Exhibit 2.1
=====================================================
AGREEMENT AND PLAN OF MERGER
BETWEEN
COMMUNITY NATIONAL BANCORP, INC.
AND
COMMUNITY NATIONAL CORPORATION
COMMUNITY NATIONAL BANK OF TENNESSEE
====================================================
DATED AS OF DECEMBER 2, 1999
TABLE OF CONTENTS
PAGE
----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . .1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE I. MERGER. . . . . . . . . . . . . . . . . . . . .5
1.1 THE MERGER . . . . . . . . . . . . . . . . . . . . .5
1.2 THE EFFECTIVE DATE6. . . . . . . . . . . . . . . . .6
ARTICLE II. CONSIDERATION. . . . . . . . . . . . . . . . .6
2.1 EFFECT ON COMPANY COMMON STOCK . . . . . . . . . . .6
2.2 EXCHANGE PROCEDURES. . . . . . . . . . . . . . . . .6
2.3 EFFECT ON NEWCO COMMON STOCK . . . . . . . . . . .7
ARTICLE III. ACTIONS PENDING CONSUMMATION. . . . . . . . .7
3.1 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . .7
3.2 DIVIDENDS, ETC . . . . . . . . . . . . . . . . . . .7
3.3 INDEBTEDNESS; LIABILITIES; ETC . . . . . . . . . . .7
3.4 LINE OF BUSINESS; OPERATING PROCEDURES; ETC. . . . .7
3.5 LIENS AND ENCUMBRANCES . . . . . . . . . . . . . . .7
3.6 COMPENSATION; EMPLOYMENT AGREEMENTS; ETC . . . . . .8
3.7 BENEFIT PLANS. . . . . . . . . . . . . . . . . . . .8
3.8 CONTINUANCE OF BUSINESS. . . . . . . . . . . . . . .8
3.9 AMENDMENTS . . . . . . . . . . . . . . . . . . . . .8
3.10 CLAIMS . . . . . . . . . . . . . . . . . . . . . . .8
3.11 CONTRACTS. . . . . . . . . . . . . . . . . . . . . .8
3.12 LOANS. . . . . . . . . . . . . . . . . . . . . . . .8
3.13 TRANSACTION EXPENSES . . . . . . . . . . . . . . . .8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES . . . . . . . .8
4.1 THE COMPANY AND THE BANK REPRESENTATIONS AND
WARRANTIES. . . . . . . . . . . . . . . . . . . . .8
4.2 NEWCO REPRESENTATIONS AND WARRANTIES . . . . . . . 17
ARTICLE V. COVENANTS . . . . . . . . . . . . . . . . . . 18
5.1 BEST EFFORTS . . . . . . . . . . . . . . . . . . . 18
5.2 THE PROXY. . . . . . . . . . . . . . . . . . . . . 18
5.3 OFFERING DOCUMENT. . . . . . . . . . . . . . . . . 18
5.4 PRESS RELEASES . . . . . . . . . . . . . . . . . . 19
5.5 ACCESS; INFORMATION19
5.6 TERMINATION FEE. . . . . . . . . . . . . . . . . . 19
5.7 REGULATORY APPLICATIONS. . . . . . . . . . . . . . 21
5.8 BLUE-SKY FILINGS . . . . . . . . . . . . . . . . . 21
5.9 [RESERVED] . . . . . . . . . . . . . . . . . . . . 21
5.10 STATE TAKEOVER LAW . . . . . . . . . . . . . . . . 21
5.11 NO RIGHTS TRIGGERED. . . . . . . . . . . . . . . . 21
5.12 INDEMNIFICATION. . . . . . . . . . . . . . . . . . 21
5.13 CURRENT INFORMATION. . . . . . . . . . . . . . . . 23
5.14 FINANCIAL COMMITMENT . . . . . . . . . . . . . . . 23
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGER . . 23
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS . . . . . . 23
6.2 CONDITIONS TO OBLIGATIONS OF NEWCO . . . . . . . . 23
6.3 CONDITIONS TO OBLIGATIONS OF COMPANY AND
THE BANK. . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII. TERMINATION . . . . . . . . . . . . . . . . 25
7.1 GROUNDS FOR TERMINATION. . . . . . . . . . . . . . 25
7.2 CONSEQUENCES OF TERMINATION. . . . . . . . . . . . 25
ARTICLE VIII. OTHER MATTERS. . . . . . . . . . . . . . . 25
8.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . 25
8.2 WAIVER; AMENDMENT. . . . . . . . . . . . . . . . . 26
8.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . 26
8.4 GOVERNING LAW. . . . . . . . . . . . . . . . . . . 26
8.5 EXPENSES . . . . . . . . . . . . . . . . . . . . . 26
8.6 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . 26
8.7 NOTICES. . . . . . . . . . . . . . . . . . . . . . 26
8.8 ENTIRE UNDERSTANDING; NO THIRD PARTY
BENEFICIARIES . . . . . . . . . . . . . . . . . . 27
8.9 HEADINGS . . . . . . . . . . . . . . . . . . . . . 27
EXHIBITS
--------
Exhibit A Approval by Directors of Community National
Corporation
Exhibit B Director's Agreement
Exhibit C [Reserved]
Exhibit D Legal Opinion of Baker, Donelson, Bearman &
Xxxxxxxx
Exhibit E [Reserved]
Exhibit F Legal Opinion of Xxxxxxx & XxXxxxxx, P.C.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 2nd day of
December, 1999 (the "Plan" or "Agreement"), between COMMUNITY
NATIONAL CORPORATION (the "Company"), COMMUNITY NATIONAL BANK OF
TENNESSEE (the "Bank"), and COMMUNITY NATIONAL BANCORP, INC.
("NEWCO").
RECITALS
(A) THE COMPANY. The Company is a company duly organized,
-----------
existing, and in good standing under the laws of the State of
Tennessee, with its principal executive offices located
in Lexington, Tennessee. The Company is a registered bank
holding company under the Bank Holding Company Act of 1956, as
amended. As of the date of this Plan, the Company has 8,000,000
authorized shares of common stock, $1.00 par value per share
("Company Common Stock"), of which 712,877 shares of Company
Common Stock are issued and outstanding; and 2,000,000
authorized shares of preferred stock none of which are
outstanding. There are no director or employee stock options
outstanding.
(B) THE BANK. The Bank is a national banking association
---------
duly organized and existing under the laws of the United States
of America, with its principal executive offices located in
Lexington, Tennessee. As of the date of this Plan, the Bank has
100,000 authorized shares of common stock, $1.00 par value per
share ("Bank Common Stock") (no other class of capital stock
being authorized), of which 100,000 shares of Bank Common Stock
are issued and outstanding. All of the issued and outstanding
shares of Bank Common Stock are owned by the Company, the sole
shareholder of the Bank.
(C) NEWCO. NEWCO is a corporation duly organized,
-----
existing and in good standing under the laws of the State of
Tennessee, with its principal executive offices located in
Lexington, Tennessee. As of the date of this Plan, NEWCO has
1,000,000 authorized shares of common stock, $1.00 par value per
share ("NEWCO Common Stock"), of which no shares are issued and
outstanding. It is expected that NEWCO will have 123,500 shares
of stock outstanding on the date of consummation of the
transaction.
(D) VOTING AGREEMENT. As a condition and an inducement
----------------
to NEWCO's willingness to enter into this Plan, the directors of
the Bank and the Company have entered into an agreement in the
form attached to this Plan as Exhibit A, pursuant to which,
among other things, each such individual has agreed to vote his
or her shares of Company Common Stock in favor of approval of
the actions contemplated by this Plan at the Meeting (as defined
below). Additionally, the directors listed in Schedule
6.2(F)have agreed to refrain from competing with the Continuing
Corporation (as defined below) and its Subsidiaries as outlined
in Exhibit B.
(E) RIGHTS, ETC. Except as Previously Disclosed (as
-----------
defined below) in Schedule 4.1(C) or paragraph (A) of the
Recitals to this Plan, or as authorized by this Plan, there are
no shares of capital stock of the Company or the Bank authorized
and reserved for issuance; neither the Company nor the Bank has
any Rights (as defined below) issued or outstanding; and neither
the Company nor the Bank has any commitment to authorize, issue
or sell any such shares or any Rights. The term "Rights" means
securities or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, or
any options, calls or commitments relating to, shares of capital
stock. There are no preemptive rights with respect to the
Company Common Stock.
(F) APPROVALS. At meetings of the respective Boards of
---------
Directors of the Company, the Bank, and NEWCO, each such Board
has approved and authorized the execution of this Plan in
counterparts.
1
In consideration of their mutual promises and obligations,
the Parties further agree as follows:
DEFINITIONS
(A) DEFINITIONS. Capitalized terms used in this Plan
-----------
have the following meanings:
"Appraisal Laws" has the meaning assigned to such term in
--------------
Section 1.1(E).
"Asset Classification" has the meaning assigned to such
--------------------
term in Section 4.1(T).
"Bank" has the meaning assigned to such term in the first
----
paragraph of this Plan.
"Bank Common Stock" has the meaning assigned to such term
-----------------
in paragraph (B) of the Recitals.
"Capital" means capital stock, surplus and retained
-------
earnings determined in accordance with GAAP.
"Code" has the meaning assigned to such term in Section
----
4.1(Q)(2).
"Company" has the meaning assigned to such term in the
-------
first paragraph of this Plan.
"Company Common Stock" has the meaning assigned to such
--------------------
term in paragraph (A) of the Recitals.
"Company Shareholders" means holders of Company Common
--------------------
Stock.
"Compensation and Benefit Plans" has the meaning assigned
------------------------------
to such term in Section 4.1(Q)(1).
"Continuing Corporation" has the meaning assigned to such
----------------------
term in Section 1.1(A).
"Derivatives Contract" means an exchange-traded or over-
--------------------
the-counter swap, forward, future, option, cap, floor or collar
financial contract or any other contract that (1) is not
included on the balance sheets of the Company contained in its
Regulatory Filings or the NEWCO financial reports, as the case
may be, and (2) is a derivative contract (including various
combinations of the foregoing).
"Dissenting Shares" means the shares of Company Common
-----------------
Stock held by those shareholders of the Company who have timely
and properly exercised their dissenters' rights in accordance
with the Appraisal Laws.
"Effective Date" has the meaning assigned to such term in
--------------
Section 1.2.
"Environmental Law" means (1) any federal, state, and/or
-----------------
local law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any
governmental entity, relating to (a) the protection,
preservation or restoration of the environment (including air,
water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any
other natural resource) or to human health or safety, or (b) the
exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Material, in each
case as amended and as now in effect, including the Federal
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the Federal Clean Water Act,
the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto),
the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, and the Federal Insecticide, Fungicide
and Rodenticide Act, the Federal Occupational Safety and Health
Act of 1970, and (2) any common law or equitable doctrine
(including
2
injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any
Hazardous Material.
"ERISA" has the meaning assigned to such term in Section
-----
4.1(Q)(2).
"ERISA Affiliate" has the meaning assigned to such term in
---------------
Section 4.1(Q)(3).
"ERISA Plans" has the meaning assigned to such term in
-----------
Section 4.1(Q)(2).
"Exception Shares" means shares held by certain identified
----------------
Company Shareholders and listed on Schedule 2.1(A), that will
retain their shares of Company Common Stock as described in
Section 2.1 rather than exchanging such shares for the Merger
Consideration.
"Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended, together with the rules and regulations promulgated
under such statute.
"FDIC" means the Federal Deposit Insurance Corporation.
----
"Federal Reserve Board" means the Board of Governors of
---------------------
the Federal Reserve System.
"GAAP" means generally accepted accounting principles.
----
"Hazardous Material" means any substance presently listed,
------------------
defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under any
Environmental Law, whether by type or quantity, including any
oil or other petroleum product, toxic waste, pollutant
contaminant, hazardous substance, toxic substance, hazardous
waste, special waste or petroleum or any derivative or by-
product thereof, radon, radioactive material, asbestos, asbestos
containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
"Loan/Fiduciary Property" means any property owned or
-----------------------
controlled by the Company or any of its Subsidiaries or in which
the Company or any of its Subsidiaries holds a security or other
interest, and where required by the context, includes any such
property where the Company or any of its Subsidiaries
constitutes the owner or operator of such property, but only
with respect to such property.
"Material Adverse Effect" means, with respect to any
-----------------------
Party, an event, occurrence or circumstance (including (i) the
making of any provisions for possible loan and lease losses,
write-downs or other real estate owned and taxes, and (ii) any
breach of a representation or warranty contained in this Plan by
such Party) that (a) has or is reasonably likely to have a
material adverse effect on the financial condition, results of
operations, business or prospects of such Party and its
Subsidiaries, taken as a whole, or (b) would materially impair
such Party's ability to perform its obligations under this Plan
or the consummation of any of the transactions contemplated by
this Plan.
"Meeting" has the meaning assigned to such term in Section
-------
5.2.
"Merger" has the meaning assigned to such term in Section
------
1.1(A).
"Merger Consideration" means the aggregate of the cash
--------------------
paid for the Company shares, other than Exception Shares which
shall be retained and not exchanged for cash.
"Multiemployer Plans" has the meaning assigned to such
-------------------
term in Section 4.1(Q)(2).
"NEWCO" has the meaning assigned to such term in the first
-----
paragraph of the Plan.
0
"XXXXX Xxxxxx Xxxxx" has the meaning assigned to such term
------------------
in paragraph (c) of the Recitals.
"Offering Document" has the meaning assigned to such term
-----------------
in Section 5.3.
"OCC" means the Office of the Comptroller of the Currency.
---
"OTS" means the Office of Thrift Supervision.
---
"Participation Facility" means any facility in which the
----------------------
Company or any of its Subsidiaries participates in the
management and, where required by the context, includes the
owner or operator of such facility.
"Party" means a party to this Plan.
-----
"Pension Plan" has the meaning assigned to such term in
------------
Section 4.1(Q)(2).
"Person" means any individual, corporation (including any
------
non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization, labor union, governmental body, or other entity.
"Plan" means this Agreement and Plan of Merger.
----
"Previously Disclosed" with respect to information, means
--------------------
that the information is provided by a Party in a Schedule that
is delivered contemporaneously with the execution of this Plan.
"Proxy Statement" has the meaning assigned to such term in
---------------
Section 5.2.
"Regulatory Authorities" means federal or state
----------------------
governmental agencies, authorities or departments charged with
the supervision or regulation of depository institutions or
engaged in the insurance of deposits.
"Regulatory Filings" has the meaning assigned to such term
------------------
in Section 4.1(H).
"Rights" has the meaning assigned to such term in
------
paragraph (E) of the Recitals.
"Securities Act" means the Securities Act of 1933, as
--------------
amended, together with the rules and regulations promulgated
under such statute.
"SEC" means the Securities and Exchange Commission.
---
"Subsidiary" means, with respect to any entity, each
----------
partnership, limited liability company, or corporation the
majority of the outstanding partnership interests, membership
interests, capital stock or voting power of which is (or upon
the exercise of all outstanding warrants, options and other
rights would be) owned, directly or indirectly, at the time in
question by such entity.
"Tax Returns" has the meaning assigned to such term in
-----------
Section 4.1(AA).
"Taxes" means federal, state, local or foreign income,
-----
gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise, employment,
withholding or similar taxes imposed on the income, properties
or operations of the respective Party or its Subsidiaries,
together with any interest, additions, or penalties relating to
such taxes and any interest charged on those additions or
penalties.
"TBCA" means the Tennessee Business Corporation Act, as
----
amended.
4
"Third Party" means a person within the meaning of Section
-----------
3(a)(9) and 13(d)(3) of the Exchange Act, excluding (1) the
Company or any Subsidiary of the Company, and (2) NEWCO or any
Subsidiary of NEWCO.
(B) GENERAL INTERPRETATION. Except as otherwise expressly
----------------------
provided in this Plan or unless the context clearly requires
otherwise, the terms defined in this Plan include the plural as
well as the singular; the words "hereof", "herein", "hereunder",
"in this Plan" and other words of similar import refer to this
Plan as a whole and not to any particular Article, Section or
other subdivision; and references in this Plan to Articles,
Sections, Schedules, and Exhibits refer to Articles and Sections
of and Schedules and Exhibits to this Plan. Whenever the words
"include", "includes", or "including" are used in this Plan,
they shall be deemed to be followed by the words "without
limitation". Unless otherwise stated, references to Subsections
refer to the Subsections of the Section in which the reference
appears. All pronouns used in this Plan include the masculine,
feminine and neuter gender, as the context requires. All
accounting terms used in this Plan that are not expressly
defined in this Plan have the respective meanings given to them
in accordance with GAAP.
ARTICLE I. MERGER
1.1 THE MERGER. Subject to the provisions of this Plan,
----------
on the Effective Date:
(A) THE CONTINUING CORPORATION. In accordance with
--------------------------
the terms of TBCA 00-00-000, NEWCO shall merge into the Company
(the "Merger"), the separate existence of NEWCO shall cease and
the Company (the "Continuing Corporation") shall survive, and
the name of the Continuing Corporation shall be "Community
National Corporation".
(B) RIGHTS, ETC. Upon consummation of the Merger,
-----------
the Continuing Corporation shall possess all of the rights,
privileges, immunities and franchises, of a public as well as of
a private nature, of each of the merging corporations; and all
property, real, personal and mixed, and all debts due on
whatever account, and all other choses in action, and all and
every other interest, of or belonging to or due to each of the
corporations so merged, shall be deemed to be vested in the
Continuing Corporation without further act or deed; and the
title to any real estate or any interest therein, vested in each
of such corporations, shall not revert or be in any way impaired
by reason of the Merger.
(C) LIABILITIES. The Continuing Corporation shall
-----------
be responsible and liable for all the liabilities, obligations
and penalties of each of the corporations so merged.
(D) CHARTER; BYLAWS; DIRECTORS; OFFICERS. The
------------------------------------
Charter and Bylaws of the Continuing Corporation shall be those
of the Company, as in effect immediately prior to the Merger
becoming effective. The directors and officers of NEWCO in
office immediately prior to the Merger becoming effective are
expected to be the directors and officers of the Continuing
Corporation, who shall hold office until such time as their
successors are elected and qualified.
(E) DISSENTING SHARES. Notwithstanding anything
-----------------
to the contrary in this Plan, each Dissenting Shareholder who,
as of the Effective Date of the Merger, has not effectively
withdrawn or lost his dissenters' rights under TBCA 00-00-000
etseq (the "Appraisal Laws") shall not be converted into or
represent a right to receive any of the Merger Consideration,
but each holder of such Dissenting Shares shall be entitled only
to such rights as are granted by the Appraisal Laws, unless and
until such holder shall have failed to perfect or shall have
effectively withdrawn or lost the right to payment under the
Appraisal Laws, in which case each such share shall be deemed to
have been converted at the Effective Date into his or her
portion of the Merger Consideration. Each holder of Dissenting
Shares who becomes entitled to payment for his Company
5
Common Stock pursuant to the provisions of the Appraisal laws
shall receive payment for such Dissenting Shares from the
Company (but only after the amount thereof shall have been
agreed upon or finally determined pursuant to the Appraisal
Laws).
1.2 EFFECTIVE DATE. Unless the Parties agree upon
--------------
another date, the "Effective Date" of the Merger will be the
tenth business day after the fulfillment or waiver of each
condition precedent set forth in, and the granting of each
approval (and expiration of any waiting period) required by,
Article VI. A business day is any day other than a Saturday,
Sunday or legal holiday in the State of Tennessee. If the
Merger is not consummated in accordance with this Plan on or
prior to March 31, 2000, the Company or NEWCO may terminate this
Plan in accordance with Article VII. On or prior to the
Effective Date, NEWCO and the Company shall execute and deliver
to the Secretary of State of the State of Tennessee articles of
merger in accordance with applicable law.
ARTICLE II. CONSIDERATION
2.1 EFFECT ON COMPANY COMMON STOCK. Subject to the
------------------------------
provisions of this Plan, on the Effective Date, by virtue of the
Merger:
(A) MERGER CONSIDERATION. The redemption price
--------------------
paid by the Continuing Corporation to the holders of Company
Common Stock ("Company Shareholders") shall be cash of $14.75
for each share of Company Common Stock (the "Merger
Consideration"), except for (i) Exception Shares listed on
Schedule 2.1(A) which shall be retained by such Shareholders or
(ii) Dissenting Shares which shall be entitled to payment under
the Appraisal Laws.
All of the issued and outstanding shares of Company Common
Stock, other than Dissenting Shares and Exception Shares, shall
be converted into the right to receive the Merger Consideration
based upon each Company Shareholder's ownership of the total
number of issued and outstanding shares of Company Common Stock
immediately prior to the Effective Date. It is expected that
approximately 471,173 shares of Company will be acquired for
cash as part of this transaction at $14.75 per share,
representing aggregate consideration of $6,949,802, and that
approximately 241,704 shares of Company, the Exception Shares,
will be retained by the shareholders who shall continue as
shareholders of the Continuing Corporation.
(B) [RESERVED]
(C) CANCELLATION OF COMPANY COMMON STOCK. All
------------------------------------
shares of Company Common Stock issued and outstanding
immediately prior to the Effective Date other than Exception
Shares shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist as of the
Effective Date, and each holder of a certificate or other
documentation representing any such shares of Company Common
Stock shall cease to have any rights with respect thereto,
except the right to receive (i) the portion of the cash Merger
Consideration applicable to such shares in consideration
therefor upon surrender of such certificate or other
documentation in accordance with the Plan, without interest, or,
(ii) if applicable, cash in accordance with the Appraisal Laws
for Dissenting shares. After the Effective Date, there shall be
no transfers on the stock transfer books of the Company or the
Continuing Corporation of the shares of Company Common Stock
that were issued and outstanding immediately prior to the
Effective Date.
(D) ANTI-DILUTION. If prior to the Effective
-------------
Date, shares of Company Common Stock shall be changed into a
different number of shares by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares,
readjustment or similar transactions, or if a stock dividend
shall be declared, appropriate and proportionate adjustment or
adjustments will be made in the Merger Consideration.
2.2 EXCHANGE PROCEDURES. As promptly as practicable
-------------------
after the Effective Date, Continuing Corporation shall send or
cause to be sent to each former Company Shareholder of record
immediately prior to the Effective Date, other than Exception
Shares, transmittal materials for use in
6
exchanging such shareholder's certificates for the Merger
Consideration set forth in this Article II. The Merger
Consideration to be paid by the Continuing Corporation, any
check that a shareholder shall be entitled to receive, and any
dividends paid on such shares of Company Common Stock for which
the record date for determination of shareholders entitled to
such dividends is on or before the Effective Date, will be
delivered to such shareholder only upon delivery to the
Continuing Corporation of the certificates representing all of
such shares of Company Common Stock (or indemnity satisfactory
to the Continuing Corporation, in its judgment, if any of such
certificates are lost, stolen or destroyed) and documentary
evidence satisfactory to the Continuing Corporation of the
otherwise valid holding of such shares. No interest will be
paid on the Merger Consideration or dividends to which the
holder of such shares shall be entitled to receive upon such
delivery. The procedures described herein shall not prevent the
use of other means of transfer of shareholder certificates
including physical delivery of such certificates to the
Company's offices, which procedures the parties intend to
utilize.
2.3 EFFECT ON NEWCO COMMON STOCK. Subject to the
----------------------------
provisions of this Plan, on the Effective Date, by virtue of the
Merger, each of the 123,500 issued and outstanding NEWCO shares
shall be exchanged, on a one-for-one share basis, for shares of
Company Common Stock.
ARTICLE III. ACTIONS PENDING CONSUMMATION
Unless otherwise agreed to in writing by NEWCO, each of
the Company and the Bank shall conduct its business in the
ordinary and usual course consistent with past practice and
shall use its best efforts to maintain and preserve its business
organization, employees and advantageous business relationships
and retain the services of its officers and key employees
identified by NEWCO, and neither the Company nor the Bank,
without the prior written consent of NEWCO, will (or cause or
allow any of its Subsidiaries to):
3.1 CAPITAL STOCK. Except for or as otherwise expressly
-------------
permitted by this Plan or as Previously Disclosed in Schedule
4.1(C), issue, sell or otherwise permit to become outstanding
any additional shares of capital stock of the Company, the Bank
or any of their Subsidiaries, or any Rights with respect
thereto, or enter into any agreement with respect to the
foregoing, or permit any additional shares of Company Common
Stock to become subject to grants of options, stock appreciation
rights or similar stock-based employee or director compensation
rights.
3.2 DIVIDENDS, ETC. Except as set forth on Schedule
--------------
3.2, make, declare or pay any dividend on or in respect of, or
declare or make any distribution on, or directly or indirectly
combine, redeem, reclassify, purchase or otherwise acquire, any
shares of its capital stock or, other than as permitted in or
contemplated by this Plan, authorize the creation or issuance
of, or issue, any additional shares of its capital stock or any
Rights with respect thereto.
3.3 INDEBTEDNESS; LIABILITIES; ETC. Except as set forth
------------------------------
on Schedule 3.3, other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for the obligations
of any other individual, corporation or other entity; provided,
however, the Company shall incur no indebtedness for borrowed
money or engage in any of the actions described in this Section
3.3.
3.4 LINE OF BUSINESS; OPERATING PROCEDURES; ETC. Except
-------------------------------------------
as may be directed by any regulatory agency, (A) change its
lending, investment, liability management or other material
banking policies in any material respect, except such changes as
are in accordance and in an effort to comply with Section 5.9,
or (B) commit to incur any further capital expenditures beyond
those Previously Disclosed in Schedule 3.4 other than in the
ordinary course of business and not exceeding $25,000
individually or $100,000 in the aggregate prior to the Effective
Date.
3.5 LIENS AND ENCUMBRANCES. Impose, or suffer the
----------------------
imposition, on any shares of stock of any of its Subsidiaries,
any lien, charge or encumbrance, or permit any such lien, charge
or encumbrance to exist.
7
3.6 COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Except as
----------------------------------------
Previously Disclosed in Schedule 3.6, enter into or amend any
employment, severance or similar agreement or arrangement with
any of its directors, officers or employees, or grant any salary
or wage increase, amend the terms of any employee benefit
(including incentive or bonus payments), except normal
individual increases (not exceeding 5% for any employee of
Company or Bank whose salary is $25,000 or more) in regular
compensation to employees in the ordinary course of business
consistent with past practice.
3.7 BENEFIT PLANS. Except as Previously Disclosed in
-------------
Schedule 3.7, enter into or modify (except as may be required by
applicable law) any pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto, in respect of any of its directors,
officers or other employees, including taking any action that
accelerates the vesting or exercise of any benefits payable
thereunder.
3.8 CONTINUANCE OF BUSINESS. Dispose of or discontinue
-----------------------
any portion of its assets, business or properties, that is
material to the Company and its Subsidiaries taken as a whole,
or merge or consolidate with, or acquire all or any portion of,
the business or property of any other entity that is material to
the Company and its Subsidiaries taken as a whole (except
foreclosures or acquisitions by the Bank in its fiduciary
capacity, in each case in the ordinary course of business
consistent with past practice).
3.9 AMENDMENTS. Amend its articles of incorporation or
----------
bylaws.
3.10 CLAIMS. Settle any claim, litigation, action or
------
proceeding involving any liability for money damages or
restrictions upon the operations of the Company or the Bank.
3.11 CONTRACTS. Except as Previously Disclosed on
---------
Schedule 3.11, enter into, renew, terminate or make any change
in any material contract, agreement or lease, except in the
ordinary course of business consistent with past practice with
respect to contracts, agreements and leases that are terminable
by it without penalty on no more than 60 days prior written
notice.
3.12 LOANS. Extend credit or account for loans and
-----
leases other than in accordance with existing lending policies
and accounting practices, except that the Bank shall not,
without the prior consent of NEWCO's Board of Directors, make
any new loan or modify, restructure or renew any existing
nonperforming loan (defined as on non-accrual status, or 90 days
or more past due) to any borrower if the amount of the resulting
loan, when aggregated with all other loans or extension of
credit to such Person (or which would be required to be
aggregated for loans-to-one-borrower limitations), would be in
excess of $75,000 for any new or existing customer as of the
date of this Plan, except that (i) single-family residential
loans may be made in amounts that would not exceed applicable
FHLMC and FNMA limits, and (ii) such limits shall not apply to
SBA, FmHA, USDA Rural Development or other governmental or
governmental agency guaranteed amounts.
3.13 TRANSACTION EXPENSES. Incur expenses in connection
--------------------
with the transactions contemplated by this Plan that exceed the
amounts set forth in Schedule 3.13.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
4.1 THE COMPANY AND THE BANK REPRESENTATIONS AND WARRANTIES
------------------------------------------------------
Each of the Company and the Bank hereby represents and warrants
to NEWCO as follows:
(A) RECITALS. The facts set forth in Recitals
--------
(A), (B), and (E) of this Plan with respect to the Company and
its Subsidiaries are true and correct.
8
(B) ORGANIZATION, STANDING AND AUTHORITY. The
------------------------------------
Company is duly qualified to do business and is in good standing
in the State of Tennessee which is the only state where the
failure to be duly qualified, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on it.
The Bank is duly qualified to do business and validly existing
under the laws of the United States and in the State of
Tennessee which are the only jurisdictions where the failure to
be duly qualified, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on it. Each
of the Company and its Subsidiaries has in effect all federal,
state, local and foreign government authorizations necessary for
it to own or lease its properties and assets and to carry on its
business as it is now conducted, the absence of which,
individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on it. The Bank is an "insured
depository institution" as defined in the Federal Deposit
Insurance Act, as amended, and applicable regulations under such
statute, and its deposits are insured by the Savings Association
Insurance Fund of the FDIC.
(C) SHARES. The outstanding shares of the Company
------
and its Subsidiaries' capital stock are validly issued and
outstanding, fully paid and nonassessable (except for the
application of 12 U.S.C. Section 55 to the shares of Bank Common
Stock), and subject to no preemptive rights. Except as
Previously Disclosed in Schedule 4.1(C) and paragraph (A) of the
Recitals, there are no shares of capital stock or other equity
securities of the Company or its Subsidiaries outstanding and no
outstanding Rights with respect thereto. There are no options
of any kind that exist with regard to Company Common Stock.
(D) THE COMPANY SUBSIDIARIES. The Company's sole
------------------------
subsidiary is the Bank. The Bank is duly qualified to do
business and validly existing under the laws of the United
States and in the State of Tennessee which are the only
jurisdictions where the failure to be duly qualified,
individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on it. No equity securities of any of
its Subsidiaries are or may become required to be issued (other
than to the Company or one of its Subsidiaries) by reason of any
Rights with respect thereto. There are no contracts,
commitments, understandings or arrangements by which any of its
Subsidiaries is or may be bound to sell or otherwise issue any
shares of such Subsidiary's capital stock, and there are no
contracts, commitments, understandings or arrangements relating
to the rights of the Company or its Subsidiaries, as applicable,
to vote or to dispose of such shares. All of the shares of
capital stock of each of its Subsidiaries held by the Company or
one of its Subsidiaries are fully paid and nonassessable and are
owned by the Company or one of its Subsidiaries free and clear
of any charge, mortgage, pledge, security interest, restriction,
claim, lien or encumbrance. Except as Previously Disclosed in
Schedule 4.1(D), the Bank does not own beneficially, directly or
indirectly, any shares of any equity securities or similar
interests of any corporation, bank, partnership, joint venture,
business trust, association or other organization.
(E) CORPORATE POWER. Each of the Company and its
---------------
Subsidiaries has the corporate power and authority to carry on
its business as it is now being conducted and to own all its
material properties and assets.
(F) CORPORATE AUTHORITY. Subject to the receipt
-------------------
of approval by its shareholders referred to in Section 6.1, this
Plan has been authorized by all necessary corporate action of
the Company and each of its Subsidiaries that is a Party, and is
a valid and binding agreement of the Company and such
Subsidiaries, enforceable against the Company and such
Subsidiaries in accordance with its terms, subject to
bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(G) NO DEFAULTS. Subject to the approval by its
-----------
shareholders referred to in Section 6.1, the required regulatory
approvals referred to in Section 6.1, and the required filings
under federal and state securities laws, and except as
Previously Disclosed in Schedule 4.1(G), the execution, delivery
and performance of this Plan and the consummation by the Company
and each of its Subsidiaries that is a Party to the transactions
contemplated by this Plan do not and will not (1) constitute a
breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit
or license, or
9
agreement, indenture or instrument of the Company or of any of
its Subsidiaries or to which the Company or any of its
Subsidiaries or its or their properties is subject or bound,
which breach, violation or default is reasonably likely,
individually or in the aggregate, to have a Material Adverse
Effect on it, (2) constitute a breach or violation of, or a
default under, the articles of incorporation, charter or bylaws
of it or any of its Subsidiaries, or (3) require any consent or
approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval
of any other party to any such agreement, indenture or
instrument, other than any such consent or approval that, if not
obtained, would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it.
(H) FINANCIAL REPORTS. The Company's Annual
-----------------
Reports on Form 10-K for the fiscal years ended December 31,
1998 and 1997, and all other reports, registration statements,
definitive proxy statements or information statements filed by
it or any of its Subsidiaries subsequent to becoming registered
as a reporting company with the SEC pursuant to the Company's
Form 8-A filed as of November 21, 1997 under the Securities
Act, or under Section 13(a), 13 (c), 14 or 15(d) of the Exchange
Act or under the securities regulations of the SEC, in the form
filed (collectively, its "Regulatory Filings") with the SEC as
of the date filed, (A) complied in all material respects as to
form with the applicable requirements under the Securities Act
or the Exchange Act, as the case may be, and (B) did not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; and each of the balance
sheets contained in or incorporated by reference into any such
Regulatory Filing (including the related notes and schedules
thereto) fairly presented in all material respects its financial
position and that of its Subsidiaries as of its date, and each
of the statements of income and changes in shareholders' equity
and cash flows or equivalent statements in such Regulatory
Filings (including any related notes and schedules thereto)
fairly presented in all material respects, the results of
operations, changes in shareholders' equity and changes in cash
flows, as the case may be, of it and its Subsidiaries for the
periods to which they relate, in each case in accordance with
GAAP consistently applied during the periods involved, except in
any case as may be noted therein, subject to normal year-end
audit adjustments in the case of unaudited statements.
(I) ABSENCE OF UNDISCLOSED LIABILITIES. Except as
----------------------------------
Previously Disclosed on Schedule 4.1(I), neither the Company nor
any of its Subsidiaries has any obligation or liability
(contingent or otherwise) that, individually or in the
aggregate, is reasonably likely to have a Material Adverse
Effect on it, except (1) as reflected in its Regulatory Filings
prior to the date of this Plan, and (2) for commitments and
obligations made, or liabilities incurred, in the ordinary
course of business consistent with past practice since December
31, 1998. Except as Previously Disclosed on Schedule 4.1(I),
since December 31, 1998, neither the Company nor any of its
Subsidiaries has incurred or paid any obligation or liability
(including any obligation or liability incurred in connection
with any acquisitions in which any form of direct financial
assistance of the federal government or any agency thereof has
been provided to any Subsidiary) that, individually or in the
aggregate, is reasonably likely to have a Material Adverse
Effect on it.
(J) NO EVENTS. Except as Previously Disclosed on
---------
Schedule 4.1(J), since December 31, 1998, no event has occurred
that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on Company or the Bank.
(K) PROPERTIES. Except as reserved against in
----------
its Regulatory Filings, the Company and each of its Subsidiaries
have good and marketable title, free and clear of all liens,
encumbrances, charges, defaults, or equities of any character,
to all of the properties and assets, tangible and intangible,
reflected in its Regulatory Filings as being owned by the
Company or its Subsidiaries as of the dates thereof other than
those that, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect on it, except those
sold or otherwise disposed of in the ordinary course of
business. All buildings and all material fixtures, equipment,
and other property and assets that are held under leases or
subleases by the Company or any of its Subsidiaries are held
under valid leases or subleases enforceable in accordance with
their respective terms, other than any such exceptions to
validity or enforceability that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse
Effect on it.
10
(L) LITIGATION; REGULATORY ACTION. Except as
-----------------------------
Previously Disclosed in Schedule 4.1(L), no litigation,
proceeding or controversy before any court or governmental
agency is pending that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on the
Company or any of its Subsidiaries or that alleges claims under
any fair lending law or other law relating to discrimination,
including the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act and the Home Mortgage
Disclosure Act, and, to the best of its knowledge, no such
litigation, proceeding or controversy has been threatened; and
except as Previously Disclosed in Schedule 4.1(L), neither the
Company nor any of its Subsidiaries or any of its or their
material properties or their officers, directors or controlling
persons is a party to or is subject to any order, decree,
agreement, board resolution, memorandum of understanding or
similar arrangement with, or a commitment letter or similar
submission to, any Regulatory Authority, and neither the Company
nor any of its Subsidiaries has been advised by any of such
Regulatory Authorities that such authority is contemplating
issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, board
resolution, memorandum or understanding, commitment letter or
similar submission.
(M) COMPLIANCE WITH LAWS. Except as Previously
--------------------
Disclosed in Schedule 4.1(M), each of the Company and its
Subsidiaries:
(1) has all permits, licenses,
authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Regulatory
Authorities that are required in order to permit it to own its
businesses presently conducted and that are material to the
business of it and its Subsidiaries taken as a whole; all such
permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to its best
knowledge, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations
are current;
(2) has received no notification or
communication from any Regulatory Authority or the staff thereof
(a) asserting that the Company or any of its Subsidiaries is not
in compliance with any of the statutes, regulations or
ordinances which such Regulatory Authority enforces, which, as a
result of such noncompliance in any such instance, individually
or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Company or its Subsidiaries, (b)
threatening to revoke any license, franchise, permit or
governmental authorization, which revocation, individually or in
the aggregate, is reasonably likely to have a Material Adverse
Effect on the Company or its Subsidiaries, or (c) requiring any
of the Company or its Subsidiaries (or any of its or their
officers, directors or controlling persons) to enter into a
cease and desist order, agreement or memorandum of understanding
(or requiring the board of directors thereof to adopt any
resolution or policy);
(3) is not required to give prior notice to
any federal banking or thrift agency of the proposed addition
of an individual to its board of directors or the employment of
an individual as a senior executive; and
(4) is in compliance in all material
respects with all fair lending laws or other laws relating to
discrimination, including the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act and the Home
Mortgage Disclosure Act.
(N) MATERIAL CONTRACTS. Except as Previously
------------------
Disclosed in Schedule 4.1(N), none of the Company or its
Subsidiaries, nor any of their respective assets, businesses or
operations, is a party to, or is bound or affected by, or
receives benefits under, any contract or agreement which is a
"material contract" within the meaning of Item 601(b)(10) of
Regulation S-K promulgated by the SEC. Neither the Company nor
any of its Subsidiaries is in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or
other instrument to which it is a party, by which its respective
assets, business or operations may be bound or affected or under
which it or any of its respective assets, business or operations
receives benefits, which default individually or in the
aggregate, is reasonably likely to have a Material Adverse
Effect on the Company or its Subsidiaries, and there has not
occurred any event in connection with any material
11
contract, agreement or amendment thereto, that with the lapse of
time or the giving notice or both, would constitute such a
default. Except as Previously Disclosed in Schedule 4.1(N),
neither the Company nor any of its Subsidiaries is subject to or
bound by any contract containing covenants that limit the
ability of the Company or any of its Subsidiaries to compete in
any line of business or with any Person or that involve any
restriction of geographical area in which, or method by which,
the Company or any of its subsidiaries may carry on its business
(other than as may be required by law or any applicable
Regulatory Authority).
(O) REPORTS. Since January 1, 1997, each of the
-------
Company and its Subsidiaries has filed all reports and
statements, together with any amendments required to be made
with respect thereto; that it was required to file with (1) the
Department, (2) the OCC, (3) the Federal Reserve Board, and (4)
any other Regulatory Authorities having jurisdiction with
respect to the Company and its Subsidiaries. As of their
respective dates (and without giving effect to any amendments or
modifications filed after the date of this Plan with respect to
reports and documents filed before the date of this Plan), each
of such reports and documents, including the financial
statements, exhibits and schedules thereto, complied in all
material respects with all of the statutes, rules and
regulations enforced or promulgated by the Regulatory Authority
with which they were filed and did not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(P) NO BROKERS. All negotiation relative to this
----------
Plan and the transactions contemplated by this Plan have been
carried on by it directly with NEWCO and no action has been
taken by it that would give rise to any valid claim against any
Party for a brokerage commission, finder's fee or other like
payment.
(Q) EMPLOYEE BENEFIT PLANS.
----------------------
(1) Schedule 4.1(Q)(1) contains a complete
list of all bonus, deferred compensation, pension, retirement,
profit-sharing, thrift savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plans,
all employment or severance contracts, all medical, dental,
health and life insurance plans, all other employee benefit
plans, contracts or arrangements and any applicable "change of
control" or similar provisions in any plan, contract or
arrangement maintained or contributed to by the Company or any
of its Subsidiaries for the benefit of employees, former
employees, directors, former directors or their beneficiaries
(the "Compensation and Benefit Plans"). True and complete
copies of all Compensation and Benefit Plans of the Company and
its Subsidiaries, including any trust instruments and/or
insurance contracts, if any, forming a part thereof, and all
amendments thereto, have been supplied to NEWCO.
(2) All "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), other than
"multiemployer plans" within the meaning of Section 3(37) of
ERISA ("Multiemployer Plans"), covering employees or former
employees of the Company and it Subsidiaries (the "ERISA
Plans"), to the extent subject to ERISA, are in substantial
compliance with ERISA. Except as Previously Disclosed in
Schedule 4.1(Q)(2), each ERISA Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of
ERISA ("Pension Plan") and which is intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986 (as
amended, the "Code") has received a favorable determination
letter from the Internal Revenue Service, and it is not aware of
any circumstances reasonably likely to result in the revocation
or denial of any such favorable determination letter or the
inability to receive such a favorable determination letter.
There is no material pending or, to its knowledge, threatened
litigation relating to the ERISA Plans. Neither the Company nor
any of its Subsidiaries has engaged in a transaction with
respect to any ERISA Plan that could subject the Company or any
of its Subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA in an amount
which would be material.
(3) No liability under Subtitle C or D of
Title IV of ERISA has been or is expected to be incurred by the
Company or any of its Subsidiaries with respect to any ongoing,
frozen or
12
terminated "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any entity which is
considered one employer with the Company under Section
4001(a)(15) of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Neither the Company nor any of its Subsidiaries
presently contributes to a Multiemployer Plan, nor have they
contributed to such a plan within the past five calendar years.
No notice of a "reportable event", within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any Pension Plan
or by any ERISA Affiliate within the past 12-month period.
(4) All contributions required to be made
under the terms of any ERISA Plan have been timely made.
Neither any Pension Plan nor any single-employer plan of an
ERISA Affiliate has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA. Neither the Company nor any of
its Subsidiaries has provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of
an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(5) Under each Pension Plan which is a
single-employer plan, as of the last day of the most recent plan
year, the actuarially determined present value of all "benefit
liability," within the meaning of Section 4001(1)(16) of ERISA
(as determined on the basis of the actuarial assumptions
contained in the plan's most recent actuarial valuation) did not
exceed the then current value of the assets of such plan, and
there has been no material change in the financial condition of
such plan since the last day of the most recent plan year.
(6) Neither the Company nor any of its
subsidiaries has any obligations for retiree health and life
benefits under any plan, except as set forth in Schedule
4.1(Q)(6). There are no restrictions on the rights of the
Company or any of its Subsidiaries to amend or terminate any
such plan without incurring any liability thereunder.
(7) Except as Previously Disclosed in
Schedule 4.1(Q)(7), neither the execution and delivery of this
Plan nor the consummation of the transactions contemplated by
this Plan will (a) result in any payment (including severance,
unemployment compensation, golden parachute or otherwise)
becoming due to any director or any employee of the Company or
any of its Subsidiaries under any Compensation and Benefit Plan
or otherwise from the Company or any of its Subsidiaries, (b)
increase any benefits otherwise payable under any Compensation
and Benefit Plan, or (c) result in any acceleration of the time
of payment or vesting of any such benefit.
(R) NO KNOWLEDGE. The Company and its Subsidiaries
------------
know of no reason why the regulatory approvals referred to in
Section 6.1 should not be obtained.
(S) LABOR AGREEMENTS. Neither the Company nor
----------------
any of its Subsidiaries is a party to or is bound by any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is
the Company or any of its Subsidiaries the subject of a
proceeding asserting that it or any such Subsidiary has
committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel it or such
Subsidiary to bargain with any labor organization as to wages
and conditions of employment, nor is there any strike or other
labor dispute involving it or any of its Subsidiaries pending
or, to the best of its knowledge, threatened, nor is it aware of
any activity involving its or any of the Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in
any other organization activity.
(T) ASSET CLASSIFICATION. The Company and its
--------------------
Subsidiaries have Previously Disclosed in Schedule 4.1(T) a
list, accurate and complete in all material respects, of the
aggregate amounts of loans, extensions of credit or other assets
of the Company and its Subsidiaries that have been classified by
it as of September 30, 1999 (the "Asset Classification"); and no
amounts of loans, extensions of credit or other assets that have
been classified as of September 30, 1999 by any regulatory
examiner as "Other Loans Specially
13
Mentioned," "Substandard," "Doubtful," "Loss," or words of
similar import are excluded from the amounts disclosed in the
Asset Classification, other than amounts of loans, extensions of
credit or other assets that were charged off, paid, or in the
reasonable judgment of management no longer warrant
classification by the Company or any Subsidiary prior to
September 30, 1999 and which have been Previously Disclosed to
NEWCO.
(U) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The
----------------------------------
allowance for possible loan losses shown on the balance sheet in
the June 30, 1999 Bank Financial Reports was, and the allowance
for possible loan losses to be shown on subsequent Regulatory
Filings and Bank Financial Reports was and will be, adequate in
the opinion of the Board of Directors of the Company to provide
for possible losses, net of recoveries relating to loans
previously charged off, on loans outstanding (including accrued
interest receivable) as of the date thereof.
(V) INSURANCE. Each of the Company and its
---------
Subsidiaries has taken all requisite action (including the
making of claims and the giving of notices) pursuant to its
directors' and officers' liability insurance policy or policies
in order to preserve all rights thereunder with respect to all
matters that are known to the Company, except for such matters
that, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect on the Company or its
Subsidiaries. Set forth in Schedule 4.1(V) is a list of all
insurance policies maintained by or for the benefit of the
Company or its Subsidiaries or their respective directors,
officers, employees or agents.
(W) AFFILIATES. Except as Previously Disclosed in
----------
Schedule 4.1(W), to the best of the Company's knowledge, there
is no person who, as of the date of this Plan, may be deemed to
be an "affiliate" of the Company as that term is used in Rule
144 under the Securities Act.
(X) STATE TAKEOVER LAWS, ARTICLES OF INCORPORATION.
----------------------------------------------
The Company and its Subsidiaries have taken all necessary action
to exempt this Plan and the transactions contemplated by this
Plan from, and this Plan and such transactions are exempt from
(1) any applicable state takeover laws and (2) any takeover-
related provisions of the Company's and the Bank's articles of
association or bylaws.
(Y) NO FURTHER ACTION. The Company and its
-----------------
Subsidiaries have taken all action so that the entering into of
this Plan and the consummation of the transactions contemplated
by this Plan (including the Merger) or any other action or
combination of actions, or any other transaction, contemplated
by this Plan do not and will not (1) require a vote of
shareholders (other than as set forth in Section 6.1), or (2)
result in the grant of any rights to any Person under the
articles of incorporation, charter or bylaws of the Company or
any of its Subsidiaries or under any agreement to which the
Company or any such Subsidiaries is a party, or (3) restrict or
impair in any way the ability of the other Parties to exercise
the rights granted under this Plan.
(Z) ENVIRONMENTAL MATTERS.
---------------------
(1) To the Company's and Bank's knowledge,
the Participation Facilities and the Loan/Fiduciary Properties
are, and have been, in compliance with all Environmental laws,
except for instances of noncompliance that are not reasonably
likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company or its Subsidiaries.
(2) There is no proceeding pending or, to
the Company's knowledge, threatened before any court,
governmental agency or board or other forum in which the Company
or any of its Subsidiaries or any Participation Facility has
been, or with respect to threatened proceedings, reasonably
would be expected to be, named as a defendant or potentially
responsible party (a) for alleged noncompliance (including by
any predecessor) with any Environmental law, or (b) relating to
the release or threatened release into the environment of any
Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by the Company or any of its
Subsidiaries or any Participation Facility, except for such
proceedings
14
pending or threatened that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse
Effect on the Company or its Subsidiaries or have been
Previously Disclosed in Schedule 4.1(Z)(2).
(3) There is no proceeding pending or, to
the Company's knowledge, threatened before any court,
governmental agency or board or other forum in which any
Loan/Fiduciary Property (or the Company or any of its
Subsidiaries in respect of any Loan/Fiduciary Property) has
been, or with respect to threatened proceedings, reasonably
would be expected to be, named as a defendant or potentially
responsible party (a) for alleged noncompliance (including by
any predecessor) with any Environmental Law, or (b) relating to
the release or threatened release into the environment of any
Hazardous Material, whether or not occurring at or on a
Loan/Fiduciary Property, except for such proceedings pending or
threatened that are not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on the Company
or have been Previously Disclosed in Schedule 4.1(Z)(3).
(4) To the Company's knowledge, there is no
reasonable basis for any proceeding of a type described in
subparagraph (2) or (3) of this paragraph (Z), except as has
been Previously Disclosed in Schedule 4.1(Z)(4).
(5) To the Company's knowledge, during the
period of (a) ownership or operation by the Company or any of
its Subsidiaries of any of their respective current properties,
(b) participation in the management of any Participation
Facility by the Company or any of its Subsidiaries, or (c)
holding of a security or other interest in a Loan/Fiduciary
Property by the Company or any of its Subsidiaries, there have
been no releases of Hazardous Material in, on, under or
affecting any such property, Participation Facility or
Loan/Fiduciary Property, except for such releases that are not
reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on the Company or its Subsidiaries or
have been Previously Disclosed in Schedule 4.1(Z)(5).
(6) To the Company's knowledge, prior to the
period of (a) ownership or operation by the Company or any of
its Subsidiaries of any of their respective current properties,
(b) participation in the management of any Participation
Facility by the Company or any of its Subsidiaries, or (c)
holding of a security or other interest in a Loan/Fiduciary
Property by the Company or any of its Subsidiaries, there were
no releases of Hazardous Material in, on, under or affecting any
such property, Participation Facility or Loan/Fiduciary
Property, except for such releases that are not reasonably
likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company or its Subsidiaries or have been
Previously Disclosed in Schedule 4.1(Z)(6).
(AA) TAX REPORTS. Except as Previously Disclosed
-----------
in Schedule 4.1(AA), (1) all reports and returns with respect to
Taxes that are required to be filed by or with respect to the
Company or its Subsidiaries, including consolidated federal
income tax returns of the Company and its Subsidiaries
(collectively, the "Tax Returns"), have been duly filed or
requests for extensions have been timely filed and have not
expired, for periods ended on or prior to the most recent fiscal
year-end, except to the extent all such failures to file, taken
together, are not reasonably likely to have a Material Adverse
Effect on the Company or its Subsidiaries, and to the Company's
knowledge, such Tax Returns were true, complete and accurate in
all material respects, (2) all Taxes shown to be due on the Tax
Returns have been paid in full, (3) the Tax Returns have been
examined by the Internal Revenue Service or the appropriate
state, local or foreign taxing authority, or the period for
assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired, (4) all Taxes due with
respect to completed and settled examinations have been paid in
full, (5) no issues have been raised by the relevant taxing
authority in connection with the examination of any of the Tax
Returns which are reasonably likely, individually or in the
aggregate, to result in a determination that would have a
Material Adverse Effect on the Company or its Subsidiaries,
except as reserved against in the Regulatory Filings of the
Company, and (6) no waivers of statutes of limitations
(excluding such statutes that relate to years under examination
by the Internal Revenue Service) have been given by or requested
with respect to any Taxes of the Company or its Subsidiaries.
15
(BB) ACCURACY OF INFORMATION. The statements with
-----------------------
respect to the Company and its Subsidiaries contained in this
Plan and the Schedules delivered by or on behalf of the Company
or any other Party pursuant to the terms of or relating to this
Plan are true and correct in all material respects, and such
statements and documents do not omit any material fact necessary
to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(CC) DERIVATIVES CONTRACTS. None of the Company or
---------------------
its Subsidiaries is a party to or has agreed to enter into a
Derivatives Contract or owns securities that are referred to as
"structured notes" except for those Derivatives Contracts and
structured notes Previously Disclosed in Schedule 4.1(CC).
Schedule 4.1(CC) includes a list of any assets of the Company or
its Subsidiaries that are pledged as security for each such
Derivatives Contract.
(DD) ACCOUNTING CONTROLS. Each of the Company and
-------------------
its subsidiaries has devised and maintained systems of internal
controls sufficient to provide reasonable assurances that (1)
all material transactions are executed in accordance with
management's general or specific authorization, (2) all material
transactions are recorded as necessary to permit the preparation
of financial statements in conformity with GAAP, and to
maintain proper accountability for items, (3) access to the
material property and assets of the Company and
its Subsidiaries is permitted only in accordance with
management's general or specific authorization, and (4) the
recorded accountability for items is compared with the actual
levels at reasonable intervals and appropriate action is taken
with respect to any differences.
(EE) COMMITMENTS AND CONTRACTS. Neither the
-------------------------
Company nor any of its Subsidiaries is a party or subject to any
of the following (whether written or oral, express or implied):
(1) except as Previously Disclosed in
Schedule 4.1(EE)(1), any employment contract or understanding
(including any understandings or obligations with respect to
severance or termination pay liabilities or fringe benefits)
with any present or former officer, director or employee (other
than those which are terminable at will by the Company or any
such Subsidiary without any obligation on the part of the
Company or any such Subsidiary to make any payment in connection
with such termination);
(2) except as Previously Disclosed in
Schedule 4.1(EE)(2), any real or personal property lease with
annual rental payments aggregating $10,000 or more; or
(3) except as Previously Disclosed in
Schedule 4.1(EE)(3), any material contract with any affiliate.
(FF) YEAR 2000 COMPLIANCE. To the Company's
--------------------
knowledge, the mission critical computer software operated by it
and/or any of its Subsidiaries is currently capable of
providing, or is being adapted to provide, uninterrupted
millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in
substantially the same manner and with substantially the same
functionality as such mission critical software records, stores,
processes and presents such calendar dates falling on or before
December 31, 1999. To the Company's knowledge, the costs of
adaptations referred to in this clause will not have a Material
Adverse Effect with respect to it. Neither the Company nor any
of its Subsidiaries has received, nor to its knowledge are there
facts that would reasonably be expected to form the basis for
the issuance of, a "Year 2000 Deficiency Notification Letter"
(as such term is employed in the Federal Reserve Supervision and
Regulatory Letter No. SR 98-3 (SUP), dated March 4, 1998) or
similar notice from any state banking authority. The Company
has made available to NEWCO a complete and accurate copy of its
and its Subsidiaries' plan, including an estimate of anticipated
associated costs, for addressing the issues set forth in the
Year 2000 guidance papers issued by the Federal Financial
Institutions Examination Council, including the statements dated
May 5, 1997, entitled "Year 2000 Project Management Awareness,"
December 17, 1997, entitled "Safety and Soundness Guidelines
Concerning the Year 2000 Business Risk," and October 14, 1998,
entitled "Interagency Guidelines Establishing Year 2000
Standards for Safety and Soundness," as
16
such issues affect any of it or its Subsidiaries. Between the
date of this Plan and the Effective Date, it shall use
commercially reasonable and practicable efforts to implement
such Plan.
4.2 NEWCO REPRESENTATIONS AND WARRANTIES. NEWCO hereby
------------------------------------
represents and warrants to the Company and the Bank as follows:
(A) RECITALS. The facts set forth in the Recitals
--------
of the Plan with respect to NEWCO are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. NEWCO
------------------------------------
is duly qualified to do business and is in good standing in the
States of the United States and foreign jurisdictions where the
failure to be duly qualified, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on it.
NEWCO has in effect all federal state, local, and foreign
governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now
conducted, the absence of which, individually or in the
aggregate, is reasonably likely to have a Material Adverse
Effect on NEWCO.
(C) SHARES. The outstanding shares of the NEWCO's
------
capital stock on the date of consummation will be validly issued
and outstanding, fully paid and nonassessable, and subject to no
preemptive rights. Except as Previously Disclosed in Schedule
4.2(C), there are no shares of capital stock or other equity
securities of it outstanding and there are no outstanding Rights
with respect thereto. It is expected that 123,500 shares of
NEWCO Common Stock will be outstanding at the time of
consummation of the transaction.
(D) CORPORATE POWER. NEWCO has the corporate
---------------
power and authority to carry on its business as it is now being
conducted and to own all its material properties and assets.
(E) CORPORATE AUTHORITY. This Plan has been
-------------------
authorized by all necessary corporate action of NEWCO, and the
Plan is a valid and binding agreement of NEWCO, enforceable
against NEWCO in accordance with its terms, subject to
bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(F) NO DEFAULTS. Subject to the receipt of
-----------
approval by its shareholders and the receipt of the required
regulatory approvals referred to in Section 6.1, and the
required filings under federal and state securities laws, and
except as Previously Disclosed in Schedule 4.2(F), the
execution, delivery and performance of this Plan and the
consummation by NEWCO of the transactions contemplated by this
Plan do not and will not (1) constitute a breach or violation
of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of NEWCO or to which NEWCO or
its properties is subject or bound, which breach, violation or
default is reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on NEWCO, (2) constitute a
breach or violation of, or a default under, the articles of
incorporation, charter or bylaws of it, or (3) require any
consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license or the
consent or approval of any other party to any such agreement,
indenture or instrument, other than any such consent or approval
that, if not obtained, would not be reasonably likely,
individually or in the aggregate, to have a Material Adverse
Effect on NEWCO.
(G) NO EVENTS. Except as Previously Disclosed on
---------
Schedule 4.2(G), since December 31, 1998, no event has occurred
which is reasonably likely to have a Material Adverse Effect on
it.
(H) ACCURACY OF INFORMATION. The statements with
-----------------------
respect to NEWCO contained in this Plan, the Schedules and any
other written documents executed and delivered by or on behalf
of NEWCO or any other Party pursuant to the terms of this Plan
are true and correct in all material respects, and such
statements and documents do not omit any material fact necessary
to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
17
(I) FINANCIAL COMMITMENT. NEWCO has received a
--------------------
financial commitment from First Tennessee Bank, National
Association, in the form set forth in Schedule 4.2(I), in the
amount of up to $6,600,000 to allow the Continuing Corporation
to acquire the stock of Company, other than Exception Shares, as
contemplated by this Agreement.
(J) NEW SUBSCRIPTIONS, STOCK EXCHANGE. NEWCO has
---------------------------------
received cash commitments from certain investors to subscribe
for an aggregate of 123,500 shares of NEWCO at $14.75 per share
representing aggregate consideration of $1,821,625. All 123,500
NEWCO shares will be exchanged for a like number of Company
shares upon consummation of the Merger, except for any
dissenting shares.
(K) NO BROKERS. All negotiation relative to this
----------
Plan and the transactions contemplated by this Plan have been
carried on by it directly with Company and Bank and no action
has been taken by NEWCO that would give rise to any valid claim
against any Party for a brokerage commission, finder's fee or
other like payment.
(L) NO KNOWLEDGE. NEWCO knows of no reason why
------------
the regulatory approvals referred to in Section 6.1 should not
be obtained.
(M) STATE TAKEOVER LAWS, ARTICLES OF INCORPORATION.
----------------------------------------------
NEWCO has taken all necessary action to exempt this Plan and the
transactions contemplated by this Plan from, and this Plan and
such transactions are exempt from (1) any applicable state
takeover laws and (2) any takeover-related provisions of NEWCO's
charter or bylaws.
(N) NO FURTHER ACTION. NEWCO has taken all action
-----------------
so that the entering into of this Plan and the consummation of
the transactions contemplated by this Plan (including the
Merger) or any other action or combination of actions, or any
other transaction, contemplated by this Plan do not and will not
(1) require a vote of shareholders (other than as set forth in
Section 6.1), or (2) result in the grant of any rights to any
Person under the articles of incorporation, charter or bylaws of
NEWCO or under any agreement to which NEWCO is a party, or (3)
restrict or impair in any way the ability of the other Parties
to exercise the rights granted under this Plan.
ARTICLE V. COVENANTS
Each of the Company and the Bank hereby covenants to
NEWCO, and NEWCO hereby covenants to the Company and the Bank,
that:
5.1 BEST EFFORTS. Subject to the terms and conditions
------------
of this Plan and, in the case of the Company and the Bank, to
the exercise by their respective Boards of Directors of such
Boards' fiduciary duties, each party shall use its best efforts
in good faith to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit
consummation of the Merger by March 31, 2000, and to otherwise
enable consummation of the transactions contemplated by this
Plan, and shall cooperate fully with the other Parties to that
end.
5.2 THE PROXY. In the case of the Company, it shall
---------
promptly prepare a proxy statement (the "Proxy Statement") to be
mailed to the holders of the Company Common Stock in connection
with the transactions contemplated by this Plan and to be filed
with the SEC, which shall conform to all applicable legal
requirements. The Company shall call a special meeting (the
"Meeting") of the holders of Company Common Stock to be held as
soon as practicable for purposes of voting upon the transactions
contemplated by this Plan, and the Company shall use its best
efforts to solicit and obtain shareholder votes in favor of the
transactions contemplated by this Plan and, subject to the
exercise of their fiduciary duties, the Board of Directors of
the Company shall recommend approval of such transactions to the
Company's Shareholders.
5.3 OFFERING DOCUMENT. NEWCO and the Company will
-----------------
jointly prepare an offering
18
document (the "Offering Document") to be sent to a group of
identified investors who have made cash commitments to purchase
stock in NEWCO and subsequently exchange the NEWCO stock for
stock of the Company, in order to provide full and adequate
disclosure of the business of NEWCO, the Company and/or the
Continuing Corporation to such investors. It is expected that
the NEWCO stock issuance will occur immediately prior to
consummation of the Merger transaction.
5.4 PRESS RELEASES. The Company and the Bank will not,
--------------
without the prior approval of NEWCO, and NEWCO will not, without
the prior approval of the Company, issue any press release or
written statement for general circulation relating to the
transactions contemplated by this Plan, except as otherwise
required by law.
5.5 ACCESS; INFORMATION.
-------------------
(A) Upon reasonable notice, the Company and the
Bank shall afford NEWCO and NEWCO shall afford the Company and
NEWCO's and the Company's respective officers, employees,
counsel, accountants and other authorized representatives,
access, during normal business hours throughout the period up to
the Effective Date, to all of their respective properties,
books, contracts, commitments and records. During such period,
the Company and the Bank shall furnish promptly to NEWCO and
NEWCO shall furnish promptly to the Company (and cause their
respective accountants and other agents to furnish promptly) (1)
a copy of each material report, schedule and other document
filed by the Company and its Subsidiaries with any Regulatory
Authority, and (2) all other information concerning the
business, properties and personnel as Company or NEWCO,
respectively, may reasonably request, provided that no
investigation pursuant to this Section 5.5 shall affect or be
deemed to modify or waive any representation or warranty made by
the Company or the Bank or NEWCO in this Plan or the conditions
to the obligations of the Company and the Bank or NEWCO to
consummate the transactions contemplated by this Plan; and
(B) The Company and NEWCO will not use any
information obtained pursuant to this Section 5.5 for any
purpose unrelated to the consummation of the transactions
contemplated by this Plan and, if this Plan is terminated, will
hold all confidential information and documents obtained
pursuant to this paragraph in confidence (as provided in Section
8.6) unless and until such time as such information or documents
become publicly available other than by reason of any action or
failure to act by Company or NEWCO or as it is advised by
counsel that any such information or document is required by law
or applicable stock exchange rule to be disclosed, and in the
event of the termination of this Plan, Company and NEWCO will,
upon request by the other, deliver to the other all documents so
obtained by it or destroy such documents and, in the case of
destruction, will certify such fact to the other.
5.6 TERMINATION FEE.
---------------
(A) Without the prior written consent of NEWCO,
the Company shall not, and it shall cause its Subsidiaries not
to, solicit, initiate or encourage inquiries or proposals with
respect to, or, except to the extent that the Board of Directors
of the Company determines in its good faith judgment after
receipt of advice in writing of counsel that such response is
reasonably required in order to discharge its fiduciary duties,
furnish any nonpublic information relating to or participate in
any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or a
substantial equity interest in, the Company or any of its
Subsidiaries or any merger or other business combination with
the Company or any of its Subsidiaries other than as
contemplated by this Plan; it shall instruct its and its
Subsidiaries' officers, directors, agents, advisors and
affiliates to refrain from doing any of the foregoing; and it
shall notify NEWCO immediately if any such inquiries or
proposals are received by, or any such negotiations or
discussions are sought to be initiated with, the Company or any
of its Subsidiaries.
(B) Subject to appropriate fiduciary standards,
Company and Bank agree not to initiate, solicit, entertain or
encourage acquisition proposals from any third party. To
protect the proposed transaction from uninvited third parties
and compensate NEWCO for expenses incurred in pursuing the
transaction,
19
Company and Bank agree that, upon the occurrence of a Subsequent
Triggering Event (as described in this section) that occurs
prior to a Termination Event (as described in this section) and
notwithstanding any other provision in this Agreement to the
contrary, Company and Bank will pay to NEWCO liquidated damages
in the amount of $250,000 upon the occurrence of a Subsequent
Triggering Event that occurs prior to a Termination Event. For
purposes of this section the following terms have the indicated
meaning.
(a) The term "Initial Triggering Event" shall
mean any of the following events or transactions occurring after
the date hereof:
(1) Company or Bank shall have entered
into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (other than NEWCO or a
subsidiary of NEWCO), or the Board of Directors of Company or
Bank shall have recommended that the stockholders of Company
approve or accept any Acquisition Transaction (other than that
contemplated by this Agreement). The term "Acquisition
Transaction" shall mean (i) a merger or consolidation, or any
similar transaction, involving Company or Bank, (ii) a purchase,
lease or other acquisition of all or any substantial part of the
assets of Company or Bank or (iii) a purchase or other
acquisition (including by way of merger, consolidation, share
exchange, tender offer or otherwise) of securities representing
25% or more of the voting power of Company or Bank. The term
"person" for purposes of this paragraph shall have the meaning
assigned thereto in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules and
regulations thereunder;
(2) Any person (other than NEWCO, a
subsidiary of NEWCO or any subsidiary acting under any employee
benefit plan for NEWCO or any of its subsidiaries) shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of 25% or more of the outstanding shares of the
Company Common Stock (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto
in Section 13(d) of the Exchange Act, and the rules and
regulations thereunder);
(3) Any person (other than NEWCO or a
subsidiary of NEWCO) shall have made a proposal (in writing or
orally) to Company or Bank or any one or more of its
shareholders owning twenty-five percent (25%) or more
(singularly or in the aggregate) of the outstanding shares of
Company Common Stock that results in or is a part of an
Acquisition Transaction;
(4) After a proposal is made by any
person (other than NEWCO or a subsidiary of NEWCO) to Company or
Bank or its stockholders to engage in an Acquisition
Transaction, Company and Bank shall have breached any covenant
or obligation contained in this Agreement and such breach would
entitle NEWCO to terminate the Agreement; and such breach shall
not have been cured within seven (7) days; or
(5) Any person (other than the Company,
NEWCO or a subsidiary of NEWCO), shall have filed an application
or notice with the Federal Reserve Board, or other federal or
state bank regulatory authority, which application or notice has
been accepted for processing, for approval to engage in an
Acquisition Transaction.
(b) "Subsequent Triggering Event" shall mean
either of the following events or transactions occurring after
the date hereof:
(1) The acquisition by any person of
beneficial ownership of 25% or more of the then outstanding
Company Common Stock; or
(2) The occurrence of the Initial
Triggering Event described in clause (1) of the definition of
"Initial Triggering Event" of this paragraph.
(c) "Termination Event" shall mean each of
the following:
20
(1) the Effective Date of the Merger;
(2) termination of this Agreement in
accordance with the provisions hereof if such termination occurs
prior to the occurrence of an Initial Triggering Event; or
(3) the passage of March 31, 2000 after
termination of this Agreement if such termination follows the
occurrence of an Initial Triggering Event.
Company and Bank shall notify NEWCO promptly in
writing of the occurrence of any Initial Triggering Event and of
any Subsequent Triggering Event.
5.7 REGULATORY APPLICATIONS. The parties to this Plan,
-----------------------
as appropriate, shall (A) promptly prepare and submit
applications to the appropriate Regulatory Authorities for
approval of the Merger and acquisition of control of the Bank,
and (B) promptly make all other appropriate filings to secure
all other approvals, consents and rulings that are necessary for
the consummation of the Merger and the new stock issuance by
NEWCO.
5.8 BLUE-SKY FILINGS. The parties to this Plan, as
----------------
appropriate, shall use their best efforts to obtain, prior to
the mailing of the Offering Document, any necessary state
securities laws or "blue sky" permits and approvals, provided
that neither NEWCO, the Company nor the Continuing Corporation
shall be required by virtue thereof to submit to general
jurisdiction in any state.
5.9 [RESERVED]
5.10 STATE TAKEOVER LAW. The Company shall not take any
------------------
action that would cause the transactions contemplated by this
Plan to be subject to any applicable state takeover statute, and
the Company shall take all necessary steps to exempt (or ensure
the continued exemption of) the transactions contemplated by
this Plan from, or, if necessary, challenge the validity or
applicability of, any applicable state takeover law.
5.11 NO RIGHTS TRIGGERED. Except for those consents of
-------------------
Third Parties Previously Disclosed on Schedule 4.1(G), the
Company shall take all necessary steps to ensure that the
entering into of this Plan and the consummation of the
transactions contemplated by this Plan (including the Merger)
and any other action or combination of actions, or any other
transactions contemplated by this Plan, do not and will not (A)
result in the grant of any rights to any Person under the
articles of incorporation or bylaws of the Company or under any
agreement to which the Company or any of its Subsidiaries is a
party, or (B) restrict or impair in any way the ability of NEWCO
to exercise the rights granted under this Plan.
5.12 INDEMNIFICATION.
---------------
(A) In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil
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 time prior to the date
hereof, or who becomes prior to the Effective Date, a director,
officer, or employee of the Company or the Bank (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, this Agreement, or any of the transactions
contemplated hereby or thereby, whether in any case asserted or
arising before or after the Effective Date, the parties hereto
agree to cooperate and use their best efforts to defend against
and respond thereto.
(B) It is understood and agreed that the Continuing
Corporation shall indemnify and hold harmless, as and to the
fullest extent permitted by applicable law, each such
Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action,
suit, proceeding or investigation. In the event of any such
threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the
Effective Date):
21
(1) the Continuing Corporation shall pay
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,
(2) the Indemnified Parties may retain one
firm of counsel satisfactory to them, and the Continuing
Corporation shall pay all fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are
received; provided, however, that in the event that the
defendants in, or targets of, any such threatened or actual
claim, action, suit, proceeding or investigation include more
than one Indemnified Party, and any Indemnified Party shall have
reasonably concluded based on the opinion of its own counsel,
that there may be one or more legal defenses available to it or
to another Indemnified Party which are in conflict with those
available to the Continuing Corporation or any other Indemnified
Party, then such Indemnified Party may employ separate counsel
to represent or defend it or any other person entitled to
indemnification and reimbursement hereunder with respect to any
such claim, action, suit, proceeding or investigation in which
it or such other person may become involved or is named as
defendant and the Continuing Corporation shall pay the
reasonable fees and disbursements of such counsel and
(3) the Continuing Corporation will use its
best efforts to assist in the vigorous defense of any such
matter, provided that the Continuing Corporation shall not be
liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld), and
provided further that the Continuing Corporation 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 non-appealable,
that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(C) Any Indemnified Party wishing to claim
indemnification under this Paragraph upon learning of any such
claim, action, suit, proceeding or investigation, shall notify
the Continuing Corporation thereof, provided that the failure to
so notify shall not affect the obligations of the Continuing
Corporation under this Paragraph hereof except to the extent
such failure to notify materially prejudices the Continuing
Corporation. Notwithstanding the foregoing, no indemnification
shall be provided the Indemnified Parties hereunder if:
(1) the claim, action, suit, proceeding or
investigation arises, in whole or in part, out of the willful
misrepresentation contained in this Agreement or willful breach
of covenants, representations, warranties or agreements
contained in this Agreement by the Indemnified Parties or
(2) the Indemnified Party does not meet the
requirements of Section 48-18-502(a) of the TBCA, which
compliance shall be interpreted in accordance with the
provisions of Section 48-18-502(d) of the TBCA;
(D) The Parties agree that all rights to
indemnification and all limitations of liability existing in
favor of the Indemnified Parties as provided in the Company's
articles of incorporation or bylaws in effect as of the date
hereof with respect to matters occurring prior to the Effective
Date shall survive the Merger and shall continue in full force
and effect, without any amendment thereto, for a period of not
less than three (3) years from the Effective Date, provided,
however, that all rights to indemnification in respect of any
claim (a "claim") asserted or made within such period shall
continue until the final disposition of such Claim;
(E) This Paragraph is intended to benefit the
Indemnified Parties and shall be binding on all successors and
assigns of the Continuing Corporation. In the event the
Continuing Corporation or any of its successors or assigns
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 transfers or conveys all or
substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so
that the successors and assigns of the Continuing Corporation
assume the obligations set forth in this Paragraph.
22
5.13 CURRENT INFORMATION.
-------------------
(A) During the period from the date of this Plan
to the Effective Date, each of the Company and NEWCO shall, and
shall cause its representatives to, confer on a regular and
frequent basis with representatives of the other.
(B) Each of the Company and NEWCO shall promptly
notify the other of (1) any material change in the business or
operations of it or its Subsidiaries, (2) any material
complaints, investigations or hearings (or communications
indicating that the same may be contemplated) of any Regulatory
Authority relating to it or its Subsidiaries, (3) the initiation
or threat of material litigation involving or relating to it or
its Subsidiaries, or (4) any event or condition that might
reasonably be expected to cause any of its representations or
warranties set forth in this Plan not to be true and correct in
all material respects as of the Effective Date or prevent it or
its Subsidiaries from fulfilling its or their obligations under
this Plan.
5.14 FINANCIAL COMMITMENT. NEWCO shall use its best
--------------------
efforts to insure the fulfillment of the cash commitments of
certain investors to acquire stock of NEWCO and NEWCO shall use
its best efforts to complete the financing pursuant to the
commitment letter of First Tennessee National Association set
forth in Schedule 4.2(I). The investor subscriptions are
subject to the receipt of an appropriate Offering Document for
shares of NEWCO and for the conversion of NEWCO shares into
shares of the Continuing Corporation.
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The
--------------------------------------
respective obligations of each Party to consummate the
transactions contemplated by this Plan are subject to the
written waiver by such Party or the fulfillment on or prior to
the Effective Date of each of the following conditions:
(A) SHAREHOLDER VOTES. This Plan shall have been
-----------------
duly approved by the requisite votes of the Company
Shareholders.
(B) REGULATORY APPROVALS. The Parties shall have
--------------------
procured all necessary regulatory consents and approvals by the
appropriate Regulatory Authorities, and any waiting periods
relating thereto shall have expired; provided, however, that no
such approval or consent shall have imposed any condition or
requirement not normally imposed in such transactions that, in
the opinion of NEWCO, would deprive the investors and the
Continuing Corporation of the material economic or business
benefits of the transactions contemplated by this Plan.
(C) NO INJUNCTION. There shall not be in effect
-------------
any order, decree or injunction of any court or agency of
competent jurisdiction that enjoins or prohibits consummation of
any of the transactions contemplated by this Plan.
(D) [RESERVED]
(E) [RESERVED]
(F) NEWCO, on behalf of and for the benefit of the
Continuing Corporation, shall have received financing from First
Tennessee in substantially the same manner and on terms and
conditions substantially similar to those set forth in the
commitment letter included as Schedule 4.2(I).
6.2 CONDITIONS TO OBLIGATIONS OF NEWCO. The obligations
----------------------------------
of NEWCO to consummate the transactions contemplated by this
Plan also are subject to the written waiver by NEWCO or the
fulfillment on or prior to the Effective Date of each of the
following conditions:
(A) LEGAL OPINION. NEWCO shall have received an
-------------
opinion, dated the Effective Date, of Baker, Donelson, Bearman &
Xxxxxxxx, counsel for the Company and the Bank, in the form of
Exhibit D.
23
(B) OFFICERS' CERTIFICATE. (1) Each of the
---------------------
representations and warranties contained in this Plan of the
Company and the Bank shall be true and correct in all material
respects (except the representations and warranties in Section
4.1(C) and those representations and warranties that are
qualified by reference to "Material Adverse Effect" or any other
materiality caveat, which shall be true and correct in all
respects) as of the date of this Plan and upon the Effective
Date with the same effect as though all such representations and
warranties had been made on the Effective Date, except for any
such representations and warranties that specifically relate to
an earlier date, which shall be true and correct as of such
earlier date, and (2) each and all of the agreements and
covenants of the Company and the Bank to be performed and
complied with pursuant to this Plan on or prior to the Effective
Date shall have been duly performed and complied with in all
material respects, and NEWCO shall have received a certificate
signed by an executive officer of the Company and the Bank dated
the Effective Date, to such effect.
(C) ADVERSE CHANGE. During the period from
--------------
December 31, 1998 to the Effective Date, there shall not have
been any material adverse change in the financial position or
results of operations of the Company or the Bank, nor shall the
Company or the Bank have sustained any loss or damage to its
properties, whether or not insured, that materially affects its
ability to conduct its business; and NEWCO shall have received a
certificate dated the Effective Date signed by an executive
officer of the Company and the Bank to such effect.
(D) CAPITAL. The Company's Capital shall not be
-------
less than $8.0 million on the Effective Date.
(E) ALLOWANCE FOR LOAN AND LEASE LOSSES. As of
-----------------------------------
the Effective Date, the Bank's allowance for possible loan and
lease losses shall not be less than 1.25% of the Bank's total
outstanding loans and leases and in all cases will be adequate
to absorb the Bank's anticipated loan and lease losses.
(F) DIRECTOR'S AGREEMENTS. NEWCO shall have
---------------------
received from the directors identified in Schedule 6.2(F) of
Company and the Bank the Director's Agreement attached as
Exhibit B.
6.3 CONDITIONS TO OBLIGATIONS OF COMPANY AND THE BANK.
-------------------------------------------------
The obligations of the Company and the Bank to consummate the
transactions contemplated by this Plan also are subject to the
written waiver by the Company and the Bank or the fulfillment on
or prior to the Effective Date of each of the following
conditions:
(A) LEGAL OPINION. The Company and the Bank shall
-------------
have received an opinion, dated the Effective Date, of Xxxxxxx &
XxXxxxxx, P.C., special counsel for NEWCO, in the form of
Exhibit F.
(B) OFFICER'S CERTIFICATE. (1) Each of the
---------------------
representations and warranties of NEWCO contained in this Plan
shall be true and correct in all material respects (except the
representations and warranties in Section 4.2(C) and those
representations and warranties that are qualified by reference
to "Material Adverse Effect" or any other materiality caveat,
which shall be true and correct in all respects) as of the date
of this Plan and upon the Effective Date with the same effect as
though all such representations and warranties had been made on
the Effective Date, except for any such representations and
warranties that specifically relate to an earlier date, which
shall be true and correct as of such earlier date, and (2) each
and all of the agreements and covenants of NEWCO to be performed
and complied with pursuant to this Plan on or prior to the
Effective Date shall have been duly performed and complied with
in all material respects, and the Company and the Bank shall
have received a certificate signed by an executive officer of
NEWCO dated the Effective Date, to such effect.
(C) ADVERSE CHANGE. During the period from the
--------------
date of NEWCO's incorporation to the Effective Date, there shall
not have been any material adverse change in the financial
position or results of operations of NEWCO, nor shall NEWCO have
sustained any loss or damage to its properties, whether or not
insured, that materially affects its ability to conduct its
business; and the Company shall have received a certificate
24
dated the Effective Date signed by an executive officer of NEWCO
to such effect.
ARTICLE VII. TERMINATION
7.1 GROUNDS FOR TERMINATION. This Plan may be
-----------------------
terminated prior to the Effective Date, either before or after
receipt of required shareholder approvals:
(A) MUTUAL CONSENT. By the mutual consent of
--------------
NEWCO and the Company, if the Board of Directors of each so
determines by vote of a majority of the members of its entire
board.
(B) BREACH. By NEWCO or the Company, if its Board
------
of Directors so determines by vote of a majority of the members
of its entire Board, in the event of (A) a material breach by
the other party of any representation or warranty contained in
this Agreement, which breach cannot or has not been cured within
30 days after the giving of written notice to the breaching
party of such breach, or (B) a material breach by the other
party of any of the covenants or agreements contained in this
Agreement, which breach cannot be or has not been cured within
30 days after the giving of written notice to the breaching
party of such breach.
(C) DELAY. By NEWCO or the Company, if its Board
-----
of Directors so determines by vote of a majority of the members
of the entire Board, in the event that the Merger is not
consummated by March 31, 2000; provided, however, that a Party
that is in material breach of any of the provisions of this Plan
shall not be entitled to terminate the Plan pursuant to this
Section 7.1(C).
(D) NO SHAREHOLDER APPROVAL. By the Company, in
-----------------------
the event that the shareholder approvals contemplated by Section
6.1 is not obtained at the Meetings, including any adjournment
or adjournments of the Meetings.
7.2 CONSEQUENCES OF TERMINATION.
---------------------------
(A) GENERAL CONSEQUENCES. Subject to Section 5.6
--------------------
(Termination Fee) and Section 7.2(c), in the event of the
termination or abandonment of this Plan pursuant to the
provisions of Section 7.1, this Plan shall become void and have
no force or effect, without any liability on the part of the
Parties or any of their respective directors or officers or
shareholders with respect to this Plan.
(B) OTHER CONSEQUENCES. Notwithstanding anything
------------------
in this Plan to the contrary, no termination of this Plan will
relieve any Party of any liability for breach of this Plan or
for any misrepresentation under this Plan or be deemed to
constitute a waiver of any remedy available for such breach or
misrepresentation. In any action or proceeding in connection
with such breach or misrepresentation, the prevailing party will
be entitled to reasonable attorney's fees and expenses.
(C) NEWCO TERMINATION FEE. In the event NEWCO fails
---------------------
to fulfill its obligation to consummate the transactions
contemplated by this Plan for any reason other than (i)
termination of the Plan pursuant to Section 7.1 or (ii) failure
of the fulfillment or written waiver of any of the conditions
set forth in Sections 6.1 and 6.2, Newco shall pay a termination
fee to the Company of $100,000. Such termination fee shall be
due and payable fifteen (15) business days after the fulfillment
or written waiver of each of the conditions set forth in
Sections 6.1 and 6.2.
ARTICLE VIII. OTHER MATTERS
8.1 SURVIVAL. Only those agreements and covenants in
--------
the Plan that by their express terms apply in whole or in part
after the Effective Date shall survive the Effective Date. All
other representations, warranties, and covenants shall be deemed
only to be conditions of the Merger and shall not survive the
Effective Date. If the Merger is abandoned and this Plan is
terminated, the provisions of Article VII shall apply and the
agreements of the Parties in Sections 5.5(B), 8.5 and 8.6 shall
survive such abandonment and termination.
25
8.2 WAIVER; AMENDMENT. Prior to the Effective Date, any
-----------------
provision of this Plan may be (A) waived in writing by the Party
benefited by the provision, or (B) amended or modified at any
time (including the structure of the transactions contemplated
by this Plan) by agreement in writing among the Parties approved
by their respective Boards of Directors and executed in the same
manner as this Plan, except that, after the vote by the
shareholders of the Company, the consideration to be received by
the shareholders of the Company for each share of Company Common
Stock shall not thereby be altered.
8.3 COUNTERPARTS. This Plan may be executed in one or
------------
more counterparts, including facsimile counterparts, each of
which shall be deemed to constitute an original. This Plan
shall become effective when one counterpart has been signed by
each Party.
8.4 GOVERNING LAW. This Plan shall be governed by, and
-------------
interpreted in accordance with, the laws of the State of
Tennessee, except as federal law may be applicable.
8.5 EXPENSES. Each Party will bear all expenses
--------
incurred by it in connection with this Plan and the transactions
contemplated by this Plan, except printing expenses which shall
be shared equally between the Company and NEWCO.
8.6 CONFIDENTIALITY. Except as otherwise provided in
---------------
Section 5.5(B), each of the Parties and their respective agents,
attorneys and accountants will maintain the confidentiality of
all information provided in connection herewith which has not
been publicly disclosed.
8.7 NOTICES. All notices, requests and other
-------
communications hereunder to a "Party" shall be in writing and
shall be deemed to have been duly given when delivered by hand,
telegram, certified or registered mail, overnight courier,
telecopy or telex (confirmed in writing) to such party at its
address set forth below or such other address as such party may
specify by notice to the Parties.
If to NEWCO to: Xxxxx Xxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
000-000-0000
Copies to: Xxxxxx X. Xxxxx
Xxxxxxx & XxXxxxxx, P.C.
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: 901/000-0000
Telecopy: 901/684-2339
If to the Company or the Bank, to: Xxxx Xxxxxx, Chairman
00 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000-0000
Telephone: 901/000-0000
Telecopy: 901/968-7481
Copies to: Xxxxxx Xxxxxx
Baker, Donelson, Bearman &
Xxxxxxxx
000 Xxxxxxx Xxxxxx, Xxxxx0000
Xxxxxxx, XX 00000
Telephone: 901/000-0000
Telecopy: 901/577-2303
26
8.8 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES.
--------------------------------------------------
This Plan represents the entire understanding of the Parties
with reference to transactions contemplated by this Plan, and
supersedes any and all other oral or written agreements
previously made. Nothing in this Plan, expressed or implied, is
intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Plan.
8.9 HEADINGS. The headings contained in this Plan are
--------
for reference purposes only and are not part of this Plan.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the Parties have caused this
instrument to be executed in counterparts by their duly
authorized officers, all as of the day and year first above
written.
COMMUNITY NATIONAL BANCORP, INC.
"NEWCO"
By:/s/ Xxxxx Xxxxxx
-----------------------------------
NAME: XXXXX XXXXXX
TITLE: PRESIDENT
COMMUNITY NATIONAL CORPORATION
By:/s/ Xxxx Xxxxxx
-----------------------------------
NAME: XXXX XXXXXX
TITLE: CHAIRMAN
COMMUNITY NATIONAL BANK
BY:/s/ Xxxx Xxxxxx
-----------------------------------
NAME: XXXX XXXXXX
TITLE: CHAIRMAN
28
