effective Time;
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(c) there shall not have occurred any event or
condition which has caused, or is reasonably likely to cause a
Material Adverse Effect with respect to Community Bankshares or
its Subsidiaries; and
(d) there shall be delivered to BBC a certificate
(dated the Effective Time and signed by the President of
Community Bankshares) stating that the conditions set forth in
clauses (a) through (c) above have been satisfied.
8.2 Required Action. All action required to be taken by or
on the part of Community Bankshares or any of its Subsidiaries to
authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby shall have been duly and validly taken by the Board of
Directors and shareholders of Community Bankshares or such
Subsidiary, as applicable, and BBC and BankAtlantic shall have
received certified copies of the resolutions evidencing such
authorizations.
8.3 Consents, Waivers. All consents, approvals, waivers,
exemptions, amendments and authorizations required to be obtained
prior to the Effective Time shall have been obtained at or prior
to the Effective Time, and all filings, registrations,
applications, designations and declarations required prior to the
Effective Time shall have been made or effected at or prior to
the Effective Time, and BBC shall have obtained the consents and
approvals of the third parties set forth on Schedule 8.3 hereto,
none of which shall contain or be subject to any conditions which
BBC in its reasonable opinion deems unduly burdensome or which
would materially reduce the value of the Merger to BBC.
8.4 Regulatory Approval. All approvals, waivers and
authorizations of, filings and registrations with, and
notifications to, all Applicable Governmental Authorities
required for consummation of the transactions contemplated by
this Agreement shall have been obtained or made and shall be in
full force and effect and all applicable waiting periods shall
have expired. No such approvals or authorizations shall contain
or be subject to any terms or conditions (other than those
generally imposed in similar transactions) which BBC in its
reasonable opinion deems unduly burdensome or which would
materially reduce the value of the Merger to BBC; provided,
however, that for the purposes hereof no term or condition
contained in such approvals or authorizations with respect to (i)
any required increases in capital levels, (ii) limitations on
future growth or (iii) limitations of business activities shall
be deemed to be unduly burdensome or to materially reduce the
value of the Merger to BBC. Such approvals, and the transactions
contemplated hereby, shall not have been contested by any federal
or state governmental or regulatory authority.
8.5 No Action to Prevent Consummation. No decision of any
federal, state or foreign court awarding substantial damages or
penalty against any of the parties or affiliates thereof in
connection with the Merger shall have been rendered.
8.6 No Action to Prevent or Restrict Merger. No order,
judgment or decree shall be outstanding against a party hereto or
a third party that would have the effect of preventing
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completion of the Merger; no suit, action or other proceeding shall
be pending or threatened by any governmental body in which it is
sought to restrain or prohibit the Merger; and no suit, action or
other proceeding shall be pending before any court or
governmental agency in which it is sought to restrain or prohibit
the Merger or obtain other substantial monetary or other relief
against one or more of the parties hereto in connection with this
Agreement and which BBC determines in good faith, based upon the
advice of counsel, makes it inadvisable to proceed with the
Merger because any such suit, action or proceeding has a
significant potential to be resolved in such a way as to deprive
it of any of the material benefits to it of the Merger.
8.7 Dissenters' Rights. Holders of not more than 15% of
the outstanding shares of Community Bankshares Common Stock shall
have exercised, or shall remain entitled to exercise, dissenters?
appraisal rights in connection with the Merger under applicable
Law.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF COMMUNITY BANKSHARES
The obligations of Community Bankshares to effect the
transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Effective Time of each of the
following conditions (any one or more of which may be waived by
Community Bankshares, but only in writing):
9.1 Representations, Warranties and Covenants. The
representations and warranties of BBC contained in this Agreement
shall be true and correct in all material respects (except for
representations and warranties qualified by materiality which
shall have been true and correct in all respects) as of the date
of this Agreement and shall continue to be true and correct in
all material respects (except for representations and warranties
qualified by materiality, which shall continue to be true and
correct in all respects) as though such representations and
warranties were made at and as of the Effective Time, except for
such representations and warranties relating to a time or times
other than the Effective Time that were or will be true, correct
and complete at such other time or times, and BBC shall have in
all material respects performed and satisfied or otherwise
complied with, or caused such performance and satisfaction of and
compliance with, all covenants, terms and conditions required by
this Agreement to be performed and satisfied or otherwise
complied with by it on or prior to the Effective Time; and at the
Effective Time there shall be delivered to Community Bankshares a
certificate (dated the Effective Time and signed by the President
of BBC), stating that the foregoing conditions have been
satisfied.
9.2 Consents, Waivers. All consents, approvals, waivers,
exemptions, amendments and authorizations required to be obtained
by BBC prior to the Effective Time shall have been obtained at or
prior to the Effective Time, and all filings, registrations,
applications, designations and declarations required on the part
of BBC prior to the Effective Time shall have been made or
effected at or prior to the Effective Time.
9.3 No Material Adverse Effect. There shall not have
occurred any event or condition which has caused or is reasonably
likely to cause a Material Adverse Effect with respect to BBC.
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9.4 Regulatory Approval. All approvals and authorizations
of, filings and registrations with, and notifications to, all
Applicable Governmental Authorities required for consummation of
the transactions contemplated by this Agreement shall have been
obtained or made and shall be in full force and effect and all
applicable waiting periods shall have expired. No such approvals
or authorizations shall contain or be subject to any terms or
conditions (other than those generally imposed in similar
transactions) which would materially adversely affect the terms
of the Merger as they relate to the stockholders of Community
Bankshares. Such approvals, and the transactions contemplated
hereby, shall not have been contested by any federal or state
governmental or regulatory authority.
9.5 No Action to Prevent Consummation. No order, judgment
or decree shall be outstanding against a party hereto or a third
party that would have the effect of preventing completion of the
Merger; no suit, action or other proceeding shall be pending or
threatened by any governmental body in which it is sought to
restrain or prohibit the Merger; and no suit, action or other
proceeding shall be pending before any court or governmental
agency in which it is sought to restrain or prohibit the Merger
or obtain other substantial monetary or other relief against one
or more of the parties hereto in connection with this Agreement
and which Community Bankshares determines in good faith, based
upon the advice of counsel, makes it inadvisable to proceed with
the Merger because any such suit, action or proceeding has a
significant potential to be resolved in such a way as to deprive
it of any of the material benefits to it of the Merger.
9.6 No Action to Prevent or Restrict Merger. No Law or
Order shall have been proposed, promulgated or enacted by any
governmental or regulatory agency or court of competent
jurisdiction which prevents or restricts or could prevent or
restrict the Merger.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination of Agreement. Notwithstanding any
provision to the contrary herein, this Agreement may be
terminated at any time on or prior to the Effective Time:
(a) by mutual written consent of BBC and Community
Bankshares; or
(b) by BBC or Community Bankshares after June 30, 2002
or such later date as may be mutually agreed upon in writing by
the parties, provided, however, that the terminating party is not
otherwise in material breach of its representations, warranties
or obligations under this Agreement; or
(c) by BBC if Community Bankshares shall have
materially breached its representations and warranties or
defaulted in the observance or in the due and timely performance
of any of its covenants and agreements herein contained and such
breach or default (i) shall reasonably be expected to result in a
Material Adverse Effect and (ii) shall not have been cured within
twenty days after written notice specifying the alleged breach or
default; or
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(d) by Community Bankshares if BBC shall have
materially breached its representations and warranties or
defaulted in the observance or in the due and timely performance
of any of its covenants and agreements herein contained and such
breach or default (i) shall reasonably be expected to result in a
Material Adverse Effect and (ii) shall not have been cured within
twenty days after written notice specifying the alleged breach or
default; or
(e) by either Community Bankshares or BBC in the event
any approval of any Applicable Governmental Authority required
for consummation of the Merger and the other transactions
contemplated by this Agreement 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
(f) by either BBC or Community Bankshares if the
shareholders of Community Bankshares shall have voted at the
Special Meeting and such vote upon the Merger and this Agreement
shall not have been sufficient to approve the foregoing; or
(g) by BBC if: (i) the Board of Directors of Community
Bankshares withdraws, modifies or changes its recommendation of
this Agreement and the Merger so that it is not in favor of the
Merger or shall have resolved to do so, (ii) the Board of
Directors of Community Bankshares shall have approved or
recommended to the shareholders of Community Bankshares a
Competing Transaction or taken a neutral position or no position
with respect to any Competing Transaction or shall have resolved
to do so, (iii) a Tender Offer or Exchange Offer (as hereinafter
defined) for 20 percent or more of the outstanding shares of
capital stock of Community Bankshares is commenced and the Board
of Directors of Community Bankshares fails to recommend against
acceptance of such tender offer or exchange offer by its
shareholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its
shareholders), or (iv) the Board of Directors of Community
Bankshares fails to reaffirm publicly and unconditionally its
recommendation to its shareholders of the Merger, which
reaffirmation must be made within three business days after BBC's
written request to do so;
(h) by Community Bankshares, if the Board of Directors
of Community Bankshares, following receipt of the advice of
outside legal counsel that failure to so terminate would be
inconsistent with its duties to its shareholders under applicable
Law, shall have finally determined to approve, endorse or
recommend a Superior Proposal to Community Bankshares'
shareholders after complying with Section 6.6; provided, however,
that Community Bankshares may not terminate this Agreement
pursuant to this Section 10.1(h) until two business days have
elapsed following delivery to BBC of written notice of such
determination of Community Bankshares (which written notice shall
inform BBC of the material terms and conditions of the Competing
Transaction); provided further, however, that such termination
under this Section 10.1(h) shall not be effective until Community
Bankshares has paid BBC the amounts required to be paid pursuant
to Section 12.1 to the extent payment is due at the time of such
termination.
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10.2 Effect of Termination. If this Agreement is terminated
pursuant to this Article X, written notice thereof shall promptly
be given by the party electing such termination to the other
party and, subject to the expiration of the cure periods provided
in clauses 10.1(c) and 10.1(d) above, if any, this Agreement
shall terminate without further actions by the parties and no
party shall have any further obligations under this Agreement;
provided, however, that nothing herein shall relieve any party
from any liability for the willful or intentional breach of any
of its representations or warranties or the willful or
intentional breach of any of its covenants or agreements
contained in this Agreement; and, provided, further, that
Sections 6.2 and 12.1 hereof shall continue to be in full force
and effect upon any termination of this Agreement.
10.3 Amendment and Waiver. This Agreement may be amended or
modified in whole or in part at any time only by a writing signed
by the parties hereto. Any term, condition or provision of this
Agreement may be waived in writing at any time by the party which
is entitled to the benefits thereof.
ARTICLE XI
SURVIVAL
11.1 Survival of the Representations and Warranties. No
investigation by the parties hereto made heretofore or hereafter
shall affect the representations and warranties of the parties
which are contained herein and each such representation and
warranty shall survive such investigation. The representations
and warranties of the parties hereto contained in this Agreement
or in any exhibit or schedule to this Agreement shall not survive
the Effective Time.
ARTICLE XII
MISCELLANEOUS
12.1 Payment of Expenses.
(a) Each party hereto shall pay its own fees and
expenses incident to preparing for, entering into, and carrying
out this Agreement and the transactions contemplated hereby.
(b) Notwithstanding any provision in this Agreement to
the contrary, in order to induce BBC and Merger Sub to enter into
this Agreement and as a means of compensating BBC and Merger Sub
for the substantial direct and indirect monetary and other
damages and costs incurred and to be incurred in connection with
this Agreement in the event the transactions contemplated hereby
do not occur as a result of circumstances described below,
Community Bankshares agrees to pay BBC, and BBC shall be entitled
to payment of, a fee (the "Fee") of $6.0 million (less any
amounts paid pursuant to the provisions of Section 12.1(f)
hereof) upon the occurrence of a Termination Event (as defined
herein) so long as the Termination Event occurs prior to a Fee
Termination Event (as defined herein). The parties hereto
acknowledge that the actual amount of such damages and costs
would be impracticable or extremely difficult to determine, and
that the sum of $6.0 million constitutes a reasonable estimate by
the parties under the circumstances existing as of the date of
this Agreement of such damages and costs. Such
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payment shall be made to BBC by wire transfer in immediately available
funds to an account specified by BBC within five business days after the
occurrence of a Termination Event. A Fee Termination Event shall
be the first to occur of the following: (i) the Effective Time,
(ii) 12 months after termination of this Agreement in accordance
with its terms following the occurrence of a Preliminary
Termination Event (as defined herein), (iii) termination of this
Agreement in accordance with the terms hereof prior to the
occurrence of a Termination Event or a Preliminary Termination
Event (other than a termination of this Agreement by BBC pursuant
to Section 10.1(c) hereof), or (iv) 12 months after the
termination of this Agreement by BBC pursuant to Section 10.1(c)
hereof as a result of a willful or intentional breach of any
representation, warranty, covenant or agreement by Community
Bankshares.
(c) For purposes of this Agreement, a "Termination
Event" shall mean any of the following events:
(i) (A) Community Bankshares, without having
received BBC's prior written consent, shall have entered
into an agreement to engage in a Competing Transaction with
any person (the term "person" for purposes of this Agreement
shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a
corporation, general or limited partnership, joint venture,
limited liability company, trust, business association,
group acting in concert, or any person acting in a
representative capacity) other than BBC or any subsidiary of
BBC, or the Board of Directors of Community Bankshares shall
have approved or recommended that the shareholders of
Community Bankshares approve or accept any Competing
Transaction with any person other than BBC or any subsidiary
of BBC or a Competing Transaction described in clauses (i),
(ii) or (iii) of Section 6.6(b) shall have been consummated;
or
(ii) any person, other than BBC, shall have
acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership, or any "group" (as
such term is defined in Section 13(d)(3) of the Exchange
Act) shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of, 20% or more of
the aggregate voting power represented by the outstanding
Community Bankshares Common Stock.
(d) For purposes of this Agreement, a "Preliminary
Termination Event" shall mean any of the following events:
(i) any person (other than BBC) shall have
commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement
under the Securities Act of 1933, as amended ("Securities
Act"), with respect to, a tender offer or exchange offer to
purchase any shares of Community Bankshares Common Stock
such that, upon consummation of such offer, such person
would own or control 20% or more of Community Bankshares
Common Stock outstanding (such an offer being referred to
herein as a "Tender Offer" and an "Exchange Offer,"
respectively,
A-51
regardless of whether the provisions of Regulations 14D or 14E
under the Exchange Act apply to such Tender Offer or Exchange
Offer);
(ii) (A) the holders of Community Bankshares
Common Stock shall not have approved this Agreement at the
meeting of such shareholders held for the purpose of voting
on this Agreement, (B) such meeting shall not have been held
or shall have been canceled prior to termination of the
Agreement or (C) the Board of Directors of Community
Bankshares shall have withdrawn, modified or changed its
recommendation of this Agreement and the Merger so that it
is not in favor of the Merger, in each case after any person
(other than BBC) shall have (x) publicly announced a
proposal, or an intention to make a proposal, to Community
Bankshares or its shareholders to engage in a Competing
Transaction, (y) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect
to an Exchange Offer or (z) filed an application or given
notice, whether in draft or final form, with the appropriate
regulatory authorities for approval to engage in a Competing
Transaction; or
(iii) Community Bankshares shall have
willfully breached any representation, warranty, covenant or
obligation contained in this Agreement and such breach would
entitle BBC to terminate this Agreement under Section
10.1(c) hereof (without regard to the cure period provided
for therein unless such cure is promptly effected without
jeopardizing consummation of the Merger pursuant to the
terms of this Agreement) after any person (other than BBC)
shall have (x) made, or indicated an intention to make, a
proposal to Community Bankshares or its shareholders to
engage in a Competing Transaction, (y) commenced a Tender
Offer or filed a registration statement under the Securities
Act with respect to an Exchange Offer or (z) filed an
application or given notice, whether in draft or final form,
with the appropriate regulatory authorities for approval to
engage in a Competing Transaction.
(e) Community Bankshares shall promptly notify BBC in
writing of the occurrence of any Preliminary Termination Event or
Termination Event.
(f) If BBC or Community Bankshares terminates this
Agreement pursuant to Section 10.1(f) and at or before the time
of the Special Meeting there had not been publicly announced a
proposal to Community Bankshares or its shareholders to engage in
a Competing Transaction, then Community Bankshares shall pay to
BBC, prior to or concurrently with such termination, the
documented out-of-pocket expenses incurred by BBC in connection
with the transactions contemplated by this Agreement not to
exceed $1,500,000 in the aggregate; provided, however, that
Community Bankshares shall not be required to reimburse BBC for
such expenses if at the time of such termination BBC had
materially breached its representation, warranties or covenants
hereunder.
(g) In the event that this Agreement is terminated as
a consequence of the fact that BBC failed for any reason to
receive all approvals, waivers and authorizations of Applicable
Governmental Authorities required for consummation of the
transactions contemplated by this
A-52
Agreement, then BBC shall pay to Community Bankshares, within five
business days of such termination, the documented out-of-pocket
expenses incurred by Community Bankshares in connection with the
transactions contemplated by this Agreement not to exceed $1.5 million
in the aggregate; provided, however, that BBC shall not be required to
reimburse Community Bankshares for such expenses if at the time
of such termination Community Bankshares had materially breached
its representations, warranties or covenants or if the failure to
obtain such approvals, waivers or authorizations resulted as a
consequence of facts or circumstances relating to Community
Bankshares or its Subsidiaries.
(h) Any amounts required to be paid pursuant to this
Section 12.1 shall be made to the party entitled to receive such
amounts by wire transfer of immediately available funds to an
account designated by such party.
(i) In the event that a party shall fail to pay any
amount required to be paid under this Section 12.1, such amount
shall be increased to include the costs and expenses actually
incurred or accrued by the party entitled to receive such amount
(including, without, limitation, fees and expenses of counsel) in
connection with the collection under and enforcement of this
Section 12.1, together with interest on such unpaid amount,
commencing on the date that such amount became due, at a rate
equal to the rate of interest publicly announced from time to
time by Chase Manhattan, as such bank's prime rate plus 2.00%.
12.2 Binding Effect. Neither this Agreement nor any rights,
duties or obligations hereunder shall be assignable by Community
Bankshares, in whole or in part, and any attempted assignment in
violation of this prohibition shall be null and void. This
Agreement shall, however, be assignable by BBC to an affiliate of
BBC without the consent of Community Bankshares. Subject to the
foregoing, all of the terms and provisions hereof shall be
binding upon, and inure to the benefit of, the successors and
permitted assigns of the parties hereto.
12.3 Law Governing. This Agreement will be governed and
enforced in all respects, including validity, interpretation and
effect, by the Laws of the State of Florida without giving effect
to its principles of conflicts of laws.
12.4 Counterparts. This Agreement may be executed in
several counterparts and one or more separate documents, all of
which together shall constitute one and the same instrument with
the same force and effect as though all of the parties had
executed the same document.
12.5 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been
duly received (i) on the date given if delivered personally or by
facsimile, telecopier, cable, telegram or telex or (ii) on the
date received if sent by overnight delivery service or (iii) five
days after having been mailed by registered or certified mail
(return receipt requested), to the parties at the following
addresses (or at such other address for a party as shall be
specified by like notice):
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If either to BBC or BankAtlantic, addressed to:
BankAtlantic Bancorp, Inc. or BankAtlantic, A Federal
Savings Bank
1750 East Sunrise Boulevard
Fort Lauderdale, Florida 33304
Attn: Alan B. Levan
Facsimile: (954) 763-4764
With copies addressed to:
Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Attn: Alison W. Miller, Esq.
Facsimile: (305) 789-3395
If to Community Bankshares, addressed to:
Community Savings Bankshares, Inc.
660 US Highway One
North Palm Beach, Florida 33408
Attn: James B. Pittard, Jr.
Facsimile: (561) 881-4920
With a copy addressed to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W., 12th Floor
Washington, D.C. 20005
Attn: Raymond A. Tiernan, Esq.
Philip Ross Bevan, Esq.
Facsimile: (202) 347-2172
12.6 Entire Agreement. All exhibits and schedules referred
to in this Agreement are integral parts hereof, and this
Agreement, together with such exhibits and schedules, constitute
the entire agreement among the parties hereto with respect to the
matters contained herein and therein, and supersede all prior
agreements and understandings between the parties with respect
thereto.
12.7 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
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12.8 Knowledge of the Parties. Where any representation or
warranty contained in this Agreement is expressly qualified by
reference to the knowledge of any of the parties hereto, each of
the parties hereto acknowledges and confirms that it has made
reasonable inquiry as to the matters that are the subject of such
representations and warranties. Where reference is made to
Community Bankshares' knowledge or any similar phrase, such
reference shall be deemed to include the respective executive
officers and directors of Community Bankshares and each of its
Subsidiaries, all of whom shall be deemed to have conducted the
inquiry required in this Section 12.8.
12.9 Attorneys' Fees. In any action or proceeding brought
to enforce any provision of this Agreement, or where any
provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees and
expenses through all appeals in addition to any other remedy.
12.10 No Third Party Beneficiary. Except as permitted
in Sections 7.4 and 7.5 hereof, nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person or entity other than the parties hereto and
their respective heirs, personal representatives, legal
representatives, successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
12.11 Injunctive Relief. It is possible that remedies
at law may be inadequate and, therefore, the parties hereto shall
be entitled to equitable relief including, without limitation,
injunctive relief, specific performance or other equitable
remedies in addition to all other remedies provided hereunder or
available to the parties hereto at law or in equity.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
BANKATLANTIC BANCORP, INC.
By: /s/ Alan B. Levan
------------------------
Alan B. Levan
Chairman of the Board
CSB MERGER SUB, INC.
By: /s/ Alan B. Levan
------------------------
Alan B. Levan
Chairman of the Board
COMMUNITY SAVINGS BANKSHARES, INC.
By: /s/ Frederick A. Teed
------------------------
Frederick A. Teed
Chairman of the Board
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Appendix B
November 9, 2001
Board of Directors
Community Savings Bankshares, Inc.
660 U.S. Highway One
North Palm Beach, Florida 33408
Board of Directors:
You have requested that Friedman, Billings, Ramsey & Co.,
Inc. ("FBR") provide you with its opinion as to the
fairness, from a financial point of view, to the holders of
common stock ("Stockholders") of Community Savings
Bankshares, Inc. ("Community" or the "Company") of the
Consideration (as hereinafter defined) to be received by the
Stockholders pursuant to the Agreement and Plan of Merger by
and between Community, BankAtlantic Bancorp, Inc. and CSB
Merger Sub, Inc. (collectively, hereinafter referred to as
"BankAtlantic"), dated September 9, 2001 (the "Merger
Agreement"), pursuant to which Community will be merged with
and into BankAtlantic (the "Merger"). The Merger Agreement
provides, among other things, that BankAtlantic will acquire
all of Community's issued and outstanding shares of common
stock, including all allocated and unallocated shares of
common stock under the ESOP and all vested and unvested
shares underlying awards under Community's recognition and
retention plans. At the effective date of the Merger, each
share of Community common stock issued and outstanding
immediately prior to the effective time of the Merger shall
be converted into and exchangeable for the right to receive
consideration consisting of $19.00 per share, in cash (the
"Consideration"). In addition, each option to purchase a
share of Community common stock outstanding immediately
prior to the effective date of the Merger shall be converted
into and exchangeable for the right to receive in cash an
amount equal to the Consideration minus the price per share
at which such option is exercisable. The complete terms of
the proposed transaction are described in the Merger
Agreement, and this summary is qualified in its entirety by
reference thereto. The Merger Agreement will be considered
at a special meeting of the Stockholders of Community.
In delivering this opinion, FBR has completed the following
tasks:
1. reviewed BankAtlantic Annual Reports on Form 10-K filed
with the Securities and Exchange Commission (the "SEC") for
the fiscal years ended December 31, 2000 and 1999; reviewed
the BankAtlantic Annual Proxy Statement dated April 23,
2001;
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November 9, 2001
reviewed BankAtlantic Quarterly Reports on Form 10-Q
filed with the SEC for the fiscal quarters ended March 31,
2001 and June 30, 2001;
2. reviewed Community Annual Report to Stockholders for
the fiscal year ended December 31, 2000 and Community Annual
Reports on Form 10-K filed with the SEC for the fiscal years
ended December 31, 2000 and 1999; reviewed the Community
Annual Proxy Statement dated March 26, 2001; reviewed
Community Quarterly Reports on Form 10-Q filed with the SEC
for the quarters ended March 31, 2001 and June 30, 2001;
3. reviewed the reported market prices and trading
activity for Community common stock for the period December
16, 1998 through October 31, 2001;
4. discussed the financial condition, results of
operations, earnings projections, business and prospects of
Community with the management of Community;
5. compared the results of operations and financial
condition of Community and BankAtlantic with those of
certain publicly-traded financial institutions (or their
holding companies) that FBR deemed to be reasonably
comparable to Community or BankAtlantic, as the case may be;
6. reviewed and discussed the pro forma regulatory capital
ratio computation provided by the management of
BankAtlantic;
7. reviewed and discussed BankAtlantic's regulatory
examinations with management of BankAtlantic, including
safety and soundness and CRA ratings;
8. reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions that FBR
deemed to be reasonably comparable to the Merger;
9. reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions entered into
by BankAtlantic;
10. reviewed a copy of the Merger Agreement; and
11. performed such other analyses and reviewed and analyzed
such other information as FBR deemed appropriate.
In rendering this opinion, FBR did not assume responsibility
for independently verifying, and did not independently
verify, any financial or other information concerning
Community and BankAtlantic furnished to it by Community or
BankAtlantic, or the
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November 9, 2001
publicly-available financial and other information regarding
Community, BankAtlantic and other financial institutions (or
their holding companies). FBR has assumed that all such
information is accurate and complete and has no reason to
believe otherwise. FBR has further relied on the assurances
of management of Community and BankAtlantic that they are not
aware of any facts that would make such financial or other
information relating to such entities inaccurate or misleading.
With respect to financial forecasts for Community provided to
FBR by its management, FBR has assumed, for purposes of this
opinion, that the forecasts have been reasonably prepared on
bases reflecting the best available estimates and judgments of
such management at the time of preparation as to the future
financial performance of Community. FBR has assumed that
there has been no undisclosed material change in Community's
assets, financial condition, results of operations, business
or prospects since June 30, 2001. FBR did not undertake an
independent appraisal of the assets or liabilities of
Community nor was FBR furnished with any such appraisals.
FBR is not an expert in the evaluation of allowances for
loan losses, was not requested to and did not review such
allowances, and was not requested to and did not review any
individual credit files of Community. FBR's conclusions and
opinion are necessarily based upon economic, market and
other conditions and the information made available to FBR
as of the date of this opinion. FBR expresses no opinion on
matters of a legal, regulatory, tax or accounting nature
related to the Merger.
FBR, as part of its institutional brokerage, research and
investment banking practice, is regularly engaged in the
valuation of securities and the evaluation of transactions
in connection with mergers and acquisitions of commercial
banks, savings institutions and financial institution
holding companies, initial and secondary offerings and
mutual-to-stock conversions of savings institutions, as well
as business valuations for other corporate purposes for
financial institutions and real estate related companies.
FBR has experience in, and knowledge of, the valuation of
bank and thrift securities in Florida and the rest of the
United States.
FBR has acted as a financial advisor to Community in
connection with the Merger and will receive a fee for
services rendered, of which 75% is contingent upon the
consummation of the Merger and 25% is payable at the time
the Merger Agreement is executed. In July 2001, FBR acted
as underwriter and financial advisor to BankAtlantic in a
capital raising transaction for which FBR received
compensation for its services. Also, in February 2000, FBR
acted as a financial advisor to BankAtlantic in connection
with a debt tender for which FBR received compensation for
its services. In addition, FBR publishes research reports
on Community and BankAtlantic. FBR has been asked to provide
and expects to provide investment banking services to
BankAtlantic for which FBR will receive compensation.
Furthermore, FBR may effect transactions in the securities
of Community or BankAtlantic for its own account and/or for
the accounts of its customers and, accordingly, may at any
time hold long or short positions in such
B-3
November 9, 2001
securities. From time to time, principals and/or employees
of FBR may also have positions in such securities.
Based upon and subject to the foregoing, as well as any such
other matters as we consider relevant, it is FBR's opinion,
as of the date hereof, that the Merger is fair, from a
financial point of view, to the Stockholders of Community.
This letter is solely for the information of the Board of
Directors and Stockholders of Community and may not be
relied upon by any other person or used for any other
purpose, reproduced, disseminated, quoted from or referred
to without FBR's prior written consent; provided, however,
this letter may be referred to and reproduced in its
entirety in proxy materials sent to the Stockholders in
connection with the solicitation of approval for the Merger.
Very truly yours,
/s/ FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
B-4
APPENDIX C
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
SECTION 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to Section 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinary meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to '251 (other than a merger effected pursuant to Section
251(g) of this title), Section 252, Section 254, Section 257, Section 258,
Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal rights shall
be available for any shares of stock of the constituent corporation surviving
a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
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a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts described
in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially
all of the assets of the corporation. If the certificate of incorporation
contains such a provision, the procedures of this section, including those set
forth in subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who
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has complied with this subsection and has not voted in favor of or consented
to the merger or consolidation of the date that the merger or consolidation
has become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for any
or all shares of such class or series of stock of such constituent corporation,
and shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all
such holders of any class or series of stock of a constituent corporation that
are entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective date
of the merger or consolidation notifying each of the holders of any class or
series of stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however,
that if such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the corporation
that is required to give either notice that such notice has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
For purposes of determining the stockholders entitled to receive either
notice, each constituent corporation may fix, in advance, a record date that
shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the effective
date of the merger or consolidation, any stockholder who has complied with the
requirements of subsections
C-3
(a) and (d) hereof, upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor of
the merger or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. Such
written statement shall be mailed to the stockholder within 10 days after such
stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown on the list
at the addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof shall
be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted
C-4
such stockholder's certificates of stock to the Register in Chancery, if such
is required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under
this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to
the corporation of the certificates representing such stock. The Court's
decree may be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting corporation be a corporation of
this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of such stockholder=s demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation. (Last amended
by Ch. 339, L. '98, eff. 7-1-98.)
C-5
REVOCABLE PROXY
COMMUNITY SAVINGS BANKSHARES, INC. Please mark [x] FOR
SPECIAL MEETING OF SHAREHOLDERS your votes as
indicated in
this example
The undersigned hereby appoints J. Sheldon Clark, Ronald P. Jaworski and
James B. Pittard, Jr., with full power of substitution, to act as attorneys
and proxies for the undersigned to vote all shares of Community Savings
Bankshares, Inc. common stock which the undersigned is entitled to vote at
Community Savings Bankshares, Inc.'s Special Meeting of Shareholders ("Special
Meeting"), to be held on Monday, December 17, 2001, at The Embassy Suites PGA,
4350 PGA Boulevard, Palm Beach Gardens, Florida at 1:30 p.m., Eastern Time,
and at any and all adjournments and postponements thereof, as follows:
[MAP OF MEETING LOCATION]
EMBASSY SUITES
4350 PGA Blvd.
Palm Beach Gardens, FL 33410
Telephone 561-622-1000
Location Conveniently located at Interstate 95 exit 57B PGA Blvd.
west, just 1 mile from the Florida Turnpike exit 109.
1. Approval of the Agreement and Plan of Merger, FOR AGAINST ABSTAIN
dated as of September 9, 2001, by and between [ ] [ ] [ ]
BankAtlantic Bancorp, Inc., CSB Merger Sub,
Inc. and Community Savings Bankshares, Inc.
2. Approval of motion to adjourn the Special FOR AGAINST ABSTAIN
Meeting, if necessary, to solicit additional [ ] [ ] [ ]
proxies with respect to approval of the
Agreement and Plan of Merger.
Your Board of Directors recommends a vote I plan to attend the YES NO
"FOR" proposals 1 and 2. Community Savings [ ] [ ]
Bankshares, Inc. Special Meeting
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Special Meeting or any adjournment or
postponement thereof.
This proxy will be voted as directed. If you date, sign and return this proxy
but do not provide specific voting instructions, this proxy will be voted FOR
Proposals 1 and 2. If any other business is presented at the Special Meeting,
this proxy will be voted by those named in this proxy in their best judgment.
At the present time, the Board of Directors knows of no other business to be
presented at the Special Meeting. The shareholder may revoke this proxy at
any time before it is voted.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned acknowledges receipt from Community Savings Bankshares
Inc., prior to the execution of this proxy, of Notice of the Special Meeting,
the Proxy Statement and other materials.
Dated:_____________________ ____________________________
Print Name of Shareholder(s)
___________________________ ____________________________
Signature of Shareholder Signature of Shareholder
Please sign exactly as your name appears above on this form. When signing as
attorney, executor, administrator, trustee, guardian or corporate officer,
please give your full title. Only one signature is required in the case of a
joint account.
- -------------------------------------------------------------------------------
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
- -------------------------------------------------------------------------------
___________________________________
VOTE BY TELEPHONE
QUICK EASY IMMEDIATE
___________________________________
YOUR VOTE IS IMPORTANT! -- YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll free 1-800-840-1208 on a touch tone telephone
24 hours a day-7 days a week (until 4:00p.m., Eastern Time, on December
14, 2001).
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control number, which is located in the box
in the lower right hand corner of this form.
You will hear the following instructions:
_______________________________________________________________________
Option 1: To vote as the Board of Directors recommends on ALL proposals,
Press 1. If you wish to vote on each proposal separately, Press 0.
_______________________________________________________________________
When you Press 1, your vote will be confirmed and cast as
you directed. END OF CALL.
_________________________________________________________________________
Option 2: If you selected 0 to vote on each proposal separately, you will
hear the following instructions:
Proposal 1: To VOTE FOR, Press 1;
To VOTE AGAINST nominees, Press 9;
To ABSTAIN, Press 0.
You may make your selection at any time.
Proposal 2: To VOTE FOR, Press 1;
To VOTE AGAINST, Press 9;
To ABSTAIN, Press 0;
You may make your selection at any time.
When asked, please confirm by pressing 1.
_______________________________________________________________________
2. TO VOTE BY PROXY: Mark, sign and date your proxy card and return promptly
in the enclosed envelope.
NOTE: IF YOU VOTE BY TELEPHONE, THERE IS NO NEED TO MAIL BACK YOUR
PROXY CARD. THANK YOU FOR VOTING.