1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 26, 1998, among FIRST
FARMERS AND MERCHANTS CORPORATION, a Tennessee corporation (the "Parent"), FIRST
FARMERS AND MERCHANTS NATIONAL BANK, COLUMBIA, a national banking association
and wholly owned subsidiary of Parent ("Buyer Bank") and FARMERS & MERCHANTS
BANK, a Tennessee banking corporation ("Seller Bank" and together with Buyer
Bank, the "Banks").
WHEREAS, the Boards of Directors of Parent and the Banks have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transaction provided
for herein in which the Seller Bank will merge with and into Buyer Bank (the
"Merger") subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
in accordance with the National Bank Act (the "NBA") and the Tennessee Banking
Act (the "TBA"), at the Effective Time (as defined in Section 1.2 hereof),
Seller Bank shall merge with and into Buyer Bank. Buyer Bank shall be the
surviving banking corporation (hereinafter sometimes called the "Surviving
Bank") in the Merger, and shall continue its corporate existence under the laws
of the United States. The name of the Surviving Bank shall continue to be First
Farmers & Merchants National Bank, Columbia. Upon consummation of the Merger,
the separate corporate existence of Seller Bank shall terminate.
1.2. Effective Time. The Merger shall become effective at 5:00 p.m. on
the Closing Date (as defined in Section 10.1) or such later time as may be
specified by applicable law (the "Effective Time").
1.3. Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in the NBA and the TBA. Without limiting the
foregoing, Buyer Bank shall be liable for all liabilities of Seller Bank from
and after the Effective Time as required by 12 U.S.C. ss.215a(a)(4).
1.4. Conversion of Seller Bank Common Stock.
(a) At the Effective Time, subject to Section 2.2(e) and
Section 9.1(g) hereof, each share of the common stock, par value $100.00, of the
Seller Bank (the "Seller Bank Common Stock") issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares (as defined herein)
and other than shares of Seller Bank Common Stock held directly or indirectly by
Parent or its Subsidiaries (as defined below) (except for Trust Account Shares
and DPC shares, as such terms are defined in Section 1.4(b) hereof)) shall, by
virtue of this Agreement and without any action on the part of the holder
thereof, be converted into and exchangeable for 40 shares (the "Exchange Ratio")
of the common stock, par value $10.00 per share, of Parent ("Parent Common
Stock"). All of the shares of Seller Bank Common Stock converted into Parent
Common Stock
1
2
pursuant to this Article I shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each certificate (each a
"Certificate") previously representing any such shares of Seller Bank Common
Stock shall thereafter only represent the right to receive (i) the number of
whole shares of Parent Common Stock and (ii) the cash in lieu of fractional
shares into which the shares of Seller Bank Common Stock represented by such
Certificate have been converted pursuant to this Section 1.4(a) and Section
2.2(e) hereof. Certificates previously representing shares of Seller Bank Common
Stock shall be exchanged for certificates representing whole shares of Parent
Common Stock and cash in lieu of fractional shares issued in consideration
therefor upon the surrender of such Certificates in accordance with Section 2.2
hereof, without any interest thereon. If, between the date of this Agreement and
the Effective Time, the shares of Parent Common Stock shall be changed into a
different number or class of shares by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment, or
a stock dividend thereon shall be declared with a record date within said
period, the Exchange Ratio shall be adjusted accordingly.
(b) At the Effective Time, all shares of Seller Bank Common
Stock that are owned directly or indirectly by Parent or Seller Bank or any of
their respective Subsidiaries (other than shares of Seller Bank Common Stock (x)
held directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity for the benefit of third parties (any
such shares, and shares of Parent Common Stock which are similarly held, whether
held directly or indirectly by Parent or Seller Bank, as the case may be, being
referred to herein as "Trust Account Shares") and (y) held by Parent or Seller
Bank or any of their respective Subsidiaries in respect of a debt previously
contracted (any such shares of Seller Bank Common Stock, and shares of Parent
Common Stock which are similarly held, whether held directly or indirectly by
Parent or Seller Bank, being referred to herein as "DPC Shares")) shall be
canceled and shall cease to exist and no stock of Parent or other consideration
shall be delivered in exchange therefor. All shares of Parent Common Stock that
are owned by Seller Bank or any of its Subsidiaries (other than Trust Account
Shares and DPC Shares) shall become treasury stock of Parent.
(c) Notwithstanding anything in this Agreement to the
contrary, shares of Seller Bank Common Stock which are outstanding immediately
prior to the Effective Time and with respect to which dissenters' rights shall
have been properly demanded in accordance with Section 45-2-1309 of the TBA
("Dissenting Shares") shall not be converted into the right to receive, or be
exchangeable for, Parent Common Stock or cash in lieu of fractional shares but,
instead, the holders thereof shall be entitled to payment of the appraised value
of such Dissenting Shares in accordance with Chapter 23 of the Tennessee
Business Corporations Act ("Chapter 23"); provided, however, that (i) if any
holder of Dissenting Shares shall subsequently deliver a written withdrawal of
his demand for appraisal of such shares, or (ii) if any holder fails to
establish his entitlement to dissenters' rights as provided in Chapter 23, such
holder or holders (as the case may be) shall forfeit the right to appraisal of
such shares of Seller Bank Common Stock and each of such shares shall thereupon
be deemed to have been converted into the right to receive, and to have become
exchangeable for, as of the Effective Time, Parent Common Stock and/or cash in
lieu of fractional shares, without any interest thereon, as provided in Section
1.4(a) and Article II hereof.
1.5. Parent Common Stock. Shares of Parent Common Stock issued and
outstanding immediately prior to the Effective Time shall be unaffected by the
Merger and such shares shall remain issued and outstanding.
1.6. Articles. At the Effective Time, the articles of association of
Buyer Bank as in effect at the Effective Time shall be the articles of
association of the Surviving Bank until thereafter amended in accordance with
applicable law.
2
3
1.7. Bylaws. At the Effective Time, the bylaws of Buyer Bank as in
effect immediately prior to the Effective Time shall be the bylaws of the
Surviving Bank until thereafter amended in accordance with applicable law.
1.8. Directors and Officers. The directors and officers of Buyer Bank
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Bank, each to hold office in accordance with the articles and
bylaws of the Surviving Bank until their respective successors are duly elected
or appointed and qualified
1.9. Tax Consequences; Accounting Treatment. It is intended that the
Merger shall (i) constitute a reorganization within the meaning of Section
368(a) of the Code and that this Agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code, and (ii) be
accounted for as a "pooling of interests" under GAAP (as defined herein).
ARTICLE II
EXCHANGE OF SHARES
2.1. Parent to Make Shares Available. At or prior to the Effective
Time, Parent shall deposit, or shall cause to be deposited, with a bank or trust
company (the "Exchange Agent") selected by Parent (which may be the Parent
acting on its own behalf) for the benefit of the holders of Certificates, for
exchange in accordance with this Article II, certificates representing the
shares of Parent Common Stock and the cash in lieu of fractional shares (such
cash and certificates for shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant
to Section 2.2(a) in exchange for outstanding shares of Seller Bank Common
Stock.
2.2. Exchange of Shares.
(a) As soon as practicable after the Effective Time, and in no
event more than three business days thereafter, the Exchange Agent shall mail to
each holder of record of a Certificate or Certificates a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of Parent Common Stock and the cash in lieu of fractional shares into
which the shares of Seller Bank Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Seller Bank
shall have the right to review both the letter of transmittal and the
instructions prior to the Effective Time and provide reasonable comments
thereon. Upon surrender of a Certificate for exchange and cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole shares of Parent Common Stock to
which such holder of Seller Bank Common Stock shall have become entitled
pursuant to the provisions of Article I hereof and (y) a check representing the
amount of cash in lieu of fractional shares, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the cash in lieu
of fractional shares and unpaid dividends and distributions, if any, payable to
holders of Certificates.
(b) No dividends or other distributions declared after the
Effective Time with respect to Parent Common Stock and payable to the holders of
record thereof shall be paid to the holder of any unsurrendered Certificate
until the holder thereof shall surrender such Certificate in accordance with
this Article II. After the surrender of a Certificate in accordance with this
Article II, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Parent Common Stock
represented by such Certificate.
3
4
(c) If any certificate representing shares of Parent Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
(or accompanied by an appropriate instrument of transfer) and otherwise in
proper form for transfer, and that the person requesting such exchange shall pay
to the Exchange Agent in advance any transfer or other taxes required by reason
of the issuance of a certificate representing shares of Parent Common Stock in
any name other than that of the registered holder of the Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no transfers on
the stock transfer books of Seller Bank of the shares of Seller Bank Common
Stock which were issued and outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be canceled and
exchanged for certificates representing shares of Parent Common Stock as
provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein,
no certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Parent Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of
Parent. In lieu of the issuance of any such fractional share, Parent shall pay
to each former shareholder of Seller Bank who otherwise would be entitled to
receive a fractional share of Parent Common Stock an amount in cash determined
by multiplying (i) $46.00 (the "Stock Price") by (ii) the fraction of a share of
Parent Common Stock which such holder would otherwise be entitled to receive
pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by
the shareholders of Seller Bank for twelve months after the Effective Time shall
be paid to Parent. Any shareholders of Seller Bank who have not theretofore
complied with this Article II shall thereafter look only to Parent for payment
of their shares of Parent Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions on the Parent Common Stock deliverable in
respect of each share of Seller Bank Common Stock such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Parent, the Banks, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Seller Bank Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such amount as Parent may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1 Disclosure Schedules. Prior to the execution and delivery of this
Agreement, the Seller Bank has delivered to Parent, and Parent has delivered to
Seller Bank, a schedule (in the case of the Seller Bank, the "Seller Bank
Disclosure Schedule," and in the case of Parent, the "Parent Disclosure
Schedule") setting forth, among other things, items the disclosure of which is
necessary or
4
5
appropriate either in response to an express disclosure requirement contained in
a provision hereof or as an exception to one or more of such party's
representations or warranties contained in Article IV, in the case of Seller
Bank, or Article V, in the case of Parent, or to one or more of such party's
covenants contained in Article VI; provided, however, that notwithstanding
anything in this Agreement to the contrary (a) no such item is required to be
set forth in the Disclosure Schedule as an exception to a representation or
warranty if its absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard established by
Section 3.2, and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or material fact, event
or circumstance or that such item has had or would have a Material Adverse
Effect (as defined herein) with respect to either Seller Bank or Parent,
respectively.
3.2. Standards.
(a) No representation or warranty of Seller Bank contained in
Article IV or of Parent contained in Article V shall be deemed untrue or
incorrect for any purpose under this Agreement, and no party hereto shall be
deemed to have breached a representation or warranty for any purpose under this
Agreement, in any case as a consequence of the existence or absence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
when taken together with all other facts, circumstances or events inconsistent
with any representations or warranties contained in Article IV, in the case of
Seller Bank, or Article V, in the case of Parent, has had a Material Adverse
Effect with respect to Seller Bank or Parent, respectively.
(b) As used in this Agreement, the term "Material Adverse
Effect" means, with respect to Parent or Seller Bank, as the case may be, a
material adverse effect on (i) the business, results of operations or financial
condition of such party and its Subsidiaries taken as a whole, other than any
such effect attributable to or resulting from (w) any change in banking or
similar laws, rules or regulations of general applicability or interpretations
thereof by courts or governmental authorities, (x) any change in GAAP or
regulatory accounting principles applicable to banks, thrifts or their holding
companies generally, (y) any action or omission of Seller Bank or Parent or any
Subsidiary of either of them taken with the express prior written consent of the
other party hereto, or (z) any expenses incurred by such party which expenses
are contemplated by or reasonably incurred in connection with this Agreement or
the transactions contemplated hereby or (ii) the ability of such party and its
Subsidiaries to consummate the transactions contemplated hereby; it being agreed
that for purposes of this paragraph, any matter or circumstance affecting Seller
Bank that has had or is reasonably likely to result in a loss, cost, liability,
or expense in excess of $25,000 individually or in the aggregate shall be
considered material for purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER BANK
Subject to Article III, Seller Bank hereby represents and warrants to
Parent as follows:
4.1. Corporate Organization.
(a) Seller Bank is a Tennessee banking corporation duly
organized, validly existing and in good standing under the laws of the State of
Tennessee. The deposit accounts of Seller Bank are insured by the Federal
Deposit Insurance Corporation (the "OCC") through the Bank Insurance Fund to the
fullest extent permitted by law, and all premiums and assessments required to be
paid in connection therewith have been paid when due.
5
6
(c) The minute books of Seller Bank contain true and correct
records of all meetings and other action held or taken since December 31, 1993
of their respective shareholders and Boards of Directors (including committees
of their respective Boards of Directors).
4.2. Capitalization.
(a) The authorized capital stock of Seller Bank consists of
4,000 shares of Seller Bank Common Stock, $100.00 par value, and 3000 shares of
preferred stock. There are 3,000 shares of Seller Bank Common Stock and no
shares of Seller Bank preferred stock outstanding. No Seller Bank Common Stock
is held by Seller Bank as treasury stock. There are (i) no shares of Seller Bank
Common Stock reserved for issuance upon exercise of outstanding stock options or
otherwise. All of the issued and outstanding shares of Seller Bank Common Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and have been issued in compliance with or free of preemptive rights, with no
personal liability attaching to the ownership thereof. Other than the preemptive
rights contained within the Seller Bank charter, Seller Bank does not have and
is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Seller Bank Common Stock or any other equity security of Seller
Bank or any securities representing the right to purchase or otherwise receive
any shares of Seller Bank Common Stock or any other equity security of Seller
Bank.
(b) Seller Bank does not own (other than in a bona fide
fiduciary capacity or in satisfaction of a debt previously contracted)
beneficially, directly or indirectly, any shares of any equity securities or
similar interests of any corporation, trust, limited liability company, or
similar entity, or any interest in a partnership or joint venture of any kind.
4.3. Authority; No Violation.
(a) Seller Bank has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Seller Bank. The Board of Directors of
Seller Bank has directed that this Agreement and the transactions contemplated
hereby be submitted to Seller Bank's shareholders for approval at a meeting of
such shareholders and, except for the adoption of this Agreement by the
requisite vote of Seller Bank's shareholders, no other corporate proceedings on
the part of Seller Bank are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Seller Bank and (assuming due
authorization, execution and delivery by Parent) this Agreement constitutes a
valid and binding obligation of Seller Bank, enforceable against Seller Bank in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Except as set forth in Section 4.3(b) of the Seller Bank
Disclosure Schedule, neither the execution and delivery of this Agreement by
Seller Bank, nor the consummation by Seller Bank of the transactions
contemplated hereby, nor compliance by Seller Bank with any of the terms or
provisions hereof, will (i) violate any provision of the charter or bylaws of
Seller Bank, or (ii) assuming that the consents and approvals referred to in
Section 4.4 hereof are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
Seller Bank, or any of its properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Seller under, any
of the terms, conditions or provisions of any note,
6
7
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Seller Bank is a party, or by which it or any
of its respective properties or assets may be bound or affected.
4.4. Consents and Approvals. Except for (a) the filing of applications
and notices, as applicable, with the Office of the Comptroller of the Currency
(the "OCC") and the Tennessee Department of Financial Institutions (the "TDFI"),
and approval of such applications and notices, (b) the filing of such
applications, filings, authorizations, orders and approvals as may be required
under applicable state law, (c) the filing with the Securities and Exchange
Commission (the "SEC") of a proxy statement in definitive form relating to the
meeting of Seller Bank's shareholders to be held in connection with this
Agreement and the transactions contemplated hereby (the "Proxy Statement") and
the filing and declaration of effectiveness of a registration statement on Form
S-4 (the "S-4") in which the Proxy Statement will be included as a prospectus,
(d) the approval of this Agreement by the requisite vote of the shareholders of
Seller Bank, and (e) such filings, authorizations or approvals as may be set
forth in Section 4.4 of the Seller Bank Disclosure Schedule, no consents or
approvals of or filings or registrations with any court, administrative agency
or commission or other governmental authority or instrumentality (each a
"Governmental Entity") or with any third party are necessary in connection with
(1) the execution and delivery by Seller Bank of this Agreement and (2) the
consummation by Seller Bank of the Merger and the other transactions
contemplated hereby.
4.5. Reports. Seller Bank has timely filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 1995 with (i) the
OCC, (ii) the Board of Governors of the Federal Reserve Board (the "Federal
Reserve") or any Federal Reserve Bank, (iii) the TDFI and (iv) any other
applicable regulatory organization (collectively, the "Regulatory Agencies"),
and have paid all fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a Regulatory Agency in the regular
course of the business of Seller Bank, and except as set forth in Section 4.5 of
the Seller Bank Disclosure Schedule, no Regulatory Agency has initiated any
proceeding or, to the knowledge of Seller Bank, investigation into the business
or operations of Seller Bank since December 31, 1995. There is no unresolved
violation, criticism, or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of Seller Bank.
4.6. Financial Statements. Seller Bank has previously made available to
Parent copies of (a) the statements of condition of Seller Bank as of December
31 for the fiscal years 1996 and 1997, and the related statements of earnings
and changes in shareholders' equity for the fiscal years 1996 through 1997,
inclusive, in each case accompanied by the audit report of Xxxxxx & Xxxxxxxxx,
independent public accountants with respect to Seller Bank, and (b) the
unaudited statements of condition of Seller Bank as of June 30, 1998 and the
unaudited statements of earnings and cash flows for the six month period ended
June 30, 1998. The December 31, 1997 statement of condition of Seller Bank
(including the related notes, where applicable) fairly presents the financial
position of Seller Bank as of the date thereof, and the other financial
statements referred to in this Section 4.6 (including the related notes, where
applicable) fairly present the results of the operations and financial position
of Seller Bank for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as indicated in the notes thereto. The books and
records of Seller Bank have been, and are being, maintained in accordance with
GAAP and any other applicable legal and accounting requirements.
4.7. Broker's Fees. Neither Seller Bank nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement.
7
8
4.8. Absence of Certain Changes or Events.
(a) Except as may be set forth in Section 4.8(a) of the Seller
Bank Disclosure Schedule, since December 31, 1997 there has been no change or
development or combination of changes or developments which, individually or in
the aggregate, has had a Material Adverse Effect on Seller Bank.
(b) Except as set forth in Section 4.8(b) of the Seller Bank
Disclosure Schedule since December 31, 1997, Seller Bank has carried on its
business in the ordinary course consistent with its past practices.
(c) Except as set forth in Section 4.8(c) of the Seller Bank
Disclosure Schedule, since December 31, 1997, Seller Bank has not (i) increased
the wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 1997 (which amounts have been
previously disclosed to Parent), granted any severance or termination pay,
entered into any contract to make or grant any severance or termination pay, or
paid any bonus except for salary increases and bonus payments made in the
ordinary course of business consistent with past practices, (ii) suffered any
strike, work stoppage, slow-down, or other labor disturbance, (iii) been a party
to a collective bargaining agreement, contract or other agreement or
understanding with a labor union or organization, or (iv) had any union
organizing activities.
4.9. Legal Proceedings.
(a) Except as set forth in Section 4.9 of the Seller Bank
Disclosure Schedule, Seller Bank is not a party to any, and there are no pending
or, to Seller Bank's knowledge, threatened, legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory investigations
of any nature against Seller Bank or challenging the validity or propriety of
the transactions contemplated by this Agreement.
(b) Except as set forth in Section 4.9(b) of the Seller Bank
Disclosure Schedule, there is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Seller Bank or the assets of Seller Bank.
4.10. Taxes.
(a) Except as set forth in Section 4.10(a) of the Seller Bank
Disclosure Schedule, each of Seller Bank has (i) duly and timely filed
(including applicable extensions granted without penalty) all Tax Returns (as
hereinafter defined) required to be filed at or prior to the Effective Time, and
such Tax Returns are true and correct, and (ii) paid in full or made adequate
provision in the financial statements of Seller Bank (in accordance with GAAP)
for all Taxes (as hereinafter defined) shown to be due on such Tax Returns.
Except as set forth in Section 4.10(a) of the Seller Bank Disclosure Schedule,
(i) as of the date hereof neither Seller Bank has requested any extension of
time within which to file any Tax Returns in respect of any fiscal year which
have not since been filed and no request for waivers of the time to assess any
Taxes are pending or outstanding, and (ii) as of the date hereof, with respect
to each taxable period of Seller Bank, the federal and state income Tax Returns
of Seller Bank have been audited by the Internal Revenue Service or appropriate
state tax authorities or the time for assessing and collecting income Tax with
respect to such taxable period has closed and such taxable period is not subject
to review.
(b) For the purposes of this Agreement, "Taxes" shall mean all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions
8
9
attributable thereto. For purposes of this Agreement, "Tax Return" shall mean
any return, report, information return or other document (including any related
or supporting information) with respect to Taxes.
4.11. Employees.
(a) Section 4.11(a) of the Seller Bank Disclosure Schedule
sets forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")); "pension" plan, fund or program (within the
meaning of Section 3(2) of ERISA); each employment, termination or severance
agreement; and each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to (the "Plans") by Seller Bank, any former
Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), all of which together with Seller Bank would be deemed a "single
employer" within the meaning of Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 414(b), (c), (m) or (o) of
the Code, for the benefit of any employee or former employee of Seller Bank, any
former Subsidiary or any ERISA Affiliate.
(b) Seller Bank has heretofore made available to Parent with
respect to each of the Plans true and correct copies of each of the following
documents if applicable: (i) the Plan document; (ii) the actuarial report for
such Plan for each of the last two years, (iii) the most recent determination
letter from the Internal Revenue Service for such Plan and (iv) the most recent
summary plan description and related summaries of material modifications.
(c) Except as set forth in Section 4.11(c) of the Seller Bank
Disclosure Schedule: each of the Plans is in compliance with the applicable
provisions of the Code and ERISA; each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the knowledge of Seller Bank, nothing
has occurred which could reasonably be expected to result in the revocation of
such letter; no Plan has an accumulated or waived funding deficiency within the
meaning of Section 412 of the Code; neither Seller Bank nor any ERISA Affiliate
has incurred, directly or indirectly, any liability to or on account of a Plan
pursuant to Title IV of ERISA (other than PBGC premiums); to the knowledge of
Seller Bank no proceedings have been instituted to terminate any Plan that is
subject to Title IV of ERISA; no "reportable event," as such term is defined in
Section 4043(c) of ERISA, has occurred with respect to any Plan (other than a
reportable event with respect to which the thirty day notice period has been
waived); no condition exists that presents a material risk to Seller Bank of
incurring a liability to or on account of a Plan pursuant to Title IV of ERISA;
no Plan is a multiemployer plan (within the meaning of Section 4001(a)(3) of
ERISA) and no Plan is a multiple employer plan as defined in Section 413 of the
Code; and there are no pending, or to the knowledge of Seller Bank, threatened
or anticipated claims (other than routine claims for benefits) by, on behalf of
or against any of the Plans or any trusts related thereto.
(d) Except as set forth in Section 4.11(d) of the Seller Bank
Disclosure Schedule or as otherwise contemplated by this Agreement or any other
agreements entered into by any party hereto in connection with the execution
hereof: neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result in any payment (including, without
limitation, severance, unemployment compensation, "excess parachute payment"
within the meaning of Section 280G of the Code, forgiveness of indebtedness or
otherwise) becoming due to any officer, director or employee of Seller Bank or
any of its Subsidiaries under any Plan or otherwise, (ii) increase any benefits
payable under any Plan or (iii) result in any acceleration of the time of
payment or vesting of any such benefits.
9
10
4.12. Shareholder Reports. Seller Bank has previously made available to
Parent a true and correct copy of each prospectus, report, schedule and
definitive proxy statement, or communication sent by Seller Bank to its
shareholders since December 31, 1996, and no prospectus, report, schedule, proxy
statement or communication contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading, except that information as of a later date shall
be deemed to modify information as of an earlier date. Seller Bank has not
registered any class of securities with the SEC and is not subject to the
periodic reporting or other requirements of the SEC or any other Regulatory
Agency with respect to its securities.
4.13. Seller Bank Information. The information relating to Seller Bank
which is provided to Parent by Seller Bank or its representatives for inclusion
in the Proxy Statement and the S-4, or in any other document filed with any
other Regulatory Agency in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Proxy Statement (except for such portions thereof that
relate only to Parent or any of its Subsidiaries) will comply with the
provisions of the Securities Act of 1933, as amended (the "Securities Act") and
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations thereunder.
4.14. Compliance with Applicable Law. Seller Bank holds, and has at all
times held, all licenses, franchises, permits and authorizations necessary for
the lawful conduct of its business under and pursuant to all, and has complied
with and is not in default in any respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to Seller Bank, and Seller Bank has not received notice of any
violations of any of the above.
4.15. Certain Contracts.
(a) Except as set forth in Section 4.15(a) of the Seller Bank
Disclosure Schedule, Seller Bank is not a party to or bound by any contract
(whether written or oral) (i) with respect to the employment of any directors or
consultants, (ii) which, upon the consummation of the transactions contemplated
by this Agreement, will (either alone or upon the occurrence of any additional
acts or events) result in any payment or benefits (whether of severance pay or
otherwise) becoming due, or the acceleration or vesting of any rights to any
payment or benefits, from Parent, Seller Bank, Buyer Bank or any of their
respective Subsidiaries to any director or consultant thereof, (iii) which is a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC)
to be performed after the date of this Agreement, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 90 days or less notice involving the payment of
more than $5,000 per annum, or (v) which materially restricts the conduct of any
line of business by Seller Bank. Each contract, arrangement, commitment or
understanding of the type described in this Section 4.15(a), whether or not set
forth in Section 4.15(a) of the Seller Bank Disclosure Schedule, is referred to
herein as a "Seller Bank Contract". Seller Bank has previously delivered or made
available to Parent true and correct copies of each Seller Bank Contract.
(b) Except as set forth in Section 4.15(b) of the Seller Bank
Disclosure Schedule, (i) each Seller Bank Contract described in clause (iii) of
Section 4.15(a) is valid and binding and in full force and effect, (ii) Seller
Bank and each of its Subsidiaries has performed all obligations required to be
performed by it to date under each Seller Bank Contract described in clause
(iii) of Section 4.15(a), (iii) no event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute, a default on the
part of Seller Bank or any of its Subsidiaries under any Seller Bank Contract
described in clause (iii) of Section 4.15(a), and (iv) no other party to any
Seller Bank Contract described in clause (iii) of Section 4.15(a) is, to the
knowledge of Seller Bank, in default in any respect thereunder.
10
11
4.16. Agreements with Regulatory Agencies. Except as set forth in
Section 4.16 of the Seller Bank Disclosure Schedule, Seller Bank is not subject
to any cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter from,
or has adopted any board resolutions at the request of (each, whether or not set
forth on Section 4.16 of the Seller Bank Disclosure Schedule, a "Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity that restricts
the conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, nor has Seller
Bank been advised by any Regulatory Agency or other Governmental Entity that it
is considering issuing or requesting any Regulatory Agreement.
4.17. No Fiduciary Accounts. Seller Bank has no persons or accounts for
which it acts as a fiduciary, including but not limited to accounts for which it
serves as a trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor.
4.18. Environmental Matters. Except as set forth in Section 4.18 of the
Seller Bank Disclosure Schedule:
(a) Seller Bank, and to the knowledge of Seller Bank, each of
the Participation Facilities and the Loan Properties (each as hereinafter
defined), are in compliance with all applicable federal, state and local laws,
including common law, regulations and ordinances, and with all applicable
decrees, orders and contractual obligations relating to pollution or the
discharge of, or exposure to, Hazardous Materials (as hereinafter defined) in
the environment or workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or,
to the knowledge of Seller Bank, threatened, before any Governmental Entity or
other forum in which Seller Bank, any Participation Facility or any Loan
Property, has been or, with respect to threatened proceedings, may be, named as
a defendant (x) for alleged noncompliance (including by any predecessor) with
any Environmental Laws, or (y) relating to the release, threatened release or
exposure to any Hazardous Material whether or not occurring at or on a site
owned, leased or operated by Seller Bank, any Participation Facility or any Loan
Property;
(c) To the knowledge of Seller Bank, during the period of (x)
Seller Bank's ownership or operation of any of their respective current or
former properties, (y) Seller Bank's participation in the management of any
Participation Facility, or (z) Seller Bank's interest in a Loan Property, there
has been no release of Hazardous Materials in, on, under or affecting any such
property. To the knowledge of Seller Bank, prior to the period of (x) Seller
Bank's ownership or operation of current or former properties, (y) Seller Bank's
participation in the management of any Participation Facility, or (z) Seller
Bank's interest in a Loan Property, there was no release of Hazardous Materials
in, on, under or affecting any such property, Participation Facility or Loan
Property; and
(d) The following definitions apply for purposes of this
Section 4.18: (x) "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or other regulated substances
or materials, (y) "Loan Property" means any property in which Seller Bank holds
a security interest, and, where required by the context, said term means the
owner or operator of such property; and (z) "Participation Facility" means any
facility in which Seller Bank participates in the management and, where required
by the context, said term means the owner or operator of such property.
11
12
4.19. Approvals. As of the date of this Agreement, Seller Bank knows of
no reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby should not be obtained.
4.20. Loan Portfolio.
(a) Except for matters to be disclosed in writing and accepted
by Parent in the course of its due diligence investigation or as set forth in
Section 4.20 of the Seller Bank Disclosure Schedule, Seller Bank is not a party
to any written or oral (i) loan agreement, note or borrowing arrangement
(including, without limitation, leases, credit enhancements, commitments,
guarantees and interest-bearing assets) (collectively, "Loans"), under the terms
of which the obligor was, as of September 30, 1998, over 90 days delinquent in
payment of principal or interest or in default of any other provision, or (ii)
as of September 30, 1998, Loan with any director, executive officer or five
percent or greater shareholder of Seller Bank, or to the knowledge of Seller
Bank, any person, corporation or enterprise controlling, controlled by or under
common control with any of the foregoing. Except for matters to be disclosed in
writing and accepted by Parent in the course of its due diligence investigation,
Section 4.20 of the Seller Bank Disclosure Schedule sets forth (i) all of the
Loans of Seller Bank that as of September 30, 1998, were classified by any bank
examiner (whether regulatory or internal) as "Other Loans Specially Mentioned",
"Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans", "Watch List" or words of
similar import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower thereunder, (ii) by
category of Loan (i.e., commercial, consumer, etc.), all of the other Loans of
Seller Bank that as of September 30, 1998, were classified as such, together
with the aggregate principal amount of and accrued and unpaid interest on such
Loans by category and (iii) each asset of Seller Bank that as of September 30,
1998, was classified as "Other Real Estate Owned" and the book value thereof.
(b) Each Loan (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and what they purport to be,
(ii) to the extent secured, has been secured by valid liens and security
interests which have been perfected and (iii) to the knowledge of Seller Bank,
is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
4.21. Property. Seller Bank has good and marketable title free and
clear of all liens, encumbrances, mortgages, pledges, charges, defaults or
equitable interests to all of the properties and assets, real and personal,
tangible or intangible, which are reflected on the statement of financial
condition of Seller Bank as of December 31, 1997 or acquired after such date,
except (i) liens for taxes not yet due and payable or contested in good faith by
appropriate proceedings, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of business, (iii) such imperfections of title,
easements and encumbrances, if any, as do not interfere with the use of the
respective property as such property is used on the date of this Agreement or
the marketability thereof, (iv) for dispositions and encumbrances of, or on,
such properties or assets in the ordinary course of business or (v) mechanics',
materialmen's, workmen's, repairmen's, warehousemen's, carrier's and other
similar liens and encumbrances arising in the ordinary course of business. All
leases pursuant to which Seller Bank as lessee leases real or personal property
are valid and enforceable in accordance with their respective terms and Seller
Bank is not, nor to the knowledge of Seller Bank, is any other party thereto, in
default thereunder.
4.22. Accounting for the Merger; Reorganization. As of the date of this
Agreement, Seller Bank has no reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests treatment under GAAP or (ii) as a
reorganization under Section 368(a) of the Code.
12
13
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Subject to Article III, Parent hereby represents and warrants to Seller
Bank as follows:
5.1. Corporate Organization.
(a) Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee. Parent has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
Parent is duly registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The Restated Articles of
Incorporation and Bylaws of Parent, copies of which have previously been made
available to Seller Bank, are true and correct copies of such documents as in
effect as of the date of this Agreement.
(b) Buyer Bank is a national banking association validly
existing and in good standing. The deposit accounts of Buyer Bank are insured by
the OCC through the Bank Insurance Fund and the Savings Association Insurance
Fund to the fullest extent permitted by law, and all premiums and assessments
required in connection therewith have been paid when due. Each Subsidiary of
Parent has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary.
(c) The minute books of Parent and each of its Subsidiaries
contain true and correct records of all meetings and other actions held or taken
since December 31, 1996 of their respective shareholders and Boards of Directors
(including committees of their respective Boards of Directors).
5.2. Capitalization.
(a) As of the date of this Agreement, the authorized capital
stock of Parent consists of 8,000,000 shares of Parent Common Stock. As of June
30, 1998, there were 2,800,000 shares of Parent Common Stock issued and
outstanding, and no shares of Parent Common Stock held in Parent's treasury. As
of the date of this Agreement, no shares of Parent Common Stock were reserved
for issuance, except as set forth in Section 5.2(a) of the Parent Disclosure
Schedule. All of the issued and outstanding shares of Parent Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as referred to above or
reflected in Section 5.2(a) of the Parent Disclosure Schedule, Parent does not
have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of Parent Common Stock or any other equity securities of
Parent or any securities representing the right to purchase or otherwise receive
any shares of Parent Common Stock. The shares of Parent Common Stock to be
issued pursuant to the Merger will be duly authorized and validly issued and, at
the Effective Time, all such shares will be fully paid, nonassessable and free
of preemptive rights, with no personal liability attaching to the ownership
thereof.
(b) Section 5.2(b) of the Parent Disclosure Schedule sets
forth a true and correct list of all of the Parent Subsidiaries as of the date
of this Agreement. Parent owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of the Subsidiaries of
13
14
Parent, free and clear of all liens, charges, encumbrances and security
interests whatsoever, and all of such shares are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, no Subsidiary of Parent has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character with any party that is not a direct or indirect Subsidiary of Parent
calling for the purchase or issuance of any shares of capital stock or any other
equity security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary.
5.3. Authority; No Violation.
(a) Parent and Buyer Bank have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly approved by the Board of Directors of Parent and Buyer
Bank, and no other corporate proceedings on the part of Parent or Buyer Bank are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly and validly
executed and delivered by Parent and Buyer Bank and (assuming due authorization,
execution and delivery by Seller Bank ) this Agreement constitutes a valid and
binding obligation of Parent and Buyer Bank, enforceable against Parent and
Buyer Bank in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(b) Except as set forth in Section 5.3(b) of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Parent or Buyer Bank, nor the consummation by Parent and Buyer Bank of the
transactions contemplated hereby or thereby, nor compliance by Parent and Buyer
Bank with any of the terms or provisions hereof or thereof, will (i) violate any
provision of the charter or bylaws of Parent, or the articles of association or
bylaws or similar governing documents of any of its Subsidiaries or (ii)
assuming that the consents and approvals referred to in Section 5.4 are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Parent or any of
its Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a party,
or by which they or any of their respective properties or assets may be bound or
affected.
5.4. Consents and Approvals. Except for (a) the filing of applications
and notices, as applicable, with the OCC and TDFI, and approval of such
applications and notices, (b) such applications, filings, authorizations, orders
and approvals as may be required under applicable state law, (c) the filing with
the SEC of the Proxy Statement and the filing and declaration of effectiveness
of the S-4, (d) such filings and approvals as are required to be made or
obtained under the securities or "Blue Sky" laws of various states in connection
with the issuance of the shares of Parent Common Stock pursuant to this
Agreement, and (e) such filings, authorizations or approvals as may be set forth
in Section 5.4 of the Parent Disclosure Schedule, no consents or approvals of or
filings or registrations with any Governmental Entity or with any third party
are necessary in connection with (1) the execution and delivery by Parent and
Buyer Bank of this Agreement and (2) the consummation by Parent and Buyer Bank
of the Merger and the other transactions contemplated hereby.
14
15
5.5. Reports. Parent and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since December 31,
1996 with any Regulatory Agency, and have paid all fees and assessments due and
payable in connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of Parent and its
Subsidiaries, and except as set forth in Section 5.5 of Parent Disclosure
Schedule, no Regulatory Agency has initiated any proceeding or, to the knowledge
of Parent, investigation into the business or operations of Parent or any of its
Subsidiaries since December 31, 1996. There is no unresolved violation,
criticism, or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of Parent or any of its Subsidiaries.
5.6. Financial Statements. Parent has previously made available to
Seller Bank copies of (i) the consolidated balance sheets of Parent and its
Subsidiaries as of December 31 for the fiscal years 1996 and 1997 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years 1996 through 1997, inclusive, as reported in
Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1997
filed with the SEC under the Exchange Act, in each case accompanied by the audit
report of Kraft Bros., Esstman, Xxxxxx & Xxxxxxx, PLLC, independent public
accountants with respect to Parent, and (ii) the unaudited consolidated balance
sheets of Parent and its Subsidiaries as of June 30, 1998 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the fiscal quarter ended June 30, 1998, as reported in Parent's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998 filed
with the SEC under the Exchange Act. The December 31, 1997 and June 30, 1998
consolidated balance sheet of Parent (including the related notes, where
applicable) fairly present the consolidated financial position of Parent and its
Subsidiaries as of the dates thereof, and the other financial statements
referred to in this Section 5.6 (including the related notes, where applicable)
fairly present and the financial statements to be filed with the SEC after the
date hereof will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount), the
results of the consolidated operations and changes in shareholders' equity and
consolidated financial position of Parent and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth; each
of such statements (including the related notes, where applicable) complies, and
the financial statements to be filed with the SEC after the date hereof will
comply, with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been, and the financial
statements to be filed with the SEC after the date hereof will be, prepared in
accordance with GAAP consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of Parent and its Subsidiaries
have been, and are being, maintained in accordance with GAAP and any other
applicable legal and accounting requirements.
5.7. Broker's Fees. Other than the services of M&D Capital, the fees of
which shall be borne solely by Parent, neither Parent nor any Subsidiary of
Parent, nor any of their respective officers or directors, has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by this
Agreement.
5.8. Absence of Certain Changes or Events.
(a) Except as may be set forth in Section 5.8 of the Parent
Disclosure Schedule, or as disclosed in any Parent Report (as defined in Section
5.12) filed with the SEC prior to the date of this Agreement, since December 31,
1997, there has been no change or development or combination of changes or
developments which, individually or in the aggregate, has had a Material Adverse
Effect on Parent.
15
16
(b) Except as set forth in Section 5.8(b) of the Parent
Disclosure Schedule, since December 31, 1997, Parent has carried on its business
in the ordinary course consistent with its past practices.
5.9. Legal Proceedings.
(a) Except as set forth in Section 5.9 of the Parent
Disclosure Schedule or Seller Bank's annual report on Form 10-K for the year
ended December 31, 1997, neither Parent nor any of its Subsidiaries is a party
to any and there are no pending or, to Parent's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against Parent or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Parent, any of its Subsidiaries or the
assets of Parent or any of its Subsidiaries.
5.10. Taxes. Except as set forth in Section 5.10 of the Parent
Disclosure Schedule, each of Parent and its Subsidiaries has (i) duly and timely
filed (including applicable extensions granted without penalty) all Tax Returns
required to be filed at or prior to the Effective Time, and such Tax Returns are
true and correct, and (ii) paid in full or made adequate provision in the
financial statements of Parent (in accordance with GAAP) for all Taxes shown to
be due on such Tax Returns. Except as set forth in Section 5.10 of the Parent
Disclosure Schedule, (i) as of the date hereof, neither Parent nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Returns in respect of any fiscal year which have not since been filed and no
request for waivers of the time to assess any Taxes are pending or outstanding,
and (ii) as of the date hereof, with respect to each taxable period of Parent
and its Subsidiaries, the federal and state income Tax Returns of Parent and its
Subsidiaries have been audited by the Internal Revenue Service or appropriate
state tax authorities or the time for assessing and collecting income Tax with
respect to such taxable period has closed and such taxable period is not subject
to review.
5.11. Employees.
(a) Section 5.11(a) of the Parent Disclosure Schedule sets
forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of Section 3(1) of the ERISA); "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to as of the date of this
Agreement (the "Parent Plans") by Parent, any of its Subsidiaries or by any
trade or business, whether or not incorporated (a "Parent ERISA Affiliate"), all
of which together with Parent would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of Parent, any Subsidiary or any Parent ERISA Affiliate.
(b) Except as set forth in Section 5.11(b) of the Parent
Disclosure Schedule: each of the Parent Plans is in compliance with the
applicable provisions of the Code and ERISA; each of the Parent Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has received
a favorable determination letter from the IRS; no Parent Plan has an accumulated
or waived funding deficiency within the meaning of Section 412 of the Code;
neither Parent nor any Parent ERISA Affiliate has incurred, directly or
indirectly, any liability to or on account of a Parent Plan pursuant to Title IV
of ERISA (other than PBGC premiums); to the knowledge of Parent no proceedings
have been instituted to terminate any Parent Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in Section 4043(c) of
ERISA, has occurred with respect to any Parent Plan (other than a reportable
event with respect to which the thirty day notice period has been
16
17
waived); and no condition exists that presents a material risk to Parent of
incurring a liability to or on account of a Parent Plan pursuant to Title IV of
ERISA; no Parent Plan is a multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA and no Parent Plan is a multiple employer plan as defined in
Section 413 of the Code; and there are no pending, or, to the knowledge of
Parent, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Parent Plans or any trusts
related thereto.
(c) Parent has heretofore made available to Seller Bank with
respect to each of the Parent Plans true and correct copies of each of the
following documents if applicable: (i) the Parent Plan document; (ii) the
actuarial report for such Parent Plan for each of the last two years, (iii) the
most recent determination letter from the Internal Revenue Service for such
Parent Plan and (iv) the most recent summary plan description and related
summaries of material modifications.
5.12. SEC Reports. Parent has previously made available to Seller Bank
a true and correct copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since December 31, 1996 by
Parent with the SEC pursuant to the Securities Act or the Exchange Act (the
"Parent Reports") and (b) communication mailed by Parent to its shareholders
since December 31, 1996, and no such registration statement, prospectus, report,
schedule, proxy statement or communication contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date shall be deemed to modify information as of an earlier date.
Parent has timely filed all Parent Reports and other documents required to be
filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all Parent Reports complied with the published rules and
regulations of the SEC with respect thereto.
5.13. Parent Information. The information relating to Parent and its
Subsidiaries to be contained in the Proxy Statement and the S-4, or in any other
document filed with any other regulatory agency in connection herewith, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Proxy Statement (except for such portions
thereof that relate only to Seller Bank or any of its Subsidiaries) will comply
with the provisions of the Securities Act and Exchange Act and the rules and
regulations thereunder. The S-4 will comply with the provisions of the
Securities Act and the rules and regulations thereunder.
5.14. Compliance with Applicable Law. Parent and each of its
Subsidiaries holds, and has at all times held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to
Parent or any of its Subsidiaries and neither Parent nor any of its Subsidiaries
knows of, or has received notice of violation of, any violations of any of the
above.
5.15. Ownership of Seller Bank Common Stock; Affiliates and Associates.
As of the date hereof, neither Parent nor any of its affiliates or associates
(as such terms are defined under the Exchange Act) (i) beneficially owns,
directly or indirectly, or (ii) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, any
shares of capital stock of Seller Bank (other than Trust Account Shares and DPC
Shares).
5.16. Agreements with Regulatory Agencies. Except as set forth in
Section 5.16 of the Parent Disclosure Schedule or as disclosed in Parent's
Annual Report on Form 10-K for the year ended December 31, 1997, neither Parent
nor any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has
17
18
adopted any board resolutions at the request of (each, whether or not set forth
in Section 5.16 of the Parent Disclosure Schedule, a "Parent Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity that restricts
the conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, nor has Parent or
any of its Subsidiaries been advised by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any Parent
Regulatory Agreement.
5.17. Environmental Matters. Except as set forth in Section 5.17 of the
Parent Disclosure Schedule:
(a) Each of Parent and its Subsidiaries and, to the knowledge
of Parent, each of the Participation Facilities and the Loan Properties (each as
hereinafter defined), are in compliance with all Environmental Laws;
(b) There is no suit, claim, action or proceeding, pending or,
to the knowledge of Parent, threatened, before any Governmental Entity or other
forum in which Parent, any of its Subsidiaries, any Participation Facility or
any Loan Property, has been or, with respect to threatened proceedings, may be,
named as a defendant (x) for alleged noncompliance (including by any
predecessor) with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by Parent or any of its
Subsidiaries, any Participation Facility or any Loan Property;
(c) To the knowledge of Parent during the period of (x)
Parent's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) Parent's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) Parent's or any of its Subsidiaries' interest in a Loan Property, there has
been no release of Hazardous Materials in, on, under or affecting any such
property. To the knowledge of Parent, prior to the period of (x) Parent's or any
of its Subsidiaries' ownership or operation of any of their respective current
or former properties, (y) Parent's or any of its Subsidiaries' participation in
the management of any Participation Facility, or (z) Parent's or any of its
Subsidiaries' interest in a Loan Property, there was no release of Hazardous
Materials in, on, under or affecting any such property, Participation Facility
or Loan Property; and
(d) The following definitions apply for purposes of this
Section 5.17: (x) "Loan Property" means any property in which Parent or any of
its Subsidiaries holds a security interest, and, where required by the context,
said term means the owner or operator of such property; and (y) "Participation
Facility" means any facility in which Parent or any of its Subsidiaries
participates in the management and, where required by the context, said term
means the owner or operator of such property.
5.18. Approvals. As of the date of this Agreement, Parent knows of no
reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger)
should not be obtained.
5.19. Accounting for the Merger; Reorganization. As of the date of this
Agreement, Parent has no reason to believe that the Merger will fail to qualify
(i) for pooling-of-interests treatment under GAAP or (ii) as a reorganization
under Section 368(a) of the Code.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of Seller Bank. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly permitted
by this Agreement, or with the prior written consent of Parent, Seller Bank
shall carry on its business in the ordinary course
18
19
consistent with past practice. Without limiting the generality of the foregoing,
and except as set forth in Section 6.1 of the Seller Bank Disclosure Schedule or
as otherwise contemplated by this Agreement or as consented to in writing by
Parent, Seller Bank shall not:
(a) declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock, other than normal
quarterly dividends for the third and fourth quarter of 1998 not in excess of
$14.00 per share of Seller Bank Common Stock;
(b) (i) repurchase, redeem or otherwise acquire any shares of
the capital stock of Seller Bank, or any securities convertible into or
exercisable for any shares of the capital stock of Seller Bank, (ii) split,
combine or reclassify any shares of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) issue, deliver or sell,
or authorize or propose the issuance, delivery or sale of, any shares of its
capital stock or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing;
(c) amend its charter, bylaws or other similar governing
documents;
(d) authorize or permit any of its officers, directors,
employees or agents to directly or indirectly solicit, initiate, facilitate or
encourage any inquiries relating to, or the making of any proposal which
constitutes, a "takeover proposal" (as defined below), or participate in any
discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal or otherwise facilitate
any effort or attempt to make a takeover proposal; provided, however, that
Seller Bank may communicate information about any such takeover proposal to its
shareholders without a favorable recommendation if, in the judgment of Seller
Bank's Board of Directors, based upon the advice of outside counsel, such
communication is required under applicable law, provided further, however, that
Seller Bank may, and may authorize and permit its officers, directors, employees
or agents to, (i) provide or cause to be provided such information, and (ii)
participate in such discussions or negotiations, if the Board of Directors of
Seller Bank, after having consulted with and considered the advice of outside
counsel, has determined that the failure to do so could cause the members of
such Board of Directors to breach their fiduciary duties under applicable laws.
Seller Bank will immediately cease and cause to be terminated any existing
activities, discussions or negotiations previously conducted with any parties
other than Parent with respect to any of the foregoing. Seller Bank will take
all actions necessary or advisable to inform the appropriate individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 6.1(d). Seller Bank will notify Parent immediately if any such
inquiries or takeover proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, Seller Bank, and Seller Bank will promptly (within
24 hours) inform Parent in writing of all of the relevant details with respect
to the foregoing including the material terms and conditions of such request or
takeover proposal and the identity of the person or group making such request or
proposal. Seller Bank will keep Parent fully informed of the status and details
(including amendments or proposed amendments) of any such request or takeover
proposal. As used in this Agreement, "takeover proposal" shall mean any tender
or exchange offer, proposal for a merger, consolidation or other business
combination involving Seller Bank or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the assets
of Seller Bank;
(e) make any capital expenditures other than those which (i)
are made in the ordinary course of business or are necessary to maintain
existing assets in good repair and (ii) in any event are in an amount of no more
than $25,000 in the aggregate;
(f) enter into any new line of business;
19
20
(g) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets, which would be material, individually or in the
aggregate, to Seller Bank, or which could reasonably be expected to impede or
delay consummation of the Merger, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings in
the ordinary course of business consistent with past practices;
(h) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article VIII not being satisfied;
(i) change its methods of accounting in effect at December 31,
1997, except as required by changes in GAAP or regulatory accounting principles
as concurred to by Seller Bank's independent auditors;
(j) (i) except as set forth in Section 7.7 hereof, as required
by applicable law or as required to maintain qualification pursuant to the Code,
adopt, amend, or terminate any employee benefit plan (including, without
limitation, any Plan) or any agreement, arrangement, plan or policy between
Seller Bank and one or more of its current or former directors, officers or
employees or (ii) except for normal increases in the ordinary course of business
consistent with past practice or except as required by applicable law, increase
in any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any Plan or agreement as in effect
as of the date hereof (including, without limitation, the granting of stock
options, stock appreciation rights, restricted stock, restricted stock units or
performance units or shares);
(k) take or cause to be taken any action which would
disqualify the Merger as a "pooling of interests" for accounting purposes or a
reorganization under Section 368(a) of the Code;
(l) other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements;
(m) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity;
(n) file any application to relocate or terminate the
operations of any banking office;
(o) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which Seller Bank is a party or
by which Seller Bank or its properties is bound, other than the renewal in the
ordinary course of business of any lease the term of which expires prior to the
Closing Date;
(p) take any action or enter into any agreement that could
reasonably be expected to jeopardize or materially delay the receipt of any
Requisite Regulatory Approval (as defined in Section 8.1(c)); or
(q) agree or commit to do any of the foregoing.
20
21
6.2. Covenants of Parent. Except as set forth in Section 6.2 of the
Parent Disclosure Schedule or as otherwise contemplated by this Agreement or
consented to in writing by Seller Bank, Parent shall not, and shall not permit
any of its Subsidiaries to:
(a) solely in the case of Parent, declare or pay any dividends
on or make any other distributions in respect of any of its capital stock other
than its current semi-annual dividends; provided, however, that Parent may
declare and pay a special dividend not to exceed $1.00 per share to shareholders
of record prior to the Effective Time if approved by the Board of Directors of
Parent;
(b) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article VIII not being satisfied;
(c) take any action or enter into any agreement that could
reasonably be expected to jeopardize or materially delay the receipt of any
Requisite Regulatory Approval;
(d) change its methods of accounting in effect at December 31,
1997, except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by Parent's independent auditors;
(e) take or cause to be taken any action which would
disqualify the Merger as a reorganization under Section 368(a) of the Code; or
(f) agree to do any of the foregoing.
6.3. Conduct of Parent's Business. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement, or with the prior written consent
of Seller Bank, Parent shall, and shall cause its Subsidiaries to, carry on
their respective businesses in the ordinary course consistent with past
practice.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters.
(a) Parent and Seller Bank shall promptly prepare and file
with the SEC the Proxy Statement and Parent shall promptly prepare and file with
the SEC the S-4, in which the Proxy Statement will be included as a prospectus.
Each of Seller Bank and Parent shall use its reasonable best efforts to have the
S-4 declared effective under the Securities Act as promptly as practicable after
such filing, and each of Seller Bank and Parent shall thereafter mail the Proxy
Statement to its respective shareholders. Parent shall also use its reasonable
best efforts to obtain all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement.
(b) The parties hereto shall cooperate with each other and use
their reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). Seller Bank and Parent
shall have the right to review in advance, and to the extent practicable each
will consult the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to Seller Bank or
Parent, as the case may be, and any of their respective Subsidiaries, which
appears in any filing made with, or written
21
22
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) Parent and Seller Bank shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of Parent, Seller
Bank or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(d) Parent and Seller Bank shall promptly furnish each other
with copies of written communications received by Parent or Seller Bank, as the
case may be, or any of their respective Subsidiaries, Affiliates or Associates
(as such terms are defined in Rule 12b-2 under the Exchange Act as in effect on
the date of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
7.2. Access to Information.
(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, each party shall, and shall cause each
of its Subsidiaries to, afford to the officers, employees, accountants, counsel
and other representatives of the other party, access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments, records, officers, employees, accountants,
counsel and other representatives and, during such period, it shall, and shall
cause its Subsidiaries to, make available to the other party all information
concerning its business, properties and personnel as the other party may
reasonably request. Neither party nor any of its Subsidiaries shall be required
to provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of its customers, jeopardize any
attorney-client privilege or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) All information furnished be subject to, and shall be held
in confidence in accordance with, the provisions of the confidentiality
agreement (the "Confidentiality Agreement"), between Parent and Seller Bank.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
7.3. Shareholder Meetings. Seller Bank shall take all steps necessary
to duly call, give notice of, convene and hold a meeting of its shareholders to
be held as soon as is reasonably practicable after the date on which the S-4
becomes effective for the purpose of voting upon the approval and adoption of
this Agreement. Seller Bank will, through its Board of Directors, recommend to
its shareholders approval of this Agreement and the transactions contemplated
hereby and such other matters as may be submitted to its shareholders in
connection with this Agreement.
7.4. Legal Conditions to Merger. Each of Parent and Seller Bank shall,
and shall cause its Subsidiaries to, use their reasonable best efforts (a) to
take, or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed
22
23
on such party or its Subsidiaries with respect to the Merger and, subject to the
conditions set forth in Article VIII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by Seller Bank or Parent or any of their respective
Subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement, and to comply with the terms and conditions of
such consent, authorization, order or approval.
7.5. Affiliates.
(a) Seller Bank shall use its reasonable best efforts to cause
each director, executive officer and other person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act and for purposes of qualifying the
Merger for "pooling-of-interests" accounting treatment) of such party to deliver
to the other party hereto, as soon as practicable after the date of this
Agreement, a written agreement, in the form of Exhibit 7.5(a) hereto.
(b) Parent shall publish, not later than 15 days after the end
of the first full calendar month following the month in which the Effective Time
occurs, financial results covering at least 30 days of post-Merger combined
operations as contemplated by SEC Accounting Series Release No. 135.
7.6. Stock Exchange Listing. Seller Bank acknowledges that the shares
of Parent Common Stock to be issued in the Merger are not listed or approved for
quotation on any stock exchange or market and that Parent has no obligation to
obtain such a listing or approval for quotation.
7.7. Employees; Employee Benefit Plans.
(a) Buyer Bank recognizes the valuable contributions made by
Seller Bank employees to Seller Bank and the value they could bring to Buyer
Bank operations. Seller Bank agrees that Parent and/or Buyer Bank may contact
employees of Seller Bank and review all records relating to the employment of
such persons by Seller Bank. Buyer Bank agrees to personally interview all of
Seller's employees, to consider in good faith the retention of up to all of
Seller Bank's employees, and to offer at-will employment to such of the Seller
Bank's employees as Buyer determines in its reasonable discretion are
appropriate to maintain necessary staffing levels.
(b) As of the Effective Time, the employees of Seller Bank who
are retained by Buyer Bank (the "Retained Employees") shall be eligible to
participate in Parent's employee benefit plans in which similarly situated
employees of Buyer Bank participate, to the same extent as similarly situated
employees of Buyer Bank (it being understood that inclusion of Retained
Employees in Parent's employee benefit plans may occur at different times with
respect to different plans.
(c) With respect to each Parent Plan that is an "employee
benefit plan," as defined in Section 3(3)of ERISA, for purposes of determining
vacation entitlement (but not profit-sharing benefits), service with Seller Bank
shall be treated as service with Parent; provided however, that such service
shall not be recognized to the extent that such recognition would result in a
duplication of benefits. Such service also shall apply for purposes of
satisfying any waiting periods, evidence of insurability requirements, or the
application of any preexisting condition limitations.
7.8. Indemnification.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any
23
24
time prior to the date of this Agreement, or who becomes prior to the Effective
Time, a director, officer or employee of Seller Bank or any of its Subsidiaries
(the "Indemnified Parties") is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was a director, officer or employee of Seller Bank, any
of the Subsidiaries of Seller Bank or any of their respective predecessors or
affiliates or (ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, Parent shall indemnify and hold harmless, as and to the extent
permitted by law, each such Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees and
expenses in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time), the Indemnified Parties
may retain counsel reasonably satisfactory to them after consultation with
Parent; provided, however, that (1) Parent shall have the right to assume the
defense thereof and upon such assumption Parent shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if Parent elects not to assume such defense or counsel for
the Indemnified Parties reasonably advises that there are issues which raise
conflicts of interest between Parent and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Parent, and Parent shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (2) Parent shall in all cases be
obligated pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (3) Parent shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (4) Parent shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. Any Indemnified Party wishing to claim
Indemnification under this Section 7.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent thereof,
provided that the failure to so notify shall not affect the obligations of
Parent under this Section 7.8 except to the extent such failure to notify
materially prejudices Parent. Parent's obligations under this Section 7.8 shall
continue in full force and effect without time limit from and after the
Effective Time.
(b) Parent shall cause the persons serving as officers and
directors of Seller Bank immediately prior to the Effective Time to be covered
for a period of three years from the Effective Time by the directors' and
officers' liability insurance policy maintained by Seller Bank (provided that
Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are not less advantageous than
such policy) with respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in their capacity as
such; provided, however, that in no event shall Parent be required to expend on
an annual basis more than 120% of the current amount expended by Seller Bank
(the "Insurance Amount") to maintain or procure insurance coverage, and further
provided that if Parent is unable to maintain or obtain the insurance called for
by this Section 7.8(b), Parent shall use all reasonable efforts to obtain as
much comparable insurance as is available for the Insurance Amount.
(c) In the event Parent or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent
assume the obligations set forth in this section.
24
25
(d) The provisions of this Section 7.8 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
7.9. Additional Agreements. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary action
as may be reasonably requested by Parent.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Shareholder Approvals. This Agreement shall have been
approved and adopted by the requisite vote of the shareholders of Seller Bank
under applicable law.
(b) Other Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby (including the Merger) shall
have been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired (all such approvals and
the expiration of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals").
(c) S-4. The S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the S-4 shall
have been issued and no proceedings for that purpose shall have been initiated
or threatened by the SEC.
(d) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
(e) Opinion. Prior to the execution of this Agreement, Seller
Bank shall have received an opinion from Xxxxxx Capital to the effect that as of
the date thereof and based upon and subject to the matters set forth therein,
the Exchange Ratio is fair to the shareholders of Seller Bank from a financial
point of view.
8.2. Conditions to Obligations of Parent. The obligation of Parent to
effect the Merger is also subject to the satisfaction or waiver by Parent at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section
3.2, the representations and warranties of Seller Bank set forth in this
Agreement (other than those set forth in Section 4.2) shall be true and correct
as of the date of this Agreement and (except to the extent such representations
and warranties speak only as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date; and (ii) the representations and
warranties of Seller Bank set forth in Section 4.2 of this Agreement shall be
true and correct in all material respects (without giving effect to Section 3.2
of this Agreement) as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. Parent shall have
received a certificate signed on behalf
25
26
of Seller Bank by the Chief Executive Officer and the Chief Financial Officer of
Seller Bank to the foregoing effect.
(b) Performance of Obligations of Seller Bank. Seller Bank
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of Seller Bank by the Chief
Executive Officer and the Chief Financial Officer of Seller Bank to such effect.
(c) No Pending Governmental Actions. No proceeding initiated
by any Governmental Entity seeking an Injunction shall be pending.
(d) Pooling of Interests. Parent shall have received a letter
from its independent auditors, addressed to Parent, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment.
(e) Due Diligence. Parent shall have conducted a due diligence
examination of Seller Bank covering such matters as it may determine and shall
be satisfied with the results of its investigation, including the results of any
assessment of environmental risk and compliance.
8.3. Conditions to Obligations of Seller Bank. The obligation of Seller
Bank to effect the Merger is also subject to the satisfaction or waiver by
Seller Bank at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section
3.2, the representations and warranties of Parent set forth in this Agreement
(other than those set forth in Section 5.2) shall be true and correct as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date; and (ii) the representations and warranties of
Parent set forth in Section 5.2 of this Agreement shall be true and correct in
all material respects (without giving effect to Section 3.2 of this Agreement)
as of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date. Seller Bank shall have received a
certificate signed on behalf of Parent by the Chief Executive Officer and the
principal financial officer of Parent to the foregoing effect.
(b) Performance of Obligations of Parent. Parent shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Seller Bank shall
have received a certificate signed on behalf of Parent by the Chief Executive
Officer and the principal financial officer of Parent to such effect.
(c) No Pending Governmental Actions. No proceeding initiated
by any Governmental Entity seeking an Injunction shall be pending.
(d) Due Diligence. Seller Bank shall have conducted a due
diligence examination of Parent and Buyer Bank covering such matters as it may
determine and shall be satisfied with the results of its investigation.
(e) Tax Matters. Seller shall have received a letter from
Kraft Bros., Esstman, Xxxxxx & Xxxxxxx, PLLC dated as of the Closing Date, in
form and substance satisfactory to Seller, stating in effect that: (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, (ii) no gain or loss will be recognized by holders of
Seller Bank stock who exchange all of their Seller Bank stock solely for Parent
Common Stock (except for cash received in lieu of fractional shares) in the
Merger, (iii) the tax basis of the Parent Stock received by holders of Seller
Bank stock who exchange all of their Seller Bank stock solely for Parent stock
in the Merger will be the same as the tax basis of the Seller stock surrendered
in exchange for the Parent
26
27
stock (reduced by an amount allocable to a fractional share interest in Parent
stock for which cash is received), and (iv) the holding period of the Parent
stock in the Merger will be the same as the holding period of the Seller Bank
stock surrendered in exchange therefor, provided that such Seller Bank stock is
held as a capital asset at the Effective Time.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of both Seller Bank and Parent:
(a) By mutual consent of Seller Bank and Parent in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) By either Parent or Seller Bank upon written notice to the
other party (i) 60 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the request
or recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 60-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity, provided, however, that no party shall
have the right to terminate this Agreement pursuant to this Section 9.1(b)(i) if
such denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
the covenants and agreements of such party set forth herein or (ii) if any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either Parent or Seller Bank if the Merger shall not
have been consummated on or before April 30, 1999, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Parent or Seller Bank (provided that the
terminating party shall not be in material breach of any of its obligations
under Section 7.3) if any approval of the shareholders of either of Seller Bank
or Parent required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of such shareholders or at any adjournment or postponement thereof;
(e) by either Parent or Seller Bank (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
thirty days following written notice to the party committing such breach, or
which breach, by its nature, cannot be cured prior to the Closing; provided,
however, that neither party shall have the right to terminate this Agreement
pursuant to this Section 9.1(e) unless the breach of representation or warranty,
together with all other such breaches, would entitle the party receiving such
representation not to consummate the transactions contemplated hereby under
Section 8.2(a) (in the case of a breach of representation or warranty by Seller
Bank ) or Section 8.3(a) (in the case of a breach of representation or warranty
by Parent);
(f) by either Parent or Seller Bank (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which breach shall not have been cured
within thirty
27
28
days following receipt by the breaching party of written notice of such breach
from the other party hereto, or which breach, by its nature, cannot be cured
prior to the Closing; or
(g) by the Board of Directors of Parent, if the Board of
Directors of Seller Bank shall have failed to recommend in the Proxy Statement
that Seller Bank's shareholders approve and adopt this Agreement, or shall have
withdrawn, modified or changed in a manner adverse to Parent its approval or
recommendation of this Agreement and the transactions contemplated hereby.
9.2. Effect of Termination. In the event of termination of this
Agreement by either Parent or Seller Bank as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect except (i) Sections
7.2(b), 9.2 and 10.3 shall survive any termination of this Agreement and (ii)
that notwithstanding anything to the contrary contained in this Agreement, no
party shall be relieved or released from any liabilities or damages arising out
of its breach of any provision of this Agreement.
9.3. Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the shareholders of
either Seller Bank or Parent; provided, however, that after any approval of the
transactions contemplated by this Agreement by Seller Bank's shareholders, there
may not be, without further approval of such shareholders, any amendment of this
Agreement which reduces the amount or changes the form of the consideration to
be delivered to Seller Bank shareholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective Time, each
of the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
GENERAL PROVISIONS
10.1. Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") will take place at 10:00 a.m. on the
first day which is (a) the last business day of month and (b) at least two
business days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Article VIII hereof (other
than those conditions which relate to actions to be taken at the Closing)(the
"Closing Date"), at such time, date and place as is agreed to by the parties
hereto.
10.2. Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time.
10.3. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
28
29
10.4. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent, to:
First Farmers and Merchants Corporation
000 Xxxxx Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
with a copy to (which shall not constitute notice):
Xxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxxx & Xxxxx
A Professional Limited Liability Company
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
(b) if to Seller Bank, to:
Farmers & Merchants Bank
0000 Xxx 00 Xxxxx
X.X. Xxx 000
Xxxxx Xxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxx, Chairman, Chief Executive
Officer, and President
with a copy to (which shall not constitute notice):
Xxxxxx X. Xxxxx, Esq.
Xxxxx Xxxxxxxx Xxxxxxx & Xxxxxxxx, P.C.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
10.5. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
10.6. Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
10.7. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement.
29
30
10.8. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Tennessee applicable to contracts made
and to be performed wholly within such state.
10.9. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained in
7.2(b) of this Agreement were 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 Section
7.2(b) of this Agreement and to enforce specifically the terms and provisions
thereof 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.
10.10. 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.
10.11. Publicity. Except as required by applicable law, neither Parent
nor Seller Bank shall, or shall permit any of its Subsidiaries to, issue or
cause the publication of any press release or other public announcement with
respect to, or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
10.12. Assignment; Third Party Beneficiaries. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. 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. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
30
31
IN WITNESS WHEREOF, Parent, Buyer Bank, and Seller Bank have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
FIRST FARMERS AND MERCHANTS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
FIRST FARMERS AND MERCHANTS NATIONAL BANK, COLUMBIA
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
FARMERS & MERCHANTS BANK
By: /s/ Xxxxxxx Xxxx
------------------------------------
Xxxxxxx Xxxx
Chairman, Chief Executive Officer, and President
31
32
AMENDMENT NO. 1 TO THE AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO THE AGREEMENT AND PLAN OF MERGER ("Amendment")
is dated as of December 15, 1998 by and among FIRST FARMERS AND MERCHANTS
CORPORATION, a Tennessee corporation (the "Parent"), FIRST FARMERS AND MERCHANTS
NATIONAL BANK OF COLUMBIA, a national banking association and wholly-owned
subsidiary of Parent (the "Buyer Bank") and FARMERS & MERCHANTS BANK - WHITE
BLUFF, TENN., a Tennessee banking corporation (the "Seller Bank" and together
with Buyer Bank, the "Banks").
R E C I T A L S:
WHEREAS, Parent, Buyer Bank and Seller Bank are parties to that certain
Agreement and Plan of Merger dated as of October 26, 1998 (the "Merger
Agreement");
WHEREAS, the Merger Agreement currently anticipates that the Merger
will be accounted for as a "pooling of interests" under generally accepted
accounting principles ("GAAP"); and
WHEREAS, Parent, Buyer Bank and Seller Bank desire to amend the Merger
Agreement as set forth in this Amendment to reflect that the Merger will be
accounted for as a purchase under GAAP.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
A G R E E M E N T:
1. Section 1.9 of the Merger Agreement is hereby amended by deleting ";
Accounting Treatment" in the heading, the subsection heading "(i)" and the
following language in the text of Section 1.9: ", and (ii) be accounted for as a
`pooling of interests' under GAAP (as defined herein)." Section 1.9 shall read,
in its entirety, as follows:
1.9. Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the
Code and that this agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code.
2. Section 4.22 of the Merger Agreement is hereby amended by deleting
"Accounting for the Merger;" in the heading and the following language in the
text of Section 4.22: "(i) for pooling-of-interests treatment under GAAP or
(ii)." Section 4.22 shall read, in its entirety, as follows:
4.22 Reorganization. As of the date of this Agreement, Seller
Bank has no reason to believe that the Merger will fail to qualify as a
reorganization under Section 368(a) of the Code.
3. Section 5.19 of the Merger Agreement is hereby amended by deleting
"Accounting for the Merger;" in the heading and the following language in the
text of Section 5.19: "(i) for pooling-of-interest treatment under GAAP or
(ii)." Section 5.19 shall read, in its entirety, as follows:
32
33
5.19. Reorganization. As of the date of this Agreement, Parent
has no reason to believe that the Merger will fail to qualify as a
reorganization under Section 368(a) of the Code.
4. Section 6.1(k) of the Merger Agreement is hereby amended by deleting "a
`pooling of interests' for accounting purposes or." Section 6.1(k) shall read,
in its entirety, as follows:
(k) take or cause to be taken any action which would
disqualify the Merger as a reorganization under Section 368(a) of the
Code;
5. Section 7.5 of the Merger Agreement is hereby amended by adding ", if the
Merger is accounted for as a `pooling of interests,' " in the text of Section
7.5(a) immediately following the words "Securities Act and", and by adding ", if
the Merger is accounted for as a `pooling of interests,' " in the text of
Section 7.5(b) immediately following the words "Parent shall." Section 7.5 shall
read, in its entirety, as follows:
7.5. Affiliates.
(a) Seller Bank shall use its reasonable best efforts
to cause each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act and, if
the Merger is accounted for as a "pooling of interests," for purposes
of qualifying the Merger for "pooling of interest" accounting
treatment) of such party to deliver to the other party hereto, as soon
as practicable after the date of this Agreement, a written agreement,
in the form of Exhibit 7.5(a) hereto.
(b) Parent shall, if the Merger is accounted for as a
"pooling of interests," publish, not later than 15 days after the end
of the first full calendar month following the month in which the
Effective Time occurs, financial results covering at least 30 days of
post-Merger combined operations as contemplated by SEC Accounting
Series Release No. 135.
6. Section 8.1(e) of the Merger Agreement is hereby amended by deleting "Prior
to the execution of this Agreement," in its entirety, and by deleting "Merger
Capital" and replacing it with "its financial advisor." Section 8.1(e) shall
read, in its entirety, as follows:
(e) Opinion. Seller Bank shall have received an opinion from
its financial advisor to the effect that as of the date hereof and
based upon and subject to the matters set forth therein, the Exchange
Ratio is fair to the shareholders of Seller Bank from a financial point
of view.
7. Section 8.2(d) of the Merger Agreement is hereby deleted in its entirety.
Section 8.2(d) shall read, in its entirety, as follows:
(d) [INTENTIONALLY OMITTED].
8. Section 8.3(e) of the Merger Agreement is hereby amended by deleting "Kraft
Bros., Esstman, Xxxxxx & Xxxxxxx, PLLC" and inserting "a law firm or accounting
firm reasonably acceptable to Seller Bank" in its place.
Section 8.3(e) shall read, in its entirety, as follows:
(e) Tax Matters. Seller shall have received a letter from a
law firm or accounting firm reasonably acceptable to Seller Bank dated
as of the Closing Date, in form and substance satisfactory to Seller,
stating in effect that: (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, (ii)
no gain or loss will be recognized by holders of Seller Bank stock who
exchange all of their Seller Bank stock solely for Parent Common Stock
(except for cash received in lieu of fractional shares) in the Merger,
(iii) the tax basis of the Parent Stock received by holders of Seller
Bank stock who exchange all of their Seller Bank stock solely for
Parent stock in the Merger will be the same as the tax
33
34
basis of the Seller stock surrendered in exchange for the Parent stock
(reduced by an amount allocable to a fractional share interest in
Parent stock for which cash is received), and (iv) the holding period
of the Parent stock in the Merger will be the same as the holding
period of the Seller Bank stock surrendered in exchange therefor,
provided that such Seller Bank stock is held as a capital asset at the
Effective Time.
9. Except as expressly set forth in this Amendment, the terms and conditions of
the Merger Agreement shall remain in place and shall not be altered, amended or
changed in any manner whatsoever, except by any further amendment to the Merger
Agreement made in accordance with the terms of the Merger Agreement, and such
terms and conditions shall be incorporated herein by this reference.
10. This Amendment may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when executed
and delivered shall be effective for binding the parties hereto, but all of
which shall together constitute one and the same instrument.
[NEXT PAGE IS SIGNATURE PAGE.]
34
35
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
signed by an individual thereto duly authorized, all on the date first written
above.
FIRST FARMERS AND MERCHANTS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman and Chief Executive Officer
FIRST FARMERS AND MERCHANTS NATIONAL BANK OF
COLUMBIA
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman and Chief Executive Officer
FARMERS & MERCHANTS BANK - WHITE BLUFF, TENN.
By: /s/ Xxxxxxx Xxxx
---------------------------------------
Name: Xxxxxxx Xxxx
Title: Chairman, Chief Executive Officer and
President
35
