AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 15, 2005
BY AND BETWEEN
FIRST HORIZON NATIONAL CORPORATION
AND
WEST METRO FINANCIAL SERVICES, INC.
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II ACTIONS PENDING MERGER. . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FHNC. . . . . . . . . . . . . 15
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI CONDITIONS TO CONSUMMATION. . . . . . . . . . . . . . . . . . . 23
ARTICLE VII TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 27
EXHIBITS:
Exhibit A: Form of Bank Merger Agreement
Exhibit B: Form of Option and Warrant Letter
Exhibit C: Form of Affiliate Letter
Exhibit D: Form of Employment Agreement
Exhibit E: Form of Consulting Agreement
Exhibit F: Form of Non-Compete Agreement
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of March 15, 2005, by and between
FIRST HORIZON NATIONAL CORPORATION ("FHNC") and WEST METRO FINANCIAL SERVICES,
INC. ("Seller"). Capitalized terms used in this Agreement are defined below in
Article VIII.
RECITALS
(A) SELLER. Seller is a bank holding company registered under the
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BHCA, and is the beneficial owner and holder of record of all of the issued and
outstanding shares of capital stock of Seller Bank. The board of directors of
Seller deems it in the best interest of Seller, Seller Bank, and Seller's
shareholders to merge Seller with and into FHNC, with FHNC surviving the merger
on the terms and conditions set forth in this Agreement (the "Merger").
(B) FHNC. FHNC is a financial holding company registered under the
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BHCA, and the board of directors of FHNC deems the Merger to be in the best
interest of FHNC and the shareholders of FHNC.
(C) INTENTION OF THE PARTIES. It is the intention of the parties to
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this Agreement that for federal income tax purposes the Merger qualify as a
"reorganization" within the meaning of Section 368 of the Code.
In consideration of their mutual promises and obligations hereunder, and
intending to be legally bound hereby, FHNC and Seller adopt and make this
Agreement and prescribe the terms and conditions of this Agreement and the
manner and basis of carrying it into effect, which shall be as follows:
ARTICLE I
THE MERGER
(A) THE MERGER. On the Effective Date, Seller will merge with and into
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FHNC, with FHNC being the Surviving Corporation, pursuant to the provisions of,
and with the effects provided in, the Tennessee Business Corporation Act and the
Georgia Business Corporation Code. At the Effective Time, the charter and
bylaws of FHNC (as the Surviving Corporation) shall be the charter and bylaws of
FHNC in effect immediately prior to the Effective Time. At the Effective Time,
the directors and officers of FHNC shall be the directors and officers of the
Surviving Corporation.
(B) EFFECTIVE DATE AND EFFECTIVE TIME. On the last Business Day of the
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month during which the expiration of all applicable waiting periods in
connection with governmental approvals occurs and all conditions to the
consummation of this Agreement are satisfied or waived or, at FHNC's option, the
first Business Day of the next succeeding month, or on such earlier or later
date as may be agreed by the parties, articles of merger shall be executed in
accordance with Applicable Law and shall be filed as required by Applicable Law,
and the Merger provided for herein shall become effective upon the date of such
filing (the "Effective
Date"). The "Effective Time" of the Merger shall be 4:01 p.m. in the State of
Tennessee on the Effective Date (or such other time on the Effective Date as may
be agreed by the parties and set forth in the articles of merger).
(C) CONVERSION OF SHARES. By virtue of the Merger, automatically and
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without any action on the part of the holder thereof, at the Effective Time, all
of the Seller Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares held directly or indirectly by FHNC, except in
a fiduciary capacity or in satisfaction of a debt previously contracted, and
other than shares held in the treasury of Seller, which shares shall be
canceled, retired and cease to exist by virtue of the Merger and without any
payment made in respect thereof) shall be converted into the right to receive
cash and shares of FHNC Common Stock, as described below (collectively, the
"Merger Consideration"):
(1) Each Seller Shareholder may elect to take all or a portion of
the consideration to be received in the Merger in cash; subject to the
aggregate limitation set forth in Article I(C)(3) (the "Cash
Consideration"). If a Seller Shareholder elects to receive in cash all or a
portion of the Merger Consideration, the amount of cash to be delivered in
exchange for each share of Seller Common Stock shall be determined by
multiplying the number of shares of Seller Common Stock held by the Seller
Shareholder for which it elects to receive cash by the Price Per Share. The
Price Per Share is $22.44.
(2) Each Seller Shareholder may elect to take all or a portion of
the Merger Consideration to be received in the Merger in FHNC Common Stock,
subject to the aggregate limitation set forth in Article I(C)(3) (the
"Stock Consideration"). If a Seller Shareholder elects to receive in FHNC
Common Stock all or a portion of the Merger Consideration, the number of
shares of FHNC Common Stock to be exchanged for each share of Seller Common
Stock shall be determined by multiplying the number of shares of Seller
Common Stock held by the Seller Shareholder for which it elects to receive
FHNC Common Stock by the Conversion Price. The Conversion Price is the
quotient of (i) the Price Per Share divided by (ii) the FHNC Common Stock
Average Price. The FHNC Common Stock Average Price shall be equal to the
average of the closing prices of the FHNC Common Stock on the NYSE, as
reported by the Wall Street Journal for the twenty (20) Business Days
immediately prior to the fifth Business Day preceding the Effective Date
(the "Calculation Period"). Solely for purposes of this definition, a
Business Day shall be a day on which the NYSE is open for trading.
(3) The aggregate Cash Consideration to be paid pursuant to
Article I(C)(1) above shall not be less than $11,000,000 (the "Cash
Threshold") or more than $13,000,000 (the "Cash Cap"). For purposes of
determining the Cash Threshold and Cash Cap, Dissenting Shareholders shall
be deemed to have elected to receive Cash Consideration unless such
Dissenting Shareholders shall effectively withdraw or lose (through failure
to perfect or otherwise) their right to payment as a dissenting shareholder
under Applicable Law at or prior to the Effective Time. In addition, for
purposes of calculating the Cash Threshold and the Cash Cap, the cash to be
received by holders of Options and Warrants pursuant to Article I(F) shall
be included in the calculation.
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(4) Each share of FHNC Common Stock issued and outstanding at the
Effective Time shall remain outstanding and unchanged as a result of the
Merger and, together with the shares of FHNC Common Stock issuable in the
Merger, shall as of the Effective Time constitute all of the issued and
outstanding shares of the common capital stock of FHNC.
(5) Subsequent to the date of this Agreement but prior to the
Effective Date, if the outstanding shares of FHNC Common Stock shall be
increased, decreased, changed into or exchanged for a different number or
class of shares by reason of any reclassification, recapitalization, stock
split or reverse stock split, split-up or if a stock dividend thereon shall
be declared with a record date within such period, or by reason of a
combination or exchange of shares in a transaction in which FHNC is
effectively acquired, or other like changes in FHNC's capitalization shall
have occurred, the Merger Consideration shall be adjusted accordingly. This
subsection (5) does not apply to transactions in which FHNC or one of its
subsidiaries is effectively the acquiring entity.
(6) No fractional shares of FHNC Common Stock and no certificates
or scrip or other evidence of ownership will be issued in the Merger.
Instead, FHNC shall pay to each Seller Shareholder who would otherwise be
entitled to a fractional share, an amount in cash determined by multiplying
such holder's fractional interest by the FHNC Common Stock Average Price.
(D) ELECTION OF MERGER CONSIDERATION.
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(1) Each Seller Shareholder may elect whether to receive Cash
Consideration, Stock Consideration, or a combination of Cash Consideration
and Stock Consideration. Such elections shall be made on a Form of
Election. Holders of record of shares of Seller Common Stock who hold such
shares as nominees, trustees or in other representative capacities (a
"Representative") may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers all the
shares of Seller Common Stock held by each such Representative for a
particular beneficial owner.
(2) FHNC and Seller shall mail the Form of Election to all Persons
who are holders of Seller Common Stock on the record date for the Seller's
meeting of its shareholders to vote upon this Agreement. A Form of Election
must be received by the Exchange Agent in the manner described below no
later than by the close of business on the Business Day which is three
Business Days immediately prior to the Effective Time (the "Election
Deadline") in order to be effective. All elections will be irrevocable.
(3) Elections shall be made by holders of Seller Common Stock by
mailing, faxing or otherwise delivering to the Exchange Agent, in a manner
reasonably acceptable to FHNC, a Form of Election. To be effective, a Form
of Election must be properly completed, signed and submitted to the
Exchange Agent. FHNC will have the reasonable discretion, which it may
delegate in whole or in part to the Exchange Agent, to determine whether
Forms of Election have been properly completed, signed and submitted and to
disregard immaterial defects in Forms of Election. The decision of FHNC (or
the Exchange Agent) in such matters shall be conclusive and binding.
Neither FHNC nor the
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Exchange Agent will be under any obligation to notify any Person of any
defect in a Form of Election.
(4) A holder of Seller Common Stock who does not submit a Form of
Election which is received by the Exchange Agent prior to the Election
Deadline shall be deemed to have made an election for Cash Consideration
for 37.5% of the shares of Seller Common Stock and Stock Consideration for
62.5% of the shares of Seller Common Stock held by the Seller Shareholder
(a "Combination Election"), unless such Combination Election would result
in violating either Cash Cap or the Cash Threshold. In either such event,
those shareholders who either do not timely or correctly submit a Form of
Election, shall be deemed to have made an election for that combination of
Stock Consideration and Cash Consideration which is not violative of either
the Cash Cap or the Cash Threshold, after taking into effect the elections
of those shareholders who have timely and correctly submitted their Forms
of Election. If FHNC or the Exchange Agent shall determine that any
purported election was not properly made, such purported election shall be
deemed to be of no force and effect and the holder of shares of Seller
Common Stock making such purported election shall for purposes hereof be
deemed to have made a Combination Election.
(5) All shares of Seller Common Stock in which a Seller
Shareholder has elected Cash Consideration are referred to herein as "Cash
Election Shares." All shares of Seller Common Stock in which a Seller
Shareholder has elected Stock Consideration are referred to herein as
"Stock Election Shares." If, after the results of the Forms of Election are
calculated, the number of shares of Seller Common Stock to be converted
into Cash Consideration exceeds the Cash Cap, the Exchange Agent shall,
after the Election Deadline but prior to the Effective Time, determine the
number of Cash Election Shares which must be redesignated as Stock Election
Shares in order to reduce the number of such shares electing Cash
Consideration to the Cash Cap. All holders who have Cash Election Shares
shall, on a pro rata basis, have such number of their Cash Election Shares
redesignated as Stock Election Shares so that the Cash Cap is not exceeded.
If, after the results of the Forms of Election are calculated, the number
of shares of Seller Common Stock to be converted into Cash Consideration is
below the Cash Threshold, the Exchange Agent, after the Election Deadline
but prior to the Effective Time, shall determine the number of Stock
Election Shares which must be redesignated as Cash Election Shares in order
to increase the amount of such cash to the Cash Threshold. All holders who
have Stock Election Shares shall, on a pro rata basis, have such number of
their Stock Election Shares redesignated as Cash Election Shares so that
the Cash Threshold is achieved. Notwithstanding the foregoing, no
redesignation shall be effected for a holder who has made an election to
receive Cash Consideration but, as a result of such redesignation, would
receive fewer than 10 shares of FHNC Common Stock in exchange for all of
such holder's shares of Seller Common Stock unless such redesignation is
necessary for the Merger to qualify as a reorganization under Section 368
of the Code. In this event, the Cash Election Shares of the remaining
holders of shares of Seller Common Stock shall be redesignated on a pro
rata basis to reduce the aggregate Cash Consideration to the Cash Cap.
Holders who make Combination Elections will be subject to the redesignation
procedures set forth in Article I(D)(4) hereinabove. Dissenting
Stockholders who are deemed to have made an election for Cash
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Consideration shall not be subject to the redesignation procedure described
herein. The Exchange Agent shall make all computations contemplated by this
Article and all such computations shall be conclusive and binding on the
holders of Seller Common Stock.
(E) DISSENTING SHARES. No outstanding share of Seller Common Stock as
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to which a Dissenting Shareholder has exercised dissenters rights under
Applicable Law shall be converted into or represent a right to receive the
Merger Consideration, and the Dissenting Shareholder shall be entitled only to
such rights as are granted by Applicable Law. Seller shall give FHNC prompt
notice upon receipt by Seller of any such written demands for payment of the
fair value of the shares of Seller Common Stock and of withdrawals of such
demands and any other instruments provided pursuant to Applicable Law from a
Dissenting Shareholder. FHNC shall direct all negotiations and proceedings with
respect to such Dissenting Shareholder. Seller shall not, without the prior
written consent of FHNC, make any payment with respect to, or settle, offer to
settle or otherwise negotiate, any such demands. If any Dissenting Shareholder
shall effectively withdraw or lose his right to such payment prior to or after
the Effective Time, such holder's shares of Seller Common Stock shall be
automatically converted into the right to receive the Merger Consideration in
accordance with this Agreement, without any interest, as if such holder had made
a Combination Election.
(F) STOCK OPTIONS AND WARRANTS. Seller has issued options to purchase
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113,000 shares of Seller Common Stock ("Options") and warrants to purchase
300,000 shares of Seller Common Stock ("Warrants"). Prior to the Effective
Time, Seller shall cause each holder of an Option or Warrant to execute and
deliver an agreement in substantially the form of EXHIBIT B pursuant to which
such holder agrees to sell to FHNC, effective at the Effective Time, such Option
for cash or, in the case of a holder of a Warrant, for either cash or shares of
FHNC Common Stock. The cash payment shall be calculated as an amount equal to
the number of shares of Seller Common Stock specified in such Warrant or Option
times the Price Per Share less the aggregate exercise price for all shares of
Seller Common Stock specified in such Warrant or Option, subject to required
withholding taxes, if any. If a holder of a Warrant elects to receive shares of
FHNC Common Stock in lieu of cash, the number of shares of FHNC Common Stock
shall be calculated as the number of shares equal to the number of shares of
Seller Common Stock specified in such Warrant times the Conversion Price less
the aggregate exercise price for all shares of Seller Common Stock specified in
such Warrant, subject to required withholding taxes, if any.
(G) PROCEDURES. Certificates which represent shares of Seller Common
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Stock that are outstanding at the Effective Time (each, a "Certificate") and are
converted into the right to receive the Merger Consideration pursuant to the
Merger shall, after the Effective Time, be exchangeable by the holders thereof
in the manner provided in the transmittal materials described below.
(1) As promptly as practicable after the Effective Date, FHNC or a
third party employed to act as exchange agent (the "Exchange Agent"), who
if a third party shall be reasonably acceptable to Seller, shall send to
each holder of record of shares of Seller Common Stock outstanding at the
Effective Time transmittal materials for use in exchanging the Certificates
for the Merger Consideration. Upon surrender of a Certificate, together
with a duly executed letter of transmittal and any other reasonably
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required documents, the holder of such Certificate shall be entitled to
receive, in exchange for the Certificate, the Merger Consideration to which
such holder is entitled, and such Certificate shall be cancelled. If any
such delivery is to be made in whole or in part to a Person other than the
Person in whose name a surrendered Certificate is registered, it shall be a
condition to such delivery or exchange that the Certificate surrendered
shall be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such delivery or exchange shall
have paid any transfer and other taxes required by reason of such delivery
or exchange in a name other than that of the registered holder of the
Certificate surrendered or shall have established to the reasonable
satisfaction of FHNC or its agent that such tax either has been paid or is
not payable.
(2) No holder of Seller Common Stock who elects Stock
Consideration shall be entitled to exercise any rights as a shareholder of
FHNC until such holder shall have properly surrendered its Certificate(s)
(together with all required documents) as set forth above. No dividend or
other distribution payable after the Effective Time with respect to the
FHNC Common Stock shall be paid to the holder of any unsurrendered
Certificate until the holder properly surrenders such Certificate (together
with all required documents), at which time such holder shall receive all
dividends and distributions, without interest, previously withheld from
such holder pursuant to this Agreement. After the Effective Time, there
shall be no transfers on the stock transfer books of Seller of shares of
Seller Common Stock which were issued and outstanding at the Effective Time
and converted pursuant to the provisions of the Merger into the right to
receive the Merger Consideration. If after the Effective Time, Certificates
are presented for transfer to Seller, they shall be cancelled and exchanged
for the Merger Consideration in accordance with the procedures set forth in
this Article.
(3) After the Effective Time, holders of Seller Common Stock shall
cease to be, and shall have no rights as, shareholders of Seller, other
than to receive the Merger Consideration.
(4) Notwithstanding the foregoing, neither FHNC nor Seller nor any
other Person shall be liable to any former holder of shares of Seller
Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar Applicable
Laws.
(5) In the event any Certificate shall have been lost, stolen or
destroyed, upon receipt of appropriate evidence as to such loss, theft or
destruction and to the ownership of such Certificate by the Person claiming
such Certificate to be lost, stolen or destroyed and the receipt by FHNC of
appropriate and customary indemnification including, when appropriate, the
posting of bond, FHNC will issue in exchange for such lost, stolen or
destroyed certificate the Merger Consideration, deliverable in respect
thereof as determined in accordance with this Article I.
(H) BANK MERGER. FHNC and Seller will take all action necessary and
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appropriate to cause their respective subsidiaries FTB and Seller Bank to enter
into a merger agreement and to merge (the "Bank Merger") simultaneously with or,
if such Bank Merger cannot be effected
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simultaneously with, immediately after the consummation of the Merger, pursuant
to the provisions of Applicable Law. A form of the Bank Merger Agreement is
attached hereto as EXHIBIT A. At the effective time of the Bank Merger (the
"Effective Time"), the articles of association and bylaws of FTB shall be the
articles of association and bylaws immediately prior to the Effective Time of
the Bank Merger, until duly amended in accordance with their terms. At the
Effective Time of the Bank Merger, the directors and officers of FTB shall be
the directors and officers of FTB immediately prior to the Effective Time of the
Bank Merger.
(I) RIGHT TO REVISE THE STRUCTURE OF THE TRANSACTION. FHNC shall have
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the right, in its sole discretion to revise the structure of the Merger in order
to achieve tax benefits or for any other reason which FHNC may deem advisable;
provided, however, that FHNC shall not have the right, without the approval of
the board of directors of Seller, to make any revision to the structure of the
Merger which (i) changes the amount, form or nature of the Merger Consideration,
including specifically the registered nature of any Stock Consideration; (ii)
changes the intended tax-deferred effect of the Merger; or (iii) materially
impedes or delays consummation of the transactions contemplated by this
Agreement. FHNC may exercise this right of revision by giving written notice to
Seller in the manner provided in this Agreement.
ARTICLE II
ACTIONS PENDING MERGER
Prior to the earlier of the Effective Time or termination of this Agreement
by either party,
(A) Without the prior written consent of FHNC, Seller will not:
(1) make, declare or pay any dividend on Seller Common Stock or
declare or make any distribution on, or directly or indirectly combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock (other than in a fiduciary capacity or in respect of a debt
previously contracted in good faith) or authorize the creation or issuance
of or issue or sell any additional shares of Seller's capital stock, or
grant any Rights to subscribe for or acquire shares of its capital stock;
(2) merge or consolidate or permit any Seller Subsidiary to merge
or consolidate with any other entity or engage in any similar transaction.
(B) Without the prior written consent of FHNC, which consent will not
be unreasonably withheld, delayed, or conditioned, Seller will not and will not
permit any Seller Subsidiary to:
(1) pay any bonus to, or increase the rate of compensation of, any
of its directors, officers or employees, except in the ordinary course of
business consistent with past practice, or enter into any employment
contracts with any Persons;
(2) enter into or modify or permit any Seller Subsidiary to enter
into or modify (except as may be required by Applicable Law and except for
the renewal of any existing plan or arrangement in the ordinary course of
business consistent with past
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practice) 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, except as expressly
contemplated by this Agreement;
(3) substantially modify the manner in which Seller and the Seller
Subsidiaries have heretofore conducted their business, taken as a whole, or
amend their articles of incorporation, articles of association, or bylaws;
(4) except for transactions in the ordinary course of its banking
business, sell, dispose of or discontinue or permit any Seller Subsidiary
to sell, dispose or discontinue any of its business, assets (including
investment securities) or property;
(5) except for the acquisition of loans, investment securities and
cash equivalent assets in the ordinary course of its banking business,
acquire (other than through foreclosure or satisfaction in whole or in part
of indebtedness owed Seller) any assets or business that is material to
such party;
(6) except in the ordinary course of its banking business, enter
into off-balance sheet transactions;
(7) take any other action not in the ordinary course of business
of it and its subsidiaries, taken as a whole; or
(8) directly or indirectly agree to take any of the foregoing
actions.
In the event Seller requests FHNC's consent to any such action, and FHNC
has not replied to Seller by refusing such consent, together with reasonable
supporting information for such refusal, within five business days of FHNC's
receipt of its request for approval, such action shall be deemed consented to by
FHNC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in the Seller Disclosure Letter, Seller represents and
warrants to FHNC the following:
(A) ORGANIZATION. Seller is a corporation duly organized, validly
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existing, and in good standing under the laws of the State of Georgia. Each
Seller Subsidiary is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. The deposit accounts of
Seller Bank are insured by the FDIC through the Bank Insurance Fund to the
fullest extent permitted by Applicable Law, and all premiums and assessments
required to be paid in connection with such insurance have been paid when due.
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(B) AUTHORITY AND QUALIFICATION. Seller and each Seller Subsidiary has
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the power and authority, and is duly qualified in all jurisdictions (except for
such qualifications the absence of which either individually or in the aggregate
will not have a Material Adverse Effect) where such qualification is required,
to carry on its business as it is now being conducted and to own all its
material properties and assets, and it has 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 being conducted,
except for such powers and authorizations the absence of which, either
individually or in the aggregate, would not have a Material Adverse Effect.
(C) CAPITALIZATION. As of the date of this Agreement, Seller has
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2,000,000 authorized shares of preferred stock, no par value, with no shares of
preferred stock outstanding, 10,000,000 authorized shares of common stock, par
value $1.00 per share, of which 1,200,000 shares are issued and outstanding and
113,000 shares are reserved for issuance pursuant to Seller's 2001 Stock
Incentive Plan, as amended, and 300,000 shares are reserved for issuance
pursuant to organizer warrants (no other class of capital stock being
authorized). Other than the shares of Seller Common Stock reserved under the
2001 Stock Incentive Plan, as amended, and the organizer warrants, Seller has no
shares of its capital stock reserved for issuance, and there are no outstanding
Rights to subscribe for or acquire from Seller any shares of its capital stock.
Seller and each Seller Subsidiary's outstanding shares of capital stock are duly
authorized, validly issued and outstanding, fully paid and non-assessable, and
subject to no preemptive rights.
(D) OWNERSHIP OF SELLER SUBSIDIARIES. Seller has identified each
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Seller Subsidiary in the Seller Disclosure Letter. Seller owns all of the
issued and outstanding shares of common stock of each of the Seller
Subsidiaries. The shares of capital stock of each Seller Subsidiary are owned
by Seller free and clear of all liens, claims, encumbrances and restrictions on
transfer (other than those imposed by Applicable Law) and there are no rights
with respect to such capital stock.
(E) CORPORATE BOOKS AND RECORDS. The respective minute books of Seller
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and each Seller Subsidiary accurately record, in all material respects, all
material corporate actions of their respective shareholders and boards of
directors through the date of this Agreement.
(F) VALIDITY OF AGREEMENT. This Agreement has been validly approved by
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the board of directors of Seller. Subject to approval of this Agreement by the
Seller Shareholders and subject to receipt of Required Regulatory Authority
Approvals, this Agreement is a valid and binding agreement of Seller enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(G) NO BREACHES OR VIOLATIONS. The execution, delivery and performance
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of this Agreement by Seller does not, and the consummation of the transactions
contemplated hereby by it will not, constitute (l) a breach or violation of, or
a default under, any Applicable Law, which breach, violation or default,
individually or collectively, will have a Material Adverse Effect, or enable any
Person to enjoin any of the transactions contemplated hereby or (2) a breach or
violation of, or a default under, the certificate or articles of incorporation
(or articles of association) or bylaws of Seller or any Seller Subsidiary; and
the consummation of the
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transactions contemplated hereby will not require any consent or approval under
any such law, rule, regulation, judgment, decree, order, governmental permit or
license, other than the Required Regulatory Authority Approvals and the approval
of the Seller Shareholders and other than any consents and approvals the absence
of which will not have a Material Adverse Effect.
(H) REPORTS. As of their respective dates, neither Seller's Annual
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Report on Form 10-K for the fiscal year ended December 31, 2003, nor any other
document filed subsequent to December 31, 2003 under the Exchange Act with the
SEC nor, Seller's interim unaudited monthly consolidated financial report for
the period ended September 30, 2004, nor any call reports filed with the FDIC or
financial reports filed with the Federal Reserve (collectively the "Seller
Reports") contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Each of the balance sheets in or incorporated by
reference into the Seller Reports (including the related notes and schedules)
fairly presents the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations and retained
earnings and of cash flow and changes in financial position or equivalent
statements in or incorporated by reference into its Seller Reports (including
any related notes and schedules) fairly presents the results of operations,
retained earnings and cash flows and changes in financial position, as the case
may be, of the entity or entities to which it relates for the periods set forth
therein (subject, in the case of unaudited interim statements or reports, to
normal year-end audit adjustments that are not material in amount or effect), in
each case in accordance with GAAP (or, with respect to the Seller Reports filed
with the applicable Regulatory Authority, in accordance with regulatory
accounting principles), consistently applied during the periods involved, except
as may be noted therein.
(I) INTERNAL CONTROLS. Seller and each Seller Subsidiary has
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maintained a system of internal accounting and disclosure controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of the Seller Reports in conformity
with GAAP (or, with respect to the Seller Reports filed with the applicable
Regulatory Authority, in accordance with regulatory accounting principles) and
to maintain accountability for assets, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
(J) ABSENCE OF UNDISCLOSED LIABILITIES. Seller has no obligations or
-------------------------------------
liabilities (whether absolute, accrued, contingent or otherwise) which are not
disclosed in the Seller Reports, the omission of which would singly or in the
aggregate have a Material Adverse Effect. Since the date of Seller's most
recent Seller Reports filed with the SEC, it has not incurred any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature
except liabilities or obligations incurred in the ordinary course of business or
which would not singly or in the aggregate have a Material Adverse Effect.
(K) NO MATERIAL ADVERSE CHANGE. There has been no adverse change in
------------------------------
the financial condition of Seller and Seller Subsidiaries, taken as a whole,
since December 31, 2004 which has had a Material Adverse Effect.
10
(L) INSURANCE. True and correct copies of all insurance policies
----------
presently in force covering the Seller, any Seller Subsidiary, or their
officers, directors, employee, or properties have previously been disclosed to
FHNC and are listed in the Seller Disclosure Letter (the "Insurance Policies").
The Insurance Policies (i) provide adequate insurance coverage for the assets
and the operations of Seller and Seller Subsidiaries for the risks normally
insured against by businesses conducting comparable lines of business as the
Seller; (ii) are sufficient for compliance with all contractual requirements to
which the Seller and the Seller Subsidiaries are parties; (iii) will continue in
full force and effect following the consummation of the Merger; and (iv) do not
provide for any retrospective premium adjustment or other experience based
liability on the part of the Seller or the Seller Subsidiaries. Seller has not
received notice from any insurance carrier that (i) such Insurance Policies will
be canceled or that coverage will be reduced or eliminated, or (ii) premium
costs with respect to the Insurance Policies will be materially increased.
(M) LOANS. Each loan reflected as an asset of Seller in the most
------
recent Seller Report or acquired or originated since that date, is the legal,
valid, and binding obligation of the obligor named therein, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency, or
other similar laws affecting the enforceability of creditors' rights generally,
and no loan is subject to any asserted defense, offset, or counterclaim known to
Seller. Except as previously disclosed to FHNC in the Seller Disclosure Letter,
Seller Bank does not have any loan which has been (or should have been in
management's reasonable opinion) classified as "Other Assets Especially
Mentioned," Substandard," "Doubtful" or "Loss," or similar classification.
(N) INVESTMENTS. Except for investments classified as held-to-maturity
------------
as prescribed under the Financial Accounting Standards Board Statement Number
115, and pledges to secure public or trust deposits, none of the investments
reflected in the Seller Reports is subject to any restriction, whether
contractual or statutory, that materially impairs the ability of Seller and the
Seller Subsidiaries freely to dispose of such investments at any time, other
than may be imposed by Applicable Law. With respect to all repurchase
agreements to which Seller or the Seller Subsidiaries are a party, Seller or the
Seller Subsidiaries, as the case may be, have a valid, perfected first lien or
security interest in the collateral securing such repurchase agreement which
equals or exceeds the amount of debt secured by such collateral under such
agreement.
(O) INTELLECTUAL PROPERTY. Seller and the Seller Subsidiaries own, or
-----------------------
are licensed or otherwise possess legally enforceable rights to use all
Intellectual Property that are used in their businesses as currently conducted.
Seller has not received notice of and does not have any knowledge of any
potential claim of any infringement on any of its Intellectual Property.
(P) RELATED PARTY TRANSACTIONS. Except as described in the Seller
-----------------------------
Reports, neither Seller nor any Seller Subsidiary is a party to any transaction
with any Affiliate of Seller (except a Seller Subsidiary). All such
transactions identified in the Seller Reports (i) were made in the ordinary
course of business, (ii) were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (iii) did not involve more than the normal
risk of collectibility or present other unfavorable features. No loan or credit
accommodation to any Affiliate of Seller is presently in default or, during the
three year period prior to the date of this Agreement, has been in default or
has been restructured, modified or extended.
11
(Q) TAXES. All material federal, state, local, and foreign tax returns
------
required to be filed by or on behalf of Seller or any Seller Subsidiary have
been timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such returns
filed are complete and accurate in all material respects. All taxes owed by
Seller have been paid in full or adequate provision has been made for any such
taxes on its balance sheet (in accordance with GAAP). As of the date of this
Agreement, there is no audit examination, deficiency, or refund litigation with
respect to any taxes of Seller and Seller is not aware of any basis for the
assertion of any claim for any tax deficiency for which adequate provision has
not been made on its balance sheet that would result in a determination that
would have a Material Adverse Effect. All taxes, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation relating to Seller have been paid in full or adequate provision has
been made for any such taxes on its balance sheet (in accordance with GAAP).
Seller has not executed an extension or waiver of any statute of limitations on
the assessment or collection of any material tax due that is currently in
effect.
(R) ABSENCE OF LITIGATION OR REGULATORY ACTIONS.
-------------------------------------------------
(1) No litigation, proceeding or controversy before any court or
governmental agency is pending, and there is no pending claim, action or
proceeding against Seller or any Seller Subsidiary, which in the reasonable
judgment of Seller's management is likely to have a Material Adverse Effect
or to prevent consummation of the transactions contemplated hereby, and, to
Seller's knowledge, no such litigation, proceeding, controversy, claim or
action has been threatened or is contemplated, and, to Seller's knowledge,
there are no facts or circumstances which could form the reasonable basis
for any claim, action or proceeding (including, but not limited to, a claim
for violation of any state or federal fair lending laws or regulations)
which is likely to have a Material Adverse Effect or prevent consummation
of the transactions contemplated hereby.
(2) Neither Seller nor any Seller Subsidiary is subject to any
cease and desist order, written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, or is subject to any board
resolutions at the request of the applicable Regulatory Authority, nor has
it been advised by any Regulatory Authority that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
(S) MATERIAL CONTRACTS. Except for this Agreement and arrangements
--------------------
made in the ordinary course of business, neither Seller nor any Seller
Subsidiary is bound by any Material Contract to be performed after the date
hereof that has not been filed with or incorporated by reference in the Seller
Reports. Each of the Material Contracts is in full force and effect. Neither
Seller nor any Seller Subsidiary (nor, to Seller's knowledge, any other party)
has breached any provision or is in default of any Material Contract.
(T) EMPLOYEE BENEFIT PLANS. All "employee benefit plans", as defined
-------------------------
in Section 3(3) of ERISA, that cover Seller's or any Seller Subsidiary's
employees comply in all
12
material respects with all applicable requirements of ERISA, the Code and other
Applicable Laws and no event has occurred and, to its knowledge, no fact or
circumstance exists with respect to any employee benefit plan now or previously
existing which would result in a Material Adverse Effect on Seller. Neither
Seller nor any Seller Subsidiary has engaged in a "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any
such plan which is likely to result in any material penalties or taxes under
Section 502(i) of ERISA or Section 4975 of the Code. No material liability to
the Pension Benefit Guaranty Corporation has been or is expected by Seller to be
incurred with respect to any such plan which is subject to Title IV of ERISA
("Pension Plan"), or with respect to any "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA) currently or formerly maintained by it, them or
any entity which is considered one employer with it under Section 4001 of ERISA
or Section 414 of the Code. No Pension Plan had an "accumulated funding
deficiency" as defined in Section 302 of ERISA (whether or not waived) as of the
last day of the end of the most recent plan year ending prior to the date
hereof. The fair market value of the assets of each Pension Plan exceeds the
present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of
ERISA) under such Pension Plan as of the end of the most recent plan year with
respect to the respective Plan ending prior to the date hereof, calculated on
the basis of the actuarial assumptions used in the most recent actuarial
valuation for such Pension Plan as of the date hereof. No notice of a
"reportable event" (as defined in 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 within the 12-month period ending on the date hereof. Neither
Seller nor any Seller Subsidiary has provided, or is required to provide,
security to any Pension Plan pursuant to Section 401(a)(29) of the Code.
Neither Seller nor any Seller Subsidiary has contributed to a "multiemployer
plan" as defined in Section 3(37) of ERISA. Except as disclosed in the Seller
Disclosure Letter, neither Seller nor any Seller Subsidiary has any obligations
for retiree health and life benefits under any benefit plan, contract or
arrangement.
(U) TITLE TO PROPERTY. Seller and each Seller Subsidiary has good
--------------------
title to its properties and assets (other than property as to which it is
lessee), free and clear of any Encumbrances, except for such defects in title
which would not, in the aggregate, have a Material Adverse Effect.
(V) REGULATORY APPROVALS. Seller knows of no reason why the Required
----------------------
Regulatory Approvals should not be obtained without the imposition of any
condition of the type which would reduce the benefits of the transactions
contemplated hereby to such a degree that FHNC would not have entered into this
Agreement had such conditions or requirements been known at the date hereof.
(W) ALLOWANCE FOR LOAN LOSSES. Seller Bank's reserve for possible loan
--------------------------
losses as shown (i) in Seller's Report for the fiscal year ended December 31,
2003, was adequate in all material respects under GAAP applicable to banks and
safe and sound banking practices; and (ii) in Seller Bank's unaudited interim
consolidated financial report at December 31, 2004 was, in its opinion, adequate
in all material respects under GAAP applicable to banks and safe and sound
banking practices. The net book value of any of Seller Bank's assets acquired
through foreclosure in satisfaction of problem loans ("ORE") is carried on the
balance sheet in the Seller Reports at fair value at the time of acquisition
less estimated selling costs which approximate the net realizable value of the
ORE in accordance with GAAP.
13
(X) COMPLIANCE WITH LAWS. Seller and the Seller Subsidiaries are in
-----------------------
compliance with all Applicable Laws, except where the failure to comply would
not have a Material Adverse Effect. Seller and each Seller Subsidiary has all
permits, licenses, certificates of authority, orders, and approvals of, and have
made all filings, applications, and registrations with, federal, state, local,
and foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently conducted and the absence
of which would have a Material Adverse Effect. All such permits, licenses,
certificates of authority, orders, and approvals are in full force and effect,
and to Seller's knowledge, no suspension or cancellation of any of them is
threatened.
(Y) LABOR RELATIONS. Neither Seller nor any Seller Subsidiary 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 Seller or any Seller Subsidiary the subject of a proceeding asserting that
Seller or any such Subsidiary has committed an unfair labor practice 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 Seller or any Seller Subsidiary pending or threatened.
(Z) BROKER FEES. Except for services performed for Seller by ▇▇▇▇▇
-------------
Capital Group, L.L.C., neither Seller nor any Seller Subsidiary, nor any of
their respective officers, directors, or employees, has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for Seller or any Seller Subsidiary, in connection with this
Agreement or the transactions contemplated hereby.
(AA) NO UNTRUE STATEMENTS. The information to be supplied by Seller for
---------------------
inclusion in (1) the Registration Statement or (2) the Proxy
Statement/Prospectus will not at the time such Registration Statement becomes
effective, and in the case of the Proxy Statement/Prospectus at the time it is
mailed and at the time of the meeting of Shareholders contemplated under this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(BB) ENVIRONMENTAL LAWS. To the knowledge of Seller, neither Seller nor
-------------------
any Seller Subsidiary has been or is in violation of or liable under any
Environmental Law, except any such violations or liabilities which would not
reasonably be expected to singly or in the aggregate have a Material Adverse
Effect on Seller. To the knowledge of Seller, none of the Loan Portfolio
Properties and Other Properties Owned by Seller or any Seller Subsidiary has
been or is in violation of or liable under any Environmental Law, except for
such violations or liabilities which singly or in the aggregate will not have a
Material Adverse Effect on Seller. To the knowledge of Seller, there are no
actions, suits, demands, notices, claims, investigations or proceedings pending
or threatened relating to the liability of the Loan Portfolio Properties and
Other Properties Owned by Seller or any Seller Subsidiary under any
Environmental Law, including without limitation any notices, demand letters or
requests for information from any federal or state environmental agency relating
to any such liabilities under or violations of Environmental Law, except such
which will not have or result in a Material Adverse Effect.
14
(CC) FULL DISCLOSURE. No representation or warranty of Seller contained
----------------
in this Agreement or in any agreement, document or certificate delivered by
Seller to FHNC pursuant to this Agreement (i) contains or at the Effective Time
will contain any untrue statement of a material fact or (ii) omits or at the
Effective Time will omit to state a material fact necessary to make the
statements herein or herein, in light of the circumstances under which such
statements were or will be made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FHNC
FHNC represents and warrants to Seller as follows:
(A) ORGANIZATION. FHNC is a corporation duly organized, validly
-------------
existing, and in good standing under the laws of the State of Tennessee. Each
FHNC Subsidiary is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. The deposit accounts of FTB
are insured by the FDIC through the Bank Insurance Fund to the fullest extent
permitted by Applicable Law, and all premiums and assessments required to be
paid in connection with such insurance have been paid when due.
(B) AUTHORITY AND QUALIFICATION. FHNC has the power and authority, and
---------------------------
is duly qualified in all jurisdictions (except for such qualifications the
absence of which either individually or in the aggregate will not have a
Material Adverse Effect) where such qualification is required, to carry on its
business as it is now being conducted and to own all its material properties and
assets, and it has 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 being conducted, except for such powers and
authorizations the absence of which, either individually or in the aggregate,
would not have a Material Adverse Effect.
(C) CAPITALIZATION. As of February 28, 2005, FHNC has 5,000,0000
---------------
authorized shares of preferred stock, no par value, of which no shares are
issued or outstanding, and 400,000,000 authorized shares of common stock, par
value $.625 per share, of which 123,923,396 shares are issued and outstanding.
FHNC's outstanding shares of FHNC Common Stock are duly authorized, validly
issued and outstanding, fully paid and non-assessable, and subject to no
preemptive rights. The shares of FHNC Common Stock to be issued pursuant to
this Agreement, when issued in accordance with the terms of this Agreement, will
be duly authorized, validly issued, fully paid and nonassessable and subject to
no preemptive rights.
(D) VALIDITY OF AGREEMENT. This Agreement has been validly approved by
----------------------
the board of directors of FHNC. Subject to receipt of Required Regulatory
Authority Approvals, this Agreement is a valid and binding agreement of FHNC
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(E) NO BREACHES OR VIOLATIONS. The execution, delivery and performance
--------------------------
of this Agreement by FHNC does not, and the consummation of the transactions
contemplated hereby
15
by it will not, constitute (l) 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 it or to which it (or any of
its properties) is subject, which breach, violation or default, individually or
collectively, will have a Material Adverse Effect, or enable any Person to
enjoin any of the transactions contemplated hereby or (2) a breach or violation
of, or a default under, the charter or bylaws of FHNC; and the consummation of
the transactions contemplated hereby will not 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 the Required Regulatory Approvals
and other than any consents and approvals the absence of which will not have a
Material Adverse Effect.
(F) REPORTS. As of their respective dates, neither FHNC's Annual
--------
Report on Form 10-K for the fiscal year ended December 31, 2003, nor any other
document filed subsequent to December 31, 2003 under the Exchange Act with the
SEC nor any call reports filed with the FDIC or financial reports filed with the
Federal Reserve (collectively the "FHNC Reports") contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Each of the balance
sheets in or incorporated by reference into the FHNC Reports (including the
related notes and schedules) fairly presents the financial position of the
entity or entities to which it relates as of its date and each of the statements
of operations and retained earnings and of cash flow and changes in financial
position or equivalent statements in or incorporated by reference into its FHNC
Reports (including any related notes and schedules) fairly presents the results
of operations, retained earnings and cash flows and changes in financial
position, as the case may be, of the entity or entities to which it relates for
the periods set forth therein (subject, in the case of unaudited interim
statements or reports, to normal year-end audit adjustments that are not
material in amount or effect), in each case in accordance with GAAP (or, with
respect to the FHNC Reports filed with the applicable Regulatory Authority, in
accordance with regulatory accounting principles), consistently applied during
the periods involved, except as may be noted therein.
(G) INTERNAL CONTROLS. FHNC and each FHNC Subsidiary has maintained a
-------------------
system of internal accounting and disclosure controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of the FHNC Reports in conformity with GAAP
(or, with respect to the FHNC Reports filed with the applicable Regulatory
Authority, in accordance with regulatory accounting principles) and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
(H) ABSENCE OF UNDISCLOSED LIABILITIES. FHNC has no obligations or
--------------------------------------
liabilities (whether absolute, accrued, contingent or otherwise) which are not
disclosed in the FHNC Reports, the omission of which would singly or in the
aggregate have a Material Adverse Effect. Since the date of FHNC's most recent
FHNC Report filed with the SEC, it has not incurred any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature
16
except liabilities or obligations incurred in the ordinary course of business or
which would not singly or in the aggregate have a Material Adverse Effect.
(I) NO MATERIAL ADVERSE CHANGE. There has been no adverse change in
------------------------------
the financial condition of FHNC and the FHNC Subsidiaries, taken as a whole,
since December 31, 2003 which has had a Material Adverse Effect.
(J) BROKER/FINDER FEES. Neither FHNC nor any FHNC Subsidiary, nor any
--------------------
of their respective officers, directors, or employees, has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for FHNC or any of its subsidiaries, in connection with this
Agreement or the transactions contemplated hereby.
(K) ABSENCE OF LITIGATION OR REGULATORY ACTIONS.
-------------------------------------------------
(1) No litigation, proceeding or controversy before any court or
governmental agency is pending, and there is no pending claim, action or
proceeding against FHNC or any FHNC Subsidiary, which in the reasonable
judgment of FHNC's management is likely to have a Material Adverse Effect
or to prevent consummation of the transactions contemplated hereby, and, to
FHNC's knowledge, no such litigation, proceeding, controversy, claim or
action has been threatened or is contemplated, and, to FHNC's knowledge,
there are no facts or circumstances which could form the reasonable basis
for any claim, action or proceeding (including, but not limited to, a claim
for violation of any state or federal fair lending laws or regulations)
which is likely to have a Material Adverse Effect or prevent consummation
of the transactions contemplated hereby.
(2) Neither FHNC nor any FHNC Subsidiary is subject to any cease
and desist order, written agreement or memorandum of understanding with, or
a party to any commitment letter or similar undertaking to, or is subject
to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, or is subject to any board resolutions at the
request of the applicable Regulatory Authority, nor has it been advised by
any Regulatory Authority that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such
order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar undertaking.
(L) REGULATORY APPROVALS. FHNC knows of no reason why the Required
----------------------
Regulatory Approvals should not be obtained without the imposition of any
condition of the type which would reduce the benefits of the transactions
contemplated hereby to such a degree that Seller would not have entered into
this Agreement had such conditions or requirements been known at the date
hereof.
(M) COMPLIANCE WITH LAWS. FHNC and the FHNC Subsidiaries are in
-----------------------
compliance with all Applicable Laws, except where the failure to comply would
not have a Material Adverse Effect. FHNC and each FHNC Subsidiary has all
permits, licenses, certificates of authority, orders, and approvals of, and have
made all filings, applications, and registrations with, federal, state, local,
and foreign governmental or regulatory bodies that are required in order to
permit it
17
to carry on its business as it is presently conducted and the absence of which
would have a Material Adverse Effect. All such permits, licenses, certificates
of authority, orders, and approvals are in full force and effect, and to FHNC's
knowledge, no suspension or cancellation of any of them is threatened.
(N) NO UNTRUE STATEMENTS. The information to be supplied by FHNC for
-----------------------
inclusion in (1) the Registration Statement or (2) the Proxy
Statement/Prospectus will not at the time such Registration Statement becomes
effective, and in the case of the Proxy Statement/Prospectus at the time it is
mailed and at the time of the meeting of Shareholders contemplated under this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(O) FULL DISCLOSURE. No representation or warranty of FHNC contained
-----------------
in this Agreement or in any agreement, document or certificate delivered by FHNC
to Seller pursuant to this Agreement (i) contains or at the Effective Time will
contain any untrue statement of a material fact or (ii) omits or at the
Effective Time will omit to state a material fact necessary to make the
statements herein or herein, in light of the circumstances under which such
statements were or will be made, not misleading
ARTICLE V
COVENANTS
FHNC hereby covenants to Seller, and Seller hereby covenants to FHNC, the
following:
(A) BEST EFFORTS. It shall use its best efforts in good faith to take
--------------
or cause to be taken all action necessary or desirable under this Agreement on
its part as promptly as practicable so as to permit the consummation of the
transactions contemplated by this Agreement at the earliest possible date and
cooperate fully with the other party hereto to that end.
(B) SHAREHOLDER MEETING. In the case of Seller, it shall (1) take all
---------------------
steps necessary to duly call, give notice of, convene and hold a meeting of its
shareholders for the purpose of approving this Agreement as soon as is
reasonably practicable; (2) subject to the fiduciary duties of the directors,
recommend to its shareholders that they approve this Agreement and use its best
efforts to obtain such approval; (3) distribute to its shareholders the Proxy
Statement/Prospectus in accordance with Applicable Law and with its
organizational documents; and (4) cooperate and consult with FHNC with respect
to each of the foregoing matters.
(C) COOPERATION. It will cooperate in the preparation and filing of
------------
the Proxy Statement/Prospectus and Registration Statement in order to consummate
the transactions contemplated by this Agreement as soon as is reasonably
practicable.
(D) NOTICE OF REGISTRATION STATEMENT EFFECTIVENESS. In the case of
---------------------------------------------------
FHNC, it will advise Seller, promptly after FHNC receives notice thereof, of the
time when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or the suspension of
the qualification of the shares of FHNC Common Stock issuable pursuant to this
Agreement for offering or sale in any jurisdiction, of the initiation or
18
threat of any proceeding for any such purpose or of any request by the SEC for
the amendment or supplement of the Registration Statement or for additional
information.
(E) COMPLIANCE WITH STATE SECURITIES LAWS. In the case of FHNC, it
--------------------------------------
shall use its best efforts to obtain, prior to the effective date of the
Registration Statement, all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement.
(F) PUBLIC ANNOUNCEMENT. Subject to its disclosure obligations imposed
--------------------
by Applicable Law, unless approved by the other party hereto in advance, it will
not issue any press release or written statement for general circulation
relating to the transactions contemplated hereby. As to any disclosure
obligation imposed by Applicable Law, it will deliver to the other party a copy
of such press release or written notice as soon as practicable and in any event,
prior to its issuance.
(G) GOVERNMENTAL COMMUNICATIONS. It shall promptly furnish the other
-----------------------------
party with copies of written communications received by it, or any of its
respective Subsidiaries or Affiliates, from, or delivered by any of the
foregoing to, any governmental body or agency in connection with or material to
the transactions contemplated hereby.
(H) SHARING OF INFORMATION.
-------------------------
(1) Upon reasonable notice, Seller shall (and shall cause each
Seller Subsidiary to) afford FHNC, and its officers, employees, counsel,
accountants and other authorized representatives (collectively, "FHNC
Agents") access, during normal business hours, to all of Seller's and each
Seller Subsidiary's properties, books, contracts, tax returns, commitments
and records; Seller shall enable the FHNC Agents to discuss its business
affairs, condition (financial and otherwise), assets and liabilities with
such third Persons, including, without limitation, its directors, officers,
employees, accountants and counsel, as the other party considers necessary
or appropriate. Seller shall and shall cause each Seller Subsidiary to
furnish promptly to FHNC (a) a copy of each report, schedule and other
document filed by it pursuant to the requirements of federal or state
securities or banking laws since December 31, 2002, and (b) all other
information concerning its business, properties and personnel as the other
party hereto may reasonably request, provided that no investigation
pursuant to this Article shall affect or be deemed to modify any
representation or warranty made by, or the conditions to the obligations to
consummate this Agreement of, the other party hereto.
(2) Seller will, upon request, furnish FHNC with all information
concerning Seller, the Seller Subsidiaries, directors, officers, partners
and shareholders and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement/Prospectus, the
Registration Statement or any other statement or application made by or on
behalf of FHNC, Seller or any of their respective Subsidiaries to any
governmental body or agency in connection with or material to the Merger
and the other transactions contemplated by this Agreement.
19
(3) FHNC will not use any information obtained pursuant to this
Section for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement and, if the transaction contemplated by this
Agreement is not consummated, FHNC will hold all information and documents
obtained pursuant to this Article in confidence unless and until such time
as such information or documents otherwise become publicly available or as
FHNC is advised by counsel that any such information or document is
required by Applicable Law to be disclosed, and in the event of the
termination of this Agreement, it will deliver to the other party hereto
all documents so obtained by it and any copies thereof. In the exercise of
its rights pursuant to this Agreement, FHNC shall use its best efforts to
minimize disruption to Seller's business operations and the business
operations of the Seller Subsidiaries.
(I) NO SOLICITATION. Neither Seller nor any of Seller Subsidiary shall
----------------
solicit or knowingly encourage inquiries or proposals with respect to, or,
subject to the fiduciary duties of its directors, furnish any information
relating to or participate in any negotiations or discussions concerning, any
acquisition or purchase of all or a material portion of its assets (whether
owned by Seller directly or owned by any Seller Subsidiary), or of a substantial
equity interest in Seller or any business combination with Seller or any Seller
Subsidiary other than as contemplated by this Agreement, and Seller shall
instruct its officers, directors, agents, advisors and affiliates to comply with
the above. Seller agrees that it shall notify FHNC immediately if any inquiries
or proposals as described in this Article are received by, any such information
is requested from, or any such negotiations or discussions are sought to be
initiated with, Seller or any Seller Subsidiary.
(J) BREACHES. It shall notify the other party hereto as promptly as
---------
practicable of (1) any breach of any of its representations, warranties or
agreements contained herein that could have a Material Adverse Effect and as to
representations, warranties or agreements contained herein which do not
specifically refer to Material Adverse Effect, of any material breach thereof,
and (2) any change in its condition (financial or otherwise), properties,
business, results of operations or prospects that could have a Material Adverse
Effect.
(K) REGULATORY FILINGS.
--------------------
(1) Each party shall cooperate and use its best efforts to
promptly prepare and file all necessary documentation, to effect all
necessary applications, notices, petitions, filings and other documents,
and to obtain all necessary permits, consents, approvals and authorizations
of all third parties and governmental bodies or agencies, including, in the
case of FHNC, submission of applications for approval of this Agreement and
the transactions contemplated hereby to the Federal Reserve, to the OCC,
and to such other Regulatory Authorities as required by Applicable Law.
(2) Each party shall (1) permit the other to review in advance
and, to the extent practicable, will consult with the other party on all
characterizations of the information relating to the other party and any of
its respective Subsidiaries, which appear in any filing made with, or
written materials submitted to, any third party or any governmental body or
agency in connection with the transactions contemplated by this Agreement;
and (2) consult with the other with respect to obtaining all necessary
permits,
20
consents, approvals and authorizations of all third parties and
governmental bodies or agencies necessary or advisable to consummate the
transactions contemplated by this Agreement and will keep the other party
apprised of the status of matters relating to completion of the
transactions contemplated herein.
(L) ACCOUNTING MODIFICATIONS. Prior to the Effective Time, Seller
--------------------------
shall, consistent with GAAP, modify and change its and each of Seller
Subsidiary's loan, litigation and real estate valuation policies and practices
(including loan classifications and levels of reserves) so as to be applied
consistently on a mutually satisfactory basis with those of FHNC; provided,
however, that Seller shall not be obligated to take any such action pursuant to
this Article unless and until FHNC acknowledges that all conditions to its
obligation to consummate the Merger have been satisfied.
(M) INDEMNIFICATION.
----------------
(1) 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 Time, a director,
officer, employee, fiduciary or agent of Seller or any of Seller Subsidiary
(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 Time, the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto. It is understood and
agreed that FHNC 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 reasonable
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, and in the event of any such threatened
or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time).
(2) FHNC 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 Applicable Law upon receipt of any
undertaking required by Applicable Law. The Indemnified Parties may retain
one firm of counsel satisfactory to them, and FHNC shall pay all reasonable
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 FHNC, Seller 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
21
become involved or is named as defendant and FHNC shall pay the reasonable
fees and expenses of such counsel.
(3) FHNC will use its best efforts to assist in the vigorous
defense of any such matter, provided that FHNC shall not be liable for any
-------- ----
settlement effected without its prior written consent (which consent shall
not be unreasonably withheld), and provided further that FHNC 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 and in such event FHNC shall be reimbursed by such
Indemnified Party for all expenses advanced on its behalf by FHNC.
(4) Any Indemnified Party wishing to claim indemnification under
this Article upon learning of any such claim, action, suit, proceeding or
investigation, shall notify FHNC thereof, provided that the failure to so
--------
notify shall not affect the obligations of FHNC under this Article except
to the extent such failure to notify materially prejudices FHNC.
(5) Notwithstanding the foregoing, no indemnification shall be
provided the Indemnified Parties hereunder if the claim, action, suit,
proceeding or investigation arises, in whole or in part, out of any
material misrepresentation contained in this Agreement or material breach
of covenants, representations, warranties or agreements contained in this
Agreement by Seller or any Indemnified Party.
(6) FHNC and Seller agree that all rights to indemnification and
all limitations of liability existing in favor of the Indemnified Parties
as provided in Seller's articles of incorporation or by-laws, or similar
governing documents of any of its Subsidiaries as in effect as of the date
hereof with respect to matters occurring prior to the Effective Time 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 Time, provided, however, that all rights to indemnification in
respect of any claim asserted or made within such period shall continue
until the final disposition of such claim.
(7) This Article is intended to benefit the Indemnified Parties
and shall be binding on all successors and assigns of FHNC.
(8) In the event FHNC or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of FHNC assume
the obligations set forth in this Article.
(N) SELLER AFFILIATES. Seller shall use its best efforts to cause each
------------------
Person who is on the date hereof an Affiliate of Seller to execute and deliver
to FHNC the written undertakings in substantially the form attached hereto as
EXHIBIT C on the date this Agreement is executed and
22
shall use its best efforts to cause any other Person who subsequently becomes an
Affiliate of Seller to execute and deliver such written undertakings prior to
the Effective Date.
(O) NO ADVERSE ACTION. Neither party shall take or agree or commit to
-------------------
take any action which would cause it to be unable to consummate the Merger with
reasonable dispatch, unless such action, agreement or commitment is otherwise
required by Applicable Law. Neither party shall take any action unless
otherwise required by Applicable Law, that would materially adversely affect the
ability of either party or any Seller Subsidiary to obtain any necessary
approval of Regulatory Authorities required for the consummation of the Merger
without imposition of a condition or restriction of the type referred to in
Article VI(A)(3).
(P) EMPLOYEE BENEFIT PLANS. At the request of FHNC, Seller shall
-------------------------
terminate, or shall cause any Seller Subsidiary to terminate, each or any of the
"employee benefit plans" as described in Article III(T) before the Effective
Time, and all liabilities of such plans shall be satisfied, or adequate
provision made therefore, before the Effective Time.
(Q) EXISTING EMPLOYMENT AGREEMENTS. FHNC acknowledges the existence of
-------------------------------
employment agreements between Seller and/or Seller Bank and each of the
following executives: ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇,
and J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇. Seller agrees to cause the Agreements with J. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇ to be terminated as of the
Effective Time. FHNC affirms that, by reason of the transactions contemplated
by this Agreement, FHNC and/or FTB shall become successors to Seller and Seller
Bank, as applicable, as parties to the employment agreement with ▇▇▇▇ ▇. ▇▇▇▇▇▇
and are bound by the duties and obligations of Seller and Seller Bank under such
employment agreement to the extent such duties and obligations have not been
discharged prior to the Effective Time. In consideration of the termination of
the employment agreement with J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, FHNC shall pay $50,000 to ▇▇.
▇▇▇▇▇▇, with payment to be delivered in immediately available funds on the
Effective Date.
ARTICLE VI
CONDITIONS TO CONSUMMATION
(A) The respective obligations of FHNC and Seller to effect the Merger
shall be subject to the satisfaction prior to the Effective Time of the
following conditions:
(1) This Agreement and the transactions contemplated hereby shall
have been approved by the requisite vote of the shareholders of Seller in
accordance with Applicable Law;
(2) The procurement of approval of this Agreement and the
transactions contemplated hereby by the Federal Reserve Board, the OCC, and
the expiration of any statutory waiting periods;
(3) Procurement of all other regulatory consents and approvals
(including, without limitation, any required consents or approvals from
state banking authorities) which are necessary to the consummation of the
transactions contemplated by this Agreement; provided, however, that no
approval or consent in Article V(A)(2) and (A)(3) shall be deemed to have
been received if it shall include any conditions or requirements
23
which would reduce the benefits of the transactions contemplated hereby to
such a degree that FHNC would not have entered into this Agreement had such
conditions or requirements been known at the date hereof;
(4) On the date of approval of this Agreement by its directors,
Seller shall have received the opinion of ▇▇▇▇▇ Capital Group, L.L.C., to
the effect that in the opinion of such firm, the terms of the transaction
are fair to the shareholders of Seller from a financial point of view;
(5) The satisfaction of all other requirements prescribed by
Applicable Law which are necessary to the consummation of the transactions
contemplated by this Agreement;
(6) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger;
(7) No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated or enforced by any
governmental authority which prohibits, restricts or makes illegal
consummation of the Merger or which imposes restrictions, conditions or
requirements on consummation of the Merger which would reduce the benefits
of the Merger to such a degree that FHNC or Seller would not have entered
into this Agreement had such conditions or requirements been known at the
date hereof;
(8) The Registration Statement shall have become effective and no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC; and
(9) FHNC's legal counsel shall have delivered its opinion dated as
of the Effective Date, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and that, accordingly: (i)
no gain or loss will be recognized by FHNC or Seller as a result of the
Merger, (ii) no gain or loss will be recognized by the shareholders of
Seller who exchange their shares of Seller Common Stock solely for shares
of FHNC Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in FHNC Common Stock);
(iii) the tax basis of the shares of FHNC Common Stock received by
shareholders who exchange all of their shares of Seller Common Stock solely
for shares of FHNC Common Stock in the Merger will be the same as the tax
basis of the shares of Seller Common Stock surrendered in exchange therefor
(reduced by any amount allocable to a fractional share interest for which
cash is received); and (iv) the holding period of the shares of FHNC Common
Stock received in the Merger will include the period during which the
shares of Seller Common Stock surrendered in exchange therefor were held,
provided such shares of Seller Common Stock were held as capital assets at
24
the Effective Time. In rendering such opinion, counsel may require and
rely upon representations contained in certificates of officers of Seller,
FHNC and others.
(B) The obligation of FHNC to effect the Merger shall be subject to the
satisfaction prior to the Effective Time of the following additional conditions:
(1) FHNC and its directors and officers who sign the Registration
Statement shall have received from Seller's independent certified public
accountants "cold comfort" letters, dated (i) the date of the mailing of
the Proxy Statement/Prospectus to Seller's shareholders and (ii) shortly
prior to the Effective Date, with respect to certain financial information
regarding Seller in the form customarily issued by such accountants at such
time in transactions of this type;
(2) FHNC shall have received an opinion, dated the Effective Date,
of Seller's counsel in the form and to the effect customarily received in
transactions of this type;
(3) Each of the representations, warranties and covenants
contained herein of Seller, subject to the Seller Disclosure Letter of
Seller provided pursuant to Article III, shall, in all respects, be true
on, or complied with by, the Effective Date as if made on such date (or on
the date when made in the case of any representation or warranty which
specifically relates to an earlier date) except (y) for breaches which
singly or in the aggregate would not have a Material Adverse Effect, and
(z) as to representations, warranties or covenants contained herein of
Seller which do not specifically refer to Material Adverse Effect, for
breaches which are not material and FHNC shall have received a certificate
signed by a duly authorized officer of Seller, dated the Effective Date, to
such effect;
(4) FHNC shall have received all state securities laws and "Blue
Sky" permits and other authorizations necessary to consummate the
transactions contemplated hereby;
(5) FHNC shall have received a Consulting Agreement executed by J.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in the form attached to this Agreement as EXHIBIT E;
(6) FHNC shall have received an Employment Agreement executed by
▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇ in the form attached to this
Agreement as EXHIBIT D;
(7) FHNC shall have received a Non Compete Agreement executed by
each of the directors of Seller, in the form attached to this Agreement as
EXHIBIT F;
(8) No litigation or proceeding is pending which (i) has been
brought against FHNC or Seller or any of their subsidiaries by any
governmental agency seeking to prevent consummation of the transactions
contemplated hereby or (ii) has been brought against Seller or Seller Bank
which in the reasonable judgement of management will have a Material
Adverse Effect on Seller or Seller Bank;
25
(9) Each Seller Affiliate who elects Stock Consideration shall
have delivered to FHNC a written agreement reasonably satisfactory to FHNC
regarding restrictions on the subsequent transfer of shares of FHNC Common
Stock; and
(10) On the Effective Date, Seller's shareholders' equity shall
not be less than $12,000,000, (calculated without giving effect to (i)
unrecognized gains or losses on "available for sale" securities as provided
in FASB 115 and consistent with Seller's prior practices, (ii) Transaction
Expenses, and (iii) other expenses or obligations incurred in connection
with the Merger, including, but not limited to, accrual for or payment of
severance benefits, prepayment of certain employee benefits and other
transactions or expenses approved by FHNC).
(C) The obligation of Seller to effect the Merger shall be subject to
the satisfaction or prior to the Effective Time of the following additional
conditions:
(1) Seller shall have received an opinion, dated the Effective
Date, of FHNC's counsel in the form and to the effect customarily received
in transactions of this type;
(2) Each of the representations, warranties and covenants
contained herein of FHNC shall, in all respects, be true on, or complied
with by, the Effective Date as if made on such date (or on the date when
made in the case of any representation or warranty which specifically
relates to an earlier date) except (y) for breaches which singly or in the
aggregate would not have a Material Adverse Effect and (z) as to
representations, warranties or covenants contained herein of FHNC which do
not specifically refer to Material Adverse Effect, for breaches which are
not material and Seller shall have received a certificate signed by a duly
authorized officer of FHNC, dated the Effective Date, to such effect; and
(3) No litigation or proceeding is pending which (i) has been
brought against FHNC or Seller or any of their subsidiaries by any
governmental agency, seeking to prevent consummation of the transactions
contemplated hereby or (ii) in the reasonable judgment of the management
will have a Material Adverse Effect on FHNC.
ARTICLE VII
TERMINATION
(A) This Agreement may be terminated prior to the Effective Date,
either before or after its approval by the Seller Shareholders:
(1) By the mutual consent of FHNC and Seller;
(2) By FHNC or Seller, in the event of the failure of the
shareholders of Seller to approve this Agreement by the requisite vote at
its meeting called to consider such approval, or in the event of a breach
by the other party hereto of any representation, warranty or agreement
contained herein which is not cured or not curable within 60 days after
written notice of such breach is given to the party committing such breach
by the other party hereto which have or will have had a Material Adverse
Effect on the breaching party;
26
(3) By FHNC or Seller, in the event that the Merger is not
consummated by September 30, 2005, unless the failure to so consummate by
such time is due to the breach of this Agreement by the party seeking to
terminate;
(4) By FHNC, if its board of directors so determines by vote of a
majority of the members of its entire board, if the FHNC Common Stock
Average Price is less than $38.50 per share by written notice to Seller
delivered within three (3) Business Days after the last day of the
Calculation Period; or
(5) By Seller, if its board of directors so determines by vote of
a majority of the members of its entire board, if the FHNC Common Stock
Average Price is greater than $45.50, by written notice to FHNC within
three (3) Business Days after the last day of the Calculation Period.
(B) In the event of the termination of this Agreement by either FHNC or
Seller, as provided above, this Agreement shall thereafter become void and there
shall be no liability on the part of any party hereto or their respective
officers or directors, except that any such termination shall be without
prejudice to the rights of any party hereto arising out of the willful breach by
any other party of any covenant or willful misrepresentation contained in this
Agreement.
ARTICLE VIII
OTHER MATTERS
(A) Certain Definitions. As used in this Agreement, the following
--------------------
terms shall have the meanings indicated except where otherwise specifically
defined:
(1) "Affiliate" means, with respect to any Person, any Person who
directly, or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person and, without
limiting the generality of the foregoing, includes any executive officer or
director of such Person and any Affiliate of such executive officer or
director.
(2) "Agreement" means this agreement and all exhibits and
schedules hereto, as the same may from time to time be amended or
supplemented by one or more instruments executed by all of the parties
hereto.
(3) "Applicable Law" means any applicable constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, court, stock
exchange, or other Regulatory Authority to which a Person is subject.
(4) "Bank Merger" has the meaning set forth in Article I(H) of
this Agreement.
(5) "BHCA" means the Bank Holding Company Act of 1956, as amended.
27
(6) "Business Day" means a day on which FTB is open for business
and which is not a Saturday, Sunday, or legal bank holiday.
(7) "Calculation Period" has the meaning set forth in Article
I(C)(2) of this Agreement.
(8) "Cash Cap" has the meaning set forth in Article I(C)(3) of
this Agreement.
(9) "Cash Consideration" means the cash to be paid to Seller
Shareholders in consideration of the Merger, calculated in accordance with
Article I of this Agreement.
(10) "Cash Election Shares" has the meaning set forth in Article
I(D)(5).
(11) "Cash Threshold" has the meaning set forth in Article I(C)(3)
of this Agreement.
(12) "Certificate" has the meaning set forth in Article I(G) of
this Agreement.
(13) "Code" means the Internal Revenue Code of 1986, as amended.
(14) "Combination Election" has the meaning set forth in Article
I(D)(4) of this Agreement.
(15) "Conversion Price" has the meaning set forth in Article
I(C)(2) of this Agreement.
(16) "Dissenting Shareholder" means a Seller Shareholder who has
voted against the Merger and has otherwise taken all requisite steps to
demand fair value in exchange for such shareholder's shares of Seller
Common Stock in accordance with Applicable Law.
(17) "Effective Date" means the date in which the Merger becomes
effective, as set forth in Article I(B) of this Agreement.
(18) "Election Deadline" has the meaning set forth in Article
I(D)(2) of this Agreement.
(19) "Effective Time" means the time in which the Merger becomes
effective, as set forth in Article I(B) of this Agreement.
(20) "Encumbrance" means any lien, pledge, security interest,
claim, charge, easement, restriction or encumbrance of any kind or nature
whatsoever.
(21) "Environmental Laws" means all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning
public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those
relating to the
28
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products
or byproducts, asbestos, radon, mold, polychlorinated biphenyls, noise or
radiation, each as amended and as now or hereafter in effect and which the
Seller is bound to observe on or before the Effective Date.
(22) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(23) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated from time to time
thereunder.
(24) "Exchange Agent" has the meaning set forth in Article I(G)(1)
of this Agreement.
(25) "Federal Reserve" means the Board of Governors of the Federal
Reserve System.
(26) "FHNC" means First Horizon National Corporation, a Tennessee
corporation, its successors and permitted assigns.
(27) "FHNC Agents" has the meaning set forth in Article V(H)(1) of
this Agreement.
(28) "FHNC Common Stock" means the common stock of FHNC, par value
$.625 per share.
(29) "FHNC Common Stock Average Price" has the meaning set forth
in Article I(C)(3).
(30) "FHNC Reports" has the meaning set forth in Article IV(F) of
this Agreement.
(31) "FDIC" means the Federal Deposit Insurance Corporation.
(32) "Form of Election" means a form designed for the purpose of
each Seller Shareholder electing either Cash Consideration or Stock
Consideration, prepared by FHNC and reasonably acceptable to Seller.
(33) "FTB" means First Tennessee Bank National Association, a
national banking association, its successors and permitted assigns.
(34) "GAAP" means generally accepted accounting principles as in
effect at the relevant date and consistently applied.
29
(35) "Indemnified Parties" has the meaning set forth in Article
V(M) of this Agreement.
(36) "Insurance Policies" has the meaning set forth in Article
III(L) of this Agreement.
(37) "Intellectual Property" means (a) all trademarks, service
marks, trade dress, logos, trade names, corporate names, any domain names
related to the business conducted by the Seller and the Seller
Subsidiaries, and assumed names together with all translations,
adaptations, derivations, and combinations thereof and including all
goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (b) all trade secrets and business
information (including ideas, customer and supplier lists, promotional
materials, pricing and cost information, and business and marketing plans
and proposals), and business records including electronic and written
communications concerning any negotiations with respect to Seller's
business. (c) all rights in and to computer software (including object and
source codes, data and related documentation), and (d) all rights relating
to any of the foregoing that are attributable to the business of Seller and
the Seller Subsidiaries.
(38) "Knowledge" with respect to Seller, means the actual
knowledge of J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇
▇▇▇▇▇▇, after reasonable inquiry, which inquiry need not rise to the level
that might alert employees as to the nature of this Agreement or the
Merger.
(39) "Loan Portfolio Properties and Other Properties Owned" means
those properties owned or operated by Seller or any Seller Subsidiary
including properties owned or operated in a fiduciary capacity, including
properties owned or operated in a fiduciary capacity.
(40) "Material Adverse Effect," with respect to a Person, means
any condition, event, change or occurrence that, individually or
collectively, is reasonably likely to have a material adverse effect upon
(x) the condition, financial or otherwise, properties, business, results of
operations or prospects of such Person and its subsidiaries, taken as a
whole, or (y) the ability of such Person to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement;
provided, however, that as to all representations, warranties and covenants
of Seller, a Material Adverse Effect shall have occurred if the actual or
reasonably projected costs of all losses, fines, penalties, costs or
expenses (including attorneys' fees) as a result of any one or more
breaches of such representations, warranties and covenants exceed $500,000
in the aggregate.
(41) "Material Contracts" has the meaning set forth in Item
601(b)(10) of Regulation SK of the Securities Act.
(42) "Merger" has the meaning set forth in Section (A) of the
Recitals to this Agreement.
30
(43) "Merger Consideration" means the aggregate of the Cash
Consideration and Stock Consideration paid to the Seller Shareholders in
accordance with the terms and conditions of this Agreement
(44) "NYSE" means the New York Stock Exchange.
(45) "OCC" means the Office of the Comptroller of the Currency.
(46) "Person" includes an individual, corporation, partnership,
limited liability company, association, trust or unincorporated
organization.
(47) "Price Per Share" has the meaning set forth in Article
I(C)(1) of this Agreement.
(48) "Proxy Statement/Prospectus" means the proxy
statement/prospectus, together with any supplements thereto, to be
transmitted to Seller Shareholders in connection with the transactions
contemplated by this Agreement.
(49) "Registration Statement" means the Registration Statement on
Form S-4, or other applicable form, including any pre-effective or
post-effective amendments or supplements thereto, as filed with the SEC
under the Securities Act with respect to the Stock Consideration to be
issued in connection with the transactions contemplated by this Agreement.
(50) "Regulatory Authority" means any agency or department of any
federal or state government, including without limitation the Office of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the Tennessee Department
of Financial Institutions, the SEC or the respective staffs thereof.
(51) "Representative" has the meaning set forth in Article I(D)(1)
of this Agreement.
(52) "Required Regulatory Approval" means the approval required by
the Federal Reserve and the Office of the Comptroller of the Currency to
consummate this transaction.
(53) "Rights" means warrants, options, rights, convertible
securities and other capital stock equivalents that obligate an entity to
issue its securities.
(54) "SEC" means the Securities and Exchange Commission.
(55) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated from time to time
thereunder.
(56) "Seller" means West Metro Financial Services, Inc., a Georgia
corporation, its successors and permitted assigns.
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(57) "Seller Bank" means First National Bank West Metro, a
national bank association.
(58) "Seller Common Stock" means the common stock, par value
$1.00 per share, of Seller.
(59) "Seller Disclosure Letter" means the letter prepared by
Seller and delivered to FHNC on the date of this Agreement which discloses
information required by (and exceptions to) Seller's representations and
warranties set forth in Article III of this Agreement.
(60) "Seller Reports" has the meaning set forth in Article III(H)
of this Agreement.
(61) "Seller Shareholders" means the equity owners of Seller.
(62) "Stock Consideration" means the shares of FHNC Common Stock
to be paid to Seller Shareholders in consideration of the Merger,
calculated in accordance with Article I of this Agreement.
(63) "Stock Election Shares" has the meaning set forth in Article
I(D)(5) of this Agreement.
(64) "Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by another
entity, except any corporation the stock of which is held as security by
either FTB or Seller Bank, as the case may be, in the ordinary course of
its lending activities.
(65) "Surviving Corporation" means FHNC at and after the Effective
Time.
(66) "Transaction Expenses" has the meaning set forth in Article
VIII(F) of this Agreement.
(B) Survival. The agreements and covenants of the parties which by
--------
their terms apply in whole or in part after the Effective Time shall survive the
Effective Date. All other representations, warranties, agreements and covenants
shall be deemed to be conditions of this Agreement and shall not survive the
Effective Date.
(C) Amendment; Modification; Waiver. Prior to the Effective Date, any
--------------------------------
provision of this Agreement may be (i) waived by the party benefited by the
provision or by both parties or (ii) amended or modified at any time (including
the structure of the transaction) by an agreement in writing between the parties
hereto approved by their respective boards of directors (to the extent allowed
by law), except that, after the vote by the shareholders of Seller, Article I
(C) shall not be amended or revised.
(D) Counterparts. This Agreement may be executed in counterparts each
------------
of which shall be deemed to constitute an original, but all of which together
shall constitute one and the same instrument.
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(E) Governing Law. This Agreement shall be governed by, and
--------------
interpreted in accordance with, the laws of the State of Tennessee, except to
the extent federal law is applicable.
(F) Expenses. Each party hereto will bear all expenses incurred by it
--------
in connection with this Agreement and the transactions contemplated hereby
including fees and expenses of its own brokers, finders, financial consultants,
accountants and counsel ("Transaction Expenses"). Seller agrees that its
Transaction Expenses will not exceed $500,000, unless there is a revision to the
structure by FHNC as contemplated by Article I(I) hereinabove.
(G) Notices. All notices, requests, acknowledgements and other
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communications hereunder to a party shall be in writing and shall be deemed to
have been duly given upon receipt if delivered personally or by overnight
courier, or telecopy or mailed by prepaid registered or certified mail (return
receipt requested), to such party at its address set forth below or such other
address as such party may specify by notice to the other party hereto.
IF TO SELLER, TO: West Metro Financial Services, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With Copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO FHNC, TO: First Horizon National Corporation
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Senior Vice President & Treasurer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
First Horizon Home Loan Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
With Copies to: First Horizon National Corporation
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PC
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(H) No Third Party Beneficiaries. All terms and provisions of this
-------------------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Except as expressly
provided for herein, nothing in this Agreement is intended to confer upon any
other Person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
(I) Entire Agreement. This Agreement represents the entire
-----------------
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made.
(J) Assignment. This Agreement may not be assigned by any party hereto
----------
without the written consent of the other parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in counterparts by their duly authorized officers as of the day and year first
above written.
FIRST HORIZON NATIONAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Senior Vice President &
Treasurer
FHNC
WEST METRO FINANCIAL SERVICES, INC.
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: Chief Executive Officer
-----------------------------
Seller
35