Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CITIZENS BANCSHARES CORPORATION,
CITIZENS TRUST BANK,
CFS BANCSHARES, INC.,
AND
CITIZENS FEDERAL SAVINGS BANK
TABLE OF CONTENTS
Page
Preamble...................................................... 1
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER.................... 1
1.1 Merger.............................................. 1
1.2 Time and Place of Closing........................... 2
1.3 Effective Time...................................... 2
ARTICLE 2 TERMS OF MERGER.................................... 2
2.1 Articles of Incorporation........................... 2
2.2 Bylaws.............................................. 2
2.3 Directors and Officers.............................. 2
2.4 Name................................................ 3
ARTICLE 3 MANNER OF CONVERTING SHARES......................... 3
3.1 Conversion of Shares................................ 3
3.2 Anti-Dilution Provisions............................ 3
3.3 Shares Held by CFSB or CBC.......................... 3
3.4 Dissenting Shareholders............................. 3
3.5 CFSB Options........................................ 4
ARTICLE 4 EXCHANGE OF SHARES.................................. 4
4.1 Exchange Procedures................................. 4
4.2 Rights of Former CFSB Shareholders.................. 4
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CFSB.............. 5
5.1 Organization, Standing, and Power................... 5
5.2 Authority; No Breach By Agreement................... 5
5.3 Capital Stock....................................... 6
5.4 CFSB Subsidiaries................................... 6
5.5 Financial Statements................................ 7
5.6 Absence of Undisclosed Liabilities.................. 7
5.7 Absence of Certain Changes or Events................ 7
5.8 Tax Matters......................................... 7
5.9 Allowance for Possible Loan Losses.................. 8
5.10 Assets.............................................. 8
5.11 Environmental Matters............................... 9
5.12 Compliance with Laws................................ 9
5.13 Labor Relations..................................... 10
5.14 Employee Benefit Plans.............................. 10
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5.15 Material Contracts.................................. 12
5.16 Legal Proceedings................................... 12
5.17 Reports............................................. 12
5.18 Statements True and Correct......................... 13
5.19 Regulatory Matters.................................. 13
5.20 Charter Provisions.................................. 13
5.21 Derivatives Contracts............................... 13
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF CBC............... 14
6.1 Organization, Standing, and Power................... 14
6.2 Authority; No Breach By Agreement................... 14
6.3 Necessary Capital................................... 15
6.4 CTB................................................. 15
6.5 Financial Statements................................ 15
6.6 Absence of Undisclosed Liabilities.................. 16
6.7 Absence of Certain Changes or Events................ 16
6.8 Statements True and Correct......................... 16
6.9 Regulatory Matters.................................. 16
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION............ 17
7.1 Affirmative Covenants of CFSB....................... 17
7.2 Negative Covenants of CFSB.......................... 17
7.3 Adverse Changes in Condition........................ 19
7.4 Reports............................................. 19
ARTICLE 8 ADDITIONAL AGREEMENTS............................... 19
8.1 Applications........................................ 19
8.2 Filings with State Offices.......................... 19
8.3 Agreement as to Efforts to Consummate............... 19
8.4 Investigation and Confidentiality................... 19
8.5 Press Releases...................................... 20
8.6 Acquisition Proposals............................... 20
8.7 Indemnification..................................... 21
8.8 Continuing Directors' and Officers' Liability
Coverage........................................... 21
8.9 Employee Benefits Matters........................... 22
8.10 Change of Control Agreements........................ 23
8.11 Exemption from Liability Under Section 16(b)........ 23
8.12 Organization of CBC Interim Corporation............. 24
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE... 24
9.1 Conditions to Obligations of Each Party............. 24
9.2 Conditions to Obligations of CBC.................... 24
9.3 Conditions to Obligations of CFSB................... 25
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ARTICLE 10 TERMINATION........................................ 26
10.1 Termination........................................ 26
10.2 Effect of Termination.............................. 27
10.3 Non-Survival of Representations and Covenants...... 27
ARTICLE 11 MISCELLANEOUS...................................... 27
11.1 Definitions........................................ 27
11.2 Expenses........................................... 34
11.3 Brokers and Finders................................ 35
11.4 Entire Agreement................................... 35
11.5 Amendments......................................... 35
11.6 Waivers............................................ 35
11.7 Assignment......................................... 36
11.8 Notices............................................ 36
11.9 Governing Law...................................... 37
11.10 Counterparts....................................... 37
11.11 Captions........................................... 37
11.12 Enforcement of Agreement........................... 37
11.13 Severability....................................... 37
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LIST OF EXHIBITS
----------------
Exhibit Number Description
- -------------- -----------
1. Form of Employment Agreement (Section 8.9(f)).
2. Form of Agreement of Directors of CFSB (Section 9.2(d)).
3. Form of Claims/Indemnification Letter (Section 9.2(e)).
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AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of May 30, 2002 by and between CITIZENS
BANCSHARES CORPORATION, INC. ("CBC"), a corporation organized and
existing under the laws of the State of Georgia, with its
principal office located in Atlanta, Georgia; CITIZENS TRUST BANK
("CTB"), a Georgia bank with its principal office located in
Atlanta, Georgia; CFS BANCSHARES, INC. ("CFSB"), a corporation
organized and existing under the laws of the State of Delaware,
with its principal office located in Birmingham, Alabama; and
CITIZENS FEDERAL SAVINGS BANK ("Citizens Federal"), a federal
savings bank with its principal office located in Birmingham,
Alabama.
Preamble
--------
The Boards of Directors of CBC, CTB, CFSB and Citizens
Federal are of the opinion that the transactions described herein
are in the best interests of the parties and their respective
shareholders. CBC is the sole shareholder of CTB. CFSB is the
sole shareholder of Citizens Federal. This Agreement provides for
the acquisition of CFSB and Citizens Federal by CBC as described
in Article 1 below. At the Effective Time of such merger as
described in Article 1 below, the outstanding shares of capital
stock of CFSB shall be converted into the right to receive cash
as described in Article 3 below. CBC shall conduct the business
and operations of CFSB, and CTB shall conduct the business and
operations of Citizens Federal. The transactions described in
this Agreement are subject to the approvals by the shareholders
of CFSB, the Federal Reserve Board, the Georgia Department of
Banking and Finance, the Office of Thrift Supervision, and the
satisfaction of certain other conditions described in this
Agreement.
Certain terms used in this Agreement are defined in Section
11.1 of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants and agreements set forth
herein, the Parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, CTB Interim Corporation, a
Georgia corporation which CTB will cause to be organized as a
wholly-owned subsidiary of CTB, will be merged into CFSB (the
"Interim Merger"). Immediately following the Interim Merger,
CFSB will be merged with and into CBC in accordance with the
provisions of Section 14-2-1101 of the GBCC and Section 252 of
the DGCL and with the effect provided for in Section 14-2-1156 of
the GBCC and Section 259 of the DGCL (the "Merger"). CBC shall
be the Surviving Corporation resulting from the Merger.
Immediately following the Merger, Citizens Federal will be merged
with and into CTB, in accordance with the provisions of Section
7-1-530 of the FICG and 12 C.F.R. Section 563.22, and with the
effect provided for in Section 7-1-536 of the FICG (the "Bank
Merger"). CTB shall be the Surviving Bank resulting from the
Bank Merger. The Interim Merger, the Merger and the Bank Merger
shall be consummated pursuant to the terms of this Agreement,
which has been approved and adopted by the respective Boards of
Directors of the Parties.
1.2 Time and Place of Closing. The Closing will take place
at 10:00 a.m. on the date that the Effective Time occurs (or the
immediately preceding day if the Effective Time is earlier than
10:00 a.m.), or at such other time as the Parties, acting through
their chief executive officers, may mutually agree. The place of
Closing shall be at the offices of Powell, Goldstein, Frazer &
Murphy LLP in Atlanta, Georgia, or such other place as may be
mutually agreed upon by the Parties.
1.3 Effective Time. The Interim Merger shall become
effective on the date and time the Certificate of Merger and the
Articles of Merger reflecting the Interim Merger shall become
effective with the Secretary of State of the State of Georgia and
the Secretary of State of the State of Delaware (the "Effective
Time"). The Merger and the Bank Merger shall then become
effective immediately following the Effective Time on the date
and at the time the Certificates of Merger reflecting the Merger
and the Bank Merger shall become effective with the Secretary of
State of the State of Georgia. Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in
writing by the chief executive officer of each Party, the
Effective Time shall occur on the fifth business day following
the last to occur of (a) the effective date (including expiration
of any applicable waiting period) of the last required Consent of
any Regulatory Authority having authority over and approving or
exempting the Merger, or (b) the date on which the shareholders
of CFSB approve this Agreement; or such other date as may be
mutually agreed upon in writing by the chief executive officer of
each Party.
ARTICLE 2
TERMS OF MERGER
---------------
2.1 Articles of Incorporation. The Certificate of
Incorporation of CFSB in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the
resulting corporation after the Interim Merger. The Articles of
Incorporation of CBC in effect immediately prior to the Merger
shall be the Articles of Incorporation of the Surviving
Corporation until otherwise amended or repealed. The Articles of
Incorporation of CTB in effect immediately prior to the Bank
Merger shall be the Articles of Incorporation of the Surviving
Bank until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of CFSB in effect immediately prior
to the Effective Time shall be the Bylaws of the resulting
corporation after the Interim Merger. The Bylaws of CBC in effect
immediately prior to the Merger shall be the Bylaws of the
Surviving Corporation until otherwise amended or repealed. The
Bylaws of CTB in effect immediately prior to the Bank Merger
shall be the Bylaws of the Surviving Bank until otherwise
amended or repealed.
2.3 Directors and Officers.
(a) The directors of the Surviving Corporation and the
Surviving Bank immediately following the Effective Time shall
consist of the directors of CBC and CTB, respectively, plus Bunny
Stokes, Jr., all of whom shall serve in accordance with the
Bylaws of the Surviving Corporation and of the Surviving Bank,
respectively.
(b) The officers of the Surviving Corporation and the
Surviving Bank immediately following the Effective Time shall
consist of the officers of CBC and CTB, respectively, plus Bunny
Stokes, Jr. and any others who may be appointed by CBC.
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2.4 Name. After the Merger, the Surviving Corporation will
operate under the name "Citizens Bancshares Corporation." After
the Bank Merger, the Surviving Bank will operate under the name
"Citizens Trust Bank."
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 Conversion of Shares. Subject to the provisions of
this Article 3, at the Effective Time, by virtue of the Interim
Merger and without any action on the part of the holders thereof
the shares of the constituent corporations shall be converted as
follows:
(a) Each share of CBC Common Stock issued and
outstanding immediately prior to the Effective Time shall remain
issued and outstanding from and after the Effective Time.
(b) Each share of CFSB Common Stock other than
Dissenting Shares (defined at Section 3.4 below) shall be
converted into the right to receive $64.62 in cash, subject to
adjustment as set forth below (the "Merger Consideration"). If
the Effective Time is subsequent to August 31, 2002, the per
share Merger Consideration will be increased as follows: to
$64.69 if the Effective Time is in September 2002, to $64.76 if
the Effective Time is in October 2002, to $64.83 if the Effective
Time is in November 2002, and to $64.90 if the Effective Time is
in December 2002. Each CFSB Option Share shall be converted into
the right to receive cash equal to the Merger Consideration minus
the per share exercise price.
3.2 Anti-Dilution Provisions. In the event CFSB changes
the number of shares of CFSB Common Stock or CFSB Option Shares,
respectively, issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend or similar
recapitalization with respect to such stock and the record date
therefor (in the case of a stock dividend) or the effective date
therefor (in the case of a stock split or similar
recapitalization) shall be prior to the Effective Time, the
Merger Consideration shall be proportionately adjusted.
3.3 Shares Held by CFSB or CBC. Each of the shares of CFSB
Common Stock held by any CFSB Company or by any CBC Company, in
each case other than in a fiduciary capacity or as a result of
debts previously contracted, shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange
therefor.
3.4 Dissenting Shareholders. Any holder of shares of CFSB
Common Stock ("Dissenting Shares") who perfects such holder's
dissenters' rights of appraisal in accordance with and as
contemplated by Section 262 of the DGCL shall be entitled to
receive the value of such shares in cash as determined pursuant
to such provisions of Law; provided, that no such payment shall
be made to any dissenting shareholder unless and until such
dissenting shareholder has complied with the applicable
provisions of the DGCL and surrendered to CBC the certificate or
certificates representing the shares for which payment is being
made. In the event that after the Effective Time a dissenting
shareholder of CFSB fails to perfect, or effectively withdraws or
loses, such holder's right to appraisal and of payment for such
holder's shares, the Surviving Bank shall issue and deliver the
consideration to which such holder of shares of CFSB Common Stock
is entitled under this Article 3 (without interest) upon
surrender by such holder of the certificate or certificates
representing shares of CFSB Common Stock held by such holder.
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3.5 CFSB Options. At the Effective Time, each CFSB Option
granted pursuant to the CFSB Option Plan that is then vested,
outstanding and unexercised shall be canceled, and in lieu
thereof the holder of such CFSB Option shall be paid in cash an
amount equal to the product of (a) the number of CFSB Option
Shares subject to such vested option at the Effective Time and
(b) the amount by which the per share Merger Consideration
exceeds the exercise price per share of such CFSB Option, net of
any cash which must be withheld under federal and state income
and employment tax requirements.
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 Exchange Procedures. Unless the parties otherwise
agree, within three business days after the Effective Time, CBC
shall cause a qualified exchange agent reasonably satisfactory to
CFSB (the "Exchange Agent") to mail to the former holders of CFSB
Common Stock appropriate transmittal materials which shall
specify that delivery shall be effected, and risk of loss and
title to the certificates theretofore representing shares of CFSB
Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent. After the Effective Time,
each holder of shares of CFSB Common Stock (other than shares as
to which dissenters' rights have been perfected as provided in
Section 3.4 of this Agreement) issued and outstanding at the
Effective Time shall surrender the certificate or certificates
representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement. The
Exchange Agent shall not be obligated to deliver the
consideration to which any former holder of CFSB Common Stock is
entitled as a result of the Merger until such holder surrenders
his or her certificate or certificates representing the shares of
CFSB Common Stock for exchange as provided in this Section 4.1.
The certificate or certificates of CFSB Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may
require. Any other provision of this Agreement notwithstanding,
CBC shall not be liable to a holder of CFSB Common Stock for any
amounts paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property Law.
4.2 Rights of Former CFSB Shareholders. At the Effective
Time, the stock transfer books of CFSB shall be closed as to
holders of CFSB Common Stock immediately prior to the Effective
Time and no transfer of CFSB Common Stock by any such holder
shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this
Agreement, each certificate theretofore representing shares of
CFSB Common Stock (other than shares as to which dissenters'
rights have been perfected as provided in Section 3.4 of this
Agreement) shall from and after the Effective Time represent for
all purposes only the right to receive the consideration provided
in Section 3.1 of this Agreement in exchange therefor. Any
shareholders of CFSB who have not theretofore complied with this
Article 4 shall thereafter look only to CBC for payment of the
consideration provided in Section 3.1 of this Agreement in
exchange therefor.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CFSB
--------------------------------------
CFSB and Citizens Federal hereby represent and warrant to
CBC and CTB as follows:
5.1 Organization, Standing, and Power. CFSB is a
corporation duly organized, validly existing, and in good
standing under the Laws of the State of Delaware and is duly
registered as a savings and loan holding company under the Home
Owners' Loan Act. Citizens Federal, which is a wholly-owned
subsidiary of CFSB, is a federal savings bank duly organized and
in good standing under the laws of the United States of America.
CFSB has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its
Assets. CFSB is duly qualified or licensed to transact business
as a foreign corporation in good standing in the states of the
United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it
to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CFSB.
5.2 Authority; No Breach By Agreement.
(a) CFSB and Citizens Federal have the corporate power
and authority necessary to execute, deliver and perform their
obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been
duly and validly authorized by all necessary corporate action in
respect thereof on the part of CFSB and Citizens Federal, subject
to the approval of this Agreement and the transactions
contemplated hereby by the holders of a majority of the
outstanding shares of CFSB Common Stock, which is the only
shareholder vote required for approval of this Agreement and
consummation of the Merger by CFSB. Subject to such requisite
shareholder approval and any approvals required of Regulatory
Authorities, this Agreement represents a legal, valid and binding
obligation of CFSB and Citizens Federal, enforceable against CFSB
and Citizens Federal in accordance with its terms (except in all
cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar
Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of
the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this
Agreement by CFSB or Citizens Federal, nor the consummation by
CFSB or Citizens Federal of the transactions contemplated hereby,
nor compliance by CFSB or Citizens Federal with any of the
provisions hereof will (i) conflict with or result in a breach of
any provision of CFSB's Certificate of Incorporation or Bylaws or
Citizens Federal's Charter or Bylaws, or (ii) except as disclosed
in Section 5.2(b) of the CFSB Disclosure Memorandum, constitute
or result in a Default under, or require any Consent pursuant to,
or result in the creation of any Lien on any Asset of any CFSB
Company under, any Contract or Permit of any CFSB Company, where
such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CFSB, or (iii) subject to receipt of
the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any CFSB
Company or any of their respective Assets.
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(c) Other than in connection or compliance with the
provisions of the Securities Laws, and applicable state corporate
and securities Laws, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with
the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other
than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CFSB, no notice to,
filing with, or Consent of any public body or authority is
necessary for the consummation by CFSB of the Merger and the
other transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of CFSB consists of
1,000,000 shares of CFSB Common Stock, of which 139,220 shares
are issued and outstanding as of the date of this Agreement, and
100,000 shares of preferred stock, none of which are issued and
outstanding as of the date of this Agreement. All of the issued
and outstanding shares of Capital Stock of CFSB are duly and
validly issued and outstanding and are fully paid and
nonassessable under the DGCL. None of the outstanding shares of
Capital Stock of CFSB has been issued in violation of any
preemptive rights of the current or past shareholders of CFSB.
CFSB has reserved 13,922 shares of CFSB Common Stock for issuance
under the CFSB Option Plan, pursuant to which options to purchase
not more than 10,450 shares of CFSB Common Stock are outstanding
as of the date of this Agreement and pursuant to which options to
purchase not more than 10,450 shares of CFSB Common Stock will be
outstanding at the Effective Time.
(b) Except as set forth in Section 5.3(a) of this
Agreement, or as disclosed in Section 5.3 of the CFSB Disclosure
Memorandum, there are no shares of capital stock or other equity
securities of CFSB outstanding and no outstanding Rights relating
to the capital stock of CFSB.
5.4 CFSB Subsidiaries. CFSB has disclosed in Section 5.4
of the CFSB Disclosure Memorandum all of the CFSB Subsidiaries as
of the date of this Agreement. Except as disclosed in
Section 5.4 of the CFSB Disclosure Memorandum, CFSB or one of its
Subsidiaries owns all of the issued and outstanding shares of
capital stock of each CFSB Subsidiary. No equity securities of
any CFSB Subsidiary are or may become required to be issued
(other than to another CFSB Company) by reason of any Rights, and
there are no Contracts by which any CFSB Subsidiary is bound to
issue (other than to another CFSB Company) additional shares of
its capital stock or Rights, or by which any CFSB Company is or
may be bound to transfer any shares of the capital stock of any
CFSB Subsidiary (other than to another CFSB Company), and there
are no Contracts by which any CFSB Company is bound to issue
(other than to another CFSB Company) additional shares of its
capital stock. There are no Contracts relating to the rights of
any CFSB Company to vote or to dispose of any shares of the
capital stock of any CFSB Subsidiary. All of the shares of
capital stock of each CFSB Subsidiary held by a CFSB Company are
fully paid and nonassessable under the applicable Law of the
jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the CFSB Company free and clear of any
Lien. Each CFSB Subsidiary is either a bank, a trust company, a
savings association or a corporation and is duly organized,
validly existing, and (as to corporations) in good standing under
the Laws of the jurisdiction in which it is organized and has the
corporate power and authority necessary for it to own, lease and
operate its Assets and to carry on its business as now conducted.
Each CFSB Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the states
of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such
jurisdictions in which
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the failure to be so qualified or licensed is not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on CFSB. Each CFSB Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and
the deposits in which are insured to applicable limits by the Bank
Insurance Fund or the Savings Association Insurance Fund, as appropriate.
5.5 Financial Statements. CFSB has included in Section 5.5
of the CFSB Disclosure Memorandum copies of all CFSB Financial
Statements for the periods ended on or before March 31, 2002, and
will deliver to CBC copies of all CFSB Financial Statements
prepared subsequent to the date hereof. The CFSB Financial
Statements (as of the dates thereof and for the periods covered
thereby) (a) are, or if dated after the date of this Agreement
will be, in accordance with the books and records of the CFSB
Companies, which are or will be, as the case may be, complete and
correct and which have been or will have been, as the case may
be, maintained in accordance with good business practices, and
(b) present or will present, as the case may be, fairly the
consolidated financial position of the CFSB Companies as of the
dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows of the CFSB
Companies for the periods indicated, in accordance with GAAP
(subject to any exceptions as to consistency specified therein or
as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end
adjustments that are not material in amount or effect).
5.6 Absence of Undisclosed Liabilities. No CFSB Company
has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CFSB except Liabilities which are reflected or otherwise accrued
or reserved against in the consolidated balance sheets of CFSB as
of March 31, 2002, included in the CFSB Financial Statements or
reflected in the notes thereto. No CFSB Company has incurred or
paid any Liability since March 31, 2002, except for such
Liabilities reflected or otherwise accrued or reserved against in
the CFSB Financial Statements, or as may have been incurred or
paid in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CFSB.
5.7 Absence of Certain Changes or Events. Since March 31,
2002, except as disclosed in Section 5.7 of the CFSB Disclosure
Memorandum, (a) there have been no events, changes or occurrences
which have had, or are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on CFSB, and (b) the
CFSB Companies have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of
the covenants and agreements of CFSB provided in Article 7 of
this Agreement.
5.8 Tax Matters.
(a) All Tax returns required to be filed by or on
behalf of any of the CFSB Companies have been timely filed or
requests for extensions have been timely filed and have not
expired for periods ended on or before December 31, 2001, except
to the extent that all such failures to file, taken together, are
not reasonably likely to have a Material Adverse Effect on CFSB
and all returns filed are complete and accurate in all material
respects to the Knowledge of CFSB. All Taxes shown as due on
filed returns have been paid. There is no audit, examination,
deficiency or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on
CFSB, except as reserved against in the
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CFSB Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 5.8(a) of the CFSB Disclosure
Memorandum. All material Taxes and other Liabilities due with respect
to completed and settled examinations or concluded Litigation have been paid.
(b) Except as disclosed in Section 5.8(b) of the CFSB
Disclosure Memorandum, none of the CFSB Companies has executed an
extension or waiver of any statute of limitations on the
assessment or collection of any Tax due that is currently in
effect, and no unpaid tax deficiency has been asserted in writing
against or with respect to any CFSB Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CFSB.
(c) Adequate provision for any Taxes due or to become
due for any of the CFSB Companies for the period or periods
through and including the date of the respective CFSB Financial
Statements has been made and is reflected on such CFSB Financial
Statements.
(d) Deferred Taxes of the CFSB Companies have been
provided for in accordance with GAAP.
(e) Each of the CFSB Companies is in compliance in all
material respects with, and its records contain all information
and documents (including, without limitation, properly completed
IRS Forms W-9) necessary to comply in all material respects with,
all applicable information reporting and Tax withholding
requirements under federal, state and local Tax Laws, and such
records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code,
except for such instances of noncompliance and such omissions as
are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CFSB.
5.9 Allowance for Possible Loan Losses. The allowance for
possible loan or credit losses (the "Allowance") shown on the
consolidated balance sheets of CFSB included in the most recent
CFSB Financial Statements dated prior to the date of this
Agreement was, and the Allowance shown on the consolidated
balance sheets of CFSB included in the CFSB Financial Statements
as of dates subsequent to the execution of this Agreement will
be, as of the dates thereof, adequate (within the meaning of GAAP
and applicable regulatory requirements or guidelines) to provide
for losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivables) of the CFSB
Companies and other extensions of credit (including letters of
credit and commitments to make loans or extend credit) by the
CFSB Companies as of the dates thereof except where the failure
of such Allowance to be so adequate is not reasonably likely to
have a Material Adverse Effect on CFSB.
5.10 Assets. Except as disclosed in Section 5.10 of the
CFSB Disclosure Memorandum or as disclosed or reserved against in
the CFSB Financial Statements, the CFSB Companies have good and
marketable title, free and clear of all Liens, to all of their
respective Assets. All material tangible properties used in the
businesses of the CFSB Companies are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with CFSB's past practices. All
Assets which are material to CFSB's business on a consolidated
basis, held under leases or subleases by any of the CFSB
Companies, are held under valid Contracts enforceable in
accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws affecting the
enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court
before which any proceedings may be brought), and each such
Contract is in full force and effect. CFSB currently maintains
insurance in amounts, scope, and
8
coverage as disclosed in Section 5.10 of the CFSB Disclosure Memorandum.
CFSB has not received written notice from any insurance carrier that
(a) such insurance will be cancelled or that coverage thereunder will
be reduced or eliminated, or (b) premium costs with respect to such
policies of insurance will be substantially increased. Except as disclosed
in Section 5.10 of the CFSB Disclosure Memorandum, to the
Knowledge of CFSB, there are presently no claims pending under
such policies of insurance and no notices have been given by CFSB
under such policies. The Assets of the CFSB Companies include
all assets required to operate the business of the CFSB Companies
as presently conducted.
5.11 Environmental Matters.
(a) Except as disclosed in Section 5.11(a) of the CFSB
Disclosure Memorandum, to the Knowledge of CFSB, each CFSB
Company, its Participation Facilities and its Loan Properties
are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CFSB.
(b) To the Knowledge of CFSB, there is no Litigation
pending or threatened before any court, governmental agency or
authority or other forum in which any CFSB Company or any of its
Loan Properties or Participation Facilities has been or, with
respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or
(ii) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not
occurring at, on, under or involving a site owned, leased or
operated by any CFSB Company or any of its Loan Properties or
Participation Facilities, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on CFSB and to the
Knowledge of CFSB, there is no reasonable basis for any such
Litigation.
(c) Except as disclosed in Section 5.11(c) of the CFSB
Disclosure Memorandum, to the Knowledge of CFSB, there have been
no releases of Hazardous Material or oil in, on, under or
affecting any Participation Facility or Loan Property, except
such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CFSB.
5.12 Compliance with Laws. Each CFSB Company has in effect
all Permits necessary for it to own, lease or operate its Assets
and to carry on its business as now conducted, except for those
Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CFSB, and there has occurred no Default under any such Permit,
other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CFSB. Except as disclosed in Section 5.12 of the CFSB Disclosure
Memorandum, no CFSB Company:
(a) is in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business,
except for violations which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CFSB; and
(b) has received any notification or communication
from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i)
asserting that any CFSB Company is not in compliance with any of
the Laws or Orders which such governmental authority or
Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CFSB, (ii) threatening to revoke any
Permits, the revocation of which is reasonably likely to have,
9
individually or in the aggregate, a Material Adverse Effect on
CFSB, or (iii) requiring any CFSB Company to enter into or
consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding,
or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve
policies, its management, or the payment of dividends.
5.13 Labor Relations. No CFSB Company is the subject of any
Litigation asserting that it or any other CFSB Company has
committed an unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state law) or seeking
to compel it or any other CFSB Company to bargain with any labor
organization as to wages or conditions of employment, nor is
there any strike or other labor dispute involving any CFSB
Company, pending or, to its Knowledge, threatened, nor, to its
Knowledge, is there any activity involving any CFSB Company's
employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 Employee Benefit Plans.
(a) CFSB has disclosed in Section 5.14 of the CFSB
Disclosure Memorandum and delivered or made available to CBC
prior to the execution of this Agreement copies in each case of
all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation,
bonus, or other incentive plans, all other written employee
programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all
other employee benefit plans or fringe benefit plans, including,
without limitation, "employee benefit plans" as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained
by, sponsored in whole or in part by, or contributed to by any
CFSB Company or ERISA Affiliate thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate
(collectively, the "CFSB Benefit Plans"). Any of the CFSB
Benefit Plans which is an "employee pension benefit plan," as
that term is defined in Section 3(2) of ERISA, is referred to
herein as a "CFSB ERISA Plan."
(b) Except as to those plans disclosed in
Section 5.14(b) of the CFSB Disclosure Memorandum as tax-
qualified CFSB ERISA Plans (the "CFSB Qualified Plans"), no CFSB
Company maintains or previously maintained during the six years
preceding the date of this Agreement a CFSB Plan which meets or
was intended to meet the requirements of Code Section 401(a).
The Internal Revenue Service has issued favorable determination
letters to the effect that each CFSB Qualified Plan qualifies
under Code Section 401(a) and that any related trust is exempt
from taxation under Code Section 501(a), and such determination
letters remain in effect and have not been revoked. Copies of
the most recent determination letters and any outstanding
requests for a determination letter with respect to each CFSB
Qualified Plan have been delivered or made available to CBC.
Except as disclosed in Section 5.14(b) of the CFSB Disclosure
Memorandum, no CFSB Qualified Plan has been amended since the
issuance of each respective determination letter. The CFSB
Qualified Plans currently comply in form with the requirements
under Code Section 401(a), other than changes required by
statutes, regulations and rulings for which amendments are not
yet required. No issue concerning qualification of the CFSB
Qualified Plans is pending before or is threatened by the
Internal Revenue Service. The CFSB Qualified Plans have been
administered according to their terms (except for those terms
which are inconsistent with the changes required by statutes,
regulations, and rulings for
10
which changes are not yet required to be made, in which case the
CFSB Qualified Plans have been administered in accordance with the
provisions of those statutes, regulations and rulings) and in accordance
with the requirements of Code Section 401(a). No CFSB Company, any
ERISA Affiliate or any fiduciary of any CFSB Qualified Plan has done
anything that would adversely affect the qualified status of the CFSB
Qualified Plans or the related trusts. Any CFSB Qualified Plan which
is required to satisfy Code Section 401(k)(3) and 401(m)(2) has been
tested for compliance with, and has satisfied the requirements
of, Code Section 401(k)(3) and 401(m)(2) for each plan year
ending prior to the date of this Agreement.
(c) Except as to those plans disclosed in
Section 5.14(c) of the CFSB Disclosure Memorandum, all CFSB
Benefit Plans are in compliance in all material respects with the
applicable terms of ERISA, the Internal Revenue Code, and any
other applicable Laws the breach or violation of which are
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CFSB. To the Knowledge of CFSB, no
CFSB Company nor any other party has engaged in a transaction
with respect to any CFSB Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would
subject any CFSB Company to a tax or penalty imposed by either
Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CFSB.
(d) Neither CFSB nor any ERISA Affiliate of CFSB
maintains or has during the six years preceding the date of this
Agreement maintained an "employee benefit pension plan," within
the meaning of Section 3(2) of ERISA that is or was subject to
Title IV of ERISA.
(e) Neither CFSB nor any ERISA Affiliate of CFSB has
any past, present or future obligation or liability to contribute
to any multi-employer plan, as defined in Section 3(37) of ERISA.
(f) Except as disclosed in Section 5.14(f) of the CFSB
Disclosure Memorandum, (i) no CFSB Company has any obligations
for retiree health and life benefits under any of the CFSB
Benefit Plans and (ii) there are no restrictions on the rights of
such CFSB Company to amend or terminate any such Plan without
incurring any Liability thereunder, which Liability is reasonably
likely to have a Material Adverse Effect on CFSB, other than for
benefits accrued before the date of such termination or
amendment.
(g) Except as disclosed in Section 5.14(g) of the CFSB
Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without
limitation, severance payments, golden parachute or otherwise)
becoming due to any director or any employee of any CFSB Company
from any CFSB Company under any CFSB Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any CFSB
Benefit Plan, or (iii) result in any acceleration of the time of
payment or vesting of any such benefit.
(h) The actuarial present values of all accrued
deferred compensation entitlements (including, without
limitation, entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees
and former employees of any CFSB Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, have been
reflected on the CFSB Financial Statements to the extent required
by and in accordance with GAAP.
11
(i) CFSB and each ERISA Affiliate of CFSB has complied
in all material respects with applicable continuation of coverage
requirements of Section 1001 of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and ERISA Sections 601
through 608.
(j) Except as disclosed in Section 5.14(j) of the CFSB
Disclosure Memorandum, neither CFSB nor any ERISA Affiliate of
CFSB is obligated, contingently or otherwise, under any agreement
to pay any amount which would be treated as a "parachute
payment," as defined in Section 280G(b) of the Internal Revenue
Code (determined without regard to Section 280G(b)(2)(A)(ii) of
the Internal Revenue Code).
(k) Other than routine claims for benefits, there are
no actions, audits, investigations, suits or claims pending, or
threatened against any CFSB Benefit Plan, any trust or other
funding agency created thereunder, or against any fiduciary of
any CFSB Benefit Plan or against the assets of any CFSB Benefit
Plan.
5.15 Material Contracts. Except as disclosed in Section
5.15 of the CFSB Disclosure Memorandum or otherwise reflected in
the CFSB Financial Statements, none of the CFSB Companies, nor
any of their respective Assets, businesses or operations, is a
party to, or is bound or affected by, or receives benefits under,
(a) any employment, severance, termination, consulting or
retirement Contract providing for aggregate payments to any
Person in any calendar year in excess of $25,000, excluding "at
will" employment arrangements, (b) any Contract relating to the
borrowing of money by any CFSB Company or the guarantee by any
CFSB Company of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds,
Federal Home Loan Bank advances, fully-secured repurchase
agreements, trade payables, and Contracts relating to borrowings
or guarantees made in the ordinary course of business), (c) any
Contracts between or among CFSB Companies, and (d) any other
Contract (excluding this Agreement) or amendment thereto that
would be required to be filed as an exhibit to a Form 10-KSB
filed by CFSB with the SEC as of the date of this Agreement that
has not been filed as an exhibit to CFSB's Form 10-KSB for the
fiscal year ended September 30, 2001 and identified to CBC
(together with all Contracts referred to in Sections 5.10 and
5.14(a) of this Agreement, the "CFSB Contracts"). None of the
CFSB Companies is in Default under any CFSB Contract, other than
Defaults which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on CFSB. Except as
to deposit liabilities and FHLB advances, all of the indebtedness
of any CFSB Company for money borrowed is prepayable at any time
by such CFSB Company without penalty or premium.
5.16 Legal Proceedings. Except as disclosed in Section 5.16
of the CFSB Disclosure Memorandum, there is no Litigation
instituted or pending, or, to the Knowledge of CFSB, threatened
(or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an
unfavorable outcome) against any CFSB Company, or against any
Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on CFSB, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any CFSB Company, that are
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CFSB.
5.17 Reports. Since January 1, 1999, each CFSB Company has
timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was
required to file with (a) the SEC, including but not limited to
Form 10-KSB, Forms 10-QSB, Forms 8-K, and
12
proxy statements, (b) the Regulatory Authorities, and (c) any applicable
state securities or banking authorities (except, in the case of state
securities authorities, failures to file which are not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on CFSB). As of their respective dates, each of
such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date,
each such report and document to CFSB's Knowledge did not, in any
material respects, contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
5.18 Statements True and Correct. No statement,
certificate, instrument or other writing furnished or to be
furnished by any CFSB Company to CBC pursuant to this Agreement
contains or will contain any untrue statement of material fact or
will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. None of the information supplied
or to be supplied by any CFSB Company for inclusion in the Proxy
Statement to be mailed to CFSB's shareholders in connection with
the CFSB Shareholders' Meeting, and any other documents to be
filed by any CFSB Company with the SEC or any other Regulatory
Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed,
and with respect to the Proxy Statement, when first mailed to the
shareholders of CFSB, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto,
at the time of the CFSB Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any
proxy for the CFSB Shareholders' Meeting. All documents that any
CFSB Company is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the
provisions of applicable Law.
5.19 Regulatory Matters. No CFSB Company or, to the
Knowledge of CFSB, any Affiliate thereof has taken any action, or
agreed to take any action, or has any Knowledge of any fact or
circumstance that is reasonably likely to materially impede or
delay receipt of any Consents of Regulatory Authorities referred
to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to
in the second sentence of such Section. To the Knowledge of
CFSB, there exists no fact, circumstance or reason attributable
to CFSB why the requisite Consents referred to in Section 9.1(b)
of this Agreement cannot be received in a timely manner without
the imposition of any condition or restriction of the type
described in the second sentence of such Section 9.1(b).
5.20 Charter Provisions. Each CFSB Company has taken all
action so that the entering into of this Agreement and the
consummation of the Merger and the other transactions
contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Certificate of
Incorporation, Bylaws or other governing instruments of any CFSB
Company or restrict or impair the ability of CBC to vote, or
otherwise to exercise the rights of a shareholder with respect
to, shares of any CFSB Company that may be acquired or controlled
by it.
5.21 Derivatives Contracts. Except as set forth in
Section 5.21 of the CFSB Disclosure Memorandum, neither CFSB nor
any of its Subsidiaries is a party to or has agreed to enter into an
13
exchange-traded or over-the-counter swap, forward, future,
option, cap, floor or collar financial contract, or any other
interest rate or foreign currency protection contract not
included on its balance sheet which is a financial derivative
contract (including various combinations thereof).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CBC
-------------------------------------
CBC and CTB hereby represent and warrant to CFSB and
Citizens Federal as follows:
6.1 Organization, Standing, and Power. CBC is a
corporation duly organized, validly existing, and in good
standing under the Laws of the State of Georgia, and is duly
registered as a financial holding company pursuant to the
provisions of Section 103(1) of the Gramm-Leach-Bliley Act and
Section 225.82 of Regulation Y. CTB, which is a wholly-owned
subsidiary of CBC, is a bank duly organized, validly existing and
in good standing under the Laws of the State of Georgia. CBC has
the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. CBC is duly
qualified or licensed to transact business as a foreign
corporation in good standing in the states of the United States
and foreign jurisdictions where the character of its Assets or
the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect on CBC.
6.2 Authority; No Breach By Agreement.
(a) CBC and CTB have the corporate power and authority
necessary to execute, deliver and perform their obligations under
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of
CBC and CTB. Subject to any approvals required of Regulatory
Authorities, this Agreement represents a legal, valid and binding
obligation of CBC and CTB, enforceable against CBC and CTB in
accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific performance
or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this
Agreement by CBC or CTB, nor the consummation by CBC or CTB of
the transactions contemplated hereby, nor compliance by CBC or
CTB with any of the provisions hereof will (i) conflict with or
result in a breach of any provision of CBC's or CTB's Articles of
Incorporation or Bylaws, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in
the creation of any Lien on any Asset of any CBC Company under,
any Contract or Permit of any CBC Company, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect on CBC, or (iii) subject to receipt of the requisite
approvals referred to in Section 9.1(b) of this Agreement,
violate any Law or Order applicable to any CBC Company or any of
their respective Assets.
14
(c) Other than Consents required from Regulatory
Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other
than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CBC, no notice to, filing
with, or Consent of any public body or authority is necessary for
the consummation by CBC of the Merger and the other transactions
contemplated in this Agreement.
6.3 Necessary Capital. Based on the financial condition of
CBC as reflected in the CBC Financial Statements, CBC and CTB
have the necessary capital required by the regulations of the
Federal Reserve Board and FDIC to consummate the transactions
contemplated by this Agreement. At the Effective Time, CTB will
have sufficient cash funds to pay the aggregate Merger
Consideration and will use such funds for the payment of the
Merger Consideration subject to the completion of the Merger in
accordance with the terms of this Agreement. CBC and its
Subsidiaries are, and will be immediately following completion of
the Merger, in material compliance with all capital, debt, and
financial and nonfinancial provisions applicable to each of them
under the BHC Act, the FICG and any other applicable Law or any
Contract to which they are a party.
6.4 CTB. CTB owns all of the issued and outstanding shares
of capital stock of CTB. All of the shares of capital stock of
CTB held by CBC are fully paid and nonassessable under the
applicable Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by CBC free and clear of
any Lien. CTB is duly organized, validly existing, and in good
standing under the Laws of the jurisdiction in which it is
organized and has the corporate power and authority necessary for
it to own, lease and operate its Assets and to carry on its
business as now conducted. CTB is duly qualified or licensed to
transact business as a foreign corporation in good standing in
the states of the United States and foreign jurisdictions where
the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CBC. CTB is an "insured
institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits in which are
insured to applicable limits by the Bank Insurance Fund or the
Savings Association Insurance Fund, as appropriate.
6.5 Financial Statements. CBC has provided to CFSB copies
of all CBC Financial Statements for the periods ended on or
before March 31, 2002, and will deliver to CFSB copies of all CBC
Financial Statements prepared subsequent to the date hereof. The
CBC Financial Statements (as of the dates thereof and for the
periods covered thereby) (a) are, or if dated after the date of
this Agreement will be, in accordance with the books and records
of the CBC Companies, which are or will be, as the case may be,
complete and correct and which have been or will have been, as
the case may be, maintained in accordance with good business
practices, and (b) present or will present, as the case may be,
fairly the consolidated financial position of the CBC Companies
as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of
the CBC Companies for the periods indicated, in accordance with
GAAP (subject to any exceptions as to consistency specified
therein or as may be indicated in the notes thereto or, in the
case of interim financial statements, to normal recurring year-
end adjustments that are not material in amount or effect).
15
6.6 Absence of Undisclosed Liabilities. No CBC Company has
any Liabilities that are reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on CBC except
Liabilities which are reflected or otherwise accrued or reserved
against in the consolidated balance sheets of CBC as of March 31,
2002, included in the CBC Financial Statements or reflected in
the notes thereto. No CBC Company has incurred or paid any
Liabilities since March 31, 2002, except for such Liabilities
reflected or otherwise accrued or reserved against in the CBC
Financial Statements, or as may have been incurred or paid in the
ordinary course of business consistent with past business
practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
CBC.
6.7 Absence of Certain Changes or Events. Since March 31,
2002, there have been no events, changes or occurrences which
have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on CBC.
6.8 Statements True and Correct. No statement,
certificate, instrument or other writing furnished or to be
furnished by any CBC Company to CFSB pursuant to this Agreement
contains or will contain any untrue statement of material fact or
will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. None of the information
supplied or to be supplied by any CBC Company for inclusion in
the Proxy Statement to be mailed to CFSB's shareholders in
connection with the CFSB Shareholders' Meeting, and any other
documents to be filed by any CBC Company with the SEC or any
other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first
mailed to the shareholders of CFSB, be false or misleading with
respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in
the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the CFSB Shareholders'
Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the
solicitation of any proxy for the CFSB Shareholders' Meeting.
All documents that any CBC Company is responsible for filing with
any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
6.9 Regulatory Matters. No CBC Company or, to the
Knowledge of CBC, any Affiliate thereof has taken any action, or
agreed to take any action, or has any Knowledge of any fact or
circumstance that is reasonably likely to materially impede or
delay receipt of any Consents of Regulatory Authorities referred
to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to
in the second sentence of such Section. To the Knowledge of CBC,
there exists no fact, circumstance or reason attributable to CBC
why the requisite Consents referred to in Section 9.1(b) of this
Agreement cannot be received in a timely manner without the
imposition of any condition or restriction of the type described
in the second sentence of such Section 9.1(b).
16
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Affirmative Covenants of CFSB. Unless the prior
written consent of CBC shall have been obtained, and except as
otherwise contemplated herein, CFSB shall, and shall cause each
of its Subsidiaries, from the date of this Agreement until the
Effective Time or termination of this Agreement: (a) to operate
its business in the usual, regular and ordinary course; (b) to
preserve intact its business organization and Assets and maintain
its rights and franchises; (c) to use its reasonable efforts to
cause its representations and warranties to be correct at all
times; and (d) to take no action which would (i) adversely affect
the ability of any Party to obtain any Consents required for the
transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last
sentence of Section 9.1(b) or 9.1(c) of this Agreement or
(ii) adversely affect in any material respect the ability of
either Party to perform its covenants and agreements under this
Agreement.
7.2 Negative Covenants of CFSB. Except as contemplated
hereby, from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, CFSB
covenants and agrees that it will not do or agree or commit to
do, or permit any of its Subsidiaries to do or agree or commit to
do, any of the following without the prior written consent of the
chief executive officer of CBC, which consent shall not be
unreasonably withheld:
(a) amend the Articles of Incorporation, Charter,
Bylaws or other governing instruments of any CFSB Company, or
(b) incur any additional debt obligation or other
obligation for borrowed money (other than indebtedness of a CFSB
Company to another CFSB Company) in excess of an aggregate of
$25,000 (for the CFSB Companies on a consolidated basis) except
for obligations incurred (i) in connection with this Agreement
and the transactions contemplated hereby, or (ii) in the ordinary
course of the business of CFSB Companies consistent with past
practices (which shall include, for CFSB, advances against its
line of credit consistent with past practices, and for any of its
Subsidiaries, creation of deposit liabilities, purchases of
federal funds, advances from the Federal Reserve Bank or Federal
Home Loan Bank, and entry into repurchase agreements fully
secured by U.S. government or agency securities), or impose, or
suffer the imposition, on any Asset of any CFSB Company of any
Lien or permit any such Lien to exist (other than in connection
with deposits, repurchase agreements, bankers acceptances,
Federal Home Loan Bank advances, "treasury tax and loan" accounts
established in the ordinary course of business, the satisfaction
of legal requirements in the exercise of trust powers, and Liens
in effect as of the date hereof that are disclosed in Section
7.2(b) of the CFSB Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or
exchange (other than repurchases or exchanges in the ordinary
course under employee benefit plans), directly or indirectly, any
shares, or any securities convertible into any shares, of the
capital stock of any CFSB Company, or declare or pay any dividend
or make any other distribution in respect of CFSB's Common Stock;
or
(d) except for this Agreement, or pursuant to the
exercise of stock options outstanding as of the date hereof and
pursuant to the terms thereof in existence on the date hereof, or
as disclosed in Section 7.2(d) of the CFSB Disclosure Memorandum,
issue, sell, pledge, encumber, authorize the issuance of or enter
into any Contract to issue, sell, pledge, encumber, or authorize
the issuance of or otherwise permit to become outstanding, any
additional shares of CFSB Common Stock
17
or any other capital stock of any CFSB Company, or any stock appreciation
rights, or any option, warrant, conversion, or other right to acquire any
such stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital
stock of any CFSB Company or issue or authorize the issuance of
any other securities in respect of or in substitution for shares
of CFSB Stock or sell, lease, mortgage or otherwise dispose of or
otherwise encumber (i) any shares of capital stock of any CFSB
Subsidiary (unless any such shares of stock are sold or otherwise
transferred to another CFSB Company) or (ii) any Asset having a
book value in excess of $25,000 other than in the ordinary course
of business for reasonable and adequate consideration; or
(f) acquire direct or indirect control over, or invest
in equity securities of, any Person, other than in connection
with (i) foreclosures in the ordinary course of business, or
(ii) acquisitions of control by a CFSB Subsidiary in its
fiduciary capacity; or
(g) grant any increase in compensation or benefits to
the employees or officers of any CFSB Company (including such
discretionary increases as may be contemplated by existing
employment agreements), except in accordance with past practice
or previously approved by the Board of Directors of CFSB, in each
case as disclosed in Section 7.2(g) of the CFSB Disclosure
Memorandum or as required by Law; pay any severance or
termination pay or any bonus other than pursuant to written
policies, written Contracts or understandings in effect on the
date of this Agreement and disclosed in Section 7.2(g) of the
CFSB Disclosure Memorandum; enter into or amend any severance
agreements with officers of any CFSB Company; grant any increase
in fees or other increases in compensation or other benefits to
directors of any CFSB Company; or voluntarily accelerate the
vesting of any stock options or other stock-based compensation or
employee benefits; or
(h) except as disclosed in Section 7.2(h) of the CFSB
Disclosure Memorandum, enter into or amend any employment
Contract between any CFSB Company and any Person (unless such
amendment is required by Law) that the CFSB Company does not have
the unconditional right to terminate without Liability (other
than Liability for services already rendered), at any time on or
after the Effective Time; or
(i) adopt any new employee benefit plan of any CFSB
Company or make any material change in or to any existing
employee benefit plans of any CFSB Company other than any such
change that is required by Law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified
status of any such plan; or
(j) make any significant change in any Tax or
accounting methods or systems of internal accounting controls,
except as may be appropriate to conform to changes in Tax Laws or
regulatory accounting requirements or GAAP; or
(k) settle any Litigation involving any Liability of
any CFSB Company for money damages in excess of $25,000 or
material restrictions upon the operations of any CFSB Company; or
(l) except in the ordinary course of business, modify,
amend or terminate any material Contract or waive, release,
compromise or assign any material rights or claims.
18
7.3 Adverse Changes in Condition. Each Party agrees to
give written notice promptly to the other Party upon becoming
aware of the occurrence or impending occurrence of any event or
circumstance relating to it or any of its Subsidiaries which
(a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (b) is reasonably
likely to cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and
to use its reasonable efforts to prevent or promptly to remedy
the same.
7.4 Reports. Each Party and its Subsidiaries shall file
all reports required to be filed by it with Regulatory
Authorities between the date of this Agreement and the Effective
Time and shall deliver to the other Party copies of all non-
confidential portions of such reports promptly after the same are
filed.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 Applications. The Parties shall promptly prepare and
file any applications, including without limitation, those with
the Federal Reserve Board, the Office of Thrift Supervision and
the Georgia Department of Banking and Finance seeking the
requisite Consents necessary to consummate the transactions
contemplated by this Agreement.
8.2 Filings with State Offices. Upon the terms and subject
to the conditions of this Agreement, the Parties shall execute
and file the Certificate of Merger with the Secretary of State of
the State of Georgia and with the Secretary of State of the State
of Delaware in connection with the Closing.
8.3 Agreement as to Efforts to Consummate. No Party shall
take, or cause to be taken, any action which may reasonably be
foreseen as delaying or otherwise adversely impacting
consummation of the Merger. Subject to the terms and conditions
of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws, as promptly
as practicable so as to permit consummation of the Merger at the
earliest possible date and to otherwise enable consummation of
the transactions contemplated hereby and shall cooperate fully
with the other Party hereto to that end, including, without
limitation, using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the
conditions referred to in Article 9 of this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use,
its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated
by this Agreement.
8.4 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party will keep
the other Party advised of all material developments relevant to
its business and to consummation of the Merger and shall permit
the other Party to make or cause to be made such investigation of
the business and properties of it and its Subsidiaries and of
their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall
be reasonably related to the transactions contemplated hereby and
shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the representations and
warranties of the other Party.
19
(b) Each Party shall, and shall cause its advisers and
agents to, maintain the confidentiality of all confidential
information furnished to it by the other Party concerning its and
its Subsidiaries' businesses, operations, and financial positions
and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement.
In addition, CBC and CTB agree that the confidentiality letter
dated February 22, 2002 and executed by them shall continue in
full force and effect. If this Agreement is terminated prior to
the Effective Time, each Party shall promptly return all
documents and copies thereof and all work papers containing
confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice
as soon as practicable after any determination by it of any fact
or occurrence relating to the other Party which it has discovered
through the course of its investigation and which represents, or
is reasonably likely to represent, either a material breach of
any representation, warranty, covenant or agreement of the other
Party or which has had or is reasonably likely to have a Material
Adverse Effect on the other Party.
8.5 Press Releases. Prior to the Effective Time, CFSB and
CBC shall agree with each other as to the form and substance of
any press release or other public disclosure materially related
to this Agreement or any other transaction contemplated hereby;
provided, however, that nothing in this Section 8.5 shall be
deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such
Party's disclosure obligations imposed by Law.
8.6 Acquisition Proposals.
(a) Except with respect to this Agreement and the
transactions contemplated hereby, no CFSB Company nor any
director, employee, investment banker, attorney, accountant or
other representative thereof (collectively, "Representatives")
retained by any CFSB Company shall directly or indirectly solicit
any Acquisition Proposal by any Person. Except to the extent
necessary to comply with the fiduciary duties of its Board of
Directors as advised by counsel, no CFSB Company nor
Representative thereof shall furnish any non-public information
in connection with, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but CFSB may
communicate information about such an Acquisition Proposal to its
shareholders if and to the extent that it is required to do so in
order to comply with its legal obligations as advised by counsel.
CFSB shall promptly notify CBC orally and in writing in the event
that it receives any inquiry or proposal relating to any such
transaction.
(b) Except as set forth herein, CFSB shall not
(i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to CBC, the approval or recommendation of its
Board of Directors of this Agreement or the Merger, (ii) approve
or recommend, or propose to approve or recommend, any Acquisition
Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal. Notwithstanding the foregoing, if in the
opinion of the Board of Directors of CFSB, after consultation
with counsel, failure to do so would be inconsistent with its
fiduciary duties to its shareholders under applicable law, then
the Board of Directors of CFSB may (subject to the terms of this
section (b)) withdraw or modify its approval or recommendation of
this Agreement or the Merger, approve or recommend an Acquisition
Proposal, or enter into an agreement with respect to an
Acquisition Proposal, in each case at any time after the second
business day following the receipt of written notice (a "Notice
of Acquisition Proposal") by CBC advising it that CFSB has
received an Acquisition Proposal, specifying the material terms
and conditions of such proposal and identifying the
20
Person making such proposal; provided that CFSB shall not enter into
an agreement with respect to an Acquisition Proposal unless it shall
have furnished CBC with written notice no later than 12:00 noon
Georgia time one (1) day in advance of any date that it intends
to enter into such agreement.
(c) In addition to the obligations set forth in
section (b) above, CFSB shall immediately advise CBC orally and
in writing of any request for information or of any Acquisition
Proposal, or any inquiry with respect to or which could lead to
an Acquisition Proposal, the material terms and conditions of
such request, Acquisition Proposal or inquiry, and the identity
of the Person making a request, Acquisition Proposal or inquiry.
CFSB shall keep CBC fully informed of the status and details
(including amendments or proposed amendments) of the material
terms of any such request, Acquisition Proposal or inquiry.
(d) Nothing contained in this Section 8.6 shall
prohibit CFSB from making any disclosure to its shareholders if,
in the opinion of its Board of Directors, after consultation with
counsel, failure to so disclose would be inconsistent with
federal securities laws or its fiduciary duties to its
shareholders under applicable law; provided that CFSB does not,
except as permitted by section (b) above, withdraw or modify, or
propose to withdraw or modify, its position with respect to the
Merger or approve or recommend, or propose to approve or
recommend, an Acquisition Proposal.
8.7 Indemnification.
(a) CBC shall indemnify, defend, and hold harmless the
present and former directors, officers, employees, and agents of
the CFSB Companies (each, an "Indemnified Party") against all
Liabilities arising out of actions or omissions occurring at or
prior to the Effective Time (including the transactions
contemplated by this Agreement) to the full extent to which such
Indemnified Parties were entitled under Delaware Law and CFSB's
Certificate of Incorporation and Bylaws as in effect on the date
hereof, including provisions relating to advances of expenses
incurred in the defense of any Litigation. Without limiting the
foregoing, in any case in which approval by CBC is required to
effect any indemnification, CBC shall direct, at the election of
the Indemnified Party, that the determination of any such
approval shall be made by independent counsel mutually agreed
upon between CBC and the Indemnified Party.
(b) If CBC or any of its successors or assigns shall
consolidate with or merge into any other Person and shall not be
the continuing or surviving Person of such consolidation or
merger or shall transfer all or substantially all of its assets
to any Person, then and in each case, proper provision shall be
made so that the successors and assigns of CBC shall assume the
obligations set forth in this Section 8.7.
(c) The provisions of this Section 8.6 are intended to
be for the benefit of and shall be enforceable by each
Indemnified Party, his or her heirs and representatives.
8.8 Continuing Directors' and Officers' Liability Coverage.
CBC shall provide and keep in force for a period of three years
after the Effective Time tail coverage and the current CFSB
directors and officers' liability insurance policy, said tail
coverage to insure directors and officers of CFSB for acts or
omissions occurring prior to the Effective Time, provided that
the cost of such coverage shall not exceed $50,000 annually.
21
8.9 Employee Benefits Matters.
(a) The employee benefit programs for officers and
employees of the Surviving Bank will be those of CBC. CBC and
its Subsidiaries also shall honor in accordance with their terms
all employment, severance, consulting and other compensation
Contracts disclosed in Section 8.9 of the CFSB Disclosure
Memorandum between any CFSB Company and any current or former
director, officer, or employee thereof and all provisions for
vested benefits accrued through the Effective Time under the CFSB
Benefit Plans. Section 8.9 of the CFSB Disclosure Memorandum
quantifies in reasonable detail the amount of payments which
would become due and payable (assuming the Merger is consummated
on or before December 31, 2002) under the employment or change in
control agreements as a result of a termination of employment
and/or a change in control of CFSB or Citizens Federal. The
total cash severance to be paid to the three officers with
employment or change in control agreements shall not exceed the
respective officer's Section 280G limit under the Code, to the
extent such officer is entitled to receive severance payments
under his or her respective agreement.
(b) Any person who is currently serving as an employee
of a CFSB Company and continues as such immediately prior to the
Effective Time (other than those employees covered by a written
employment or change in control agreement set forth in Section
8.9 of the CFSB Disclosure Memorandum)whose employment is
discontinued by the CBC Companies within one year after the
Effective Time (unless termination of such employment is for
Cause (as defined below)) shall be entitled to a severance
payment from CTB in an amount equal to their current salary of
one week for every year of service at the CFSB Companies, up to a
maximum severance of six weeks for current officers and four
weeks for current non-officer employees, together with any
accrued but unused vacation leave with respect to the 2002
calendar year. For purposes of this Section 8.9(b), "Cause"
shall mean termination because of the employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform
stated duties or willful violation of any law, rule or regulation
(other than traffic violations or similar offenses).
(c) Subject to the provisions of this Section 8.9(c),
all employees of a CFSB Company immediately prior to the
Effective Time who are employed by a CBC Company immediately
following the Effective Time ("Transferred Employees") will be
eligible to participate in the respective CBC Company's employee
benefit plans on substantially the same basis as any employee of
the CBC Company in a comparable position. Except as otherwise
prohibited by law, Transferred Employees' service with a CFSB
Company shall be recognized as service with the CBC Companies for
purposes of eligibility to participate and vesting, if applicable
(but not for purposes of benefit accrual) under the benefit plans
of the CBC Companies, subject to applicable break-in-service
rules. CBC agrees that any pre-existing condition, limitation or
exclusion in its medical, long-term disability and life insurance
plans shall not apply to Transferred Employees or their covered
dependents who are covered under a medical or hospitalization
indemnity plan maintained by a CFSB Company on the Effective Time
and who then change coverage to the CBC Companies' medical or
hospitalization indemnity health plan at the time such
Transferred Employees are first given the option to enroll.
(d) CFSB shall take all necessary action to cause the
Citizens Federal employee stock ownership plan ("ESOP") to be
terminated as of the Effective Time. The Merger Consideration
received by the Citizens Federal ESOP trustee in connection with
the Merger with respect to the unallocated shares of CFSB Common
Stock shall be first applied by the Citizens Federal ESOP trustee
22
to the full repayment of the Citizens Federal ESOP loan. The
balance of the Merger Consideration received by the Citizens
Federal ESOP trustee with respect to the unallocated shares of
CFSB Common Stock shall be allocated as earnings to the accounts
of all participants in the Citizens Federal ESOP who have
accounts remaining in accordance with the provisions of the
Citizens Federal ESOP. The accounts of all participants and
beneficiaries in the Citizens Federal ESOP immediately prior to
the Effective Time shall become fully vested as of the Effective
Time. As soon as practicable after the date hereof, Citizens
Federal shall file or cause to be filed all necessary documents
with the IRS for a determination letter for termination of the
Citizens Federal 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 Citizens Federal ESOP shall be
distributed to participants and beneficiaries or transferred to
an eligible individual retirement account or plan as a
participant or beneficiary may direct. Prior to the Effective
Time, no prepayments shall be made on the Citizens Federal ESOP
loan and contributions to the Citizens Federal ESOP and payments
on the Citizens Federal ESOP loan shall be made consistent with
past practices on the regularly scheduled payment dates.
(e) At the Effective Time, the directors of CFSB will
be appointed to a newly created Alabama Advisory Board for CBC
and/or CTB for a period of not less than one year. Mr. Bunny
Stokes, Jr. will chair the Advisory Board. Each Advisory Board
member shall be compensated for their services in a minimum
amount of $1,800 per annum, payable bi-monthly. The provisions
of this Section 8.9(e) are intended to be for the benefit of, and
shall be enforceable by, members of the Board of Directors of
CFSB.
(f) At the Effective Time, CBC and/or CTB shall offer
to enter into an employment agreement with Bunny Stokes, Jr. on
substantially the terms set forth in Exhibit 1.
8.10 Change of Control Agreements. CBC acknowledges the
change of control agreements between CFSB and Bunny Stokes, Jr.,
Cynthia N. Day and W. Kent McGriff. CBC will cause CFSB to make
the change of control payments to Mr. Stokes, Ms. Day and
Mr. McGriff immediately prior to the Effective Time in the
amounts set forth in Section 8.9 of the CFSB Disclosure
Memorandum.
8.11 Exemption from Liability Under Section 16(b). Assuming
that CFSB delivers to CBC the Section 16 Information (as defined
below) in a timely fashion, the Board of Directors of CBC, or a
committee of "Non-Employee Directors" thereof (as such term is
defined for purposes of Rule 16b-3(d) under the 1934 Act), shall
adopt a resolution providing that the receipt by CFSB Insiders
(as defined below) of cash in exchange for shares of CFSB Common
Stock and CFSB Options, in each case pursuant to the transactions
contemplated hereby and to the extent such securities are listed
in the Section 16 Information, are intended to be exempt from
liability pursuant to Section 16(b) under the 1934 Act.
"Section 16 Information" shall mean information accurate in all
respect regarding CFSB Insiders, the number of shares of CFSB
Common Stock held by each such CFSB Insider and expected to be
exchanged for cash in the Merger, and the number and description
of the CFSB Options held by each such CFSB Insider. "CFSB
Insiders" shall mean those officers and directors of CFSB who are
subject to the reporting requirements of Section 16(a) of the
1934 Act and who are listed in the Section 16 Information.
23
8.12 Organization of CBC Interim Corporation. CBC shall
cause CBC Interim Corporation to be organized under the laws of
the State of Georgia. The Board of CBC Interim Corporation shall
approve this Agreement and the Interim Merger, whereupon CBC
Interim Corporation shall become a party to, and be bound by,
this Agreement, and CBC shall adopt and ratify this Agreement in
its capacity as the sole shareholder of CBC Corporation.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 Conditions to Obligations of Each Party. The
respective obligations of each Party to perform this Agreement
and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following
conditions, unless waived by both Parties to the extent permitted
by Law pursuant to Section 11.6 of this Agreement:
(a) Shareholder Approval. The shareholders of CFSB
shall have approved this Agreement, and the consummation of the
transactions contemplated hereby, including the Merger, as and to
the extent required by Law, or by the provisions of any governing
instruments.
(b) Regulatory Approvals. All Consents of, filings
and registrations with, and notifications to all Regulatory
Authorities required for consummation of the Merger shall have
been obtained or made and shall be in full force and effect and
all waiting periods required by Law shall have expired. No
Consent obtained from any Regulatory Authority which is necessary
to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including, without
limitation, requirements relating to the raising of additional
capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of either Party would so
materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement as to render
inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have
obtained any and all Consents required for consummation of the
Merger (other than those referred to in Section 9.1(b) of this
Agreement) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made,
is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party. No Consent so obtained
which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in
the reasonable judgment of the Board of Directors of either party
would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement as to
render inadvisable the consummation of the Merger.
(d) Legal Proceedings. No court or governmental or
regulatory authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any Law or
Order (whether temporary, preliminary or permanent) or taken any
other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
9.2 Conditions to Obligations of CBC. The obligations of
CBC to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by CBC
pursuant to Section 11.6(a) of this Agreement:
24
(a) Representations and Warranties. For purposes of
this Section 9.2(a), the accuracy of the representations and
warranties of CFSB set forth or referred to in this Agreement
shall be assessed as of the date of this Agreement and as of
immediately prior to the Effective Time with the same effect as
though all such representations and warranties had been made on
and as of immediately prior to the Effective Time (provided that
representations and warranties which are confined to a specified
date shall speak only as of such date). The representations and
warranties of CFSB set forth in Section 5.3 of this Agreement
shall be true and correct (except for inaccuracies which are de
minimus in amount or effect). The representations and warranties
of CFSB set forth in Sections 5.19 and 5.20 of this Agreement
shall be true and correct in all material respects. There shall
not exist inaccuracies in the representations and warranties of
CFSB set forth in this Agreement (excluding the representations
and warranties set forth in Sections 5.3, 5.19 and 5.20) such
that the aggregate effect of such inaccuracies would have, or is
reasonably likely to have, a Material Adverse Effect on CFSB;
provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references
to "material" or "Material Adverse Effect" shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and
all of the agreements and covenants of CFSB to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been
duly performed and complied with in all material respects.
(c) Certificates. CFSB shall have delivered to CBC
(i) a certificate, dated as of the Effective Time and signed on
its behalf by its chief executive officer and its chief financial
officer, to the effect that the conditions to CBC's obligations
set forth in Sections 9.2(a) and 9.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly
adopted by CFSB's Board of Directors evidencing the taking of all
corporate action necessary to authorize the execution, delivery
and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail
as CBC and its counsel shall request.
(d) Directors Agreements. Each of the directors of
CFSB shall have executed and delivered to CBC agreements in
substantially the form of Exhibit 2.
(e) Claims/Indemnification Letters. Each of the
directors and officers of CFSB shall have executed and delivered
to CBC letters in substantially the form of Exhibit 3.
9.3 Conditions to Obligations of CFSB. The obligations of
CFSB to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by CFSB
pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of
this Section 9.3(a), the accuracy of the representations and
warranties of CBC set forth or referred to in this Agreement
shall be assessed as of the date of this Agreement and as of
immediately prior to the Effective Time with the same effect as
though all such representations and warranties had been made on
and as of immediately prior to the Effective Time (provided that
representations and warranties which are confined to a specified
date shall speak only as of such date). The representations and
warranties of CBC set forth in
25
this Agreement shall be true and correct (except for inaccuracies
which are de minimus in amount or effect).
(b) Performance of Agreements and Covenants. Each and
all of the agreements and covenants of CBC to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been
duly performed and complied with in all material respects.
(c) Certificates. CBC shall have delivered to CFSB
(i) a certificate, dated as of the Effective Time and signed on
its behalf by its chief executive officer and its chief financial
officer, to the effect that the conditions to CFSB's obligations
set forth in Section 9.3(a) and 9.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly
adopted by CBC's Board of Directors evidencing the taking of all
corporate action necessary to authorize the execution, delivery
and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail
as CFSB and its counsel shall request.
ARTICLE 10
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision of
this Agreement, and notwithstanding the approval of this
Agreement by the shareholders of CFSB, this Agreement may be
terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) By mutual consent of the Board of Directors of CBC
and the Board of Directors of CFSB; or
(b) By the Board of Directors of either Party
(provided that the terminating Party is not then in breach of any
representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement
in the case of CFSB and Section 9.3(a) in the case of CBC or in
material breach of any covenant or other agreement contained in
this Agreement) in the event of an inaccuracy of any
representation or warranty contained in this Agreement which
cannot be or has not been cured within thirty (30) days after the
giving of written notice to the breaching Party of such
inaccuracy and which inaccuracy would provide the terminating
Party the ability to refuse to consummate the Merger under the
applicable standard set forth in Section 9.2(a) of this Agreement
in the case of CFSB's representations and warranties and Section
9.3(a) of this Agreement in the case of CBC's representations and
warranties; or
(c) By the Board of Directors of either Party
(provided that the terminating Party is not then in breach of any
representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement
in the case of CFSB and Section 9.3(a) in the case of CBC or in
material breach of any covenant or other agreement contained in
this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within thirty (30) days
after the giving of written notice to the breaching Party of such
breach; or
(d) By the Board of Directors of either Party in the
event (provided that the terminating Party is not then in breach
of any representation or warranty contained in this Agreement
26
under the applicable standard set forth in Section 9.2(a) of this
Agreement in the case of CFSB and Section 9.3(a) in the case of
CBC or in material breach of any covenant or other agreement
contained in this Agreement) (i) any Consent of any Regulatory
Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by
such authority is not appealed within the time limit for appeal,
or (ii) if the shareholders of CFSB fail to vote their approval
of this Agreement and the transactions contemplated hereby as
required by the DGCL, at the Shareholders' Meeting where the
transactions were presented to such shareholders for approval and
voted upon; or
(e) By the Board of Directors of either Party in the
event that the Merger shall not have been consummated on or
before December 31, 2002, but only if the failure to consummate
the transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party electing
to terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party
(provided that the terminating Party is not then in breach of any
representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement
in the case of CFSB and Section 9.3(a) in the case of CBC or in
material breach of any covenant or agreement contained in this
Agreement) in the event that any of the conditions precedent to
the obligations of such Party to consummate the Merger (other
than as contemplated by Section 10.1(d) of this Agreement) cannot
be satisfied or fulfilled by the date specified in Section
10.1(e) of this Agreement; or
(g) By the Board of Directors of CFSB in connection
with such Party's entering into a definitive agreement in
accordance with Section 8.6(b), provided that it has compiled
with all provisions thereof, including the notice provisions
therein.
10.2 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 10.1 of
this Agreement, this Agreement shall become void and have no
effect, except that the provisions of this Section 10.2 and
Sections 8.4(b), 11.2 and 11.12 of this Agreement shall survive
any such termination and abandonment, and a termination pursuant
to Sections 10.1(b) or 10.1(c) of this Agreement shall not
relieve the breaching Party from Liability under Sections 11.2(b)
or (c) of this Agreement for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to
such termination.
10.3 Non-Survival of Representations and Covenants. The
respective representations, warranties, obligations, covenants,
and agreements of the Parties shall not survive the Effective
Time except for this Section 10.3, Articles 2, 3 and 4 and
Sections 8.7, 8.8, 8.9, 8.10, 11.2 and 11.12 of this Agreement.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 Definitions. Except as otherwise provided herein, the
capitalized terms set forth below shall have the following
meanings:
"1933 Act" shall mean the Securities Act of 1933, as
amended.
27
"1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
"Acquisition Proposal" with respect to a Party shall
mean any tender offer or exchange offer or any proposal for
a merger (other than the Interim Merger, the Merger and the
Bank Merger), acquisition of all of the stock or Assets of,
or other business combination involving such Party or any of
its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the Assets of such
Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean any person who is an
affiliate for purposes of Rule 145 under the 1933 Act and
for purposes of qualifying the Merger for pooling of
interests accounting treatment.
"Agreement" shall mean this Agreement and Plan of
Merger, including the Exhibits delivered pursuant hereto and
incorporated herein by reference.
"Allowance" shall have the meaning provided in Section
5.9 of this Agreement.
"Assets" of a Person shall mean all of the assets,
properties, businesses and rights of such Person of every
kind, nature, character and description, whether real,
personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in
part, whether or not carried on the books and records of
such Person, and whether or not owned in the name of such
Person or any Affiliate of such Person and wherever located.
"Bank Merger" shall mean the merger of Citizens Federal
with and into CBT referred to in Section 1.1 of this
Agreement.
"BHC Act" shall mean the federal Bank Holding Company
Act of 1956, as amended.
"CBC Capital Stock" shall mean, collectively, the CBC
Common Stock and any other class or series of capital stock
of CBC.
"CBC Common Stock" shall mean the $1 par value of
common stock of CBC.
"CBC Companies" shall mean, collectively, CBC and all
CBC Subsidiaries.
"CBC Financial Statements" shall mean (a) the
consolidated balance sheets (including related notes and
schedules, if any) of CBC as of December 31, 2001 and 2000,
and the related statements of income, changes in
shareholders' equity, and cash flows (including related
notes and schedules, if any) for each of the three years
ended December 31, 2001, 2000 and 1999 and (b) the
consolidated balance sheets (including related notes and
schedules, if any) of CBC and related statements of income,
changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) with respect to
quarterly periods ended subsequent to December 31, 2001.
"CBC Subsidiaries" shall mean the direct and indirect
Subsidiaries of CBC.
28
"CFSB Benefit Plans" shall have the meaning set forth
in Section 5.14 of this Agreement.
"CFSB Common Stock" shall mean the $.01 par value
common stock of CFSB.
"CFSB Companies" shall mean, collectively, CFSB and all
CFSB Subsidiaries.
"CFSB Disclosure Memorandum" shall mean the written
information entitled "CFSB Disclosure Memorandum" delivered
on or prior to the date of this Agreement to CBC describing
in reasonable detail the matters contained therein.
"CFSB Financial Statements" shall mean (a) the
consolidated balance sheets (including related notes and
schedules, if any) of CFSB as of September 30, 2001 and
2000, and the related statements of operations, changes in
stockholders' equity, and cash flows (including related
notes and schedules, if any) for each of the three years
ended September 30, 2001, 2000 and 1999 and (b) the
consolidated balance sheets (including related notes and
schedules, if any) of CFSB and related statements of
operations and cash flows (including related notes and
schedules, if any) with respect to quarterly periods ended
subsequent to September 30, 2001.
"CFSB Options" means options to purchase shares of CFSB
Common Stock granted under the CFSB Option Plan.
"CFSB Option Plan" means the CFSB 2001 Stock Option and
Incentive Plan.
"CFSB Option Shares" shall mean any shares of CFSB
Stock underlying outstanding options to purchase CFSB Common
Stock.
"CFSB Subsidiaries" shall mean the direct and indirect
subsidiaries of CFSB.
"Closing" shall mean the closing of the transactions
contemplated hereby, as described in Section 1.2 of this
Agreement.
"Closing Date" shall mean the date on which the Closing
occurs.
"Consent" shall mean any consent, approval,
authorization, clearance, exemption, waiver, or similar
affirmation by any Person pursuant to any Contract, Law,
Order or Permit.
"Contract" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice, restriction,
understanding or undertaking of any kind or character, or
other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or
business.
"Default" shall mean (a) any breach or violation of or
default under any Contract, Order or Permit, (b) any
occurrence of any event that with the passage of time or the
giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit,
or (c) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a
right to terminate or revoke, change the current terms of, or
29
renegotiate, or to accelerate, increase, or impose any
Liability under, any Contract, Order or Permit.
"Delaware Certificate of Merger" shall mean the
Certificate of Merger to be filed with the Secretary of
State of the State of Delaware relating to the Merger
contemplated by Section 1.1 of this Agreement.
"DGCL" shall mean the Delaware General Corporation Law.
"Effective Time" shall mean the date and time at which
the Merger becomes effective as defined in Section 1.3 of
this Agreement.
"Environmental Laws" shall mean all Laws pertaining to
pollution or protection of the environment and which are
administered, interpreted or enforced by the United States
Environmental Protection Agency and state and local agencies
with primary jurisdiction over pollution or protection of
the environment.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" shall refer to a relationship between
entities such that the entities would, now or at any time in
the past, constitute a "single employer" within the meaning
of Section 414 of the Code.
"ERISA Plan" shall have the meaning provided in Section
5.14 of this Agreement.
"Exhibits" 1 through 3, inclusive, shall mean the
Exhibits so marked, copies of which are attached to this
Agreement. Such Exhibits are hereby incorporated by
reference herein and made a part hereof and may be referred
to in this Agreement and any other related instrument or
document without being attached hereto.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of
the Federal Reserve System.
"FICG" shall mean the Financial Institutions Code of
Georgia.
"GAAP" shall mean generally accepted accounting
principles, consistently applied during the periods
involved.
"Georgia Certificate of Merger" shall mean the
Certificate of Merger to be filed with the Secretary of
State of the State of Georgia relating to the Merger as
contemplated by Section 1.1 of this Agreement.
"Hazardous Material" shall mean any pollutant,
contaminant, or toxic or hazardous substance, pollutant,
chemical or waste within the meaning of the Comprehensive
Environment Response, Compensation, and Liability Act, 42
U.S.C. Section 9601 et seq., or any similar federal,
30
state or local Law (and specifically shall include asbestos
requiring abatement, removal or encapsulation pursuant to
the requirements of governmental authorities,
polychlorinated biphenyls, and petroleum and petroleum
products).
"Interim Merger" shall mean the merger of CTB Interim
Corporation into CFSB.
"Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
"Knowledge" as used with respect to CFSB or CBC, as the
case may be, shall mean the actual knowledge of the
Chairman, President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer, General Counsel,
any Assistant or Deputy General Counsel, or any Senior or
Executive Vice President of such Person.
"Law" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule or statute
applicable to a Person or its Assets, Liabilities or
business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory
Authorities.
"Liability" shall mean any direct or indirect, primary
or secondary, liability, indebtedness, obligation, penalty,
cost or expense (including, without limitation, costs of
investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented
for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement,
default of title, easement, encroachment, encumbrance,
hypothecation, infringement, lien, mortgage, pledge,
reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or
interest, charge or claim of any nature whatsoever of, on or
with respect to any property or property interest, other
than (a) Liens for current property Taxes not yet due and
payable and (b) for depository institution Subsidiaries of a
Party, pledges to secure deposits and other Liens incurred
in the ordinary course of the banking business.
"Litigation" shall mean any action, arbitration, cause
of action, claim, complaint, criminal prosecution, demand
letter, governmental or other examination or investigation,
hearing, inquiry, administrative or other proceeding, or
notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting
a Party, its business, its Assets (including, without
limitation, Contracts related to it), or the transactions
contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities.
"Loan Property" shall mean any property owned by the
Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest, and,
where required by the context, includes the owner or
operator of such property, but only with respect to such
property.
31
"Material" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the
matter in question; provided that any specific monetary
amount stated in this Agreement shall determine materiality
in that instance.
"Material Adverse Effect" on a Party shall mean an
event, change or occurrence which has a material adverse
impact on (a) the financial position, business, or results
of operations of such Party and its Subsidiaries, taken as a
whole, or (b) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger
or the other transactions contemplated by this Agreement,
provided that "material adverse impact" shall not be deemed
to include the impact of (i) changes in banking and similar
Laws of general applicability or interpretations thereof by
courts or governmental authorities, (ii) changes in GAAP or
regulatory accounting principles generally applicable to
depository institutions and their holding companies,
(iii) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed written consent
of the other Party in contemplation of the transactions
contemplated hereby, (iv) the Merger and compliance with the
provisions of this Agreement on the operating performance of
the Parties, including expenses incurred in connection with
this Agreement and the transactions contemplated hereby or
(v) changes in economic or other conditions affecting the
banking industry in general, including changes in the
prevailing level of interest rates.
"Merger" shall mean the merger of CFSB with and into
CBC referred to in Section 1.1 of this Agreement.
"Merger Consideration" shall have the meaning provided
in Section 3.1(b) of this Agreement.
"NASD" shall mean the National Association of
Securities Dealers, Inc., including the Nasdaq.
"Order" shall mean any administrative decision or
award, decree, injunction, judgment, order, quasi-judicial
decision or award, ruling, or writ of any federal, state,
local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Participation Facility" shall mean any facility or
property in which the Party in question or any of its
Subsidiaries participates in the management (including any
property or facility held in a joint venture) and, where
required by the context, said term means the owner or
operator of such facility or property, but only with respect
to such facility or property.
"Party" shall mean CFSB, CBC, CTB, Citizens Federal or
(after it becomes a party to this Agreement) CBC Interim
Corporation, and "Parties" shall mean CFSB, CBC, CTB,
Citizens Federal and (after it becomes a party to this
Agreement) CBC Interim Corporation.
"Permit" shall mean any federal, state, local, and
foreign governmental approval, authorization, certificate,
easement, filing, franchise, license, notice, permit, or
right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its
securities, Assets, Liabilities, or business.
32
"Person" shall mean a natural person or any legal,
commercial or governmental entity, such as, but not limited
to, a corporation, general partnership, joint venture,
limited partnership, limited liability company, trust,
business association, group acting in concert, or any person
acting in a representative capacity.
"Proxy Statement" shall mean the proxy statement used
by CFSB to solicit the approval of its shareholders of the
transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the
Federal Trade Commission, the United States Department of
Justice, the Board of the Governors of the Federal Reserve
System, the Office of Thrift Supervision, the Office of the
Comptroller of the Currency, the FDIC, all state regulatory
agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD and the SEC.
"Rights" shall mean all arrangements, calls,
commitments, Contracts, options, rights to subscribe to,
scrip, understandings, warrants or other binding obligations
of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be
bound to issue additional shares of its capital stock or
other Rights.
"SEC" shall mean the United States Securities and
Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements,
registration statements, reports, schedules and other
documents filed, or required to be filed, by a Party or any
of its Subsidiaries with any Regulatory Authority pursuant
to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934
Act, the Investment Company Act of 1940, as amended, the
Investment Advisors Act of 1940, as amended, the Trust
Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated
thereunder.
"Shareholders' Meeting" shall mean the meeting of the
shareholders of CFSB to be held to approve the Merger and
the transactions contemplated by this Agreement, including
any adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations,
banks, associations, partnerships or other entities or
ventures of which the entity in question owns or controls
50% or more of the outstanding equity securities or the
ownership interest, as the case may be, either directly or
through an unbroken chain of entities as to each of which
50% or more of the outstanding equity securities is owned
directly or indirectly by its parent; provided, however,
there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of
which are owned or controlled in a fiduciary capacity.
"Surviving Bank" shall mean CTB as the surviving bank
resulting from the Bank Merger.
33
"Surviving Corporation" shall mean CBC as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean any federal, state, county,
local or foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, withholding,
excise, occupancy and other taxes, assessments, charges,
fares or impositions, including interest, penalties and
additions imposed thereon or with respect thereto.
Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words
"include," "includes," or "including" are used in this Agreement,
they shall be deemed followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2,
each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing,
registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment
bankers, accountants and counsel, except that each of the Parties
shall bear and pay (i) one-half of the filing fees payable in
connection with applications filed with Regulatory Authorities,
and (ii) one-half of the costs incurred in connection with the
printing or copying of the Proxy Statement.
(b) Notwithstanding the foregoing:
(i) if this Agreement is terminated by CBC pursuant to either
of Sections 10.1(b) or 10.1(c) due to a willful breach by
CFSB or Citizens Federal of a representation, warranty or
covenant, the satisfaction or performance of which was
within their control, or
(ii) if this Agreement is terminated by CBC pursuant to
Section 10.1(d)(ii) (but only after receipt by CFSB
of an Acquisition Proposal), or
(iii) if this Agreement is terminated by CBC pursuant to
Section 10.1(g) of this Agreement,
then CFSB shall promptly pay to CBC $250,000 plus all the out-of-
pocket costs and expenses of CBC incurred in connection with the
transactions contemplated by this Agreement, including its
enforcement, including costs of counsel, consultants, investment
bankers, actuaries and accountants, up to but not exceeding
$200,000.
(c) Notwithstanding the foregoing, if this Agreement
is terminated by CFSB pursuant to either of Sections 10.1(b) or
10.1(c) due to a willful breach by CBC or CTB of a
representation, warranty or covenant the satisfaction or
performance of which was within their control, then CBC shall
promptly pay to CFSB $250,000 plus all the out-of-pocket costs
and expenses of CFSB incurred in connection with the transactions
contemplated by this Agreement, including its enforcement, and
including costs of counsel, consultants, investment bankers,
actuaries and accountants, up to but not exceeding $200,000.
34
(d) The Parties agree and acknowledge that they have
agreed upon Sections 11.2(b) and (c) above to liquidate the
amount of damages they estimate each Party would suffer in the
event of termination of this Agreement in the circumstances
described. Each Party acknowledges that such damages cannot be
estimated exactly, that each Party intends that the foregoing
provisions provide for damages rather than a penalty inserted for
the purpose of deterring a Party from breaching the Agreement and
penalizing such Party in the event of such breach, and that the
foregoing amount is agreed upon in good faith as a reasonable
estimate at this time of the damages that each Party would suffer
in the event of termination of the Agreement in the circumstances
described.
11.3 Brokers and Finders. Except as set forth in Section
11.3 of the CFSB Disclosure Memorandum, and with the exception of
RP Financial, Inc., CFSB represents and warrants that neither it
nor any of its officers, directors, employees or Affiliates has
employed any broker or finder or incurred any Liability for any
financial advisory fees, investment bankers' fees, brokerage
fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event
of a claim by any broker or finder (with the exception of RP
Financial, Inc.) based upon his or its representing or being
retained by or allegedly representing or being retained by CFSB,
CFSB agrees to indemnify and hold CBC harmless of and from any
Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly
provided herein, this Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement
between the Parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereto, written or oral. Nothing in this
Agreement, expressed or implied, is intended to confer upon any
Person, other than the Parties or their respective successors,
any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, other than as provided in Sections 8.7,
8.8, 8.9, 8.10 and 8.11 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each
of the Parties upon the approval of the Board of Directors of
each of the Parties; provided, however, that after any such
approval by the holders of CFSB Common Stock, there shall be made
no amendment that pursuant to the DGCL requires further approval
by such shareholders without the further approval of such
shareholders.
11.6 Waivers.
(a) Prior to or at the Effective Time, CBC, acting
through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in
the performance of any term of this Agreement by CFSB, to waive
or extend the time for the compliance or fulfillment by CFSB of
any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of CBC
under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly
authorized officer of CBC.
(b) Prior to or at the Effective Time, CFSB, acting
through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in
the performance of any term of this Agreement by CBC, to waive or
extend the time for the compliance or fulfillment by CBC of any
and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of CFSB
under this Agreement, except any condition which, if
35
not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly
authorized officer of CFSB.
(c) The failure of any Party at any time or times to
require performance of any provision hereof shall in no manner
affect the right of such Party at a later time to enforce the
same or any other provision of this Agreement. No waiver of any
condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or
construed as a waiver of any other condition or of the breach of
any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior
written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the Parties and their respective
successors and assigns.
11.8 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and
sufficient if delivered by hand, by facsimile transmission, by
registered or certified mail, postage pre-paid, or by courier or
overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder),
and shall be deemed to have been delivered as of the date so
delivered:
CBC: Citizens Bancshares Corporation
175 John Wesley Dobbs Avenue, NE
P. O. Box 4485
Atlanta, Georgia 30303-4485
Fax: (404) 653-2883
Attn: James E. Young, President
With a copy (which shall not constitute notice) to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor, 191 Peachtree Street, NE
Atlanta, Georgia 30303
Fax: (404) 572-6999
Attn: Beth Lanier, Esq.
CFSB: CFS Bancshares, Inc.
1700 Third Avenue North
Birmingham, Alabama 35203
Fax: (205) 214-3071
Attn: Bunny Stokes, Jr., Chairman/CEO
36
With a copy (which shall not constitute notice) to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
12th Floor
Washington, D.C. 20005
Fax: (202) 347-2172
Attn: Gerald F. Heupel, Jr., Esq.
11.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Georgia,
without regard to any applicable conflicts of Laws, except to the
extent that the federal laws of the United States may apply to
the Merger.
11.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
11.11 Captions. The captions contained in this
Agreement are for reference purposes only and are not part of
this Agreement.
11.12 Enforcement of Agreement. The Parties hereto
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement was not performed in
accordance with its specific terms or was otherwise breached. It
is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are
entitled at law or in equity.
11.13 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
37
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed on its behalf and its corporate seal to
be hereunto affixed and attested by officers thereunto as of the
day and year first above written.
ATTEST: CITIZENS BANCSHARES CORPORATION
By:
- ---------------------- ----------------------------
- ----------------- James E. Young
Secretary President/CEO
[CORPORATE SEAL]
ATTEST: CITIZENS TRUST BANK
By:
- ---------------------- ---------------------------
- ---------------- James E. Young
Secretary President/CEO
[CORPORATE SEAL]
ATTEST: CFS BANCSHARES, INC.
By:
- ---------------------- ---------------------------
Bunny Stokes, Jr.
Chairman/CEO
[CORPORATE SEAL]
ATTEST: CITIZENS FEDERAL SAVINGS BANK
By:
- ---------------------- ---------------------------
Bunny Stokes, Jr.
Chairman/CEO
[CORPORATE SEAL]
[Signatures Continued on Next Page]
38
CTB Interim Corporation has joined as a Party to this
Agreement on this ____ day of _______________, 2002.
ATTEST: CTB INTERIM CORPORATION
By:
- --------------------- -----------------------------
Secretary James E. Young
President/CEO
39
EXHIBIT 1
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of ___________________, 2002 by
and between CITIZENS TRUST BANK (the "Employer"), a state bank
chartered under the laws of the State of Georgia, and BUNNY
STOKES, a resident of the State of Alabama (the "Executive").
RECITALS:
The Employer desires to employ the Executive as the
President of the Alabama Division of the Employer and the
Executive desires to accept such employment.
In consideration of the above premises and the mutual
agreements hereinafter set forth, the parties hereby agree as
follows:
1. Definitions. Whenever used in this Agreement, the following
terms and their variant forms shall have the meaning set forth
below:
1.1 "Agreement" shall mean this Agreement and any exhibits
incorporated herein together with any amendments hereto made in
the manner described in this Agreement.
1.2 "Affiliate" shall mean any business entity which
controls the Employer, is controlled by or is under common
control with the Employer.
1.3 "Area" shall mean the geographic area within the
boundaries of Jefferson and Greene Counties in the State of
Alabama. It is the express intent of the parties that the Area
as defined herein is the area where the Executive performs
services on behalf of the Employer under this Agreement as of the
Effective Date.
1.4 "Business of the Employer" shall mean the business
conducted by the Employer, which is the business of commercial
banking.
1.5 "Cause" shall mean:
1.5.1 With respect to termination by the Employer:
(a) A material breach of the terms of this
Agreement by the Executive, including, without
limitation, failure by the Executive to perform his
duties and responsibilities in the manner and to the
extent required under this Agreement, which remains
uncured after the expiration of thirty (30) days
following the delivery of written notice of such breach
to the Executive by Employer;
(b) Conduct by the Executive that amounts to
fraud, dishonesty or willful misconduct in the
performance of his duties and responsibilities
hereunder;
(c) Arrest for, charged in relation to (by
criminal information, indictment or otherwise), or
conviction of the Executive during the Term of this
Agreement of a crime involving a breach of trust or
moral turpitude;
(d) Conduct by the Executive that amounts to
gross and willful insubordination or inattention to his
duties and responsibilities hereunder; or
(e) Conduct by the Executive that results in
removal from his position as an officer or executive of
Employer pursuant to a written order by any regulatory
agency with authority or jurisdiction over the
Employer.
1.5.2 With respect to termination by the Executive,
a material diminution in the powers, responsibilities or
duties of the Executive hereunder or a material breach of
the terms of this Agreement by Employer, which remains
uncured after the expiration of thirty (30) days following
the delivery of written notice of such breach to Employer by
the Executive.
1.6 "Company" means Citizens Bancshares Corporation, a bank
holding company organized under the laws of the State of Georgia.
1.7 "Confidential Information" means data and information
relating to the business of the Employer or the Company (which
does not rise to the status of a Trade Secret) which is or has
been disclosed to the Executive or of which the Executive became
aware as a consequence of or through the Executive's relationship
to the Employer and which has value to the Employer and is not
generally known to its competitors. Confidential Information
shall not include any data or information that has been
voluntarily disclosed to the public by the Employer (except where
such public disclosure has been made by the Executive without
authorization) or that has been independently developed and
disclosed by others, or that otherwise enters the public domain
through lawful means.
1.8 "Disability" shall mean the inability of the Executive
to perform each of his material duties under this Agreement for
the duration of the short-term disability period under the
Employer's policy then in effect as certified by a physician
chosen by the Employer and reasonably acceptable to the
Executive.
1.9 "Effective Date" shall mean the closing date of the
Company's acquisition of CFS Bancshares, Inc.
1.10 "Employer Information" means Confidential Information
and Trade Secrets.
1.11 "Initial Term" means that period of time commencing on
the Effective Date and running until the close of business on the
last business day immediately preceding the second anniversary of
the Effective Date.
2
1.12 "Term" shall mean that period of time commencing on the
Effective Date and running until (a) the last day of the Initial
Term or any subsequent renewal period as provided for in Section
3.1 or (b) any earlier termination of employment of the Executive
under this Agreement as provided for in Section 3.
1.13 "Trade Secrets" means Employer information including,
but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product
plans or lists of actual or potential customers or suppliers
which:
(a) derives economic value, actual or potential, from
not being generally known to, and not being readily
ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.
2. Duties.
2.1 Position. The Executive is employed as the President
of the Alabama Division of the Employer, subject to the direction
of the Chief Executive Officer and the Chief Operating Officer of
the Employer or his designee(s) and shall perform and discharge
well and faithfully the duties which may be assigned to him from
time to time by the Employer in connection with the conduct of
its business. The Employer shall cause its Board of Directors to
appoint the Executive to its Board of Directors as of the
Effective Date and to nominate the Executive as a director for an
additional term at the next regularly scheduled election of
directors that falls on or after the Effective Date.
2.2 Full-Time Status. In addition to the duties and
responsibilities specifically assigned to the Executive pursuant
to Section 2.1 hereof, the Executive shall:
(a) devote substantially all of his time, energy and
skill during regular business hours to the performance of
the duties of his employment (reasonable vacations and
reasonable absences due to illness excepted) and faithfully
and industriously perform such duties;
(b) diligently follow and implement all reasonable and
lawful management policies and decisions communicated to him
by the Chief Executive Officer or the Chief Operating
Officer of the Employer; and
(c) timely prepare and forward to the Chief Executive
Officer and the Chief Operating Officer of the Employer all
reports and accountings as may be requested of the
Executive.
3
2.3 Permitted Activities. The Executive shall devote his
entire business time, attention and energies to the Business of
the Employer and shall not during the Term be engaged (whether or
not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued
for gain, profit or other pecuniary advantage; but this shall not
be construed as preventing the Executive from:
(a) investing his personal assets in businesses which
(subject to clause (b) below) are not in competition with
the Business of the Employer and which will not require any
services on the part of the Executive in their operation or
affairs and in which his participation is solely that of an
investor;
(b) purchasing securities in any corporation whose
securities are regularly traded provided that such purchase
shall not result in him collectively owning beneficially at
any time five percent (5%) or more of the equity securities
of any business in competition with the Business of the
Employer;
(c) participating in religious, civic and professional
affairs and organizations and conferences as set forth in
Exhibit 1 hereto; and
(d) participating in such other civic and professional
affairs and organizations and conferences, or preparing or
publishing papers or books or teaching so long as the Chief
Executive Officer of the Employer approves of such
activities prior to the Executive's engaging in them.
3. Term and Termination.
3.1 Term. This Agreement shall remain in effect for the
Term. At the election of the Employer, the Term shall be
extended for an additional year on each anniversary of the first
day of the Initial Term and each annual anniversary date
thereafter; provided, however, that the Executive must consent to
any such extension. The Employer shall provide such notice of
extension not less than sixty (60) days prior to the end of the
Initial Term or any additional one-year period. If the Employer
does not elect to extend the Term or the Executive does not
consent to such extension, the Term shall expire on the last day
of the Term then in effect.
3.2 Termination. During the Term, the employment of the
Executive under this Agreement may be terminated only as follows:
3.2.1 By the Employer:
(a) For Cause, upon written notice to the
Executive pursuant to Section 1.5.1 hereof;
(b) Without Cause at any time, provided that
the Employer shall give the Executive thirty (30) days'
prior written notice of its intent to terminate, in
which event the Employer shall be required to continue
to meet its obligations to the Executive under Section
4.1 for the remainder of the Term if the Executive is
4
terminated during the Initial Term and if the Executive
is terminated after the Initial Term, then for the
lesser of (i) three (3) months or (ii) the remainder of
the Term. However, during the period that the
Executive is receiving compensation pursuant to this
Section 3.2.1(b), the Executive must remain available
to the Employer to provide consulting services as may
be requested by the Employer; or
(c) Upon the Disability of the Executive at
any time, provided that the Employer shall give the
Executive thirty (30) days' prior written notice of its
intent to terminate, in which event, the Employer shall
be required to continue to meet its obligations under
Section 4.1 for six (6) months following the
termination or until the Executive begins receiving
payments under the long-term disability policy
maintained by the Employer for its employees, whichever
occurs first.
3.2.2 By the Executive:
(a) For Cause, in which event the Employer
shall be required to continue to meet its obligations
under Section 4.1 for the remainder of the Term if the
Executive terminates his employment during the Initial
Term and if the Executive terminates his employment
after the Initial Term, then for the lesser of (i)
three (3) month or (ii) the remainder of the Term.
However, during the period that the Executive is
receiving compensation pursuant to this Section
3.2.2(a), the Executive must remain available to the
Employer to provide consulting services as may be
requested by the Employer; or
(b) Without Cause or upon the Disability of
the Executive, provided that the Executive shall give
the Employer sixty (60) days' prior written notice of
his intent to terminate.
3.2.3 At any time upon mutual, written agreement of
the parties.
3.2.4 Notwithstanding anything in this Agreement to
the contrary, the Term shall end automatically upon the
Executive's death.
3.3 Effect of Termination. Upon termination of the
Executive's employment hereunder for any reason, the Employer
shall have no further obligations to the Executive or the
Executive's estate with respect to this Agreement, except for the
payment of salary amounts, if any, accrued pursuant to Section
4.1 hereof and unpaid as of the effective date of the termination
of employment and any payments set forth in Sections 3.2.1(a),
(b) or (c) and/or Section 3.2.2(a), as applicable. Nothing
contained herein shall limit or impinge upon any other rights or
remedies of the Employer or the Executive under any other
agreement or plan to which the Executive is a party or of which
the Executive is a beneficiary.
5
4. Compensation. The Executive shall receive the following
salary and benefits during the Term, except as otherwise provided
below:
4.1 Base Salary. The Executive shall be compensated at a
base rate of $115,000 per year (the "Base Salary"). Base Salary
shall be payable in accordance with the Employer's normal payroll
practices.
4.2 Business Expenses. The Employer specifically agrees to
reimburse the Executive for reasonable and necessary business
(including travel) expenses incurred by him in the performance of
his duties hereunder, as approved by the Chief Executive Officer
of the Employer; provided, however, that the Executive shall, as
a condition of reimbursement, submit verification of the nature
and amount of such expenses in accordance with reimbursement
policies from time to time adopted by the Employer and in
sufficient detail to comply with rules and regulations
promulgated by the Internal Revenue Service.
4.3 Vacation. On a non-cumulative basis, the Executive
shall initially be entitled to three (3) weeks of vacation in
each successive twelve-month period during the Term.
4.4 Benefits. The Executive shall be entitled to such
benefits as may be available from time to time to executives of
the Employer similarly situated to the Executive. All such
benefits shall be awarded and administered in accordance with the
Employer's standard policies and practices.
4.5 Withholding. The Employer may deduct from each payment
of compensation hereunder all amounts required to be deducted and
withheld in accordance with applicable federal and state income,
FICA and other withholding requirements.
5. Employer Information.
5.1 Ownership of Employer Information. All Employer
Information received or developed by the Executive while employed
by the Employer will remain the sole and exclusive property of
the Employer.
5.2 Obligations of the Executive. The Executive agrees:
(a) to hold Employer Information in strictest
confidence;
(b) not to use, duplicate, reproduce, distribute,
disclose or otherwise disseminate Employer Information or
any physical embodiments of Employer Information; and
(c) in any event, not to take any action causing, or
fail to take any action necessary in order to prevent, any
Employer Information from losing its character or ceasing to
qualify as Confidential Information or a Trade Secret.
6
In the event that the Executive is required by law to disclose
any Employer Information, the Executive will not make such
disclosure unless (and then only to the extent that) the
Executive has been advised by independent legal counsel that such
disclosure is required by law and then only after prior written
notice is given to the Employer when the Executive becomes aware
that such disclosure has been requested and is required by law.
This Section 5 shall survive for a period of twelve (12) months
following termination of this Agreement for any reason with
respect to Confidential Information, and shall survive
termination of this Agreement for any reason for so long as is
permitted by applicable law, with respect to Trade Secrets.
5.3 Delivery upon Request or Termination. Upon request by
the Employer, and in any event upon termination of his employment
with the Employer, the Executive will promptly deliver to the
Employer all property belonging to the Employer, including,
without limitation, all Employer Information then in his
possession or control.
6. Non-Competition. The Executive agrees that during his
employment by the Employer hereunder and, in the event of his
termination:
* by the Employer for Cause or without Cause pursuant to
either Section 3.2.1(a) and (b),
* by the Executive with Cause or without Cause pursuant to
either Section 3.2.2(a) or Section 3.2.2(b), or
* in the event that the Term expires without extension
pursuant to Section 3.1,
for a period of twelve (12) months thereafter, he will not
(except on behalf of or with the prior written consent of the
Employer), within the Area, either directly or indirectly, on his
own behalf or in the service or on behalf of others, as an
executive employee or in any other capacity which involves duties
and responsibilities similar to those undertaken for the Employer
(including as an organizer or proposed executive officer of a new
financial institution), engage in any business which is the same
as or essentially the same as the Business of the Employer.
7. Non-Solicitation of Customers. The Executive agrees that
during his employment by the Employer hereunder and, in the event
of his termination:
* by the Employer for Cause or without Cause pursuant to
either Section 3.2.1(a) and (b),
* by the Executive with Cause or without Cause pursuant to
either Section 3.2.2(a) or Section 3.2.2(b), or
* in the event that the Term expires without extension
pursuant to Section 3.1,
for a period of twelve (12) months thereafter, he will not
(except on behalf of or with the prior written consent of the
Employer), within the Area, on his own behalf or in the service
or on behalf of others, solicit, divert or appropriate or attempt
to solicit, divert or appropriate, any business from any of the
Employer's customers, including actively sought prospective
customers, with whom the Executive has or had material contact
during the last two (2) years of his employment, for purposes of
providing products or services that are competitive with the
Business of the Employer.
7
8. Non-Solicitation of Employees. The Executive agrees that
during his employment by the Employer hereunder and, in the event
of his termination:
* by the Employer for Cause or without Cause pursuant to
either Section 3.2.1(a) and (b), or
* by the Executive with Cause or without Cause pursuant to
either Section 3.2.2(a) or Section 3.2.2(b), or
* in the event that the Term expires without extension
pursuant to Section 3.1,
for a period of twelve (12) months thereafter, he will not,
within the Area, on his own behalf or in the service or on behalf
of others, solicit, recruit or hire away or attempt to solicit,
recruit or hire away, any employee of the Employer or its
Affiliates to another person or entity providing products or
services that are competitive with the Business of the Employer,
whether or not:
* such employee is a full-time employee or a temporary
employee of the Employer or its Affiliates,
* such employment is pursuant to written agreement, and
* such employment is for a determined period or is at will.
9. Remedies. The Executive agrees that the covenants contained
in Sections 5 through 8 of this Agreement are of the essence of
this Agreement; that each of the covenants is reasonable and
necessary to protect the business, interests and properties of
the Employer, and that irreparable loss and damage will be
suffered by the Employer should he breach any of the covenants.
Therefore, the Executive agrees and consents that, in addition to
all the remedies provided by law or in equity, the Employer shall
be entitled to a temporary restraining order and temporary and
permanent injunctions to prevent a breach or contemplated breach
of any of the covenants. The Employer and the Executive agree
that all remedies available to the Employer or the Executive, as
applicable, shall be cumulative.
10. Severability. The parties agree that each of the provisions
included in this Agreement is separate, distinct and severable
from the other provisions of this Agreement and that the
invalidity or unenforceability of any Agreement provision shall
not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement
is ruled invalid or unenforceable by a court of competent
jurisdiction because of a conflict between the provision and any
applicable law or public policy, the provision shall be redrawn
to make the provision consistent with and valid and enforceable
under the law or public policy.
11. No Set-Off by the Executive. The existence of any claim,
demand, action or cause of action by the Executive against the
Employer, or any Affiliate of the Employer, whether predicated
upon this Agreement or otherwise, shall not constitute a defense
to the enforcement by the Employer of any of its rights
hereunder.
12. Notice. All notices and other communications required or
permitted under this Agreement shall be in writing and, if mailed
by prepaid first-class mail or certified mail, return
8
receipt requested, shall be deemed to have been received on the earlier
of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may
be delivered by hand or overnight courier, in which event the
notice shall be deemed effective when delivered. All notices and
other communications under this Agreement shall be given to the
parties hereto at the following addresses:
(i) If to the Employer, to it at:
Citizens Trust Bank
75 Piedmont Avenue, N.E.
Atlanta, Georgia 30303
(ii) If to the Executive, to him at:
Bunny Stokes
1423 Mohican Drive
Birmingham, Alabama 35214
13. Assignment. Neither party hereto may assign or delegate
this Agreement or any of its rights and obligations hereunder
without the written consent of the other party to this Agreement.
14. Waiver. A waiver by one party to this Agreement of any
breach of this Agreement by the other party to this Agreement
shall not be effective unless in writing, and no waiver shall
operate or be construed as a waiver of the same or another breach
on a subsequent occasion.
15. Arbitration. Any controversy or claim arising out of or
relating to this contract, or the breach thereof, shall be
settled by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.
Judgment upon the award rendered by the arbitrator may be entered
only in the State Court of Alabama or the federal court for the
Northern District of Alabama. The Employer and the Executive
agree to share equally the fees and expenses associated with the
arbitration proceedings. Executive must initial here: ____.
16. Attorneys' Fees. In the event that the parties have
complied with this Agreement with respect to arbitration of
disputes and litigation ensues between the parties concerning the
enforcement of an arbitration award, the party prevailing in such
litigation shall be entitled to receive from the other party all
reasonable costs and expenses, including without limitation
attorneys' fees, incurred by the prevailing party in connection
with such litigation, and the other party shall pay such costs
and expenses to the prevailing party promptly upon demand by the
prevailing party.
17. Applicable Law. This Agreement shall be construed and
enforced under and in accordance with the laws of the State of
Alabama.
18. Interpretation. Words importing any gender include all
genders. Words importing the singular form shall include the
plural and vice versa. The terms "herein", "hereunder",
"hereby", "hereto", "hereof" and any similar terms refer to this
Agreement. Any captions, titles or
9
headings preceding the text of any article, section or subsection
herein are solely for convenience of reference and shall not constitute
part of this Agreement or affect its meaning, construction or effect.
19. Entire Agreement. This Agreement embodies the entire and
final agreement of the parties on the subject matter stated in
this Agreement. No amendment or modification of this Agreement
shall be valid or binding upon the Employer or the Executive
unless made in writing and signed by both parties. All prior
understandings and agreements relating to the subject matter of
this Agreement are hereby expressly terminated.
20. Rights of Third Parties. Nothing herein expressed is
intended to or shall be construed to confer upon or give to any
person, firm or other entity, other than the parties hereto and
their permitted assigns, any rights or remedies under or by
reason of this Agreement.
21. Survival. The obligations and agreements of the Executive
pursuant to Sections 5, 6, 7, 8 and 9 shall survive the
termination of the employment of the Executive hereunder for the
period designated under each of those respective sections.
10
IN WITNESS WHEREOF, the Employer and the Executive have
executed and delivered this Agreement as of the date first shown
above.
CITIZENS TRUST BANK
By:
----------------------------
Print Name:
--------------------
Title:
-------------------------
-------------------------------
BUNNY STOKES
11
EXHIBIT 2
DIRECTORS AGREEMENT
Citizens Bancshares Corporation
75 Piedmont Avenue, N.E.
Atlanta, Georgia 30303
Ladies and Gentlemen:
I am a shareholder of CFS Bancshares, Inc. ("CFSB"), a
corporation organized and existing under the laws of the State of
Delaware. Pursuant to the transactions described in the
Agreement and Plan of Merger, dated as of May 30, 2002 (the
"Agreement"), by and among Citizens Bancshares Corporation
("CBC"), Citizens Trust Bank, CFSB and Citizens Federal Savings
Bank, CFSB will be merged into CTB Interim Corporation (the
"Interim Merger"). Immediately following the Interim Merger,
CFSB will be merged into CBC (the "Merger") and the shares of
common stock of CFSB will be converted into cash as set out in
Section 3.1(b) of the Agreement and Citizens Federal Savings Bank
will be merged into Citizens Trust Bank, the wholly-owned
subsidiary of CBC (the "Bank Merger"). This Directors Agreement
represents an agreement between CBC and me regarding certain
rights and obligations I have in connection with the Merger.
In consideration of the Merger and the mutual covenants
contained herein, the undersigned represents, warrants and agrees
that:
(1) At any meeting of shareholders of CFSB called to vote
upon the Merger and the Merger Agreement or at any adjournment
thereof at which a vote, consent or other approval with respect
to the Merger and the Merger Agreement is sought (the
"Shareholders' Meeting"), the undersigned shall, to the extent
that the Shareholder has the power, vote (or cause to be voted)
the Shareholder's Shares in favor of the Merger, the execution
and delivery by CFSB of the Merger Agreement, and the approval of
the terms thereof and each of the other transactions contemplated
by the Merger Agreement, provided that the terms of the Merger
Agreement shall not have been amended to reduce the consideration
payable in the Merger to a lesser amount of cash or otherwise to
materially and adversely impair the Shareholder's rights or
increase the Shareholder's obligations thereunder. The
undersigned hereby waives any rights of appraisal, or rights to
dissent from the Merger, that the undersigned may have.
(2) For a period of one (1) year after the effective time
of the Merger, the undersigned shall not, without the prior
written consent of CBC, directly or indirectly serve as a
consultant to, serve as a management official of, or be or become
a major shareholder of any financial institution (other than CBC
and/or Citizens Trust Bank) having an office in Jefferson County
or Tuscaloosa County, Alabama. It is expressly understood that
the covenants contained in this paragraph (2) do not apply to (i)
"management official" positions which the undersigned holds with
financial institutions (other than CFSB) as of the date of this
Agreement, (ii) securities
holdings which cause the undersigned to be deemed a major shareholder
of a financial institution (other than CFSB) as of the date of this
Agreement, or (iii) advisory relationships with a financial institution
which the undersigned has as of the date of this Agreement or may have
after the date hereof solely in the capacity as legal counsel.
For the purposes of the covenants contained in this paragraph 2,
the following terms shall have the following respective meanings:
(a) The term "management official" shall refer to service of any
type which gives the undersigned the authority to participate, directly or
indirectly, in policy-making functions of the financial institution. This
includes, but is not limited to, service as an organizer, officer, director,
or advisory director of the financial institution. It is expressly understood
that the undersigned may be deemed a management official of the financial
institution whether or not he holds any official, elected, or appointed
position with such financial institution.
(b) The term "financial institution" shall refer to any bank, bank
holding company, savings and loan association, savings and loan holding
company, banking-related company, or any other similar financial institution
which engages in the business of accepting deposits or making loans or which
owns or controls a company which engages in the business of accepting deposits
or making loans. It is expressly understood that the term "financial
institution" shall include any financial institution as defined herein that,
after the date of this Agreement, makes application for an appropriate federal
or state regulatory authority for approval to organize.
(c) The term "major shareholder" shall refer to the beneficial
ownership of five percent (5%) or more of any class of voting securities or
the ownership of five percent (5%) of the total equity interest in such
company, however denominated.
3. This Directors Agreement is the complete agreement between CBC and
the undersigned concerning the subject matter hereof. Any notice required to
be sent to any party hereunder shall be sent by registered or certified mail,
return receipt requested, using the addresses set forth herein or such other
address as shall be furnished in writing by the parties. This Directors
Agreement shall be governed by the laws of the State of Georgia.
[SIGNATURES CONTAINED ON NEXT PAGE]
2
This Directors Agreement is executed as of the ______ day of
______________, 2002.
Very truly yours,
------------------------------
Signature
------------------------------
Print Name
Address:
---------------------
------------------------------
------------------------------
AGREED TO AND ACCEPTED as of the
____ day of ______________, 2002.
CITIZENS BANCSHARES CORPORATION
By:
-----------------------------
3
EXHIBIT 3
CLAIMS/INDEMNIFICATION LETTER
_____________, 2002
Citizens Bancshares Corporation
75 Piedmont Avenue, N.E.
Atlanta, Georgia 30303
Re: CFS Bancshares, Inc. and Citizens Federal Savings Bank
Ladies and Gentlemen:
This letter is delivered pursuant to Section 9.2(d) of the
Agreement and Plan of Merger, dated as of May 30, 2002, by and
among Citizens Bancshares Corporation, Citizens Trust Bank,
CFS Bancshares, Inc. ("CFSB") and Citizens Federal Savings Bank.
In my capacity as an officer or a director of CFSB and/or
Citizens Federal Savings Bank, as of the date of this letter, I
do not, to the best of my knowledge, have any claims, and I am
not aware of any facts or circumstances that I believe are likely
to give rise to any claim for indemnification under CFSB's
Certificate of Incorporation or Bylaws or Citizens Federal
Savings Bank's Charter or Bylaws as existing on ____________,
2002, or as may be afforded by the laws of the State of Delaware,
other than in connection with West Alabama Health Care vs.
Citizens Federal Savings Bank.
Sincerely,
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Signature of Officer or Director
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Name of Officer or Director