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As filed with the Securities and Exchange Commission on December 1, 1994
Registration No. ____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FIRST TENNESSEE NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
TENNESSEE 6021 62-0803242
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
165 MADISON AVENUE
MEMPHIS, TENNESSEE 38103
(901) 523-4444
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
HARRY A. JOHNSON, III
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FIRST TENNESSEE NATIONAL CORPORATION
165 MADISON AVENUE
MEMPHIS, TENNESSEE 38103
(901) 523-5624
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With Copies to:
CLYDE A. BILLINGS, JR. R. NASH NEYLAND
Vice President & Counsel McDonnell Dyer, PLC
First Tennessee National Corporation Crescent Center, Ste. 650
165 Madison Avenue 6075 Poplar Avenue
Memphis, TN 38103 Memphis, TN 38117
(901) 523-5679 (901) 537-1023
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after this Registration Statement becomes
effective and after conditions contained in Merger Agreement have been
satisfied.
If any of the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box: / /
CALCULATION OF REGISTRATION FEE
Title of each
class of Amount Proposed Maximum Proposed Maximum Amount
securities to be Offering Price Aggregate of
to be registered Registered(1) per Unit(2) Offering Price(2) Registration Fee
---------------- ------------- ---------------- ----------------- ----------------
Common Stock and
Associated Rights 1,494,532 $36.99 $55,282,739 $19,063
(1) Based upon the assumed number of shares that may be issued in the Merger
described herein. Such assumed number is based on the number of shares of
Community Bancshares, Inc. Common Stock that may be outstanding immediately
prior to the Merger and the assumed minimum price per share for Registrant's
Common Stock under Section (B)(1) of Article I of the Merger Agreement.
(2) Estimated solely for purpose of computing the registration fee pursuant to
Rule 457(f)(1) on the basis of the market value (average of bid and asked
price) of a share of Community Bancshares, Inc. Common Stock on November 29,
1994, divided by 0.43593, the maximum number of shares of the Registrant's
Common Stock to be exchanged for each share of Community Bancshares, Inc.
Common Stock in the proposed merger to which this Registration Statement
relates, based on the assumed value for Registrant's Common Stock used in Note
(1).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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FIRST TENNESSEE NATIONAL CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
FORM S-4 ITEM AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
------------------------- ---------------------------------
A. Information About the Transaction
1. Forepart of the Registration Statement and Facing page of Registration Statement; Outside Front
Outside Front Cover Page of Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages Available Information; Table of Contents
of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges Summary; The Special Meeting; The Merger
and Other Information
4. Terms of the Transaction Summary; The Merger; Incorporation of Certain
Documents by Reference; Certain Regulatory
Considerations; Effect of the Merger on Rights of
Shareholders; Description of FTNC Capital Stock
5. Pro Forma Financial Information Index to Pro Forma Financial Information
6. Material Contacts with the Company Being The Merger
Acquired
7. Additional Information Required for Reoffering Not Applicable
by Persons and Parties Deemed to Be Underwriters
8. Interests of Named Experts and Counsel Validity of Common Stock; Experts
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
B. Information About the Registrant
10. Information with Respect to S-3 Registrants Incorporation of Certain Documents by Reference
11. Incorporation of Certain Information by Incorporation of Certain Documents by Reference
Reference
12. Information with Respect to S-2 or S-3 Not Applicable
Registrants
13. Incorporation of Certain Information by Not Applicable
Reference
14. Information with Respect to Registrants Other Not Applicable
Than S-3 or S-2 Registrants
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-2 or S-3 Incorporation of Certain Documents by Reference
Companies
17. Information with Respect to Companies Other Not Applicable
Than S-2 or S-3 Companies
D. Voting and Management Information
18. Information if Proxies, Consents or Incorporation of Certain Documents by Reference;
Authorizations are to be Solicited Summary; The Special Meeting; Experts; The Merger;
Cover Page of Proxy Statement-Prospectus
19. Information if Proxies, Consents or Not Applicable
Authorizations are not to be Solicited or in
an Exchange Offer
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_____________________, 1994
Dear Community Bancshares, Inc. Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Community Bancshares, Inc. ("Community") to be held at the main office of
Community, Germantown Commons Office Complex, Suite 108, 2175 Germantown Road
South, Germantown, Tennessee, on _________________, 1995 at 5:00 p.m., local
time.
At this Special Meeting, you will have an opportunity to consider and
vote on the terms of an Agreement and Plan of Merger (the "Agreement") that
provides for the merger of Community with and into First Tennessee National
Corporation ("FTNC") (the "Merger") with FTNC as the surviving corporation, and
the simultaneous merger of Community's principal subsidiary, Community First
Bank, with and into FTNC's principal subsidiary, First Tennessee Bank National
Association.
The Agreement generally provides for a tax-free exchange in which
Community shareholders will receive shares of FTNC Common Stock in exchange for
shares of Community Common Stock in accordance with an exchange ratio based on
the average closing price of FTNC Common Stock for a period of time preceding
the consummation of the Merger. The specifics of the exchange ratio are more
fully discussed in the section entitled "The Merger -- Terms of the Merger" of
the Proxy Statement-Prospectus accompanying this letter.
The proposed Merger has been approved by the Boards of Directors of
both FTNC and Community.
The enclosed Notice of Special Meeting of Shareholders and Proxy
Statement-Prospectus explain the Merger and provide specific information
relative to the Special Meeting. Please carefully read these materials and
thoughtfully consider the information contained in them. Your vote is of great
importance, as the approval of the holders of at least 67% of the outstanding
shares of Community Common Stock is required to consummate the Merger.
Whether or not you plan to attend the Special Meeting, you are urged
to complete, date, sign and promptly return the enclosed proxy card to assure
that your shares will be voted at the Special Meeting. For your convenience,
there is included a postage-paid, addressed envelope for your proxy card. No
additional postage is required if mailed in the United States.
THE MERGER IS AN IMPORTANT STEP FOR COMMUNITY BANCSHARES, INC. AND ITS
SHAREHOLDERS. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE MERGER.
Sincerely,
JOHN D. FERGUSON
Chairman and Chief Executive Officer
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COMMUNITY BANCSHARES, INC.
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD _______________, 1995
================================================================================
Notice is hereby given that a Special Meeting of Shareholders of
Community Bancshares, Inc. ("Community") has been called by the Board of
Directors and will be held at the main office of Community, Germantown Commons
Office Complex, Suite 108, 2175 Germantown Road South, Germantown, Tennessee,
on _________________, 1995 at 5:00 p.m., local time to consider and vote upon a
proposal to approve an Agreement and Plan for Merger dated as of September 22,
1994 (the "Agreement") by and between First Tennessee National Corporation
("FTNC") and Community. The Agreement provides for the merger of Community with
and into FTNC, with FTNC as the surviving corporation and the merger of
Community First Bank with and into First Tennessee Bank National Association,
all as more fully described in the accompanying Proxy Statement-Prospectus.
Shareholders of Community are entitled to assert dissenters' rights
upon compliance with the applicable provisions of Tennessee Business
Corporation Act Sections 48-23-101 through 48-23-302, which are described in
and a copy of which is attached as an appendix to the accompanying Proxy
Statement-Prospectus.
Whether or not you plan to attend, please complete, date and sign the
enclosed proxy card and return it promptly in the stamped return envelope in
order to insure that your shares will be represented at the Special Meeting. If
you attend in person, the proxy can be disregarded, if you wish, and you may
vote your own shares. PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
Only shareholders of record at the close of business on
____________________, 1994 will be entitled to receive notice of and to vote at
the meeting and any adjournments or postponements thereof.
By Order of the Board of Directors,
_______________________, Secretary
Germantown, Tennessee
Dated: ___________________, 1994
THE BOARD OF DIRECTORS OF COMMUNITY BANCSHARES, INC. UNANIMOUSLY
RECOMMENDS THAT THE HOLDERS OF COMMUNITY BANCSHARES, INC. COMMON STOCK VOTE TO
APPROVE THE AGREEMENT.
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PROXY STATEMENT
COMMUNITY BANCSHARES, INC.
SPECIAL MEETING TO BE HELD ON _____________________, 1995
PROSPECTUS
FIRST TENNESSEE NATIONAL CORPORATION
_____________ SHARES OF COMMON STOCK
This Proxy Statement-Prospectus is being furnished to the holders of
common stock, par value $1.00 per share (the "Community Common Stock"), of
Community Bancshares, Inc. ("Community"), a Tennessee corporation and bank
holding company, in connection with the solicitation of proxies by the
Community Board of Directors (the "Community Board") for use at the Special
Meeting of Community shareholders to be held at 5:00 p.m., local time, on
________________, 1995, at the main office of Community, Germantown Commons
Office Complex, Suite 108, 2175 Germantown Road South, Germantown, Tennessee,
and at any adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, the shareholders of record of Community Common
Stock as of the close of business on ______________, 1994 will consider and
vote upon a proposal to approve the Agreement and Plan of Merger dated as of
September 22, 1994 (the "Agreement") by and between First Tennessee National
Corporation ("FTNC"), a Tennessee corporation registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended, and Community,
pursuant to which, among other things, Community, will merge with and into
FTNC, with FTNC surviving the merger (the "Merger"). At the same time,
Community First Bank ("Community First"), a subsidiary of Community, will merge
with and into First Tennessee Bank National Association ("FTB"), a subsidiary
of FTNC. Upon consummation of the Merger, each outstanding share of Community
Common Stock (other than shares held directly or indirectly by FTNC or any of
its subsidiary banks, except in a fiduciary capacity or in satisfaction of a
debt previously contracted, and shares held in the treasury of Community, which
shares shall be canceled, retired and cease to exist by virtue of the Merger
and without any payment made in respect thereof) will be converted into the
right to receive shares of common stock, par value $2.50 per share, of FTNC
("FTNC Common Stock") based on exchange ratio as described herein. For a
description of the material terms of the Agreement, a copy of which is included
herein in its entirety as Appendix "A" to this Proxy Statement-Prospectus, see
"The Merger."
This Proxy Statement-Prospectus also constitutes a prospectus of FTNC
in respect of up to ___,___ shares of FTNC Common Stock to be issued to
shareholders of Community in connection with the Merger. The shares of FTNC
Common Stock to be issued in connection with the Merger are based upon the
conversion of each outstanding share of Community Common Stock into shares of
FTNC Common Stock as described herein. See "The Merger -- Terms of the Merger."
The outstanding shares of FTNC Common Stock are, and the shares
offered hereby will be, included for quotation on the Nasdaq Stock Market's
National Market System. The last reported sale price of FTNC Common Stock on
the Nasdaq Stock Market on _________________, 1994 was $__.__ per share.
All information contained in this Proxy Statement-Prospectus relating
to FTNC and its subsidiaries has been supplied by FTNC and all information
relating to Community has been supplied by Community. This Proxy
Statement-Prospectus and the accompanying proxy card are first being mailed to
shareholders of Community on or about __________________, 1994.
THE SHARES OF FTNC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION INSURANCE FUND OF
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________________
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS _____________________, 1994
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TABLE OF CONTENTS
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Page
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . - 4 -
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . - 4 -
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6 -
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . - 14 -
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . - 14 -
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . - 15 -
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 -
Background of and Reasons for the Merger . . . . . . . . . . . . - 15 -
Opinion of Financial Adviser . . . . . . . . . . . . . . . . . . - 18 -
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . - 23 -
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . - 24 -
Surrender of Certificates . . . . . . . . . . . . . . . . . . . - 24 -
Representations and Warranties . . . . . . . . . . . . . . . . . - 25 -
Conditions to Consummation of the Merger . . . . . . . . . . . . - 25 -
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . - 27 -
Conduct of Business Pending Merger . . . . . . . . . . . . . . . - 28 -
No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . - 28 -
Waiver and Amendment; Termination . . . . . . . . . . . . . . . - 29 -
Interests of Certain Persons in the Merger . . . . . . . . . . . - 30 -
Shareholders' Dissenters' Rights . . . . . . . . . . . . . . . . - 31 -
Certain Federal Income Tax Consequences . . . . . . . . . . . . - 33 -
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . - 34 -
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 34 -
Resale of FTNC Common Stock . . . . . . . . . . . . . . . . . . - 35 -
The Nasdaq Stock Market . . . . . . . . . . . . . . . . . . . . - 35 -
CERTAIN REGULATORY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . - 35 -
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 35 -
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . - 36 -
Transactions with Affiliates . . . . . . . . . . . . . . . . . . - 37 -
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . - 37 -
Holding Company Structure and Support of Subsidiary Banks . . . - 38 -
FDICIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 38 -
Interstate Act . . . . . . . . . . . . . . . . . . . . . . . . . - 40 -
Brokered Deposits . . . . . . . . . . . . . . . . . . . . . . . - 40 -
FDIC Insurance Premiums . . . . . . . . . . . . . . . . . . . . - 40 -
Depositor Preference . . . . . . . . . . . . . . . . . . . . . . - 40 -
DESCRIPTION OF FTNC CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . - 40 -
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . - 41 -
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . - 41 -
FTNC Common Stock . . . . . . . . . . . . . . . . . . . . . . . - 41 -
Shareholder Protection Rights Plan . . . . . . . . . . . . . . . - 42 -
Subordinated Capital Notes due 1999 . . . . . . . . . . . . . . - 42 -
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Page
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EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . - 43 -
Shareholder Proposals and Nominations . . . . . . . . . . . . . - 43 -
Amendment of Articles of Incorporation or Charter and Bylaws . . - 43 -
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . - 44 -
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . - 44 -
Rights of Holders of Capital Notes . . . . . . . . . . . . . . . - 45 -
Shareholder Rights Plan . . . . . . . . . . . . . . . . . . . . - 45 -
VALIDITY OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . - 45 -
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 45 -
INDEX TO PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . - 47 -
APPENDICES:
Appendix "A" - Agreement and Plan of Merger
Appendix "B" - Opinion of Attkisson, Carter & Akers Incorporated
Appendix "C" - Sections 48-23-101, et seq. of the Tennessee Code Annotated
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AVAILABLE INFORMATION
FTNC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). The reports, proxy statements
and other information filed by FTNC with the SEC can be inspected and copied at
the public reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
statements and other information can be inspected and copied at the SEC's
Regional Offices at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621-2511. Copies of such material can be obtained from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C., at prescribed
rates. The FTNC Common Stock is included for quotation on the Nasdaq Stock
Market and such reports, proxy statements and other information concerning FTNC
should be available for inspection and copying at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006. FTNC has filed with the SEC a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of FTNC Common Stock and associated rights to be issued pursuant to the
Agreement. As permitted by the rules and regulations of the SEC, this Proxy
Statement-Prospectus does not contain all the information set forth in the
Registration Statement. Such additional information may be obtained from the
SEC's principal office in Washington, D.C. Statements contained in this Proxy
Statement-Prospectus or in any document incorporated by reference in this Proxy
Statement-Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are hereby incorporated by
reference in this Proxy Statement-Prospectus and made a part hereof: (a) FTNC's
Current Report on Form 8-K, dated October 1, 1993, filed October 18, 1993; (b)
FTNC's Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
and its Forms 10-K/A filed on April 27, 1994 and June 29, 1994, amending its
Annual Report on Form 10-K; (c) FTNC's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30, and September 30, 1994 and its Form 10-Q/A
filed August 19, 1994, amending its Form 10-Q for the quarter ended March 31,
1994; (d) FTNC's proxy statement dated March 14, 1994, exclusive of the Board
Compensation Committee Report and the Total Shareholder Return Performance
Graph on pages 11-16 thereof; (e) the description of FTNC Common Stock
contained in FTNC's registration statement on Form 10 (File No. 0-4491), filed
April 14, 1970, pursuant to Section 12 of the Exchange Act (and any amendments
or reports filed for the purpose of updating the description); (f) the
description of the FTNC's rights to purchase Participating Preferred Stock
included in FTNC's registration statement on Form 8-A (File No. 0-4491), filed
September 8, 1989, pursuant to Section 12 of the Exchange Act pursuant to which
FTNC registered the Shareholder Protection Rights under the Exchange Act; (g)
Community's Current Reports on Form 8-K, dated January 27 and September 22,
1994; (h) Community's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993; and (i) Community's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30, and September 30, 1994.
The Proxy Statement-Prospectus is accompanied by a copy of Community's
Annual report on Form 10-K for the year ended December 31, 1993 and Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994.
All documents filed by FTNC and Community, respectively, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement-Prospectus and prior to the Special Meeting shall be
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deemed to be incorporated by reference in this Proxy Statement-Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated
herein by reference will be deemed to be modified or superseded for the purpose
of this Proxy Statement-Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is, or is deemed
to be, incorporated herein by reference modifies or supersedes such statement.
Any such statement so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement
Prospectus.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS RELATING TO
FTNC AND COMMUNITY BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. SUCH DOCUMENTS, OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS, ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST TO THE TREASURER, FIRST TENNESSEE
NATIONAL CORPORATION, P.O. BOX 84, MEMPHIS, TENNESSEE 38101, TELEPHONE NUMBER
(901) 523-5630. COPIES OF EXHIBITS THAT ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS MAY BE OBTAINED FOR A CHARGE COVERING THE COST OF
REPRODUCTION AND MAILING. IN ORDER TO INSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY _____________, 1995.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS DOCUMENT NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF FTNC OR COMMUNITY SINCE THE
DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF.
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SUMMARY
The following summary is not intended to be a complete description of
all material facts regarding FTNC, Community and the matters to be considered
at the Special Meeting and is qualified in all respects by the information
appearing elsewhere and incorporated by reference in this Proxy
Statement-Prospectus, the Appendices hereto and the documents referred to
herein.
PARTIES TO THE MERGER
FTNC. FTNC is a regional bank holding company incorporated under the
laws of Tennessee, which, through First Tennessee Bank National Association,
Memphis, Tennessee ("FTB") and its other banking and banking-related
subsidiaries, provides a broad range of financial services. FTNC was
incorporated in Tennessee in 1968. At September 30, 1994, FTNC had consolidated
total assets of approximately $10.4 billion, consolidated total deposits of
approximately $7.6 billion and equity capital of approximately $752.0 million.
At September 30, 1994, FTNC ranked 58th among bank holding companies in the
United States and first among bank holding companies headquartered in Tennessee
in terms of total assets.
FTNC coordinates the financial resources of the consolidated
enterprise and maintains systems of financial, operational and administrative
control that allow coordination of selected policies and activities. FTNC
operates principally through FTB, which was chartered as a national banking
association in 1864. As of September 30, 1994, FTB was the largest commercial
bank headquartered in Tennessee both in terms of total assets and deposits. At
September 30, 1994, FTB had total assets of approximately $10.0 billion, total
deposits of approximately $7.1 billion and equity capital of approximately
$658.9 million. FTB conducts a broad range of retail and commercial banking and
fiduciary services and had 212 banking locations at September 30, 1994. FTB
also offers a comprehensive range of financial services, including bond
broker/agency services, mortgage banking and check clearing, to companies
nationally. Bond broker/agency services provided by FTB consist primarily of
the sale of bank-eligible securities to other financial institutions.
Subsidiaries of FTNC and FTB are engaged primarily in providing mortgage
banking, integrated check processing solutions, discount brokerage, equipment
finance, venture capital, investment management and credit life insurance.
The principal executive offices of FTNC are located at 165 Madison
Avenue, Memphis, Tennessee 38103, and its telephone number is (901) 523-4444.
Community. Community is a Tennessee corporation and bank holding
company, which was chartered in 1981. It operates a general banking business
through its principal subsidiary, Community First Bank ("Community First"), a
Tennessee state-chartered bank, with offices in Bartlett, Collierville,
Germantown, and Memphis, Tennessee. At September 30, 1994, Community had
consolidated total assets of approximately $256.8 million, consolidated total
deposits of approximately $200.0 million, and equity capital of approximately
$21.4 million.
The executive offices of Community are located at Germantown Commons
Office Complex, Suite 104, 2175 Germantown Road South, Germantown, Tennessee
38138 and the telephone number is (901) 759-7799.
Additional information about FTNC and its subsidiaries and about
Community and its subsidiaries is included in documents incorporated by
reference in this Proxy Statement-Prospectus. See "Incorporation of Certain
Documents by Reference."
SPECIAL MEETING OF SHAREHOLDERS
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11
The Special Meeting will be held on __________________, 1995 at 5:00
p.m., local time, at the main office of Community, Germantown Commons Office
Complex, Suite 108, 2175 Germantown Road South, Germantown, Tennessee. The
purpose of the Special Meeting is to consider and vote upon a proposal to
approve the Agreement.
VOTE REQUIRED; RECORD DATE
Only Community shareholders of record at the close of business on
______________, 1994, (the "Community Record Date") will be entitled to notice
of and vote at the Special Meeting. The affirmative vote of the holders of
sixty-seven (67%) percent of the shares of Community Common Stock outstanding
on such date is required to approve the Agreement. "Abstentions" and broker
"non votes" will have the same effect as a vote "against" approval of the
Agreement. See "The Special Meeting -- Vote Required." As of the Community
Record Date, there were _________ shares of Community Common Stock entitled to
be voted.
The directors and executive officers of Community and their affiliates
beneficially owned, as of the Community Record Date, 1,013,220 shares, or
approximately 31.45%, of the outstanding shares of Community Common Stock.
Community has been advised that such directors and executive officers intend to
vote their shares for approval of the Agreement.
As of the Community Record Date, FTB, through its Trust Department,
held of record or in the name of nominees 632 shares (or less than 0.1% of the
outstanding shares) of Community Common Stock as fiduciary for the
beneficiaries of trusts, and the directors and executive officers of FTNC
beneficially owned 250 shares of Community Common Stock. As of such date, other
than the shares held through FTB's Trust Department, FTNC and its subsidiaries
owned no shares of Community Common Stock.
TERMS OF THE MERGER
On the Effective Date (as defined below) of the Merger, Community will
merge with and into FTNC with FTNC being the surviving entity. At the same
time, Community First Bank will merge with and into FTB with FTB being the
surviving entity.
Upon consummation of the Merger, each outstanding share of Community
Common Stock (other than shares held directly or indirectly by FTNC or any
subsidiary of FTNC, except in a fiduciary capacity or in satisfaction of a debt
previously contracted, and shares held in the treasury of Community, which
shares shall be canceled, retired and cease to exist by virtue of the Merger
and without any payment made in respect thereof) will be converted into the
right to receive shares of FTNC Common Stock. Each share of Community Common
Stock issued and outstanding at the Effective Date will become and be converted
into the right to receive the number of shares of FTNC Common Stock equal to
the Conversion Number (the "Conversion Number" or the "Exchange Ratio")
determined as follows:
(i) If the FTNC Common Stock Average Price (defined below) is
within the range of $43.52 and $51.00, inclusive, the Conversion
Number will be .39067.
(ii) If the FTNC Common Stock Average Price is greater than
$51.00 per share, the Conversion Number will be the product of (y)
.39067 multiplied by (2) the quotient of (1) $51.00 divided by (2) the
FTNC Common Stock Average Price.
(iii) If the FTNC Common Stock Average Price is less than
$43.52 per share, the Conversion
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12
Number will be the product of (y) .39067 multiplied by (2) the
quotient of (1) $43.52 divided by (2) the FTNC Common Stock Average
Price.
(iv) See "The Merger--Terms of the Merger" for the Conversion
Number if the FTNC Common Stock Average Price is less than $41.00 or
greater than $53.50, or if FTNC is involved in certain acquisitions or
if FTNC pays a special dividend.
"FTNC Common Stock Average Price" means the average of the closing
prices of the FTNC Common Stock for the twenty (20) business days (the
"Calculation Period") immediately prior to the tenth (10th) calendar day
preceding the Effective Date.
If the Effective Date had been ____________, 1994, the Conversion
Number would have been __.____.
No fractional shares of FTNC Common Stock will be issued in connection
with the Merger. In lieu of fractional shares, FTNC will make a cash payment
equal to the fractional interest which a Community shareholder would otherwise
receive multiplied by the amount specified in the section "The Merger--Terms of
the Merger." The holders of Community Common Stock at the Effective Date will
become holders of FTNC Common Stock. Each outstanding share of FTNC Common
Stock will remain outstanding and unchanged as a result of the Merger. See "The
Merger -- Terms of the Merger."
EFFECTIVE DATE
The Merger will become effective at the time of the filing of a
certificate of merger or on such date as the certificate of merger may specify
(the "Effective Date"). Unless otherwise mutually agreed upon by FTNC and
Community, the Effective Date will occur on the last business day of the month
during which the expiration of all applicable waiting periods in connection
with governmental approvals occurs and all conditions to the consummation of
the Agreement have been satisfied or waived or, at FTNC's option, on the first
business day of the next succeeding month.
REASONS FOR THE MERGER; RECOMMENDATION OF COMMUNITY BOARD OF DIRECTORS
The Community Board believes the Merger is fair to and in the best
interest of Community and its shareholders and recommends that Community's
shareholders vote FOR approval of the Agreement. The Community Board believes
that the Merger will provide significant value to all Community shareholders
and also enable them to participate in opportunities for growth that the
Community Board believes that the Merger makes possible. See "The Merger --
Background of and Reasons for the Merger." For information on the interests of
certain officers and directors of Community in the Merger, see "The Merger --
Interests of Certain Persons in the Merger."
OPINION OF FINANCIAL ADVISER
Attkisson, Carter & Akers Incorporated, ("Attkisson, Carter")
Atlanta, Georgia, has delivered its written opinion to the Community Board to
the effect that, as of September 21, 1994, the terms of the Merger are fair to
the holders of Community Common Stock from a financial point of view. A copy of
the opinion of Attkisson, Carter dated as of September 21, 1994 is attached
hereto as Appendix "B." The opinion should be read in its entirety for a
description of the procedures followed, assumptions and qualifications made,
matters considered, and the limitations undertaken by Attkisson, Carter. See
"The Merger -- Opinion of Financial Adviser."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is subject to various conditions, including
receipt of the shareholder approval
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solicited hereby, receipt by Community of a fairness opinion, which has been
received, receipt of the necessary regulatory approvals, receipt of opinions of
counsel to FTNC regarding certain tax aspects of the Merger, receipt of
assurances that the Merger qualifies for pooling-of-interests accounting
treatment, implementation, to the extent consistent with generally accepted
accounting principles ("GAAP"), of certain adjustments to Community's loan,
litigation and real estate valuation policies and practices (including loan
classifications and levels of reserves), if any, and satisfaction of customary
closing conditions.
The regulatory approvals and consents necessary to consummate the
transactions contemplated by the Agreement include the approval of the Office
of the Comptroller of the Currency ("Comptroller"), the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"), and the Commissioner
of the Tennessee Department of Financial Institutions (the "Tennessee
Commissioner"). Applications have been submitted for such approvals, except
for the Federal Reserve Board, with respect to which a waiver has been
requested. There can be no assurances as to when, if or with what conditions
such approvals or waiver will be granted. A regulatory agency's approval of the
applications sumbitted is not, and should not be construed as, an endorsement
of or recommendation for approval of the Agreement. See "The Merger --
Conditions to Consummation of the Merger," "-- Regulatory Approvals," "--
Conduct of Business Pending the Merger" and "--Certain Regulatory
Considerations."
TERMINATION OF THE AGREEMENT
The Agreement may be terminated at any time prior to the Effective
Date by the mutual consent of FTNC and Community, by either of them
individually under certain specified circumstances, including, if the Merger
has not become effective by April 30, 1995, or if FTNC's Common Stock Average
Price is less than $41.00 or greater than $53.50 per share, subject to FTNC's
or Community's right to require consummation of the Merger under certain
specified circumstances. In certain situations if the Merger is not consummated
and Community engages in a specified transaction with another party within 12
months following termination of the Agreement, Community must pay to FTNC
liquidated damages in the amount of $2,000,000. See "The Merger -- Waiver and
Amendment; Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Community's management and the Community Board have
certain interests in the Merger that are in addition to their interests as
shareholders of Community generally. These consist of provisions relating to
indemnification in the Agreement and continuation of certain employee benefits.
See "The Merger - Interests of Certain Persons in the Merger."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
At the Effective Date, shareholders of Community automatically will
become shareholders of FTNC, and their rights as shareholders of FTNC will be
determined by the Tennessee Business Corporation Act ("TBCA") and by FTNC's
Charter and Bylaws. The rights of shareholders of FTNC differ from rights of
the shareholders of Community with respect to certain important matters,
including, but not limited to, shareholder proposals and nominations, amendment
of the charter and bylaws, indemnification, dissenters' rights, the rights of
holders of debt securities, and restrictions on certain share acquisitions.
For a summary of these differences, see "Effect of the Merger on Rights of
Shareholders."
SHAREHOLDERS' DISSENTERS' RIGHTS
Under the Tennessee Business Corporation Act ("TBCA"), holders of
Community Common Stock who deliver to Community the required written notice of
intent to demand payment for their shares prior to the vote at the Special
Meeting and who do not vote in favor of the Merger and who otherwise comply
with the requirements of the TBCA will have the right to be paid the "fair
value" of their shares as determined under the provisions of the TBCA. A vote
in favor of or, if a proxy card is returned, the failure to vote against the
Merger will disqualify
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14
a Community shareholder from exercising dissenters' rights. SUCH DISSENTERS'
RIGHTS WILL BE LOSTIF THE PROCEDURAL REQUIREMENTS OF THE TBCA ARE NOT FULLY AND
PRECISELY SATISFIED. See "The Merger -- Shareholders' Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that for federal income tax purposes the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and, accordingly, for
federal income tax purposes, no gain or loss will be recognized by either
Community or FTNC as a result of the Merger and Community's shareholders will
not recognize gain or loss upon the receipt of FTNC Common Stock in exchange
for Community Common Stock, except to the extent of any cash received in lieu
of fractional shares. Consummation of the Merger is dependent upon, among other
conditions, receipt by each of FTNC and Community of an opinion of counsel to
FTNC, dated as of the Effective Date, substantially to this effect. See "The
Merger -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a
pooling-of-interests of FTNC and Community under GAAP. Consummation of the
Merger is conditioned upon receipt by FTNC of a letter from its independent
public accountants to the effect that the Merger should be accounted for in
such manner. See "The Merger -- Accounting Treatment."
MARKET PRICES OF COMMON STOCK
The FTNC Common Stock is included for quotation on the Nasdaq Stock
Market's National Market System (symbol: FTEN). The Community Common Stock is
quoted on the NASDAQ System (symbol: CBOG). The following table sets forth the
high and low closing prices of FTNC Common Stock and the high and low bid
prices for Community Common Stock as reported on the Nasdaq Stock Market on a
quarterly basis since 1991 through __________, 1994. The price of FTNC Common
Stock has been adjusted for a 3-for-2 stock split effected in the form of a 50%
stock dividend, which was distributed on May 22, 1992.
1994 1993 1992
---------------------------------- --------------------------------- ---------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd 1st
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
--- --- --- --- --- --- --- --- --- --- --- ---
FTNC:
47 3/4 45 1/4 39 3/4 40 1/2 43 1/2 47 43 1/4 37 1/4 38 36 3/4 34 7/8
43 1/2 37 3/4 37 3/8 36 1/4 38 7/8 37 3/4 36 1/8 35 33 1/8 32 7/8 26 3/8
Community:
15.25 13.50 10.50 9.50 8.50 8.00 7.50 5.75 5.00 4.50 4.50
14.00 10.50 9.50 8.50 8.00 7.50 5.75 5.00 4.50 4.50 4.50
The following table sets forth the closing price per share of FTNC
Common Stock the closing bid price per share of Community Common Stock and the
equivalent per share price for Community Common Stock giving effect to the
Merger as of September 21, 1994, the last business day preceding public
announcement of the execution of the Agreement; and as of _____________, 1994,
the last
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15
practicable date prior to the mailing of this Proxy Statement-Prospectus. The
equivalent price per share of Community Common Stock at each specified date
represents the closing price of a share of FTNC Common Stock on such date
multiplied by .39067 and ________, respectively, assuming that to be the
Conversion Number provided for in the Agreement.
FTNC Community Equivalent Price
Common Stock Common Stock Per Community Share
------------ ------------ ---------------------
September 21, 1994 $45.75 $14.50 $ 17.87
______________, 1994 __.__ __.__ ___.__
Community shareholders are advised to obtain current market quotations
for FTNC Common Stock and Community Common Stock. The market price of FTNC
Common Stock at the Effective Date may be higher or lower than the market price
at the time the Agreement was executed, at the date of mailing of this Proxy
Statement-Prospectus, at the time of the Special Meeting, or at the time of
calculation of the Conversion Number.
EQUIVALENT AND PRO FORMA SHARE DATA
The following table presents selected comparative unaudited per share
data for FTNC Common Stock and Community Common Stock on a historical basis and
for FTNC Common Stock on a pro forma combined basis and Community Common Stock
on a pro forma equivalent basis giving effect to the Merger on a
pooling-of-interests accounting basis. Per share amounts have been adjusted for
FTNC's 3-for-2 stock split effected May 22, 1992. The data is not necessarily
indicative of the results of the future operations of the combined entity or
the actual results that would have occurred had the Merger been consummated
prior to the periods indicated. For a description of the pooling-of-interests
accounting basis with respect to the Merger and the related effects on the
historical financial statements of FTNC, see "The Merger -- Accounting
Treatment." The information is derived from and should be read in conjunction
with the consolidated historical financial statements of FTNC and Community,
including the related notes thereto, incorporated herein by reference. See
"Incorporation of Certain Documents by Reference" and "Index to Pro Forma
Financial Information."
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EQUIVALENT AND PRO FORMA SHARE DATA (UNAUDITED)
Nine Months Ended
September 30 Twelve Months Ended
--------------- ------------------------
1994 1993 1993 1992(4) 1991
---- ---- ------- -------- ------
Income Per Common Share:(1)
FTNC $ 3.40 $ 2.61 $ 3.31 $ 3.00 $ 2.52
Community .65 .61 .81 .43 (1.15)
FTNC pro forma 3.34 2.58 3.27 2.93 2.34
Community pro forma equivalent 1.30 1.01 1.28 1.14 .91
Fully Diluted Income Per Common Share:(1)
FTNC $ 3.35 $ 2.57 $ 3.26 $ 2.94 $ 2.49
Community .65 .61 .81 .43 (1.15)
FTNC pro forma 3.28 2.54 3.22 2.88 2.31
Community pro forma equivalent 1.28 .99 1.26 1.13 .90
Dividends Declared Per Common Share:(2)
FTNC $ 1.26 $ 1.08 $ 1.50 $ 1.26 $ 1.14
Community --- --- --- --- ---
FTNC pro forma 1.26 1.08 1.50 1.26 1.14
Community pro forma equivalent .49 .42 .59 .49 .45
Book Value Per Common Share (end of period):(3)
FTNC $23.35 $21.31 $21.65 $19.71 $18.96
Community 6.66 6.04 6.24 5.55 5.12
FTNC pro forma 23.11 21.08 21.43 19.54 18.76
Community pro forma equivalent 9.03 8.24 8.37 7.63 7.33
(1) Pro forma income per share is calculated using combined historical
income for FTNC and Community divided by the average pro forma common
shares of the combined entity. The average pro forma common shares of
the combined entity have been calculated by combining FTNC's
historical average shares with the historical average shares of
Community as adjusted by an exchange ratio of .39067. The exchange
ratio of .39067 is based on a FTNC stock price of $43.52 -
$51.00. Community's exchange ratio may actually vary within the range
of .37241 and .41468 based on the average stock price of FTNC's Common
Stock. The pro forma equivalent is computed by multiplying the FTNC
pro forma amount by the exchange ratio.
(2) FTNC pro forma dividends per share represent historical dividends paid
by FTNC. Community pro forma equivalent dividends per share represent
such amounts multiplied by the exchange ratio.
(3) FTNC pro forma book value per common share is based upon the
historical total common equity of the combined entity divided by the
total pro forma common shares of the combined entity assuming
conversion of Community's common stock at an exchange ratio of .39067.
Community's pro forma equivalent book value per common share is based
on the exchange ratio.
(4) SNMC Management Corporation (SNMC) was acquired by FTNC in 1994 and
was accounted for as a pooling of interests. Therefore, the results of
operations and statement of condition for SNMC are included from the
inception of SNMC, which was November 1, 1992.
SELECTED FINANCIAL DATA AND RATIOS
The following tables present for FTNC and Community, on a historical
basis, selected unaudited consolidated financial data and ratios. This
information is based on the consolidated financial statements of FTNC and
Community incorporated herein by reference and should be read in conjunction
therewith and with the notes thereto. Per share amounts have been adjusted for
FTNC's 3-for-2 stock split effected May 22, 1992. See "Incorporation of
Certain Documents by Reference" and "Index to Pro Forma Financial Information."
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SELECTED FINANCIAL DATA AND RATIOS (UNAUDITED)
(THOUSANDS, EXCEPT PER SHARE DATA)
Nine Months Ended
September 30 Twelve Months Ended
----------------- --------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- -------- -------- -------- -------- --------
Total Interest Income and Other Income:
FTNC $ 790,303 $ 695,063 $ 959,789 $ 856,503 $ 857,428 $ 841,090 $ 806,826
Community 14,646 13,668 18,351 18,541 22,541 25,473 24,235
FTNC pro forma 804,949 708,731 978,140 875,044 879,969 866,563 831,061
Net Income Applicable to Common Stock:
FTNC $ 109,248 $ 83,231 $ 106,082 $ 90,421 $ 74,732 $ 59,103 $ 39,627
Community 2,111 1,629 2,306 1,134 (3,032) (2,185) 1,674
FTNC pro forma 111,359 84,860 108,388 91,555 71,700 56,918 41,301
Net Income per Common Share:(1)
FTNC $ 3.40 $ 2.61 $ 3.31 $ 3.00 $ 2.52 $ 1.97 $ 1.32
Community .65 .61 .81 .43 (1.15) (.83) .64
FTNC pro forma (1) 3.34 2.58 3.27 2.93 2.34 1.83 1.33
Dividends Declared per Common Share:
FTNC $ 1.26 $ 1.08 $ 1.50 $ 1.26 $ 1.14 $ 1.09 $ .96
Community --- --- --- --- --- .18 .24
FTNC pro forma(2) 1.26 1.08 1.50 1.26 1.14 1.09 .96
Total Assets (end of period):
FTNC $10,446,866 $10,158,897 $10,366,697 $9,400,626 $9,006,308 $7,721,067 $7,376,750
Community 256,821 229,872 240,468 227,430 228,044 259,410 240,305
FTNC pro forma 10,703,687 10,388,769 10,607,165 9,628,056 9,234,352 7,980,477 7,617,055
Long-Term Debt and Capital Leases:
(end of period):
FTNC $ 92,311 $ 93,656 $ 92,723 $ 130,063 $ 131,443 $ 132,174 $ 133,418
Community 484 588 513 547 574 600 622
FTNC pro forma 92,795 94,244 93,236 130,610 132,017 132,774 134,040
Performance Ratios:
Return on Average Assets
FTNC 1.45% 1.19% 1.11% 1.05% .95% .80% .56%
Community 1.13 .96 1.01 .50 (1.27) (0.88) .76
FTNC pro forma 1.44 1.18 1.10 1.04 .88 .74 .56
Return on Average Shareholders' Equity
FTNC 20.12% 17.04% 16.07% 14.98% 13.84% 11.61% 8.08%
Community 13.36 13.81 13.63 8.06 (20.19) (12.23) 8.84
FTNC pro forma 19.93 16.96 16.01 14.83 12.92 10.80 8.11
Shareholders' Equity to Total Assets
(end of period)
FTNC 7.20% 6.69% 6.69% 6.68% 6.25% 6.74% 6.78%
Community 8.35 8.76 8.66 6.43 5.92 6.37 7.99
FTNC pro forma 7.23 6.73 6.74 6.67 6.24 6.72 6.82
(1) Pro forma income per share is calculated using combined historical
income for FTNC and Community divided by the average pro forma common
shares of the combined entity. The average pro forma common shares of
the combined entity have been calculated by combining FTNC's
historical average shares with the historical average shares of
Community as adjusted by an exchange ratio of .39067. The exchange
ratio of .39067 is based on an FTNC stock price of $43.52 - $51.00.
Community's exchange ratio may actually vary within the range of
.37241 and .41468 based on the average stock price of FTNC's Common
Stock.
(2) FTNC pro forma dividends per share represent historical dividends paid
by FTNC.
(3) SNMC Management Corporation (SNMC) was acquired by FTNC in 1994 and
was accounted for as a pooling of interests. Therefore, the results of
operations and statement of condition for SNMC is included from the
inception of SNMC, which was November 1, 1992.
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THE SPECIAL MEETING
Each copy of this Proxy Statement-Prospectus mailed to holders of
Community Common Stock is accompanied by a proxy card furnished in connection
with the Community Board's solicitation of proxies for use at the Special
Meeting and at any adjournments or postponements thereof. The Special Meeting
is scheduled to be held at 5:00 p.m., local time, on ____________, 1995, at the
main office of Community, Germantown Commons Office Complex, Suite 108, 2175
Germantown Road South, Germantown, Tennessee. Only holders of record of
Community Common Stock at the close of business on ________________, 1994 are
entitled to receive notice of and to vote at the Special Meeting. At the
Special Meeting, shareholders will consider and vote upon a proposal to approve
the Agreement.
HOLDERS OF COMMUNITY COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE PAID ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED PROXY CARD OR
TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER (BUT WILL NOT BE SUFFICIENT TO PERFECT DISSENTERS' RIGHTS).
Any holder of Community Common Stock who has delivered a proxy may
revoke it any time before it is voted by attending the Special Meeting and
voting in person at the meeting or by giving notice of revocation in writing or
submitting a signed proxy card bearing a later date to Community, at its main
office, Germantown Commons Office Complex, Suite 108, 2175 Germantown Road
South, Germantown, Tennessee 38138, Attention: Secretary, provided such notice
or proxy is actually received by Community before the vote of shareholders. The
shares of Community Common Stock represented by properly executed proxy cards
received at or prior to the Special Meeting and not subsequently revoked will
be voted as directed by the shareholders submitting such proxies. If
instructions are not given, proxy cards received will be voted FOR approval of
the Agreement proposed Merger.
The cost of soliciting proxies from holders of Community Common Stock
will be borne by Community. Such solicitation will be made by mail but also may
be made by telephone or in person by the directors, officers and employees of
Community (who will receive no additional compensation for doing so). In
addition, Community will make arrangements with brokerage firms and other
custodians, nominees and fiduciaries to send proxy materials to their
principals.
COMMUNITY SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
VOTE REQUIRED
The affirmative vote of the holders of sixty-seven (67%) percent of
the outstanding shares of Community Common Stock entitled to vote at the
Special Meeting is required in order to approve the Agreement. Therefore, a
failure to return a properly executed proxy card or to vote in person at the
Special Meeting will have the same effect as a vote against the Agreement. As
of the Community Bank Record Date, there were _________ shares of
Community Common Stock outstanding and entitled to vote at the Special
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Meeting, with each share being entitled to one vote.
A majority of the outstanding shares entitled to vote at the Special
Meeting constitutes a quorum for purposes of that meeting. An "abstention" will
be considered present for quorum purposes, but will have the same effect as a
vote "against" the proposal to approve the Agreement. Broker "non votes" will
not be considered present for quorum purposes and will have the same effect as
a vote "against" the proposal to approve the Agreement.
As of the Community Record Date, the directors and executive officers
of Community and their affiliates beneficially owned a total of 1,013,220
shares or approximately 31.45% of the outstanding shares of Community Common
Stock. Community has been advised that such directors and executive officers
intend to vote their shares in favor of approval of the Agreement.
As of the Community Record Date, FTB, through its Trust Department,
held of record or in the name of nominees 632 shares (or less than 0.1% of the
outstanding shares) of Community Common Stock as fiduciary for the
beneficiaries of trusts and the directors and executive officers of FTNC
beneficially owned no shares of Community Common Stock, except for one director
who beneficially owns 250 shares. As of such date, other than the shares held
through FTB's Trust Department, FTNC and its subsidiaries owned no shares of
Community Common Stock.
RECOMMENDATION
FOR THE REASONS DESCRIBED BELOW, THE COMMUNITY BOARD HAS APPROVED THE
AGREEMENT, BELIEVES THE MERGER IS IN THE BEST INTEREST OF COMMUNITY AND ITS
SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS OF COMMUNITY VOTE FOR APPROVAL OF
THE AGREEMENT. IN MAKING ITS RECOMMENDATION TO SHAREHOLDERS, THE COMMUNITY
BOARD CONSIDERED, AMONG OTHER THINGS, THE OPINION OF ATTKISSON, CARTER THAT
THE TERMS OF THE AGREEMENT ARE FAIR TO THE HOLDERS OF COMMUNITY COMMON STOCK
FROM A FINANCIAL POINT OF VIEW. SEE "THE MERGER -- BACKGROUND OF AND REASONS
FOR THE MERGER" AND "-- OPINION OF FINANCIAL ADVISER."
THE MERGER
The following information concerning the Merger, insofar as it relates
to matters contained in the Agreement, is qualified in its entirety by
reference to the Agreement, which is incorporated herein by reference and
attached hereto as Appendix "A." Community shareholders are urged to read
carefully the Agreement.
BACKGROUND OF AND REASONS FOR THE MERGER
Background. In the summer of 1990 the Community Board became aware of
significant problems with asset quality at Community First. Upon making changes
in executive management, new executive management set about returning Community
First to a safe and sound condition. After approximately two years of
identifying and addressing asset quality problems and building a strong
management team, Community First began developing strategies to become a high
performing institution.
Because of Community's strategic location, growth potential and the
fact that is was beginning to demonstrate consistent earnings growth,
management of Community was contacted from time to time by other in-state and
out-of-state financial institutions which expressed an interest in a potential
transaction with Community. The prevalent feeling among a majority of the
Community Board was to maintain Community's independence, building book value
and market share and, therefore, value to its shareholders. However, it was
recognized that a potential acquiror could express interest at an acquisition
price that, when weighed against the potential appreciation in value by staying
independent, would require strong considerations by the Board.
In mid-May 1994, one of Community's outside directors was contacted by
representatives of an out-of-state
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bank holding company ("Bank A") to determine whether such director believed
Community would be interested in discussing a possible merger. On May 26, 1994,
Community's Chairman and Chief Executive Officer John Ferguson and President
Jake Farrell had a lunch meeting with the CEO of Bank A to discuss generally
their respective banking operations and philosophies. Bank A was informed at
that time that Community's Board appeared to be content to remain independent,
but if Bank A wished to perform limited due diligence and suggest a price
range, that information would be passed on to the Board for it to determine
whether to consider the matter further.
On June 16, 1994, a consultant of Bank A met with Ferguson and certain
other officers of Community to further discuss Community's operations and
potential. Representatives of Bank A performed no other on-site due diligence.
On June 21, 1994, Bank A's consultant indicated to Ferguson in a telephone
conversation that he believed Bank A to be very interested in negotiating a
transaction with Community. A meeting was scheduled for July 13, 1994 for
Ferguson, Farrell and a representative of Community's financial advisor,
Attkisson, Carter, to meet with the CEO of Bank A and its consultant to further
discuss a proposed transaction. At this meeting a potential pricing structure
was discussed which, based on the then current market price of Bank A stock,
indicated that Bank A might be willing to offer Bank A stock worth
approximately $17 for each share of Community Common Stock, subject to further
due diligence, board approvals and related matters. Further conversations on
August 5, 1994 with Bank A's consultant indicated that Bank A was still
considering making a proposal in the above mentioned price range, but that Bank
A's CEO would be away on vacation for the following few weeks and would contact
Ferguson when he returned.
This information was relayed to certain of Community's board members
on August 25, 1994. These persons indicated that the price range under
discussion with Bank A was at a level that they would be interested in
considering more definitive discussions. Management and its advisors were also
asked to contact certain other financial institutions which had previously
expressed an interest in a transaction with Community, including, but not
limited to, FTNC. Four institutions were identified and each was contacted to
determine its interest in making a proposal to acquire Community should it
decide to forego its then current plans to remain independent. Upon execution
of confidentiality agreements, Community provided information packages to each
of the four institutions and requested that they submit their respective
proposals to Community by September 6, 1994. By September 6, 1994, two of the
institutions, FTNC and Bank B, had submitted merger proposals to Community. The
other two institutions, chose not to submit proposals. On September 7, 1994, a
special meeting of the executive committee of Community's Board was held to
discuss the two new proposals from FTNC and Bank B as well as Bank A's
proposal. At the meeting the members of the executive committee reviewed
information prepared by Attkisson, Carter analyzing the proposals submitted by
FTNC and Bank B as well as by Bank A. The Attkisson, Carter representative
discussed the information page-by-page, identifying the information and the
assumptions he used in reaching tentative conclusions on the various values
assigned to not only Community, but the value of the stock of the proposing
institutions as of a recent date and their respective potential values in the
future.
After extensive review and discussion, the executive committee
directed Ferguson and the Attkisson, Carter representative to contact FTNC and
Bank B, to refine and further clarify their proposals. It was noted these two
offers provided similar, but not equal, valuations and that both exceeded the
offer from Bank A. At that time the FTNC proposal appeared to be the better of
the proposals because the FTNC's offer had a "floor" feature to the proposed
exchange ratio which would protect Community's shareholders if the market price
of FTNC Common Stock declined below a certain dollar amount; that based on
current market prices the exchange ratio proposed by FTNC reflected a higher
purchase price; and because the FTNC offer contained what management believed
to be a stronger commitment to retaining a larger number of employees of
Community First. Preliminary analysis of publicly available information also
indicated to management, the executive committee and its advisor that the FTNC
Common Stock had a better long-term value, but it was also recognized that
additional due diligence of non-public information was required to substantiate
that position.
Management and its advisors were directed to seek, among other things,
from Bank B an increase in the consideration it offered and the inclusion of a
"floor" that would establish the minimum number of shares of Bank
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B's stock that would be exchanged for Community's Common Stock. Ferguson and
the Attkisson, Carter representative were also directed to further establish
the proposed structure and related terms of the proposals with Bank A and Bank
B and FTNC so that if the full Board determined to accept an offer, it
would have a substantial likelihood of consummation. The potential acquiror's
ability to terminate a proposed merger was to be limited to the greatest extent
practical. Management was directed to report back to the executive committee at
its normal meeting to be held September 13, 1994.
During the ensuing week management and its advisors met or talked with
representatives of Bank A, Bank B and FTNC on numerous occasions. Bank A and
Bank B indicated to the Attkisson, Carter representative that they would not
meaningfully improve their offers. Negotiations with FTNC provided additional
information to Ferguson and the Attkisson, Carter representative regarding a
proposed transaction with FTNC. This information was presented to the executive
committee on September 13, 1994. The executive committee then directed
management and its advisors to begin to negotiate a definitive merger agreement
with FTNC to be presented to the full board at the next regularly scheduled
Board meeting. Management and the Attkisson, Carter representative were also
directed to conduct further due diligence on FTNC and to present their findings
and recommendation to the Board.
After additional due diligence on FTNC, Ferguson and the Attkisson,
Carter representative presented their findings and recommendation to
Community's Board at its regularly scheduled meeting held on September 21,
1994. Ferguson and the Attkisson, Carter representative reviewed page-by-page a
written report prepared by the Attkisson, Carter representative comparing the
proposals from Bank A, Bank B and FTNC. This written report had been previously
provided to the Board members. The Attkisson, Carter representative reiterated
to some extent the chronology of events leading up to the definitive proposal
by FTNC, providing additional information and points deemed informative or
material.
Both Ferguson and the Attkisson Carter representative expressed
confidence in the ability of management of FTNC to continue to operate FTNC in
a profitable manner. In response to questions regarding why they believed the
FTNC offer was the better of the offers received for Community despite FTNC's
high multiple of market price to book value, Ferguson and the Attkissson Carter
representative pointed out that they also focused on the multiple of FTNC's
market price to earnings, and their belief that FTNC's earnings were of higher
quality and more stable than those of Bank A and Bank B.
The Board noted that FTNC's earnings stream was generated by a more
diverse base of non-bank and fee generating activities, therefore less likely
to be affected by changes in banking regulations and the interest rate
environment, while Bank A's and Bank B's earnings were significantly more
exposed to fluctuations in the interest rate. All in all, the stability of
earnings, the mix of earnings assets and product lines, previous operating
success, current depth of management, the fact the FTNC offer also had a
"floor" feature to the exchange ratio, that its exchange ratio represented a
higher price per share of Community Common Stock based on the then current
market value of FTNC stock, and that FTNC had committed to retaining a greater
number of employees of Community and its subsidiaries, led Ferguson and the
Attkisson, Carter representative to report that they believed the FTNC offer to
be the better offer. The Attkisson, Carter representative informed the Board
that in his opinion a merger with FTNC under the terms offered was fair to
Community's stockholders from a financial point of view. Both Ferguson and the
Attkisson, Carter representative indicated to the Board that, in their opinion,
it was unlikely that any other institution would make a higher offer for
Community.
After further discussions, the Board voted to approve the proposed
Agreement with FTNC. The next day, September 22, 1994, the Agreement was
executed by FTNC and Community. At the Community Board meeting held November
16, 1994, all directors indicated to management that they recommended that the
Community shareholders approve the Agreement, and each director indicated to
management that he or she intended to vote all shares of Community Common Stock
owned or controlled by such director in favor of the Agreement.
At a special meeting held on September 22, 1994, the FTNC Board
unanimously approved the Agreement.
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22
Reasons for the Merger. In reaching its determination that the Merger
and Agreement are fair to, and in the best interest of, Community and its
shareholders, the Community Board consulted with its advisers, as well as with
Community's management, and considered a number of factors, including, without
limitation, the following:
a. Its familiarity with and review of Community's business,
operations, earnings and financial condition and future capital requirements;
b. The current and prospective economic and regulatory
environment and competitive constraints facing the banking industry and
financial institutions in Community's market area;
c. Its belief, based upon analysis of the anticipated financial
effects of the Merger, that upon consummation of the Merger, FTNC and its
banking subsidiaries would be well capitalized institutions, the financial
positions of which would be well in excess of all applicable regulatory capital
requirements;
d. FTNC's commitments to continue providing quality service to
customers and communities served by Community and to provide maximum
consideration to employees affected by the Merger;
e. FTNC's wide range of banking products and services and its
dividend payment history;
f. Its belief that the terms of the Agreement are attractive in
that the Agreement allows Community shareholders to become shareholders in
FTNC, an institution which is the largest bank holding company headquartered in
the area, whose stock is traded over NASDAQ's National Market System, and the
recent earnings performance of FTNC;
g. The recent business combinations involving financial
institutions, either announced or completed, during the past twelve months in
the United States, the State of Tennessee and contiguous states and the effect
of such combinations on competitive conditions in Community's market area;
h. The expectation that the Merger will generally be a tax-free
transaction to Community's shareholders. (See "Certain Federal Income Tax
Consequences");
i. The condition contained in the Agreement that Community shall
have received the opinion of Attkisson, Carter that the terms of the Agreement
are fair to the shareholders of Community from a financial point of view. (See
"Opinion of Financial Advisor");
j. Based in part on the opinion of Attkisson, Carter, the Board's
belief that the offer made by FTNC was superior to that of the other
institutions;
k. Its review and consideration of alternatives to the Merger
(including the alternatives of remaining independent and growing internally,
remaining independent for a period of time and then selling the company, and
remaining independent and growing through future acquisition), the range of
possible values to Community's shareholders obtainable through implementation
of such alternatives and the timing and likelihood of actually receiving such
values; and
l. Its believed that, in light of the reasons discussed above,
FTNC was the most attractive choice as a long term affiliation partner of
Community;
The Community Board did not assign any specific or relative weight to
the foregoing factors in their considerations.
OPINION OF FINANCIAL ADVISER
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23
Attkisson, Carter & Akers Incorporated ("Attkisson, Carter") or its
representative has served from time to time as financial advisor to Community
since 1991. In late May 1994, Attkisson, Carter was engaged by Community to
represent it regarding its potential merger or sale. This engagement was
formalized in a letter agreement dated July 15, 1994.
A representative of Attkisson, Carter attended meetings of the
Community Board and the Executive Committee of the Community Board in
connection with this process, including the meeting held on September 21, 1994
at which the Community Board considered the Agreement. At the September 21,
1994 meeting of the Community Board, Attkisson, Carter rendered its oral
opinion to the Community Board to the effect that, as of that date, the
Exchange Ratio (also referred to in this Proxy Statement - Prospectus as the
("Conversion Number") was fair to the holders of Community Common Stock from a
financial point of view. In addition, Attkisson, Carter has delivered its
written opinion to the Community Board dated as of September 21, 1994 stating
that the Exchange Ratio is fair to the holders of Community Common Stock from a
financial point of view. THE FULL TEXT OF ATTKISSON, CARTER'S OPINION IS
ATTACHED HERETO AS APPENDIX "B" AND IS INCORPORATED HEREIN BY REFERENCE. THE
DESCRIPTION OF THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO APPENDIX "B". HOLDERS OF COMMUNITY COMMON STOCK ARE URGED TO READ
THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED,
ASSUMPTIONS AND QUALIFICATIONS MADE, MATTERS CONSIDERED, AND LIMITATIONS
UNDERTAKEN BY ATTKISSON, CARTER.
Attkisson, Carter's opinion is directed to the Community Board only
and is directed only to the Exchange Ratio and does not constitute a
recommendation to any Community shareholder as to how such shareholder should
vote at the Special Meeting. The terms of the Merger (including the Exchange
Ratio) were determined through arm's-length negotiations between Community and
FTNC and their respective advisers.
In connection with its opinion, Attkisson, Carter reviewed, among
other things, the Agreement, certain publicly available financial information
concerning Community and FTNC including the recent Annual Reports to
Shareholders and the Annual Reports on Form 10-K of Community and FTNC and
certain interim reports to shareholders and Quarterly Reports on Form 10-Q of
Community and FTNC and certain other communications from Community and FTNC to
their respective shareholders, and certain internal financial analyses and
forecasts for Community and FTNC prepared by their respective managements.
Attkisson, Carter also held discussions with members of the senior managements
of Community and FTNC regarding the past and current business operations,
results of regulatory examinations, financial condition and future prospects of
their respective companies. In addition, Attkisson, Carter has reviewed the
reported price and trading activity for the Community Common Stock and the FTNC
Common Stock, compared certain financial and stock market information for
Community and FTNC with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the banking industry and performed such
other studies and analyses as Attkisson, Carter considered appropriate.
Attkisson, Carter relied, without independent verification, upon the
accuracy and completeness of all of the financial and other information
reviewed by it for purposes of its opinion. Attkisson, Carter also relied upon
the managements of Community and FTNC as to the reasonableness and
achieveablity of the financial and operating forecasts provided to it (and the
assumptions and bases therefor). In that regard, Attkisson, Carter assumed with
Community's consent that such forecasts, including without limitation projected
cost savings and operating synergies resulting from the Merger and projections
regarding under-performing and non-performing assets, net charge-offs and the
adequacy of loan loss reserves, reflect the best currently available estimates
and judgments of such respective managements. Community instructed Attkisson,
Carter that, for the purposes of its opinion, Attkisson, Carter should assume
that such projections and forecasts will be realized in the amounts and in the
time periods currently estimated by the managements of Community and FTNC.
Attkisson, Carter also assumed, with Community's consent, that the aggregate
allowances for loan losses for each of Community and FTNC are adequate to cover
such losses. In addition, Attkisson, Carter has not made an independent
evaluation or appraisal of the assets and liabilities of Community or FTNC or
any of their subsidiaries and Attkisson, Carter has not been furnished with any
such evaluation or appraisal. Attkisson, Carter is not an expert in the
evaluation of allowances
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24
for loan losses and has not reviewed any individual credit files. Moreover,
Community has informed Attkisson, Carter and it has assumed that the Merger
will be recorded as a pooling-of-interests under GAAP.
As a part of its engagement, Attkisson, Carter explored Community's
merger or sale opportunities with potential acquirors other than FTNC. Over the
period of its engagement Attkisson, Carter provided detailed financial
information concerning Community to five financial institutions including FTNC.
Additionally meetings were arranged between Community's management and
representatives of three of these institutions, including FTNC, to discuss the
financial condition and prospects of Community. As a result of this activity,
in addition to the acquisition proposal received from FTNC, Community received
and considered two other acquisition proposals.
The following is a summary of selected analyses presented by
Attkisson, Carter to the Community Board on September 21, 1994 (the "Attkisson,
Carter Report") in connection with its opinion:
Summary of Proposal. Attkisson, Carter described the terms of the
proposed transaction as reflected in the proposed Agreement, including the
terms of the Exchange Ratio collar provision. Attkisson, Carter stated that
based on the closing bid price of FTNC Common Stock on September 21, 1994 of
$45.50 the Exchange Ratio of .39067 shares of FTNC Common Stock per share of
Community Common Stock provides Community shareholders a per share value of
$17.78. Attkisson, Carter noted that the Exchange Ratio was fixed at .39067 if
the FTNC Common Stock Average Price is in the range of $43.52 and $51.00,
inclusive. If the FTNC Common Stock Average Price is above $51.00, the Exchange
Ratio decreases at a rate which has the effect of providing Community
shareholders a per share value of $19.92. Attkisson, Carter explained that
Community could terminate the Merger Agreement if the FTNC Common Stock Average
Price is more than $53.50. However in such event, FTNC has the right to require
Community to consummate the Merger with an Exchange Ratio of .37241. Attkisson,
Carter also explained that if the FTNC Common Stock Average Price declines to
less than $43.52, the Exchange Ratio increases at a rate which has the effect
of providing Community shareholders with a per share value of $17.00. If the
FTNC Common Stock Average Price is less than $41.00, FTNC has the right to
terminate the Merger Agreement. However in such event, Community has the right
to require FTNC to consummate the Merger with an Exchange Ratio of .41468.
Attkisson, Carter stated that based upon the September 21, 1994
closing bid price of FTNC Common Stock, the FTNC proposal represented a 21.9
times multiple of Community's trailing twelve months earnings per share, a
22.6% premium to the closing bid price of the Community Common Stock on
September 21, 1994, a 2.60 times multiple of Community's stated book value per
share and a 18.6% premium to Community's tangible book value as a percentage of
Community's deposits as of June 30, 1994.
Review of Selected Financial Data for Community and FTNC. Attkisson,
Carter reviewed selected historical financial information for FTNC for the 3
years ended December 31, 1993 and for the 8 months ended August 31, 1994. This
review included income statement and balance sheet data for FTNC as well as
selected financial ratios relating to asset and liability yields, revenue mix,
efficiency, profitability, capital structure, balance sheet composition and
asset quality. Attkisson, Carter also reviewed the estimated impact of market
interest rates as of August 31, 1994 on certain of Community's and FTNC's
assets and liabilities. This analysis showed that there would be a decrease in
Community's and FTNC's common equity per share if certain of their assets and
liabilities were marked-to-market to reflect adjustments for market interest
rates as of such date. Attkisson, Carter did not make an independent appraisal
of Community's assets or liabilities and the mark-to-market analysis reviewed
by Attkisson, Carter is not meant to indicate the value at which any individual
or portfolios of assets or liabilities could be sold.
Comparison of Alternative Acquisition Proposals. Attkisson, Carter
reviewed for Community's Board the overall results of its efforts to generate
acquisition proposals for Community. FTNC's acquisition proposal was then
compared in detail to the other two proposals received. This comparison
addressed (i) the market value of the consideration to be provided to Community
shareholders by each proposal (acquiror's common stock was to be
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utilized in all cases), (ii) other structural terms of each proposal, (iii) on
a per share basis, the amounts of stated book value, tangible book value,
estimated 1995 earnings and 1995 dividends which would be available to
Community shareholders through each proposal and in comparison to those amounts
currently attributable to Community as an independent entity.
In addition, as more fully described under "Comparison with Selected
Companies," Attkisson, Carter compared historical and current financial
information, business strategies and market valuation data for each of of the
prospective acquirors. Attkisson, Carter also compared the per share
consequences on book value, tangible book value and estimated 1995 earnings to
each prospective acquiror of acquiring Community on the terms stated in its
proposal.
Attkisson, Carter noted that, on the basis of the closing bid price on
September 21, 1994 as well as the 30, 90 and 180 day average trading prices for
each potential acquirors' common stock, the FTNC proposal provided Community
shareholders a market value premium of between 1.0% and 5.5% over the next best
proposal.
Attkisson, Carter noted that on a per share basis the FTNC proposal
could be expected to provide Community shareholders 3.7% more in earnings and
53.5% more in dividends than the next best proposal. However, Attkisson, Carter
also noted the more attractive of the other proposals could be expected provide
Community shareholders with 34.6% and 47.0% greater book value and tangible
book value, respectively, on an equivalent per share basis than provided by the
FTNC proposal.
Attkisson, Carter noted that, with an Exchange Ratio of .39067, the
FTNC proposal provided Community Shareholders with the equivalent of (i) an
estimated 87.6% increase in projected 1995 earnings per share over the amount
anticipated by the management of Community for 1995 if it remained independent,
(ii) stated and tangible book values per share of $8.81 and $7.27,
respectively, in comparison to Community's current stated and tangible book
value of $6.83 and (iii) an indicated dividend of $0.66. Community does not
pay dividends currently.
Comparison with Selected Companies. Attkisson, Carter compared selected
historical stock market and financial data and financial ratios for FTNC to the
corresponding data and ratios of the other institutions which made acquisition
proposals who expressed an acquisition interest in Community. This comparison
showed, among other things, that as of September 21, 1994, (i) the ratio of
FTNC's market price to the earnings per share consensus estimates developed by
independent brokerage firms for 1994 and 1995 was 9.84 and 8.98 times
respectively, notably lower than the ratios for the other institutions which
averaged 11.63 and 10.60 times, respectively, (ii) the ratio of FTNC's market
price to its book value and tangible book value per share was 2.01 and 2.46
times respectively, notably higher than the ratios for the other institutions
which averaged 1.91 and 2.00 times, respectively, (iii) for the 6 months ended
June 30, 1994, FTNC s return on average assets was 1.46%, somewhat higher than
the returns for the other institutions which averaged 1.32% and (iv) for the 6
months ended June 30, 1994, FTNC's return on average common equity was 20.38%,
notably higher than the returns for the other institutions which averaged
15.96%.
Stock Trading History. Attkisson, Carter examined the history of the
trading prices and volume for the FTNC Common Stock, the other institutions
expressing an acquisition interest in Community and the Standard and Poors
Index of Major Regional Banks. The history showed that FTNC's stock price had
appreciated 18.0% over the past 6 months. The stock prices of the other
institutions making an acquisition proposal to Community show appreciation
ranging from 16.8% to 19.5% over the same period. In contrast, the Standard and
Poors Index of Major Regional Bank stocks showed appreciation of only 6.1%
during this same period.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis
methodology, Attkisson, Carter estimated the range of shareholder values which
were implied by Community's current 3 year capital plan as developed by
management. Attkisson, Carter noted that no such dividends were contemplated to
be paid to the common stockholders in this capital plan. In this analysis
methodology, Attkisson, Carter assumed a terminal valuation at December 31,
1996 for Community based upon a 2.0 times multiple of December 31, 1996 stated
book value and 15.0 times 1996 earnings. These amounts were discounted at rates
ranging from 10.0% to 14.0% and
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indicated net present values to Community's shareholders on a per share basis
ranging from $13.50 to $14.74.
Analysis of Selected Acquisition Transactions. Attkisson, Carter
reviewed 13 selected acquisitions of community banks located in the southeast
where the seller had total assets in excess of $125 million. Attkisson, Carter
calculated the ratio of the transaction price to the latest twelve months
earnings, the ratio of the transaction price to the stated book value and the
ratio of the premium paid over tangible book value to the institution s total
deposits. The calculations yielded a range of transaction values as multiples
of latest 12 months earnings per share of a low of 11.9 times and a high of
29.6 times and a median value of 17.4 times. The equivalent multiple
represented by the Exchange Ratio as of September 21, 1994 was 21.9 times. The
calculations yielded a range of transaction values as multiples of stated book
value per share of a low of 2.08 times to a high of 3.58 times with a median
value of 2.52 times. The equivalent multiple represented by the Exchange Ratio
as of September 21, 1994 was 2.60 times. The calculations yielded a range of
deposit base premiums paid from a low of 10.0% to a high of 25.4% with a median
value of 14.3%. The equivalent premium represented by the Exchange Ratio as of
September 21, 1994 was 18.6%.
No company or transaction used in the above analyses as a comparison
is identical to Community, FTNC or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not, in itself, a meaningful method of
using comparable company data.
Pro Forma Merger Analysis. As previously described under "Comparison
of Alternative Acquisition Proposals", Attkisson, Carter analyzed the pro forma
effects of earnings per share resulting from the FTNC proposal for 1995 and on
stated and tangible book value per share from the perspective of both FTNC and
Community. Based upon the assumptions described above and the projections of
the managements of Community and FTNC, this analysis showed modest earnings
dilution for FTNC with significant earnings accretion on a per share equivalent
basis from Community s perspective. Similarly, the analysis also showed modest
dilution in book value per share from FTNC s perspective and significant
accretion from Community s perspective.
The summary of the Attkisson, Carter Report set forth above provides a
description of the material elements of Attkisson, Carter's presentation to the
Community Board on September 21, 1994. It does not purport to be a complete
description of the presentation by Attkisson, Carter of the Attkisson, Carter
Report to the Community Board or of the analyses performed by Attkisson,
Carter. The preparation of a fairness opinion is not necessarily susceptible to
partial analysis or summary description. Attkisson, Carter believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting portions of their analyses, without considering all analyses, or of
the above summary, without considering all factors and analyses, would create
an incomplete view of the process underlying the analyses set forth in the
Attkisson, Carter Report and their opinion. In addition, Attkisson, Carter may
have given various analyses more or less weight than other analyses, and may
have deemed various assumptions more or less probable than other assumptions,
so that the ranges of valuations resulting from any particular analysis
described above should not be taken to be Attkisson, Carter's view of the
actual value of Community or FTNC. The fact that any specific analysis had been
referred to in the summary above is not meant to indicate that such analysis
was given greater weight than any other analysis.
In performing their analyses, Attkisson, Carter made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of Community
or FTNC. The analyses performed by Attkisson, Carter are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Attkisson, Carter s analysis of the
fairness of the Exchange Ratio to Community shareholders and were provided to
the Community Board in connection with the delivery of Attkisson, Carter's
opinion. The analyses do not purport to be appraisals or the reflect the prices
at which a
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27
company might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future. In addition, as described
above, Attkisson, Carter's opinion and presentation to the Community Board was
one of many factors taken into consideration by the Community Board in making
its determination to approve the Agreement.
Attkisson, Carter as part of its investment banking business, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, private placements, and valuations for estate,
corporate or other purposes.
Community has paid Attkisson, Carter advisory fees of $75,000 for
services pursuant to the Engagement Letter. In addition, for services in
connection with the Merger, Community has agreed to pay, if the Merger is
consummated, an additional fee of $225,000. Community has also agreed to
reimburse Attkisson, Carter for its reasonable out-of-pocket expenses and to
indemnify Attkisson, Carter against certain liabilities, including certain
liabilities under the federal securities laws.
TERMS OF THE MERGER
At the Effective Date, Community will merge with and into FTNC, with
FTNC being the surviving entity. Simultaneously with the Merger, or immediately
after consummation thereof, Community First will merge with and into FTB, with
FTB being the surviving entity. Upon consummation of the Merger, each share of
Community Common Stock outstanding immediately prior to the Effective Date
(other than shares held directly or indirectly by FTNC or any subsidiary of
FTNC, except in a fiduciary capacity or in satisfaction of a debt previously
contracted, and other than shares held in the treasury of Community, which
shares shall be canceled, retired and cease to exist by virtue of the Merger
and without any payment made in respect thereof) will be converted into the
right to receive shares of FTNC Common Stock. Each share of Community Common
Stock issued and outstanding at the Effective Date will become and be converted
into the right to receive the number of shares of FTNC Common Stock equal to
the Conversion Number determined as follows:
(i) if the FTNC Common Stock Average Price (defined below) is
within the range of $43.52 and $51.00, inclusive, the Conversion
Number will be .39067;
(ii) if the FTNC Common Stock Average Price is greater than
$51.00 per share, the Conversion Number will be the product of (y)
.39067 multiplied by (z) the quotient of (1) $51.00 divided by (2) the
FTNC Common Stock Average Price.
(iii) if the FTNC Common Stock Average Price is less than
$43.52 per share, the Conversion Number will be the product of (y)
.39067 multiplied by (z) the quotient of (1) $43.52 divided by (2) the
FTNC Common Stock Average Price;
(iv) if the FTNC Common Stock Average Price is less than
$41.00 per share, FTNC shall have the right to terminate the
Agreement; provided, however, if FTNC exercises its termination right,
Community shall have the right to require FTNC to consummate the
Merger in which event the Conversion Number will be .41468;
(v) if the FTNC Common Stock Average Price is greater then
$53.50, Community shall have the right to terminate the Agreement;
provided, however, if Community exercises its termination right, FTNC
shall have the right to require Community to consummate the Merger in
which event the Conversion Number will be .37241;
(vi) in the event that prior to the Effective Date FTNC enters
into a letter of intent or comparable
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document or a definitive purchase and sale agreement to be acquired by
another person or another person publicly announces the intent to
acquire 25% or more of the outstanding equity securities of FTNC
whether by tender offer or otherwise or FTNC enters into a letter of
intent or comparable document or a definitive merger agreement in
which FTNC is not the surviving corporation, the Conversion Number
will be the greater of (y) the amount determined under (i) through (v)
above, as applicable, or (z) .37241; and
(vii) in the event that prior to the Effective Date FTNC pays
any special dividend on FTNC Common Stock in an amount greater than 1%
of its total assets on a consolidated basis immediately prior to such
dividend payment (an "Extraordinary Dividend"), and if FTNC exercises
it termination right, Community shall have the right to require FTNC
to consummate the Merger in which event the Conversion Number will be
the quotient of (y) .41468 divided by (z) the remainder of (1) 1 minus
(2) the quotient of (i) the Extraordinary Dividend divided by (ii) the
total assets of FTNC immediately prior to the Extraordinary Dividend.
"FTNC Common Stock Average Price" means the average of the closing
prices of the FTNC Common Stock as reported on the Nasdaq Stock Market for the
twenty (20) business days (the "Calculation Period") immediately prior to the
tenth (10th) calendar day preceding the Effective Date. A business day shall be
a day on which the Nasdaq Stock Market is generally open for trading.
If the Effective Date had been ________________, 1995, the Conversion
Number would have been _.___.
Any shares of Community Common Stock held directly or indirectly by
Community other than in a fiduciary capacity or in satisfaction of a debt
previously contracted will be cancelled and retired and will cease to exist as
of the Effective Date of the Merger and no payment will be made with respect
thereto. No fractional shares of FTNC Common Stock will be issued in connection
with the Merger. In lieu of fractional shares, FTNC will make a cash payment
equal to the fractional interest which a Community shareholder would otherwise
receive multiplied by the closing price of FTNC Common Stock on the Effective
Date if the Conversion Number is .39067 and multiplied by an amount based on
the FTNC Common Stock Average Price used to calculate the Conversion Number in
most other situations. See Section I(C) of the Agreement. If prior to the
Effective Date the outstanding shares of FTNC Common Stock are 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 is declared with a record date
between the date of the Agreement and the Effective Date, or by reason of a
combination or exchange of shares in which FTNC is acquired or other like
changes have occurred in FTNC's capitalization, then the Conversion Number will
be adjusted accordingly.
Pursuant to the Agreement, Community and FTNC have agreed to take all
action necessary to merge Community First with and into FTB simultaneously with
the Merger, or if necessary, immediately after consummation thereof.
EFFECTIVE DATE
The Effective Date of the Merger will be the date the certificate of
merger is filed in accordance with the TBCA or on such date as the certificate
may specify. Unless otherwise mutually agreed upon by FTNC and Community, the
Effective Date will occur on the last business day of the month during which
the expiration of all applicable waiting periods in connection with
governmental approvals occurs and all conditions to the consummation of the
Agreement have been satisfied or waived or, at FTNC's option, the first
business day of the next succeeding month.
SURRENDER OF CERTIFICATES
As promptly as practicable after the Effective Date, FTNC's Exchange
Agent will mail to each former holder of record of Community Common Stock a
form of letter of transmittal, together with instructions for the
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exchange of such holder's certificates formerly representing shares of
Community Common Stock for certificates representing shares of FTNC Common
Stock.
HOLDERS OF COMMUNITY COMMON STOCK SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS
FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more certificates for
Community Common Stock together with a properly completed letter of transmittal
and any other required documents, there will be issued and mailed to the holder
of Community Common Stock surrendering such items a certificate or certificates
representing the number of shares of FTNC Common Stock to which such holder is
entitled and, where applicable, a check for the amount representing any
fractional share determined in the manner described above.
No dividend or other distribution payable after the Effective Date
with respect to FTNC Common Stock will be paid to the holder of any
unsurrendered Community certificate until the holder properly surrenders such
certificate(s) together with all required documents, at which time the holder
will be entitled to receive all previously withheld dividends and
distributions, without interest.
After the Effective Date, there will be no transfers on Community's
stock transfer books of shares of Community Common Stock which were issued and
outstanding at the Effective Date and converted pursuant to the Merger into the
right to receive FTNC Common Stock. If certificates representing shares of
Community Common Stock are presented for transfer after the Effective Date,
they will be returned to the presenter together with a form of letter of
transmittal and exchange instructions.
Neither FTNC nor Community nor any other person will be liable to any
former holder of Community Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
If a certificate for Community Common Stock has been lost, stolen or
destroyed, FTNC will issue the consideration properly payable in accordance
with the Agreement upon receipt of appropriate evidence as to such loss, theft
or destruction, appropriate evidence as to the ownership of such certificate by
the claimant, and appropriate and customary indemnification including, when
appropriate, the posting of a bond.
REPRESENTATIONS AND WARRANTIES
The Agreement contains various customary representations and
warranties by Community and by FTNC, which do not survive the Effective Date,
relating to, among other things: organization, good standing, authority;
capitalization; validity and enforceability of the Agreement and absence of
conflicts with law or other documents; financial statements and undisclosed
liabilities; no adverse change in financial condition; taxes; litigation;
material contracts; employee benefit plans; properties; regulatory approvals;
loan loss reserves; permits; collective bargaining agreements; brokerage; full
disclosure in proxy statement-prospectus; and environmental matters.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of FTNC and Community to effect the Merger
are subject to the satisfaction of the following conditions prior to the
Effective Date: (a) approval of the Agreement and the transactions contemplated
thereby by the affirmative vote of the holders of at least sixty-seven (67%)
percent of the outstanding shares of Community Common Stock entitled to vote
thereon; (b) receipt by the Community Board of a fairness opinion from its
investment banker, which has been received; (c) receipt of all regulatory
consents and approvals, or waivers thereof, necessary to consummate the
transactions contemplated by the Agreement including the Federal Reserve Board,
the Tennessee Commissioner, and the Comptroller and the expiration of any
statutory waiting periods (provided, however, that no such consent or approval
referred to herein will be deemed to have been
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received if it includes any conditions or requirements which would reduce the
benefits of the transactions contemplated by the Agreement to such a degree
that FTNC would not have entered into the Agreement had such conditions or
requirements been known at the date thereof); (d) the satisfaction of all other
requirements prescribed by law necessary to the consummation of the
transactions contemplated by the Agreement; (e) neither FTNC nor Community is
subject to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the Merger; (f) no
statute, rule, regulation, order, injunction, or decree has 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 which would reduce the benefits of the
Merger to such a degree that FTNC or Community would not have entered into the
Agreement had such conditions or requirements been known at the date thereof;
(g) the Registration Statement of which this Proxy Statement-Prospectus forms a
part has become effective and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been initiated or threatened by the Securities & Exchange Commission; and (h)
receipt by each party from counsel of a legal opinion to the effect that the
Merger qualifies as a tax-free reorganization under the provisions of Section
368(a) of the Internal Revenue Code.
The obligations of FTNC to effect the Merger are further subject to
the satisfaction (or waiver by FTNC) of the following conditions: (a) FTNC will
have received from Community's independent certified public accountants certain
customary letters with respect to certain financial information of Community;
(b) FTNC will have received a customary legal opinion, dated the date of
closing, from counsel to Community; (c) each of the representations, warranties
and covenants of Community set forth in the Agreement will, in all material
(generally, as to Community $1 million on a pre-tax basis as to environmental
matters and $550,000 on a pre-tax basis as to other matters) respects, be true
on, or complied with by, the Effective Date and FTNC will have received a
certificate signed by the CEO of Community to such effect [provided, however,
that any effect on Community as a result of any action taken by Community
pursuant to its obligations under the Agreement to, consistent with GAAP,
modify and change its loan, litigation and real estate valuation policies and
practices (including loan classifications and levels of reserves) (see "Conduct
of Business Pending the Merger") will be disregarded for purposes of
determining the truth or correctness of any representation or warranty of
Community and for purposes of determining whether any conditions are
satisfied]; (d) FTNC will have received all necessary state securities laws and
"Blue Sky" permits; (e) FTNC will have received a letter dated as of the
Effective Date from its independent certified public accountants to the effect
that the Merger will qualify for pooling-of-interests accounting treatment if
closed and consummated in accordance with the Agreement; (f) no litigation or
proceeding will be pending against either FTNC or Community or any of their
subsidiaries by any governmental agency seeking to prevent consummation of the
transactions contemplated by the Agreement nor is any litigation or proceeding
pending which in the reasonable judgment of the CEO of Community is likely to
have a material adverse effect (defined in subparagraph (c) above) on
Community; (g) each director, executive officer and other affiliate of
Community will have delivered to FTNC a written agreement satisfactory to FTNC
providing, among other matters, that such person will not sell, pledge,
transfer, or otherwise dispose of or take any action to reduce his risk with
respect to any shares of FTNC Common Stock received in the Merger except in
compliance with applicable securities laws and will not sell, pledge, transfer
or otherwise dispose of or take any action to reduce his risk with respect to
any shares of Community Common Stock or FTNC Common Stock during any period
when such sale, pledge, transfer, disposition or action would disqualify the
Merger for pooling-of-interests accounting treatment, which agreements are in
the possession of Community's counsel; and (h) Community's shareholders'
equity, with certain adjustments described in Section V(B)(8) of the Agreement,
will not be less than $22.2 million on the Effective Date.
The obligations of Community to effect the Merger are further subject
to the satisfaction (or waiver by Community) of the following conditions: (a)
FTNC will have received the pooling letter from its independent certified
public accountants; (b) Community will have received a customary legal opinion,
dated the date of closing, from counsel to FTNC; (c) each of the
representations, warranties and covenants of FTNC set forth in the Agreement
will, in all material respects, be true on, or complied with by, the Effective
Date and Community will have received a certificate signed by the CEO or Chief
Financial Officer of FTNC to such effect; and (d) no litigation or proceeding
will be pending against either FTNC or Community or any of their subsidiaries
by any
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governmental agency seeking to prevent consummation of the transactions
contemplated by the Agreement nor is any litigation or proceeding pending which
in the reasonable judgment of the CEO of FTNC is likely to have a material
adverse effect on FTNC.
No assurance can be provided as to when, if ever, the regulatory
consents and approvals necessary to consummate the Merger will be obtained (or,
if so obtained, that such consents and approvals will not contain conditions or
requirements which cause such approvals to fail to satisfy the conditions to
the Merger set forth in the Agreement) or whether all of the other conditions
precedent to the Merger will be satisfied or waived by the party permitted to
do so. See "Regulatory Approvals." If the Merger is not effected on or before
April 30, 1995, the Agreement may be terminated, and the Merger abandoned, by a
vote of a majority of the Board of Directors of either FTNC or Community,
unless the failure to effect the Merger by such date is due to the breach of
the Agreement by the party seeking to terminate the Agreement.
REGULATORY APPROVALS
The merger of Community First with and into FTB ("subsidiary merger")
Merger is subject to prior approval by the Comptroller under the Bank Merger
Act, which requires that the Comptroller take into consideration, among other
factors, the financial and managerial resources and future prospects of the
institutions and the convenience and needs of the communities to be served.
Application for such approval has been filed with the Comptroller. The Bank
Merger Act prohibits the Comptroller from approving the subsidiary merger if it
would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any part of the United States, or if its effect in any section of the country
may be substantially to lessen competition or to tend to create a monopoly, or
if it would in any other manner be a restraint of trade, unless the Comptroller
finds that the anticompetitive effects of the subsidiary merger are clearly
outweighted in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. Under the
Bank Merger Act, the subsidiary merger may not be consummated until the 30th
calendar day after the Comptroller's approval, during which time the United
States Department of Justice may challenge the Merger on antitrust grounds. In
certain instances this post-approval waiting period can be reduced to not less
than 15 calendar days. The commencement of an antitrust action would stay the
effectiveness of the Comptroller's approval unless a court specifically orders
otherwise.
The subsidiary merger is also subject to approval by the Tennessee
Commissioner. An application for such approval has been filed.
The Merger is not subject to the approval of the Federal Reserve Board
if (a) the merger of FTB and Community First occurs simultaneously with the
Merger, (b) the merger described in clause (a) requires the prior approval of
the Comptroller under the Bank Merger Act, (c) the Merger does not involve the
acquisition by FTNC of any non-bank company, (d) both before and after the
Merger FTNC meets the Federal Reserve Board's capital adequacy guidelines, and
(e) FTNC has provided written notice of the transaction to the appropriate
Federal Reserve Bank at least 30 days prior to the Effective Date and during
such period, the Federal Reserve Bank has not informed FTNC that an application
is required. A letter requesting a waiver of the necessity of filing an
application with the Federal Reserve Board has been filed. The parties are
aware of no facts which would lead them to believe that the regulatory
approvals will not be obtained.
The Merger cannot proceed in the absence of the requisite regulatory
approvals. Regulatory approval is not, and should not be construed as, an
endorsement of or a recommendation for approval of, the Agreement. See
"Conditions to Consummation of the Merger" and "Waiver and Amendment;
Termination."
THERE CAN BE NO ASSURANCE THAT THE REGULATORY AUTHORITIES DESCRIBED
ABOVE WILL APPROVE THE MERGER, AND IF THE MERGER IS APPROVED, THERE CAN BE NO
ASSURANCE AS TO THE DATE OF SUCH APPROVAL. THERE CAN ALSO BE NO ASSURANCE THAT
ANY SUCH APPROVALS WILL NOT CONTAIN A CONDITION OR REQUIREMENT WHICH CAUSES
SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS TO CONSUMMATION OF THE MERGER
SET FORTH IN THE AGREEMENT. THERE
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CAN LIKEWISE BE NO ASSURANCE THAT THE DEPARTMENT OF JUSTICE WILL NOT CHALLENGE
THE MERGER, OR IF SUCH A CHALLENGE IS MADE, AS TO THE RESULT THEREOF.
CONDUCT OF BUSINESS PENDING MERGER
The Agreement contains certain restrictions on the conduct of
Community's business pending consummation of the Merger. In particular, the
Agreement provides that, without the prior written consent of FTNC, Community
may not, among other things, (a) make, declare or pay any dividend on the
Community Common Stock for any period ending before April 1, 1995, or make,
declare or pay any dividend for any quarterly period beginning April 1, 1995,
greater than $0.165 per share, or declare or make any distribution on, or
directly or indirectly combine, redeem, reclassify or 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 Community
Common Stock, or any options, calls or commitments relating to such stock or
securities convertible into or exchangeable for such stock; or (b) merge or
consolidate or permit any subsidiary to merge or consolidate with any other
entity or engage in any similar transactions. In addition, without the prior
written consent of FTNC, which will not be unreasonably withheld, Community
will not (a) 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; (b) enter
into or modify or permit any subsidiary to enter into or modify (except as may
be required by law and except for renewal of any existing plan in the ordinary
course of business consistent with past practice) any employee benefit plan
covering any of Community's directors, officers or other employees except for
the amendment to Community's Option Plan described herein; (c) except as may be
required to, consistent with GAAP, modify and change its loan, litigation and
real estate valuation policies and practices so as to be applied consistently
on a mutually satisfactory basis with those of FTNC, substantially modify the
manner in which it has conducted its business, taken as a whole, or amend its
Articles of Incorporation or Bylaws; (d) except for transactions in the
ordinary course of its banking business, sell, dispose of or discontinue or
permit any subsidiary to sell, dispose or discontinue any of its business,
assets (including investment securities) or property; (e) 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 of indebtedness owed Community) any assets or
business or permit any subsidiary to acquire any assets or business that is
material to such party; (f) take any other action not in ordinary course of
business of it and its subsidiaries, taken as a whole; or (g) directly or
indirectly agree to take any of the foregoing actions.
The Agreement also contains various customary covenants and
agreements, including agreement to cooperate, use best efforts and obtain
appropriate consents. Also, Community will, consistent with GAAP, modify its
loan, litigation, and real estate valuation policies and practices so as to be
applied consistently with those of FTNC.
NO SOLICITATION
Community has agreed with FTNC and FTNC has agreed with Community in
the Agreement that neither it nor any of its subsidiaries will 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 it
directly or owned by any of its subsidiaries), or of a substantial equity
interest in, it or any business combination with it or any of its subsidiaries
other than, in the case of FTNC, a business combination initiated by FTNC or in
which FTNC or a company which is its subsidiary following the transaction is as
a practical matter the surviving corporation. Community will notify FTNC
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, it or any of its subsidiaries (provided, however,
Community's duty is limited to notifying FTNC of the existence of any inquiry
or proposal); and it has instructed its officers, directors, agents, advisers
and affiliates to comply with the same restrictions.
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WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Date, any provision of the Agreement may be
waived by the party benefitted by the provision or amended or modified
(including the structure of the transaction) by an agreement in writing
approved by the FTNC and Community Boards (to the extent allowed by law),
provided that after the vote of the shareholders of Community, Article I(B) of
the Agreement, which concerns conversion of the Community Common Stock and the
Conversion Number, may not be amended or revised.
The Agreement may be terminated at any time prior to the Effective
Date, either before or after its approval by the shareholders of Community, as
follows: (a) by the mutual consent of FTNC and Community; (b) by either FTNC or
Community in the event of a failure by the shareholders of Community to approve
the Agreement; (c) by the non-breaching party in the event a material breach of
the Agreement is not cured or curable within 60 days after written notice of
such breach is given to the breaching party; (d) by either FTNC or Community in
the event that the Merger has not been consummated by April 30, 1995, unless
the failure to consummate the Merger is due to the breach of the Agreement by
the party seeking to terminate the Agreement; (e) by FTNC if the FTNC Common
Stock Average Price is less than $41.00 per share, adjusted accordingly for
stock splits, stock dividends, and other changes in FTNC's capitalization,
provided written notice (a "termination notice") is delivered to the other
party within three business days after the last day of the Calculation Period;
provided further, Community has the right to require FTNC to consummate the
Merger using .41468 as the Conversion Number by giving written notice to FTNC
within 3 business days of receipt of an FTNC termination notice; and (f) by
Community if the FTNC Common Stock Average Price is greater than $53.50 per
share, provided written notice is delivered to FTNC within three business days
after the last day of the Calculation Period; provided further, FTNC has the
right to require Community to consummate the Merger using .37241 as the
Conversion Number by giving written notice to Community within three business
days of receipt of a Community termination notice.
Except as set forth below, in the event of the termination of the
Agreement by either FTNC or Community, as provided above, the Agreement will
become void, and there will be no liability on the part of either FTNC or
Community or their respective officers or directors, except that such
termination will be without prejudice to the rights of any party arising out of
a willful breach by any other party of any covenant or a willful
misrepresentation contained in the Agreement. If the Merger is not consummated
and both an Initial Triggering Event (as defined below) and a Subsequent
Triggering Event (as defined below) occur prior to a Termination Event (as
defined below), Community is required to pay to FTNC liquidated damages in the
amount of $2,000,000.
For purposes hereof the following terms have the indicated meanings:
"Initial Triggering Event" shall mean any of the following
events or transactions occurring after September 22, 1994:
(1) Community shall have entered into an
agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (other than FTNC or a
subsidiary of FTNC), or the Community Board shall have
recommended that the shareholders of Community approve or
accept any Acquisition Transaction (other than that
contemplated by the Agreement). The term "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving Community or any of its
subsidiaries, (y) a purchase, lease or other acquisition of
all or any substantial part of the assets of Community or any
of its subsidiaries, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the
voting power of Community. The term "person" for purposes of
this paragraph has the meaning assigned thereto in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder;
(2) Any person (other than FTNC, a subsidiary of
FTNC or any fiduciary acting
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under any employee benefit plan for FTNC or any of its
subsidiaries) shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the
outstanding shares of the Community Common Stock (the term
"beneficial ownership" having the meaning assigned thereto in
Section 13(d) of the Exchange Act, and the rules and
regulations thereunder) in a tender offer or that results in
or is part of an Acquisition Transaction;
(3) Any person (other than FTNC or a subsidiary
of FTNC) shall have made a proposal (in writing or orally) to
Community or any one or more of its shareholders owning ten
percent (10%) or more (singly or in the aggregate) of the
outstanding shares of Community Common Stock that results in
or is a part of an Acquisition Transaction;
(4) After a proposal is made by any person (other
than FTNC or a subsidiary of FTNC) to Community or its
shareholders to engage in an Acquisition Transaction,
Community shall have breached any covenant or obligation
contained in the Agreement and such breach would entitle FTNC
to terminate the Agreement (without regard to the cure periods
provided for therein) and such breach shall not have been
cured within twenty (20) days after written notice; or
(5) Any person (other than FTNC or a subsidiary
of FTNC), shall have filed an application or notice with the
Board of Governors of the Federal Reserve System, or other
federal or state bank regulatory authority, which application
or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction and which results in an
Acquisition Transaction.
"Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after September 22, 1994:
(1) The acquisition by any person of beneficial
ownership of 25% or more of the then outstanding Community
Common Stock; or
(2) The occurrence of the Initial Triggering
Event described in clause (1) of the definition of "Initial
Triggering Event", except that the percentage referenced in
clause (z) shall be 25%.
"Termination Event" shall mean each of the following:
(1) The Effective Date of the Merger;
(2) Termination of the Agreement in accordance
with the provisions thereof if such
termination occurs prior to the occurrence of
an Initial Triggering Event; or
(3) The passage of 12 months after termination of
the Agreement if such termination follows the
occurrence of an Initial Triggering Event.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Community's management and the Community Board have
certain interests in the Merger that are in addition to their interests as
shareholders of Community generally. The Community Board was aware of these
interests and considered them, among other matters, in approving the Agreement
and the transactions contemplated thereby.
Indemnification. Pursuant to the Agreement, FTNC has agreed, among
other things, to (a) indemnify any
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person who is, has been or becomes, prior to the Effective Date, a director,
officer, employee, fiduciary or agent of Community or any of its subsidiaries
against any claims, based upon or arising out of or pertaining to the Agreement
or any of the transactions contemplated thereby, whether asserted or
threatened; and (b) maintain the indemnification with respect to matters
occurring before the Effective Date for such persons provided by Community's
Articles of Incorporation and Bylaws for a period of not less than 3 years
following the Effective Date.
Stock Options. Pursuant to Community's Employee Incentive Stock Option
Plan, immediately prior to the Merger, outstanding options to purchase
Community Common Stock that are not then fully exercisable will become
exercisable by the optionee.
Other Employee Benefits. Following the Merger, employees of Community
and its subsidiaries will be entitled to participate, to the same extent and on
the same terms as the employees of FTNC, in any qualified pension, profit
sharing and stock bonus plans in effect at such time for employees of FTNC.
Community employees will receive service credit from their hire date for
employment at Community for purposes of eligibility and vesting requirements
under FTNC's retirement savings plan and defined benefit pension plan, and
service credit from the Effective Date for purposes of benefit calculation
under FTNC's defined benefit pension plan. All Community employees who become
regular full time employees of FTNC will be entitled to credit for service with
Community for purposes of vesting in long-term disability benefits pursuant to
FTNC's plan. Immediately prior to the Effective Date, Community shall terminate
its self-insured medical benefit plan; provided, however, the Community medical
plan shall remain liable for all claims incurred through Effective Date. Upon
the Effective Date, FTNC employees who were Community employees immediately
prior to the Effective Date shall be eligible for group hospitalization,
medical, life and disability benefits on the same terms and conditions as other
FTNC employees holding comparable positions. Service by such employees with
Community shall be credited for purposes of FTNC's short-term disability plan
and vacation policy from the employee's date of employment by Community.
SHAREHOLDERS' DISSENTERS' RIGHTS
Any shareholder of Community entitled to vote on the Agreement has the
right to receive payment of the fair value of his shares of Community Common
Stock upon compliance with Sections 48-23-202 and 48-23-204 of the TBCA. A
shareholder may not dissent as to less than all of the shares that he
beneficially owns. A nominee or fiduciary may not dissent on behalf of any
beneficial owner as to less than all of the shares of such beneficial owner
held of record by such nominee or fiduciary. A beneficial owner asserting
dissenters' rights to shares held on his behalf must submit to Community the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights. Any Community shareholder
intending to enforce this right must not vote in favor of the Agreement and
must file a written notice of his intent to demand payment for his shares (the
"Objection Notice") with the Corporate Secretary of Community either before the
Community Special Meeting or before the vote is taken at the meeting. The
Objection Notice must state that the shareholder intends to demand payment for
his shares of Community Common Stock if the Merger is effected. A vote against
approval of the Agreement will not, in and of itself, constitute an Objection
Notice satisfying the requirements of Section 48-23-202 of the TBCA. A failure
to vote will not constitute a waiver of appraisal rights as long as the
requirements of Sections 48-23-101 through 48-23-302 of the TBCA are complied
with. HOWEVER, ANY SHAREHOLDER WHO EXECUTES A PROXY CARD AND WHO DESIRES TO
EFFECT HIS APPRAISAL RIGHTS MUST MARK THE PROXY CARD "AGAINST" THE PROPOSAL
RELATING TO THE MERGER BECAUSE IF THE PROXY CARD IS LEFT BLANK, IT WILL BE
VOTED "FOR" THE PROPOSAL
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RELATING TO THE MERGER. If the Agreement is approved by Community's
shareholders at the Community Special Meeting, each shareholder who has filed
an Objection Notice will be notified by Community of such approval within 10
days of the Community Special Meeting (the "Dissenters' Notice"). The
Dissenters' Notice will (i) state where dissenting shareholders must (a) send
the Payment Demand (as defined below) and where and when they must (b) deposit
their Community Common Stock Certificates (the "Certificates"), (ii) inform
holders of uncertificated shares of Community Common Stock of the extent of any
restrictions on the transferability of such shares, (iii) be accompanied by a
form for demanding payment that includes the date of the first announcement to
the news media or to shareholders of the terms of the proposed Merger, (iv) set
a date by which Community must receive the Payment Demand, which may not be
fewer than 1 or more than 2 months after the date the Dissenters' Notice is
delivered, and (v) be accompanied by a copy of Sections 48-23-101 through
48-23-302 of the TBCA. Within the time prescribed in the Dissenters' Notice, a
shareholder electing to dissent must make a demand for payment (the "Payment
Demand"), certify whether he acquired beneficial ownership of the shares of
Community Common Stock before September 22, 1994, (the date of the first public
announcement of the principal terms of the Agreement), and deposit his
Certificates in accordance with the terms of the Dissenters' Notice. Upon
filing the Payment Demand and depositing the Certificates, the shareholder will
retain all other rights of a shareholder until these rights are cancelled or
modified by consummation of the Merger. A Payment Demand may not be withdrawn
unless Community consents. FAILURE TO COMPLY WITH THESE PROCEDURES WILL CAUSE
THE SHAREHOLDER TO LOSE HIS DISSENTERS' RIGHTS TO PAYMENT FOR THE SHARES.
CONSEQUENTLY, ANY COMMUNITY SHAREHOLDER WHO DESIRES TO EXERCISE HIS RIGHTS TO
PAYMENT FOR HIS SHARES IS URGED TO CONSULT HIS LEGAL ADVISER BEFORE ATTEMPTING
TO EXERCISE SUCH RIGHTS.
As soon as the Merger is consummated, or upon receipt of a Payment
Demand, Community shall, pursuant to Section 48-23-206, pay to each dissenting
shareholder who has complied with the requirements of Section 48-23-204 of the
TBCA the amount that Community estimates to be the fair value of the shares of
Community Common Stock, plus accrued interest. Section 48-23-206 of the TBCA
requires the payment to be accompanied by (i) certain of Community's financial
statements, (ii) a statement of Community's estimate of fair value of the
shares and explanation of how the interest was calculated, (iii) notification
of rights to demand payment, and (iv) a copy of Sections 48-23-101 through
48-23-302 of the TBCA. As authorized by Section 48-23-208, Community intends to
delay any payments with respect to any shares (the "after-acquired shares")
held by a dissenting shareholder which were not held by such shareholder on
September 22, 1994, the date of the first public announcement of the terms of
the Agreement. When payments are so withheld, Sections 48-23-208(b) and
48-23-209(a) will require Community, after the Merger, to send to the holder of
the after-acquired shares an offer to pay the holder an amount equal to
Community's estimate of their fair value plus accrued interest, together with
an explanation of the calculation of interest and a statement of the holder's
right to demand payment under Section 48-23-209.
If the Merger is not consummated within two months after the date set
for demanding payment and depositing Certificates, Community shall return the
deposited Certificates and release the transfer restrictions imposed on
uncertificated shares. If, after returning deposited Certificates and releasing
transfer restrictions, the Merger is consummated, Community must send a new
Dissenters' Notice and repeat the payment demand procedure.
If the dissenting shareholder believes that the amount paid by
Community pursuant to Section 48-23-206 or offered under Section 48-23-208 is
less than the fair value of his shares or that the interest due is calculated
incorrectly, or if Community fails to make payment (or, if the Merger has not
been consummated, Community does not return the deposited Certificates or
release the transfer restrictions imposed on uncertificated shares) within two
months after the date set in the Dissenters' Notice, then the dissenting
shareholder may, within one month after (i) Community made or offered payment
for the shares or failed to pay for the shares or (ii) Community failed to
return deposited Certificates or release restrictions on uncertificated shares
timely, notify Community in writing of his own estimate of the fair value of
such shares (including interest due) and demand payment of such estimate (less
any payment previously received). FAILURE TO NOTIFY COMMUNITY IN WRITING OF A
DEMAND FOR PAYMENT WITHIN ONE MONTH AFTER COMMUNITY MADE OR OFFERED PAYMENT FOR
SUCH SHARES WILL CONSTITUTE A WAIVER OF THE RIGHT TO DEMAND PAYMENT.
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If Community and the dissenting shareholder cannot agree on a fair
price two months after Community receives such a demand for payment, the
statute provides that Community will institute judicial proceedings in a court
of record with equity jurisdiction in Shelby County, Tennessee, (the "Court")
to fix (i) the fair value of the shares immediately before consummation of the
Merger, excluding any appreciation or depreciation in anticipation of the
Merger, and (ii) the accrued interest. The "fair value" of the Community Common
Stock could be more than, the same as, or less than that produced by the
Exchange Ratio. Community must make all dissenters whose demands remain
unsettled parties to the proceeding and all such parties must be served with a
copy of the petition. The Court may, in its discretion, appoint an appraiser
to receive evidence and recommend a decision on the question of fair value.
The Court is required to issue a judgment for the amount, if any, by which the
fair value of the shares, as determined by the Court, plus interest, exceeds
the amount paid by Community or for the fair value, plus accrued interest, of
his after-acquired shares for which Community elected to withhold payment. If
Community does not institute such proceeding within such two month period,
Community shall pay each dissenting shareholder whose demand remains unsettled
the respective amount demanded by each shareholder.
The Court will assess the costs and expenses of such proceeding
(including reasonable compensation for and the expenses of the appraiser but
excluding fees and expenses of counsel and experts) against Community, except
that the Court may assess such costs and expenses as it deems appropriate
against any or all of the dissenting shareholders if it finds that their demand
for additional payment was arbitrary, vexatious or otherwise not in good faith.
The Court may assess fees and expenses of counsel and experts in amounts the
Court finds equitable: (i) against Community if the Court finds that Community
did not substantially comply with the relevant requirements of the TBCA or (ii)
against either Community or any dissenting shareholder, if the Court finds that
the party against whom the fees and expenses are assessed acted arbitrarily,
vexatiously or not in good faith. If the Court finds that the services of
counsel for any dissenter were of substantial benefit to other dissenters and
that the fees of such counsel should be assessed against Community, the Court
may award reasonable fees to such counsel to be paid out of amounts awarded to
benefitted dissenters.
THE FOREGOING SUMMARY OF THE APPLICABLE PROVISIONS OF SECTIONS
48-23-101 THROUGH 48-23-302 OF THE TBCA IS NOT INTENDED TO BE A COMPLETE
STATEMENT OF SUCH PROVISIONS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH SECTIONS, WHICH ARE INCLUDED AS APPENDIX "C" HEREOF.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below represents a summary
of the opinion of Baker, Donelson, Bearman & Caldwell, a Professional
Corporation, counsel to FTNC. It may not be applicable to a shareholder who
acquired his shares of Community Common Stock pursuant to the exercise of
employee stock options or rights or otherwise as compensation. Community
shareholders are urged to consult their own tax advisers as to the specific tax
consequences to them of the Merger, including the applicability and effect of
federal, state, local and other tax laws.
General. It is intended that for federal income tax purposes the
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Code, and that, accordingly, (a) no gain or loss will be recognized by
either FTNC or Community as a result of the Merger, (b) no gain or loss will be
recognized by the Community shareholders upon the receipt of FTNC Common Stock
in exchange for Community Common Stock in connection with the Merger (except as
discussed below with respect to cash received in lieu of a fractional share
interest in FTNC Common Stock); (c) the tax basis of the FTNC Common Stock to
be received by the Community shareholders in connection with the Merger will be
the same as the basis in the Community Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest in
which cash is received); and (d) the holding period of the FTNC Common Stock to
be received by the Community shareholders in connection with the Merger will
include the holding period of the Community Common Stock surrendered in
exchange therefor, provided that the Community Common Stock is held as a
capital asset at the Effective Date. Consummation of the Merger is dependent
upon, among other conditions, receipt by FTNC and Community of an
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opinion of counsel to FTNC, dated as of the Effective Date, substantially to
this effect.
Consequences of Receipt of Cash in Lieu of Fractional Shares. A
Community shareholder who is entitled to receive cash in lieu of a fractional
share interest of FTNC Common Stock in connection with the Merger will
recognize, as of the Effective Date, gain (or loss) equal to the difference
between such cash amount and the shareholder's basis in the fractional share
interest. Any gain (or loss) recognized will be capital gain (or loss) if the
Community Common Stock is held by such shareholder as a capital asset at the
Effective Date.
No IRS Rulings. The parties do not intend to request a ruling from the
IRS regarding the federal income tax consequences of the Merger. An opinion of
counsel will be furnished to the Community Shareholders stating that the Merger
should qualify as a "reorganization" within the meaning of Section 368(a) of
the Code, but any such opinion of counsel is not binding on the IRS.
Cash Received by Community Shareholders Who Dissent. A shareholder of
Community who perfects his dissenter's rights under the laws of the State of
Tennessee and who receives a payment in cash of the value of his shares of
Community Common Stock will generally be treated as having received such
payment in complete redemption of such stock under Section 302(b)(3) of the
Code. In general, if the shares of Community Common Stock are held by the
shareholder as a capital asset at the Effective Date, the shareholder will
recognize capital gain or loss measured by the difference between the amount of
cash received by the shareholder and the basis for such shares. However, this
general rule is subject to the conditions and limitations of Section 302 of the
Code, including the attribution rules of Section 318, and the treatment of each
dissenting shareholder of Community will depend on his individual
circumstances. Each Community shareholder who contemplates exercising his
dissenter's rights should consult his own tax advisor as to the possibility
that any payment to him will be treated as dividend income.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the receipt by FTNC of
a letter from FTNC's independent public accountants to the effect that the
Merger qualifies for pooling-of-interests accounting treatment if closed and
consummated in accordance with the terms of the Agreement. Under the
pooling-of-interests method of accounting, the historical basis of the assets
and liabilities of FTNC and Community will be combined at the Effective Date
and carried forward at their previously recorded amounts and the shareholders'
equity accounts of Community and FTNC will be combined on FTNC's consolidated
balance sheet. FTNC intends to restate retroactively income and other financial
statements of FTNC issued after consummation of the Merger to reflect the
consolidated operations of FTNC and Community as if the Merger had taken place
prior to the periods covered by such financial statements.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding shares of
Community Common Stock must be exchanged for FTNC Common Stock. Community has
agreed to use its best efforts to cause the Merger to qualify for
pooling-of-interests treatment. See "Resale of FTNC Common Stock."
The unaudited pro forma financial information contained in this Proxy
Statement--Prospectus has been prepared using the pooling-of-interests
accounting method to account for the Merger. See "Summary -- Equivalent and Pro
Forma Share Data," "--Selected Financial Data and Ratios" and "Index to Pro
Forma Financial Information."
EXPENSES
The Agreement provides, in general, that FTNC and Community will each
pay its own expenses in connection with the Agreement and the transactions
contemplated thereby, including fees and expenses of brokers, finders,
financial consultants, accountants and counsel. In addition, Community has
agreed that its transaction
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expenses will not exceed $400,000. See "Waiver and Amendment; Termination."
RESALE OF FTNC COMMON STOCK
The shares of FTNC Common Stock issued pursuant to the Agreement will
be freely transferable under the Securities Act except for shares issued to any
shareholder who may be deemed to be an "affiliate" of Community for purposes of
Rule 145 under the Securities Act as of the date of the Special Meeting.
Affiliates may not sell their shares of Community Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such shares or in compliance with
Rule 145 promulgated under the Securities Act or another applicable exemption
from the registration requirements of the Securities Act. Persons who may be
deemed to be affiliates of Community generally include individuals or entities
that control, are controlled by or are under common control with Community and
may include certain officers and directors of Community as well as principal
shareholders of Community.
Community has agreed in the Agreement to use its best efforts to cause
each director, executive officer and other person who is an affiliate of
Community to enter into and deliver to FTNC an agreement at the time of
execution of the Agreement or on such later date (not later than 40 days prior
to the Effective Date) as a person becomes an affiliate providing that such
person will not, directly or indirectly, (a) sell, pledge, transfer or
otherwise dispose of shares of FTNC Common Stock to be received by such person
in the Merger except in compliance with the applicable provisions of the
Securities Act and rules and regulations thereunder, or (b) sell, pledge,
transfer or otherwise dispose of or take any action which would reduce such
person's risk with respect to shares of Community Common Stock owned by such
person or shares of FTNC Common Stock to be received by such person in the
Merger during the periods when any such sale, pledge, transfer, disposition or
action would, under GAAP or the rules, regulations or interpretations of the
SEC, disqualify the Merger for pooling-of-interests accounting treatment. Such
periods in general encompass the period commencing 30 days prior to the Merger
and ending at the time of the publication of financial results covering at
least 30 days of combined operations of FTNC and Community.
THE NASDAQ STOCK MARKET
FTNC Common Stock is included for quotation on the Nasdaq Stock Market
on its National Market System. The FTNC Common Stock issued to the shareholders
of Community pursuant to the Agreement will be included for quotation on the
Nasdaq Stock Market.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
As a bank holding company, FTNC is subject to the regulation and
supervision of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). Under the BHCA, bank holding companies may not in general
directly or indirectly acquire the ownership or control of more than 5% of the
voting shares or substantially all of the assets of any company, including a
bank, without the prior approval of the Federal Reserve Board. The BHCA also
restricts the types of activities in which a bank holding company and its
subsidiaries may engage. Generally, activities are limited to banking and
activities found by the Federal Reserve Board to be so closely related to
banking as to be a proper incident thereto.
In addition, the BHCA prohibits the Federal Reserve Board from
approving an application by a bank holding company to acquire shares of a bank
or bank holding company located outside the acquiror's principal state of
operations unless such an acquisition is specifically authorized by statute in
the state in which the bank or bank holding company whose shares are to be
acquired is located. Tennessee has adopted legislation that authorizes
nationwide interstate bank acquisitions, subject to certain state law
reciprocity requirements, including the filing of
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an application with and approval of the Tennessee Commissioner of Financial
Institutions. The Tennessee Bank Structure Act of 1974 restricts the
acquisition by bank holding companies of banks in Tennessee. A bank holding
company is prohibited from acquiring any bank in Tennessee as long as banks
that it controls retain 16 1/2% or more of the total deposits in individual,
partnership and corporate demand and other transaction accounts and in savings
accounts and time deposits in all federally insured financial institutions in
Tennessee, subject to certain limitations and exclusions. As of December 31,
1993, FTNC estimates that it held approximately 12% of such deposits. Also,
under this act, no bank holding company may acquire any bank in operation for
less than five years or begin a de novo bank in any county in Tennessee with a
population, in 1970, of 200,000 or less, subject to certain exceptions. Under
Tennessee law, branch banking is permitted in any county in the state. As to
certain changes in the laws applicable to banks that have recently been
enacted, see "-- Interstate Act."
FTNC's subsidiary banks (the "Subsidiary Banks") are subject to
supervision and examination by applicable federal and state banking agencies.
FTB is a national banking association subject to regulation and supervision by
the Comptroller of the Currency (the "Comptroller"), as is First Tennessee Bank
National Association Mississippi, which is headquartered in Southaven,
Mississippi. The remaining Subsidiary Banks are Cleveland Bank & Trust Company
and Peoples and Union Bank, which are Tennessee state-chartered banks, and
Planters Bank, which is a Mississippi state-chartered bank, none of which are
members of the Federal Reserve System, and therefore are subject to the
regulations of and supervision by the Federal Deposit Insurance Corporation
(the "FDIC") as well as state banking authorities. The Subsidiary Banks are
also subject to various requirements and restrictions under federal and state
law, including requirements to maintain reserves against deposits, restrictions
on the types and amounts of loans that may be granted and the interest that may
be charged thereon and limitations on the types of investments that may be made
and the types of services that may be offered. Various consumer laws and
regulations also affect the operations of the Subsidiary Banks. In addition to
the impact of regulation, commercial banks are affected significantly by the
actions of the Federal Reserve Board as it attempts to control the money supply
and credit availability in order to influence the economy.
PAYMENT OF DIVIDENDS
FTNC is a legal entity separate and distinct from its banking and
other subsidiaries. The principal source of cash flow of FTNC, including cash
flow to pay dividends on its stock or principal (premium, if any) and interest
on debt securities, is dividends from the Subsidiary Banks. There are statutory
and regulatory limitations on the payment of dividends by the Subsidiary Banks
to FTNC, as well as by FTNC to its shareholders.
Each Subsidiary Bank that is a national bank is required by federal
law to obtain the prior approval of the Comptroller for the payment of
dividends if the total of all dividends declared by the board of directors of
such Subsidiary Bank in any year will exceed the total of (i) its net profits
(as defined and interpreted by regulation) for that year plus (ii) the retained
net profits (as defined and interpreted by regulation) for the preceding two
years, less any required transfers to surplus. A national bank also can pay
dividends only to the extent that retained net profits (including the portion
transferred to surplus) exceed bad debts (as defined by regulation).
State-chartered banks are subject to varying restrictions on the
payment of dividends under applicable state laws. Tennessee law imposes
dividend restrictions on Tennessee state banks substantially similar to those
imposed under federal law on national banks, as described above. Mississippi
law prohibits Mississippi state banks from declaring a dividend without the
prior written approval of the Mississippi Banking Commissioner.
If, in the opinion of the applicable federal bank regulatory
authority, a depository institution or a holding company is engaged in or is
about to engage in an unsafe or unsound practice (which, depending on the
financial condition of the depository institution or holding company, could
include the payment of dividends), such authority may require that such
institution or holding company cease and desist from such practice. The federal
banking agencies have indicated that paying dividends that deplete a depository
institution's or holding company's capital base to an inadequate level would be
such an unsafe and unsound banking practice. Moreover, the Federal Reserve
Board, the Comptroller and the FDIC have issued policy statements which provide
that bank holding companies and
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insured depository institutions generally should only pay dividends out of
current operating earnings.
In addition, under the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), a FDIC-insured depository institution may
not pay any dividend if payment would cause it to become undercapitalized or
once it is under capitalized. See "-- FDICIA."
At September 30, 1994, under dividend restrictions imposed under
applicable federal and state laws, the Subsidiary Banks, without obtaining
regulatory approvals, could legally declare aggregate dividends of
approximately $237.9 million.
The payment of dividends by FTNC and the Subsidiary Banks may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which FTNC and
its nonbank subsidiaries can borrow or otherwise obtain credit from the
Subsidiary Banks. There are also legal restrictions on the Subsidiary Banks'
purchases of or investments in the securities of and purchases of assets from
FTNC and its nonbank subsidiaries, a bank's loans or extensions of credit to
third parties, collateralized by the securities or obligations of FTNC and its
nonbank subsidiaries, the issuance of guaranties, acceptances and letters of
credit on behalf of FTNC and its nonbank subsidiaries, and certain bank
transactions with FTNC and its nonbank subsidiaries, or with respect to which
FTNC and it nonbank subsidiaries, act as agent, participates or has a financial
interest. Subject to certain limited exceptions, a Subsidiary Bank (including
for purposes of this paragraph all subsidiaries of such Subsidiary Bank) may
not extend credit to FTNC or to any other affiliate (other than another
Subsidiary Bank) in an amount which exceeds 10% of the Subsidiary Bank's
capital stock and surplus and may not extend credit in the aggregate to such
affiliates in an amount which exceeds 20% of its capital stock and surplus.
Further, there are legal requirements as to the type, amount and quality of
collateral which must secure such extensions of credit by these banks to FTNC
or to such other affiliates. Also, extensions of credit and other transactions
between the Subsidiary Bank and FTNC or such other affiliates must be on terms
and under circumstances, including credit standards, that are substantially the
same or at least as favorable to such Subsidiary Bank as those prevailing at
the time for comparable transactions with non-affiliated companies. Also, FTNC
and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.
CAPITAL ADEQUACY
The Federal Reserve Board has adopted risk-based capital guidelines
for bank holding companies. The minimum guideline for the ratio of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%, and the
minimum ratio of Tier I Capital (defined below) to risk--weighted assets is 4%.
At least half of the Total Capital must be composed of common stock, minority
interests in the equity accounts of consolidated subsidiaries, noncumulative
perpetual preferred stock and a limited amount of cumulative perpetual
preferred stock, less goodwill and certain other intangible assets ("Tier 1
Capital"). The remainder may consist of subordinated debt, other preferred
stock and a limited amount of loan loss reserves. At September 30, 1994, FTNC's
consolidated Tier 1 Capital and Total Capital ratios were 9.94% and 12.36%,
respectively.
In addition, the Federal Reserve Board has established minimum
leverage ratio guidelines for bank holding companies. These guidelines provide
for a minimum ratio of Tier 1 Capital to average assets, less goodwill and
certain other intangible assets (the "Leverage Ratio"), of 3% for bank holding
companies that meet certain specific criteria, including having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3%, plus an additional cushion of 100 to
200 basis points. FTNC's Leverage Ratio at September 30, 1994 was 7.01%. The
guidelines also provide that bank holding companies
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experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve Board has indicated that it will consider a "tangible Tier 1
Capital leverage ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Each of the Subsidiary Banks is subject to risk-based and leverage
capital requirements similar to those described above adopted by the
Comptroller or the FDIC, as the case may be. FTNC believes that each of the
Subsidiary Banks was in compliance with applicable minimum capital requirements
as of September 30, 1994. Neither FTNC nor any of the Subsidiary Banks has been
advised by any federal banking agency of any specific minimum Leverage Ratio
requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety
of enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. See "-- FDICIA."
All of the federal banking agencies have proposed regulations that
would add an additional risk-based capital requirement based upon the amount of
an institution's exposure to interest rate risk. In addition, bank regulators
continue to indicate their desire generally to raise capital requirements
applicable to banking organizations beyond their current levels. However, the
management of FTNC is unable to predict whether and when higher capital
requirements would be imposed and, if so, at what levels and on what schedule.
HOLDING COMPANY STRUCTURE AND SUPPORT OF SUBSIDIARY BANKS
Because FTNC is a holding company, its right to participate in the
assets of any subsidiary upon the latter's liquidation or reorganization will
be subject to the prior claims of the subsidiary's creditors (including
depositors in the case of bank subsidiaries) except to the extent that FTNC may
itself be a creditor with recognized claims against the subsidiary.
Under Federal Reserve Board policy, FTNC is expected to act as a
source of financial strength to, and commit resources to support, each of the
Subsidiary Banks. This support may be required at times when, absent such
Federal Reserve Board policy, FTNC may not be inclined to provide it. In
addition, any capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance. The FDIC's claim for damages is superior to claims of
shareholders of the insured depository institution or its holding company but
is subordinate to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. The Subsidiary Banks are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of the Subsidiary Banks would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against
FTNC's other Subsidiary Banks and a potential loss of FTNC's investment in such
Subsidiary Banks.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") which was enacted on December 19, 1991, substantially revised the
depository institution regulatory and funding provisions of the FDIA
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43
and made revisions to several other federal banking statutes. Among other
things, FDICIA requires the federal banking regulators to take "prompt
corrective action" in respect of FDIC-insured depository institutions that do
not meet minimum capital requirements. FDICIA establishes five capital tiers:
"well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." Under
applicable regulations, a FDIC-insured depository institution is defined to be
well capitalized if it maintains a Leverage Ratio of at least 5%, a risk
adjusted Tier 1 Capital Ratio of at least 6% and a Total Capital Ratio of at
least 10% and is not subject to a directive, order or written agreement to meet
and maintain specific capital levels. An insured depository institution is
defined to be adequately capitalized if it meets all of its minimum capital
requirements as described above. In addition, an insured depository institution
will be considered undercapitalized it fails to meet any minimum required
measure, significantly undercapitalized if it is significantly below such
measure and critically undercapitalized if it fails to maintain a level of
tangible equity equal to not less than 2% of total assets. An insured
depository institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
The capital-based prompt corrective action provisions of FDICIA and
their implementing regulations apply to FDIC-insured depository institutions
and are not directly applicable to holding companies which control such
institutions. However, the Federal Reserve Board has indicated that, in
regulating bank holding companies, it will take appropriate action at the
holding company level based on an assessment of the effectiveness of
supervisory actions imposed upon subsidiary depository institutions pursuant to
such provisions and regulations. Although the capital categories defined under
the prompt corrective action regulations are not directly applicable to FTNC
under existing law and regulations, if FTNC were placed in a capital category
FTNC believes that it would qualify as well-capitalized as of September 30,
1994.
FDICIA generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to restrictions on borrowing from the Federal Reserve System. In
addition, undercapitalized depository institutions are subject to growth
limitations and are required to submit capital restoration plans. A depository
institution's holding company must guarantee the capital plan, up to an amount
equal to the lesser of 5% of the depository institution's assets at the time it
becomes undercapitalized or the amount of the capital deficiency when the
institution fails to comply with the plan. The federal banking agencies may not
accept a capital plan without determining, among other things, that the plan is
based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. If a depository institution fails to submit
an acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized depository institutions are subject to
appointment of a receiver or conservator.
FTNC believes that at September 30, 1994 all of the Subsidiary Banks
were well capitalized under the criteria discussed above.
FDICIA contain numerous other provisions, including new accounting,
audit and reporting requirements, beginning in 1995 termination of the "too big
to fail" doctrine except in special cases, limitations on the FDIC's payment of
deposits at foreign branches, new regulatory standards in such areas as asset
quality, earnings and compensation and revised regulatory standards for, among
other things, powers of state banks, real estate lending and capital adequacy.
FDICIA also requires that a depository institution provide 90 days prior notice
of the closing of any branches.
Various other legislation, including proposals to revise the bank
regulatory system and to limit the investments that a depository institution
may make with insured funds, is from time to time introduced in Congress.
- 39 -
44
INTERSTATE ACT
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 ("Interstate Act"), which was enacted on September 29, 1994, among other
things and subject to certain conditions and exceptions, (i) permits bank
holding company acquisitions commencing one year after enactment of banks of a
minimum age of up to five years as established by state law in any state, (ii)
mergers of national and state banks after May 31, 1997 across state lines
unless the home state of either bank has opted out of the interstate bank
merger provision, (iii) branching de novo by national and state banks into
other states if the state has opted-in to this provision of the Interstate Act,
and (iv) certain interstate bank agency activities after one year after
enactment. Regulations have not yet been issued under the Interstate Act.
BROKERED DEPOSITS
The FDIC has adopted regulations under FDICIA governing the receipt of
brokered deposits. Under the regulations, a bank cannot accept a rollover or
renew brokered deposits unless (i) it is well capitalized or (ii) it is
adequately capitalized and receives a waiver from the FDICIA. A bank that
cannot receive brokered deposits also cannot offer "pass-through" insurance on
certain employee benefit accounts. Whether or not it has obtained such a
waiver, an adequately capitalized bank may not pay an interest rate on any
deposits in excess of 75 basis points over certain prevailing market rates
specified by regulation. There are no such restrictions on a bank that is well
capitalized. Because it believes that all the Subsidiary Banks were well
capitalized as of September 30, 1994, FTNC believes the brokered deposits
regulation will have no material effect on the funding or liquidity of any of
the Subsidiary Banks.
FDIC INSURANCE PREMIUMS
The Subsidiary Banks are required to pay semiannual FDIC deposit
insurance assessments. As required by FDICIA, the FDIC adopted a risk-based
premium schedule which increased the assessment rates for most FDIC-insured
depository institutions. Under the schedule, the premiums initially range from
$.23 to $.31 for every $100 of deposits. Each financial institution is assigned
to one of three capital groups -- well capitalized, adequately capitalized or
undercapitalized -- and further assigned to one of three subgroups within a
capital group, on the basis of supervisory evaluations by the institution's
primary federal and, if applicable, state supervisors and other information
relevant to the institution's financial condition and the risk posed to the
applicable FDIC deposit insurance fund. The actual assessment rate applicable
to a particular institution will, therefore, depend in part upon the risk
assessment classification so assigned to the institution by the FDIC.
The FDIC is authorized by federal law to raise insurance premiums in
certain circumstances. Any increase in premiums would have an adverse effect on
the Subsidiary Banks' and FTNC's earnings.
Under the FDIA, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by a
federal bank regulatory agency.
DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits
and certain claims for administrative expenses and employee compensation
against an insured depositary institution would be afforded a priority over
other general unsecured claims against such an institution, including federal
funds and letters of credit, in the "liquidation or other resolution" of such
an institution by any receiver.
DESCRIPTION OF FTNC CAPITAL STOCK
- 40 -
45
The following summaries of certain provisions of the Restated Charter,
as amended (the "Charter"), and Bylaws, as amended, of FTNC, the Rights Plan
(defined below) and the Indenture (defined below) do not purport to be
complete, are qualified in their entirety by reference to such instruments,
each of which is an exhibit to the Registration Statement of which this Proxy
Statement-Prospectus is a part, and are subject, in all respects, to
applicable Tennessee law.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of FTNC currently consists of 5,000,000
shares of Preferred Stock, without par value ("Preferred Stock"), which may be
issued from time to time by resolution of the FTNC Board and 100,000,000 shares
of FTNC Common Stock. As of September 30, 1994, there were 32,202,722 shares of
FTNC Common Stock and no shares of Preferred Stock outstanding. Approximately
3.3 million shares of FTNC Common Stock are reserved for issuance under various
employee stock plans and FTNC's dividend reinvestment plan, approximately
1.3 million shares are reserved for issuance in connection with other
pending acquisitions (See page PF-1 herein), and 322,027 shares of Preferred
Stock are reserved for issuance under the Rights Plan. Also, FTNC has on file
with the SEC an effective shelf registration pursuant to which it may offer
from time to time, at its discretion, senior or subordinated debt securities,
preferred stock, including depository shares, and FTNC Common Stock at an
aggregate initial offering price not to exceed $300 million.
PREFERRED STOCK
The FTNC Board is authorized, without further action by the
shareholders, to provide for the issuance of up to 5,000,000 shares of
Preferred Stock, without par value, from time to time in one or more series
and, with respect to each such series, has the authority to fix the powers
(including voting power), designations, preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions thereof. Currently, no shares of Preferred Stock
are outstanding.
FTNC COMMON STOCK
The FTNC Board is authorized to issue a maximum of 100,000,000 shares
of Common Stock, $2.50 par value per share. The holders of the FTNC Common
Stock are entitled to receive, ratably, such dividends as may be declared by
the FTNC Board from funds legally available therefor. The holders of the
outstanding shares of FTNC Common Stock are entitled to one vote for each such
share on all matters presented to shareholders and are not entitled to cumulate
votes for the election of directors. Upon any dissolution, liquidation or
winding up of FTNC resulting in a distribution of assets to the shareholders,
the holders of FTNC Common Stock are entitled to receive such assets ratably
according to their respective holdings after payment of all liabilities and
obligations and satisfaction of the liquidation preferences of any shares of
Preferred Stock at the time outstanding. The shares of FTNC Common Stock have
no preemptive, redemption, subscription or conversion rights. The shares of
FTNC Common Stock will be, when issued in accordance with the Agreement, fully
paid and nonassessable. Under FTNC's Charter, the FTNC Board is authorized to
issue authorized shares of FTNC Common Stock without further action by FTNC's
shareholders. However, the FTNC Common Stock is traded in the over-the-counter
market and is quoted on the NASDAQ/NMS, which requires shareholder approval of
the issuance of additional shares of FTNC Common Stock in certain situations.
The Transfer Agent for the Common Stock is The First National Bank of Boston.
The FTNC Board is divided into three classes, which results in
approximately 1/3 of the directors being elected each year. In addition, the
Charter and the Bylaws, among other things, generally give to the FTNC Board
the authority to fix the number of directors on the FTNC Board and to remove
directors from and fill vacancies on the FTNC Board, other than removal for
cause and the filling of vacancies created thereby which are reserved to
shareholders exercising at least a majority of the voting power of all
outstanding voting stock of FTNC. To change these provisions of the Bylaws,
other than by action of the FTNC Board, and to amend these provisions of the
Charter or to adopt any provision of the Charter inconsistent with such Bylaw
provisions, would require approval
- 41 -
46
by the holders of at least 80% of the voting power of all outstanding voting
stock. Such classification of the FTNC Board and such other provisions of the
Charter and the Bylaws may have a significant effect on the ability of the
shareholders of FTNC to change the composition of an incumbent FTNC Board or to
benefit from certain transactions which are opposed by the FTNC Board.
SHAREHOLDER PROTECTION RIGHTS PLAN
Each share of FTNC Common Stock has, and each share of the FTNC Common
Stock issued in the Merger will have, attached to it one right (a "Right")
issued pursuant to a Shareholder Protection Rights Agreement dated as of
September 7, 1989 (the "Rights Plan"). Each Right entitles its holder to
purchase 1/100th of a share of Participating Preferred Stock, without par
value, for $76.67 (the "Exercise Price"), subject to adjustment, upon the
business day following the earlier of (i) the 10th day after commencement of a
tender or exchange offer which, if consummated, would result in a person's
becoming the beneficial owner of 10% or more of the outstanding shares of FTNC
Common Stock (an "Acquiring Person") and (ii) the first date (the "Flip-in
Date") of public announcement that a person has become an Acquiring Person.
The Rights will expire on the earliest of (i) the Exchange Time
(defined below), (ii) September 18, 1999 and (iii) the date on which the Rights
are redeemed as described below. The FTNC Board may, at its option, at any time
prior to the Flip-in Date, redeem all the Rights at a price of $.01 per Right.
If a Flip-in Date occurs, each Right (other than Rights beneficially
owned by the Acquiring Person or its affiliates, associates or transferees,
which Rights will become void), to the extent permitted by applicable law, will
constitute the right to purchase shares of FTNC Common Stock or Participating
Preferred Stock having an aggregate market price equal to twice the Exercise
Price for an amount in cash equal to the then-current Exercise Price. In
addition, the FTNC Board may, at its option, at any time after a Flip-in Date
and prior to the time that an Acquiring Person becomes the beneficial owner of
more than 50% of the outstanding shares of FTNC Common Stock, elect to exchange
the Rights (other than Rights beneficially owned by the Acquiring Person or its
affiliates, associates or transferees) for shares of FTNC Common Stock or
Participating Preferred Stock at an exchange ratio of one share of FTNC Common
Stock or 1/100th of a share of Participating Preferred Stock per Right (the
"Exchange Time").
FTNC may not agree to be acquired by an Acquiring Person without
providing that each Right, upon such acquisition, will constitute the right to
purchase common stock of the Acquiring Person having an aggregate market price
equal to twice the Exercise Price for an amount in cash equal to the
then-current Exercise Price.
The Rights will not prevent a takeover of FTNC. The Rights, however,
may have certain anti-takeover effects. The Rights may cause substantial
dilution to a person or group that acquires 10% or more of the outstanding FTNC
Common Stock unless the Rights are first redeemed by the FTNC Board.
SUBORDINATED CAPITAL NOTES DUE 1999
On June 10, 1987, FTNC issued $75,000,000 principal amount of 10 3/8%
Subordinated Capital Notes Due 1999 (the "Capital Notes"). The Capital Notes
currently constitute Tier 2 capital under the Federal Reserve Board's
risk-based capital guidelines. Pursuant to the Indenture, dated as of June 1,
1987 (the "Indenture"), between FTNC and BankAmerica National Trust Company,
formerly Security Pacific National Trust Company (New York), Trustee, at
maturity the Capital Notes are required to be exchanged for Common Stock,
Preferred Stock or certain other eligible capital securities to be issued by
FTNC ("Capital Securities") having a market value equal to the principal amount
of the Capital Notes, except to the extent that FTNC, at its option, shall
elect to pay in cash such principal amount from amounts representing proceeds
of other issuances of Capital Securities designated for such use.
- 42 -
47
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
FTNC and Community are Tennessee corporations subject to the
provisions of the TBCA. Shareholders of Community, whose rights are governed by
Community's Charter and Bylaws, will, upon consummation of the Merger, become
shareholders of FTNC whose rights will then be governed by the Charter and
Bylaws of FTNC. The following is a summary of the material differences in the
rights of shareholders of FTNC and Community and is qualified in its entirety
by reference to the TBCA and the Charter and Bylaws of each of Community and
FTNC. Certain topics discussed below are also subject to federal law and the
regulations promulgated thereunder. See "Certain Regulatory Considerations."
SHAREHOLDER PROPOSALS AND NOMINATIONS
Pursuant to Community's bylaws, a Nominating Committee of the Board of
Directors meets annually to determine persons to be nominated for election to
the Board for the ensuing year. The Nominating Committee may consider
nominating people to serve as directors who are suggested or recommended by
persons who are not on the Nominating Committee. No formal procedure has been
established for determining when or how shareholder proposals and/or director
nominations should be submitted.
Pursuant to FTNC's Bylaws, shareholder proposals and director
nominations must be in writing and delivered or mailed to the Secretary of FTNC
not less than 30 nor more than 60 days prior to the date of a meeting of
shareholders; provided, however, that if fewer than 40 days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder will be timely if it is delivered or received not
later than the close of business on the 10th day following the earlier of the
day on which such notice of the date of such meeting was mailed or the date on
which such public disclosure was made.
AMENDMENT OF ARTICLES OF INCORPORATION OR CHARTER AND BYLAWS
Community shareholders can amend Community's bylaws at any annual or
special shareholders meeting. Any amendment to to the bylaws requires a
majority vote and only shareholders can amend the bylaw provisions relating to
the duties, term of office or indemnification of directors. The board of
directors can amend the bylaws except for those amendments specifically
reserved to the shareholders at any regular or special meeting by 2/3 vote.
Neither the bylaws nor the charter sets forth any special procedure to follow
for an amendment to Community's charter.
FTNC's Charter provides that any amendment to the Charter which is
inconsistent with any provision of the Bylaws may be adopted only by the
affirmative vote of the holders of at least 80 percent of the voting power
- 43 -
48
of all outstanding stock. FTNC's Bylaws may be amended or repealed by a vote of
a majority of all the directors of FTNC at any regular or special meeting of
the FTNC Board. In addition, the shareholders of FTNC may make, alter, amend or
repeal the Bylaws at any annual meeting or at a special meeting called for that
purpose, if at least 80 percent of the voting power of all outstanding voting
stock approves the amendment. The Charter also provides that at least 80
percent of the voting power of all outstanding voting stock must approve an
amendment to the Charter and Bylaws to change the classification the FTNC's
Board or the 80 percent voting requirement for an amendment of the Bylaws.
INDEMNIFICATION
Community's Bylaws provide indemnification to its directors and
officers against judgments based on acts or omissions in such capacity except
for matters involving an adjudication of negligence or misconduct. Such rights
are not exclusive.
The TBCA provides in certain situations for mandatory and permissive
indemnification of directors and officers. The TBCA also provides that the
statutory indemnification is not to be deemed exclusive of any other rights to
which a director seeking indemnification may be entitled. No such
indemnification may be made if a final adjudication adverse to the director or
officer establishes his liability (1) for any breach of loyalty to the
corporation or its shareholders; (2) for acts of omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; or (3) for
unlawful distributions.
FTNC has provided additional indemnification to its directors and
certain officers designated by the FTNC Board in a shareholder-approved bylaw
amendment and individual indemnity agreements which provide indemnification to
the maximum extent not prohibited by law.
DISSENTERS' RIGHTS
The TBCA generally provides dissenters' rights for mergers and share
exchanges that would require
- 44 -
49
shareholder approval, sales of substantially all the assets (other than sales
that are in the usual and regular course of business and certain liquidations
and court-order sales), and certain amendments to the charter that materially
and adversely affect rights in respect of a dissenter's shares. Under TBCA,
however, dissenters' rights are not available as to any shares which are listed
on an exchange registered under Section 6 of the Exchange Act or are "National
Market System" securities as defined in rules promulgated pursuant to the
Exchange Act (such as FTNC Common Stock). Shares of Community Common Stock have
dissenters' rights. See "The Merger -- Shareholder Dissenters' Rights."
RIGHTS OF HOLDERS OF CAPITAL NOTES
On June 10, 1987, FTNC issued Capital Notes due in 1999. At maturity,
the Capital Notes will be exchanged for Capital Securities having a market
value equal to the principal amount of the notes. See "Description of FTNC
Capital Stock--Subordinated Capital Notes due 1999."
SHAREHOLDER RIGHTS PLAN
For a discussion of the FTNC Shareholder Rights Plan, see "Description
of FTNC Capital Stock--Shareholder Rights Plan." The Community Board has not
adopted a shareholder rights plan.
VALIDITY OF COMMON STOCK
A legal opinion to the effect that the shares of FTNC Common Stock and
associated Rights offered hereby, when issued in accordance with the Agreement,
will be validly issued, fully paid and nonassessable, has been rendered by
Clyde A. Billings, Jr., Vice President and Counsel, First Tennessee National
Corporation. Mr. Billings beneficially owns approximately 10,400 shares of FTNC
Common Stock.
Baker, Donelson, Bearman & Caldwell, a Professional Corporation, has
rendered an opinion, summarized above in the section entitled "--Certain
Federal Income Tax Consequences." Attorneys in the firm beneficially own
approximately 25,000 shares of FTNC Common Stock.
EXPERTS
The consolidated financial statements of FTNC and its subsidiaries
incorporated in this Proxy Statement-Prospectus by reference from FTNC's Annual
Report on Form 10-K for the year ended December 31, 1993 have been audited by
Arthur Andersen LLP, independent public accountants, as stated in their report
dated January 18, 1994, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Community as of December 31,
1993 and 1992, and for each of the years in the three-year period ended
December 31, 1993, have been incorporated by reference in this Proxy
Statement-Prospectus in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated herein by reference, and
upon the authority of said firm as experts in accounting and auditing.
- 45 -
50
With respect to the 1991 financial statements of Home Financial
Corporation, a company acquired by FTNC during 1992 in a transaction accounted
for as a pooling-of-interests, Arthur Andersen LLP relied upon the report of
Baylor and Backus, independent accountants, whose report dated February 21,
1992, except with respect to the information discussed in Note 27, as to which
the date is October 21, 1992, was incorporated by reference in FTNC's Form 10-K
for 1993 and is incorporated herein by reference.
The consolidated financial statements of Maryland National Mortgage
Corporation and subsidiaries, appearing in First Tennessee National
Corporation's Current Report on Form 8-K, dated October 1, 1993, for the year
ended December 31, 1992, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements
referred to above are incorporated herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
- 46 -
51
INDEX TO PRO FORMA FINANCIAL INFORMATION Page
------
FTNC Pro Forma Combined Condensed Statement of Condition as of
September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . PF - 2
FTNC Pro Forma Combined Condensed Statement of Condition as of
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . PF - 3
FTNC Pro Forma Combined Condensed Statements of Income for the Nine
Months Ended September 30, 1994 . . . . . . . . . . . . . . . . . . . . PF - 4
FTNC Pro Forma Combined Condensed Statements of Income for the Year Ended
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . PF - 5
- 47 -
52
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed statements of
condition and statements of income for the nine months reflect the historical
condensed statements of condition and statements of income for the nine months
ended September 30, 1994, of FTNC, adjusted for the completed acquisition of
Planters Bank, which was accounted for as a pooling-of-interests, and of
Community, giving effect to the Merger on a pooling-of-interests accounting
basis.
The following unaudited pro forma combined condensed statements of
condition and statements of income for the year ended, reflect the historical
consolidated condensed statements of condition and statements of income of FTNC
for the year ended December 31, 1993, adjusted for the completed acquisitions
of Planters Bank, Cleveland Bank and Trust Company, Highland Capital Management
Corp., and SNMC Management Corporation, which were accounted for as
poolings-of-interest, and accordingly, reflect the financial position and
results of operations of all companies on a combined basis, and the historical
statement of condition and statement of income of Community, giving effect to
the Merger on a pooling-of-interests accounting basis.
Pro forma results presented for the nine month period and for the year
are not necessarily indicative of the results which may be expected for any
interim period or for the year as a whole.
On October 1, 1994, FTNC acquired Emerald Mortgage Company, Lynnwood,
Washington ("Emerald"), which was merged into Sunbelt National Mortgage
Corporation, for approximately 152,000 shares of FTNC Common Stock. At
September 30, 1994, Emerald had approximately $1.1 million in assets and $0.5
million in capital. The transaction is not included in the following pro forma
combined condensed statements of condition or income.
On September 6, 1994, FTNC announced the execution of a definitive
agreement to acquire Carl I. Brown and Company ("CIB"), Kansas City, Missouri.
Under the agreement, a wholly-owned subsidiary of FTNC will be merged into CIB,
with CIB surviving the Merger. Immediately prior to the merger, FTNC will
direct that all shares of CIB Common Stock be issued directly to FTB. All
shares of CIB Common Stock will be converted into approximately 961,000 shares
of FTNC Common Stock, based on an estimated purchase price of $43.2 million and
an assumed FTNC Stock price of $45.00 per share. The actual purchase price and
the FTNC stock price may vary from the assumed amounts, and FTNC has the right
to terminate the agreement if its average stock price is less than $35.00 per
share. The merger is subject to regulatory and CIB shareholder approvals. At
July 31, 1994, CIB had total assets of approximately $139.4 million and
a servicing portfolio of $2.6 billion.
On October 19, 1994, FTNC announced the execution of a definitive
agreement to acquire Peoples Commercial Services Corp. ("PCSC"). PCSC will be
merged with and into FTNC, and at a price of $42 or greater per share for FTNC
Common Stock, each PCSC shareholder will receive 3.1658 shares of FTNC Common
Stock for each share of PCSC stock, for a total of approximately 420,000 shares
of FTNC Common Stock. The number of FTNC shares will be adjusted if the price
of FTNC Common Stock is less than $42.00. The acquisition will be accounted for
as a purchase, and the FTNC Board has approved the repurchase of the amount of
FTNC Common Stock necessary to complete the acquisition. The transaction is
subject to regulatory and PCSC shareholder approvals and is expected to close
in the first half of 1995.
PF - 1
53
FIRST TENNESSEE NATIONAL CORPORATION
PRO FORMA COMBINED CONDENSED
STATEMENTS OF CONDITION
AS OF
SEPTEMBER 30, 1994
Adjust-
(Thousands) FTNC (1) Community Bancshares ment (2) Pro Forma
================================================================================================================================
ASSETS
Cash and cash equivalents $ 890,728 $ 10,707 $ $ 901,435
Investments in bank time deposits 2,745 2,745
Trading account securities inventory 223,227 223,227
Assets available for sale 1,655,826 28,486 1,684,312
Investment securities held to maturity 937,221 66,942 1,004,163
Net loans 6,011,184 141,275 6,152,459
Premises and equipment, net 148,492 4,482 152,974
Real estate acquired by foreclosure 21,609 1,476 23,085
Mortgage servicing rights 70,436 70,436
Other identifiable intangible assets 26,450 26,450
Goodwill 61,561 61,561
Customers' acceptances 3,562 3,562
Other assets 393,825 3,453 397,278
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $ 10,446,866 $ 256,821 $ -- $ 10,703,687
================================================================================================================================
LIABILITIES
Deposits $ 7,593,883 $ 200,016 $ $ 7,793,899
Federal funds purchased and securities
sold under agreements to repurchase 1,155,809 12,951 1,168,760
Other borrowings 492,930 20,000 512,930
Long term debt 91,701 91,701
Acceptances outstanding 3,562 3,562
Other liabilities 356,984 2,417 359,401
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,694,869 235,384 -- 9,930,253
SHAREHOLDERS' EQUITY
Preferred stock
Common stock 80,507 3,342 (197) 83,652
Surplus 94,397 14,349 (1,020) 107,726
Retained earnings 594,083 5,272 599,355
Treasury stock (1,217) 1,217
Net unrealized loss on marketable
equity securities (13,931) (309) (14,240)
Deferred compensation on restricted stock
incentive plan (3,059) (3,059)
- -------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 751,997 21,437 -- 773,434
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 10,446,866 $ 256,821 $ -- $ 10,703,687
================================================================================================================================
(1) FTNC amounts as of September 30, 1994 do not include the acquisition of
Emerald Mortgage Company which closed October 1, 1994 or the pending
acquisitions of Carl I. Brown and Co. and Peoples Commercial Services
Corp. which are immaterial.
(2) Reflects the conversion of 3,220,070 shares of all Community Bancshares
common stock outstanding after the retirement of its treasury stock at
September 30, 1994, into 1,257,985 shares of FTNC's $2.50 par value common
stock using an exchange ratio of .39067 which is based on an assumed FTNC
Common Stock Average Price of $43.52 - $51.00.
PF-2
54
FIRST TENNESSEE NATIONAL CORPORATION
PRO FORMA COMBINED CONDENSED
STATEMENTS OF CONDITION
AS OF
DECEMBER 31, 1993
Community Adjust-
(Thousands) FTNC (1) Bancshares ment (2) Pro Forma
============================================================================================================================
ASSETS
Cash and cash equivalents $ 760,747 $ 15,565 $ $ 776,312
Investments in bank time deposits 7,637 7,637
Trading account securities inventory 178,663 178,663
Assets held for sale 1,152,721 21,650 1,174,371
Investment securities 2,220,087 69,568 2,289,655
Net loans 5,329,249 120,379 5,449,628
Premises and equipment, net 136,230 3,809 140,039
Real estate acquired by foreclosure 31,658 3,390 35,048
Mortgage servicing rights 82,625 82,625
Other identifiable intangible assets 28,905 28,905
Goodwill 62,565 62,565
Customers' acceptances 4,871 4,871
Other assets 370,739 6,107 376,846
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $ 10,366,697 $ 240,468 $ -- $ 10,607,165
============================================================================================================================
LIABILITIES
Deposits $ 7,402,581 $ 200,073 $ $ 7,602,654
Federal funds purchased and securities
sold under agreements to repurchase 1,014,644 10,480 1,025,124
Other borrowings 746,561 6,000 752,561
Long term debt 92,043 92,043
Acceptances outstanding 4,871 4,871
Other liabilities 412,413 3,083 415,496
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,673,113 219,636 -- 9,892,749
SHAREHOLDERS' EQUITY
Preferred stock
Common stock 80,079 3,339 (77) 83,341
Surplus 90,198 14,332 77 104,607
Retained earnings 525,682 3,161 528,843
Treasury stock
Deferred compensation on restricted stock
incentive plan (2,375) (2,375)
- ----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 693,584 20,832 -- 714,416
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 10,366,697 $ 240,468 $ -- $ 10,607,165
============================================================================================================================
(1) FTNC amounts as of December 31, 1993 include the acquisitions of SNMC
Management Corporation, Cleveland Bank and Trust Company, Highland
Capital Management Corp., and Planters Bank which have closed during 1994
and have been accounted for as poolings of interests. Amounts do not
include the acquisition of Emerald Mortgage Company which closed October
1, 1994 or the pending acquisitions of Carl I. Brown and Co. and Peoples
Commercial Services Corp. which are immaterial.
(2) Reflects the conversion of 3,339,216 shares of all Community Bancshares
common stock outstanding at December 31, 1993, into 1,304,532 shares of
FTNC's $2.50 par value common stock using an exchange ratio of .39067
which is based on an assumed FTNC Common Stock Average Price of $43.52 -
$51.00.
PF-3
55
FIRST TENNESSEE NATIONAL CORPORATION
PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
Community
(Thousands) FTNC (1) Bancshares Pro Forma
=====================================================================================================================
Interest income:
Interest and fees on loans $ 381,904 $ 8,889 $ 390,793
Interest on investment securities 93,583 4,662 98,245
Interest on trading securities inventory 9,449 9,449
Interest on other earning assets 5,619 10 5,629
- ---------------------------------------------------------------------------------------------------------------------
Total interest income 490,555 13,561 504,116
- ---------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 150,545 4,444 154,989
Interest on other borrowings 45,278 630 45,908
Interest on long-term debt 6,787 6,787
- ---------------------------------------------------------------------------------------------------------------------
Total interest expense 202,610 5,074 207,684
- ---------------------------------------------------------------------------------------------------------------------
Net interest income 287,945 8,487 296,432
Provision for loan losses 12,558 360 12,918
- ---------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 275,387 8,127 283,514
- ---------------------------------------------------------------------------------------------------------------------
Noninterest income:
Bond division 63,759 63,759
Service charges on deposit accounts 46,853 747 47,600
Mortgage banking 88,102 88,102
Bank card 22,620 22,620
Trust service 20,738 20,738
Securities gains 22,580 22,580
Other 35,096 338 35,434
- ---------------------------------------------------------------------------------------------------------------------
Total noninterest income 299,748 1,085 300,833
- ---------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Employee compensation, incentives, and benefits 226,735 3,029 229,764
Operations services 24,702 24,702
Occupancy 22,110 835 22,945
Communications and courier 19,699 19,699
Equipment rentals, depreciation, and
maintenance 17,709 17,709
Deposit insurance premium 12,250 12,250
Amortization of intangible assets 16,326 16,326
Other 78,089 2,219 80,308
- ---------------------------------------------------------------------------------------------------------------------
Total noninterest expense 417,620 6,083 423,703
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 157,515 3,129 160,644
Applicable income taxes 48,267 1,018 49,285
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 109,248 $ 2,111 $ 111,359
=====================================================================================================================
Net income per common share $ 3.40 $ .65 $ 3.34
- ---------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding (2) 32,132 3,225 33,391
- ---------------------------------------------------------------------------------------------------------------------
(1) FTNC amounts as of September 30, 1994 do not include the acquisition of
Emerald Mortgage Company which closed October 1, 1994 or the pending
acquisitions of Carl I. Brown and Company and Peoples Commercial Services
Corp. which are immaterial.
(2) Pro forma weighted average shares outstanding have been calculated by
increasing FTNC's current weighted average shares by the FTNC equivalent
weighted average shares for Community Bancshares. The exchange ratio
used in the Community Bancshares calculation was .39067, an estimate
based on an assumed FTNC Common Stock Average Price of $43.52 - $51.00.
PF-4
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FIRST TENNESSEE NATIONAL CORPORATION
PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
FOR THE YEAR ENDED
DECEMBER 31, 1993
Community
(Thousands) FTNC (1) Bancshares Pro Forma
=============================================================================================================================
Interest income:
Interest and fees on loans $ 435,039 $ 10,349 $ 445,388
Interest on investment securities 176,764 6,268 183,032
Interest on trading securities inventory 9,304 9,304
Interest on other earning assets 3,875 24 3,899
- -----------------------------------------------------------------------------------------------------------------------------
Total interest income 624,982 16,641 641,623
- -----------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 197,103 6,118 203,221
Interest on other borrowings 55,106 257 55,363
Interest on long-term debt 9,315 212 9,527
- -----------------------------------------------------------------------------------------------------------------------------
Total interest expense 261,524 6,587 268,111
- -----------------------------------------------------------------------------------------------------------------------------
Net interest income 363,458 10,054 373,512
Provision for loan losses 35,697 764 36,461
- -----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 327,761 9,290 337,051
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Bond division 91,525 91,525
Service charges on deposit accounts 57,420 957 58,377
Mortgage banking 85,640 85,640
Bank card 28,467 28,467
Trust service 26,532 26,532
Securities gains 805 87 892
Other 44,418 666 45,084
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest income 334,807 1,710 336,517
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Employee compensation, incentives, and benefits 265,851 4,124 269,975
Operations services 28,482 28,482
Occupancy 24,863 1,230 26,093
Communications and courier 21,544 21,544
Equipment rentals, depreciation, and
maintenance 20,264 20,264
Deposit insurance premium 16,014 571 16,585
Amortization of intangible assets 30,811 30,811
Other 84,069 2,765 86,834
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 491,898 8,690 500,588
- -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 170,670 2,310 172,980
Applicable income taxes 64,588 4 64,592
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 106,082 $ 2,306 $ 108,388
=============================================================================================================================
Net income per common share $ 3.31 $ .81 $ 3.27
- -----------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding (2) 32,031 2,842 33,141
- -----------------------------------------------------------------------------------------------------------------------------
(1) FTNC amounts as of December 31, 1993 include the acquisitions of SNMC
Management Corporation, Cleveland Bank and Trust Company, Highland Capital
Management Corp., and Planters Bank which have closed during 1994 and have
been counted for as poolings of interests. Amounts do not include the
acquisition of Emerald Mortgage Company which closed October 1, 1994 or the
pending acquisitions of Carl I. Brown and Co. and Peoples Commercial
Services Corp. which are immaterial.
(2) Pro forma weighted average shares outstanding have been calculated by
increasing FTNC's weighted average shares by the FTNC equivalent weighted
average shares for Community Bancshares. The exchange ratio used in the
Community Bancshares calculation was .39067, an estimate based on an
assumed FTNC Common Stock Average Price of $43.52 - $51.00.
PF-5
57
APPENDIX "A"
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 22ND DAY OF SEPTEMBER, 1994
BY AND BETWEEN
FIRST TENNESSEE NATIONAL CORPORATION
AND
COMMUNITY BANCSHARES, INC.
58
TABLE OF CONTENTS
PAGE
----
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(A) The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
(B) Conversion of CBI Common Stock . . . . . . . . . . . . . . . 2
(C) No Fractional Shares . . . . . . . . . . . . . . . . . . . . 3
(D) Stock Options . . . . . . . . . . . . . . . . . . . . . . . . 4
(E) Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II.
ACTIONS PENDING MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III.
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV.
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V.
CONDITIONS TO CONSUMMATION . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI.
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII.
EFFECTIVE DATE AND EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII.
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
i
59
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 22nd day of September,
1994, by and between FIRST TENNESSEE NATIONAL CORPORATION ("FTNC"), a Tennessee
corporation, and COMMUNITY BANCSHARES, INC. ("CBI"), a Tennessee corporation.
RECITALS
(A) FTNC. FTNC has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Tennessee, with its
principal executive offices located in Memphis, Tennessee. As of the date
hereof, FTNC has 100,000,000 authorized shares of common stock, par value $2.50
per share ("FTNC Common Stock"), of which 31,884,333 shares are outstanding as
of July 31, 1994, and 5,000,000 authorized shares of preferred stock, no par
value, none of which are outstanding (no other class of capital stock being
authorized).
(B) CBI; COMMUNITY FIRST BANK. (1) CBI has been duly incorporated
and is an existing corporation in good standing under the laws of the State of
Tennessee, with its principal executive offices located in Germantown,
Tennessee. As of the date hereof, CBI has 4,000,000 authorized shares of
common stock, par value $1.00 per share ("CBI Common Stock"), of which
3,218,816 shares are outstanding and 2,920 shares are reserved for issuance to
CBI's 401(k) plan as of the date hereof (no other class of capital stock being
authorized). CBI owns all of the issued and outstanding common stock of
Community First Bank.
(C) RIGHTS, ETC. Neither FTNC, CBI nor Community First Bank has any
shares of its capital stock reserved for issuance, any outstanding option, call
or commitment relating to shares of its capital stock or any outstanding
securities, obligations or agreements convertible into or exchangeable for, or
giving any person any right (including, without limitation, preemptive rights)
to subscribe for or acquire from it, any shares of its capital stock
(collectively, "Rights"), except (i) in the case of FTNC, pursuant to a
Shareholder Protection Rights Agreement, dated as of September 7, 1989, between
FTNC and First Tennessee Bank National Association, as Rights Agent (the "FTNC
Rights Agreement"), (ii) for securities issued as permitted under Section (I)
of Article IV, and (iii) as set forth on EXHIBIT "A" hereto (as to FTNC) and
EXHIBIT "B" hereto (as to CBI) and Community First Bank.
(D) INTENTION OF THE PARTIES. It is the intention of the parties to
this Agreement that the Merger for federal income tax purposes shall qualify as
a "reorganization" within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
(E) MATERIALITY. Unless the context otherwise requires, any
reference in this Agreement to materiality shall, as to CBI, be deemed to be
with respect to CBI and its subsidiaries taken as a whole and as to FTNC shall
be deemed to be with respect to FTNC and its subsidiaries, taken as a whole.
In consideration of their mutual promises and obligations hereunder,
and intending to be legally bound hereby, FTNC and CBI adopt and make this
Agreement and prescribe the terms and conditions hereof and the manner and
basis of carrying it into effect, which shall be as follows:
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ARTICLE I.
THE MERGER
(A) THE MERGER. On the Effective Date (as defined in Article VII),
CBI will merge (the "Merger") with and into FTNC, with FTNC being the surviving
corporation (the "Surviving Corporation"), pursuant to the provisions of, and
with the effects provided in, the Tennessee Code. At the Effective Time (as
defined in Article VII), the charter and bylaws of FTNC (as the Surviving
Corporation) shall be the charter and bylaws of FTNC in effect immediately
prior to the Effective Time. At the Effective Time, the directors and officers
of FTNC shall be the directors and officers of the Surviving Corporation.
(B) CONVERSION OF CBI COMMON STOCK. By virtue of the Merger,
automatically and without any action on the part of the holder thereof, at the
Effective Time, all of the CBI Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares held directly or indirectly by
FTNC or any subsidiary of FTNC, except in a fiduciary capacity or in
satisfaction of a debt previously contracted, and other than shares held in the
treasury of CBI, 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 shares of FTNC Common Stock, as described
below:
(1) Each share of CBI Common Stock issued and outstanding
at the Effective Time shall become and be converted into the right to
receive shares of FTNC Common Stock based on a conversion ratio (the
"Conversion Number") determined as follows:
(i) if the FTNC Common Stock Average Price
(hereafter defined) is within the range of $43.52 and $51.00,
inclusive, the Conversion Number will be .39067;
(ii) if the FTNC Common Stock Average Price is
greater than $51.00 per share, the Conversion Number will be
the product of (y) .39067 multiplied by (z) the quotient of
(1) $51.00 divided by (2) the FTNC Common Stock Average Price.
(iii) if the FTNC Common Stock Average Price is less
than $43.52 per share, the Conversion Number will be the
product of (y) .39067 multiplied by (z) the quotient of (1)
$43.52 divided by (2) the FTNC Common Stock Average Price;
(iv) if the FTNC Common Stock Average Price is less
than $41.00 per share, FTNC shall have the right to terminate
this Agreement as provided in Paragraph (D) of Article VI;
provided, however, if FTNC exercises its termination right as
provided in Paragraph (D) of Article VI, CBI shall have the
right to require FTNC to consummate the Merger in which event
the Conversion Number will be .41468;
(v) if the FTNC Common Stock Average Price is
greater than $53.50, CBI shall have the right to terminate
this Agreement as provided in Paragraph (E) of Article VI;
provided, however, if CBI exercises its termination right as
provided in Paragraph (E) of Article VI, FTNC shall have the
right to require CBI to consummate the Merger in which event
the Conversion Number will be .37241;
(vi) in the event that prior to the Effective Date
FTNC enters into a letter of intent or comparable document or
a definitive purchase and sale agreement to be acquired by
another Person or another Person publicly announces the intent
to acquire 25% or more of the outstanding equity securities of
FTNC whether by tender offer or otherwise or FTNC enters into
a letter of intent or comparable document or a definitive
merger agreement in which
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FTNC is not the surviving corporation, the Conversion Number
will be the greater of (y) the amount determined under (i)
through (v) above, as applicable, or (z) .37241; and
(vii) in the event that prior to the Effective Date
FTNC pays any special dividend on FTNC Common Stock in an
amount greater than 1% of its total assets on a consolidated
basis immediately prior to such dividend payment (an
"Extraordinary Dividend"), and if FTNC exercises its
termination right as provided in Paragraph (D) of Article VI,
CBI shall have the right to require FTNC to consummate the
Merger in which event the Conversion Number will be the
quotient of (y) .41468 divided by (z) the remainder of (1) 1
minus (2) the quotient of (i) the Extraordinary Dividend
divided by (ii) the total assets of FTNC immediately prior to
the Extraordinary Dividend.
The FTNC Common Stock Average Price shall be equal to the average of
the closing prices of the FTNC Common Stock as reported on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on the
twenty (20) business days included in the Calculation Period. The Calculation
Period shall consist of the twenty (20) business days immediately prior to the
tenth (10th) calendar day preceding the planned Effective Date (not including
the Effective Date). For purposes of this Section I.B, a business day shall be
a day on which The NASDAQ Stock Market is generally open for trading;
(2) Each share of FTNC Common Stock issued and outstanding at
the Effective Time [other than (x) shares, if any, held directly or
indirectly by CBI (or any CBI subsidiary) except in a fiduciary
capacity or in satisfaction of a debt previously contracted, and (y)
shares, if any, held as treasury stock by FTNC] shall remain
outstanding and unchanged as a result of the Merger and, together with
the shares of FTNC 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 FTNC.
(3) Subsequent to the date of this Agreement but prior to the
Effective Date, if the outstanding shares of FTNC 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 FTNC is effectively acquired, or other like
changes in FTNC's capitalization shall have occurred, the terms and
provisions of subsection (1) of this Section (B) shall be adjusted
accordingly. This Paragraph (3) does not apply to transactions in
which FTNC or one of its subsidiaries is effectively the acquiring
entity.
(C) NO FRACTIONAL SHARES. Notwithstanding any other provision
hereof, no fractional shares of FTNC Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, FTNC shall pay to each holder of CBI Common Stock exchanged pursuant
to this Agreement who would otherwise be entitled to a fractional share an
amount in cash determined by multiplying such holder's fractional interest (i)
if the Conversion Number is .39067, by the closing price of FTNC Common Stock
as reported on the NASDAQ for the Effective Date; (ii) if the Conversion Number
is determined under Paragraph (B)(1)(ii) or (iii) of Article I, by the FTNC
Common Stock Average Price as used to calculate the Conversion Number; (iii) if
the Conversion Number is determined under Paragraph (B)(1)(iv) of Article I, by
$41.00 per share; (iv) if the Conversion Number is determined under Paragraph
(B)(1)(v) of Article I, by $53.50 per share (in any case rounded up to the
nearest cent); (v) if the Conversion Number is determined under Paragraph
(B)(1)(vi)(y) of Article I, by the amount determined under Sections (i) through
(v) of Paragraph (B)(1) of Article I and if the Conversion Number is determined
under Paragraph (B)(1)(vi)(z) of Article I, by the closing price of FTNC Common
Stock as reported on NASDAQ for the Effective Date; and (vi) if the Conversion
Number is determined under Paragraph (B)(1)(vii) of Article I, by the closing
price of FTNC Common Stock as reported on NASDAQ for the Effective Date.
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62
(D) STOCK OPTIONS. If appropriate actions have been taken by CBI to
amend its Employee Incentive Stock Option Plan, at the Effective Time each
option granted by CBI to purchase shares of CBI Common Stock which is
outstanding and unexercised shall be converted automatically into an option to
purchase shares of FTNC Common Stock in an amount and at an exercise price
determined as provided below (and otherwise having the same duration and other
terms as the original option):
(i) The number of shares of FTNC Common Stock to be subject to the
new option shall be equal to the product of the number of shares of
CBI Common Stock subject to the original option and the Conversion
Number, provided that any fractional shares of FTNC Common Stock
resulting from such multiplication shall be rounded down to the
nearest share; and
(ii) The exercise price per share of FTNC Common Stock under the new
option shall be equal to the exercise price per share of CBI Common
Stock under the original option divided by the Conversion Number,
provided that such exercise price shall be rounded up to the nearest
cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of 1986,
as amended, the "Code") shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code.
(E) PROCEDURES. Certificates which represent shares of CBI Common
Stock that are outstanding at the Effective Time (each, a "Certificate") and
are converted into the right to receive shares of FTNC Common Stock 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 for
new certificates representing the shares of FTNC Common Stock into which such
shares have been converted.
As promptly as practicable after the Effective Date, FTNC shall send
to each holder of record of shares of CBI Common Stock outstanding at the
Effective Time transmittal materials for use in exchanging the Certificates for
such shares for certificates for shares of the FTNC Common Stock into which
such shares of the CBI Common Stock have been converted pursuant to the Merger.
Upon surrender of a Certificate, together with a duly executed letter of
transmittal and any other required documents, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate for the number
of shares of FTNC Common Stock to which such holder is entitled, and such
Certificate shall forthwith 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 FTNC or its agent that such tax either has been
paid or is not payable.
No holder of CBI Common Stock shall be entitled to exercise any rights
as a shareholder of FTNC 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 FTNC Common Stock shall be paid to the holder of any unsurrendered
Certificate until the holder thereof properly surrenders such Certificate
(together with all required documents), at which time such holder shall receive
all dividends and distributions, without interest thereon, previously withheld
from such holder pursuant hereto. After the Effective Time, there shall be no
transfers on the stock transfer books of CBI of shares of CBI 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 FTNC Common Stock.
If after the Effective Time, Certificates are presented for transfer to CBI,
they shall be cancelled and exchanged for the shares of FTNC
A-4
63
Common Stock deliverable in respect thereof as determined in accordance with
the provisions of Article I, Paragraph (B) and in accordance with the
procedures set forth in this Paragraph.
After the Effective Time, holders of CBI Common Stock shall cease to
be, and shall have no rights as, stockholders of CBI, other than to receive
shares of FTNC Common Stock into which such shares have been converted or
fractional share payments pursuant to this Agreement.
Notwithstanding the foregoing, neither FTNC nor CBI nor any other
person shall be liable to any former holder of shares of CBI Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
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 FTNC of
appropriate and customary indemnification including, when appropriate, the
posting of bond, FTNC will issue in exchange for such lost, stolen or destroyed
certificate shares of FTNC Stock and the fractional share payment, if any,
deliverable in respect thereof as determined in accordance with this Article I.
(F) Bank Merger. FTNC and CBI will take all action necessary and
appropriate to cause their respective subsidiaries First Tennessee Bank
National Association, or any successor thereto ("FTB"), and Community First
Bank to enter into a merger agreement substantially in the form attached hereto
as EXHIBIT "C" and to merge (the "Bank Merger") simultaneously with or, if such
Bank Merger cannot be effected simultaneously with, immediately after the
consummation of the Merger, pursuant to the provisions of applicable law. The
structure and terms of the Bank Merger shall be determined by FTNC subject to
the condition that such structure and terms do cause the Merger to fail to
qualify as a reorganization under Section 368(a) of the Code. At the effective
time of the Bank Merger, 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.
ARTICLE II.
ACTIONS PENDING MERGER
Prior to the earlier of the Effective Time or termination of this
Agreement by either party under Article VI,
(A) without the prior written consent of FTNC, CBI will not:
(1) (y) make, declare or pay any dividend on CBI Common Stock for any
period ending before April 1, 1995, or make, declare or pay any
dividend for any quarterly period beginning April 1, 1995, greater
than 16.5c. per share, or (z) (except as provided in the immediately
preceding clause (y)) 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 CBI's capital stock, or any options, calls or
commitments relating to its capital stock, or any securities,
obligations or agreements convertible into or exchangeable for, or
giving any person any right to subscribe for or acquire, shares of its
capital stock;
A-5
64
(2) merge or consolidate or permit any subsidiary to merge or
consolidate with any other entity or engage in any similar
transaction.
(B) Without the prior written consent of FTNC, which consent will not
be unreasonably withheld, CBI will not and will not permit any 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 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 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; provided, however, CBI shall be permitted
to propose and/or cause such amendments to be made to its existing
Employee Incentive Stock Option Plan to provide that options
outstanding pursuant to such plan on the date hereof, whether or not
vested as of the date hereof, should vest as a result of a change of
control of CBI and be convertible into options to acquire FTNC Common
Stock as provided in Paragraph (D) of Article I;
(3) except as contemplated by Paragraph (M) of Article IV,
substantially modify the manner in which it and its subsidiaries have
heretofore conducted their business, taken as a whole, or amend its
articles of incorporation or by-laws;
(4) except for transactions in the ordinary course of its banking
business, sell, dispose of or discontinue or permit any 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 CBI) 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.
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65
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
FTNC represents and warrants to CBI, and CBI represents and warrants
to FTNC, that, except as previously disclosed in a letter of FTNC or CBI,
respectively, of even date herewith delivered to the other party or in the
Exhibits attached hereto:
(A) The facts set forth in the Recitals of this Agreement with
respect to it are true and correct;
(B) The outstanding shares of capital stock of it and as to CBI, its
subsidiaries, and as to FTNC, its Significant Subsidiaries (as defined in Rule
1-02 of Regulation S-X), if any, are duly authorized, validly issued and
outstanding, fully paid and (subject to 12 U.S.C. Section 55 in the case of a
national bank subsidiary and comparable state statutes, in the case of a state
bank subsidiary) non-assessable, and subject to no preemptive rights;
(C) Each of it and as to CBI, its subsidiaries, and as to FTNC, its
Significant Subsidiaries (EXHIBIT "III(C)(1)" hereto in the case of FTNC sets
forth a list of its Significant Subsidiaries and EXHIBIT "III(C)(2)" hereto in
the case of CBI sets forth a list of its subsidiaries) 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 (as hereinafter defined)) 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;
(D) The shares of capital stock as to CBI, of each of its
subsidiaries and as to FTNC, each of its Significant Subsidiaries are owned by
it (except for director's qualifying shares) free and clear of all liens,
claims, encumbrances and restrictions on transfer and there are no rights with
respect to such capital stock;
(E) Subject in the case of CBI to any required shareholder approvals
of this Agreement, and, subject to receipt of required regulatory approvals,
this Agreement is a valid and binding agreement of it 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;
(F) The execution, delivery and performance of this Agreement by it
does not, and the consummation of the transactions contemplated hereby by it
will not, constitute (1) 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 its subsidiaries or to
which it or its subsidiaries (or any of their respective 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 certificate or articles of incorporation or bylaws of it or as to
CBI, any of its subsidiaries, or as to FTNC, any of its Significant
Subsidiaries; 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 approvals of applicable regulatory authorities referred
to in Paragraphs (A)(2) and (A)(3) of Article V and the approval of
shareholders of CBI referred to in Paragraph (E) of Article III and other than
any consents and approvals the absence of which will not have a Material
Adverse Effect;
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(G) As of their respective dates, neither its Annual Report on Form
10-K for the fiscal year ended December 31, 1993, nor any other document filed
subsequent to December 31, 1993 under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"),
each in the form (including exhibits) filed with the Securities and Exchange
Commission (the "SEC") nor, as to CBI, its interim unaudited monthly
consolidated financial report for the period ended July 31, 1994 (collectively
the "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 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 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 generally accepted accounting principles ("GAAP") applicable to
bank holding companies, consistently applied during the periods involved,
except as may be noted therein. For purposes of the representations made in
the immediately preceding two sentences as to the interim unaudited monthly
consolidated financial report for the period ended July 31, 1994, an untrue
statement of fact or an omitted statement of fact required to make statements
made not misleading shall be deemed material if the untrue statement or omitted
statement has a Material Adverse Effect. It has no obligations or liabilities
(whether absolute, accrued, contingent or otherwise) which are not disclosed in
the Reports, the omission of which would singly or in the aggregate have a
Material Adverse Effect. Since the date of its most recent Form 10-Q 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.
(H) There has been no adverse change in the financial condition of it
and its subsidiaries, taken as a whole, since December 31, 1993 which has had a
Material Adverse Effect;
(I) All material federal, state, local, and foreign tax returns
required to be filed by or on behalf of it or any of its subsidiaries 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 shown on
returns filed by it 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 it and it 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 it have been paid in full or adequate provision has been
made for any such taxes on its balance sheet (in accordance with GAAP). It 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;
(J) (1) Except as disclosed in Exhibit "III J(1)(1)" as to FTNC or
EXHIBIT "III J(1)(2)" as to CBI hereto, no litigation, proceeding or
controversy before any court or governmental agency is pending, and there is no
pending claim, action or proceeding against it or any of its subsidiaries,
which in the reasonable judgment of its Chief Executive Officer is likely to
have a Material Adverse Effect or to prevent consummation of the transactions
contemplated hereby, and, to the best of its knowledge, no such litigation,
proceeding, controversy, claim or action has been threatened or is
contemplated, and, to its 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
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Material Adverse Effect or prevent consummation of the transactions
contemplated hereby, and (2) neither it nor any of its subsidiaries 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, federal or state governmental authorities charged with the supervision or
regulation of banks or bank holding companies or engaged in the insurance of
bank deposits ("Bank Regulators"), nor has it been advised by any Bank
Regulator 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;
(K) Except as disclosed in EXHIBIT "III(K)(1)" hereto in the case of
FTNC and EXHIBIT "III(K)(2)" hereto in the case of CBI and except for this
Agreement and arrangements made in the ordinary course of business, neither it
and nor any of subsidiaries are bound by any material contract (as defined in
Item 601(b)(10)(i) and (ii) of Regulation S-K) to be performed after the date
hereof that has not been filed with or incorporated by reference in the
Reports;
(L) All "employee benefit plans", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), that cover as to
CBI, its or any of its subsidiaries, employees or as to FTNC, any of its or its
Significant Subsidiaries' employees, comply in all 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 CBI; neither it nor as to CBI, any of
its subsidiaries, or as to FTNC, any of its Significant Subsidiaries 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 it or them 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 it nor as to CBI, any of
its subsidiaries, or as to FTNC, any of its Significant Subsidiaries has
provided, or is required to provide, security to any Pension Plan pursuant to
Section 401(a)(29) of the Code; as to CBI, it and its subsidiaries and as to
FTNC, it and its Significant Subsidiaries have not contributed to a
"multiemployer plan" as defined in Section 3(37) of ERISA, on or after
September 26, 1980; and as to CBI, it or its subsidiaries and as to FTNC, it
and its Significant Subsidiaries do not have any obligations for retiree health
and life benefits under any benefit plan, contract or arrangement;
(M) Each of it and its subsidiaries has good title to its properties
and assets (other than property as to which it is lessee) except for such
defects in title which would not, in the aggregate, have a Material Adverse
Effect;
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(N) It knows of no reason why the regulatory approvals referred to in
Paragraphs (A)(2) and (A)(3) of Article V should not be obtained without the
imposition of any condition of the type referred to in the proviso following
such Paragraphs (A)(2) and (A)(3);
(O) Its reserve for possible loan losses as shown (i) in its Report
for the fiscal year ended December 31, 1993, was adequate in all material
respects under GAAP applicable to banks and safe and sound banking practices;
and (ii) in CBI's unaudited interim consolidated financial report at July 31,
1994 was, in its opinion, adequate in all material respects under GAAP
applicable to banks and safe and secure banking practices;
(P) It and as to CBI each of its subsidiaries, and as to FTNC each of
its Significant Subsidiaries have 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 the best knowledge
of it no suspension or cancellation of any of them is threatened;
(Q) In the case of FTNC, the shares of capital 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;
(R) Neither it nor any of its subsidiaries is a party to, or is bound
by, any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is it or any of its
subsidiaries the subject of a proceeding asserting that it 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 it or any of its subsidiaries pending or threatened;
(S) Except services performed for CBI by Attkisson, Carter & Akers,
Incorporated, neither it nor any of its subsidiaries, 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 it or any of its subsidiaries, in connection with this Agreement
or the transactions contemplated hereby;
(T) The information to be supplied by it for inclusion in (1) the
Registration Statement on Form S-4 and/or such other form(s) as may be
appropriate to be filed under the Securities Act of 1933, as amended (the
"Securities Act"), with the SEC by FTNC for the purpose of, among other things,
registering the FTNC Common Stock to be issued to the shareholders of CBI in
the Merger (the "Registration Statement"), or (2) the proxy statement to be
distributed in connection with CBI's meeting of its shareholders to vote upon
this Agreement (as amended or supplemented from time to time, the "Proxy
Statement", and together with the prospectus included in the Registration
Statement, as amended or supplemented from time to time, 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 stockholders 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;
(U) For purposes of this section, the following terms shall have the
indicated meaning:
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"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction
or agreement with any governmental entity relating to (1) the
protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal
life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances. The term Environmental Law includes without limitation
(1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, et seq., the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901, et seq., the Clean Air Act, as amended, 42 U.S.C. Section 7401,
et seq., the Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1251, et seq., the Toxic Substances Control Act, as
amended, 15 U.S.C. Section 9601, et seq., the Emergency Planning and
Community Right to Know Act, 42 U.S.C. Section 11001, et seq., the
Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq., all
comparable state and local laws, and (2) any common law (including
without limitation common law that may impose strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any
Hazardous Substance.
"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any material containing any
such substance as a component. Hazardous Substances include without
limitation petroleum or any derivative or by-product thereof,
asbestos, radioactive material, and polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means
those properties owned or operated by FTNC or CBI or any of their
subsidiaries including properties owned or operated in a fiduciary
capacity.
(1) To the best knowledge of it and its subsidiaries, neither it nor
any of its subsidiaries 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;
(2) To the best knowledge of it and its subsidiaries, none of the
Loan Portfolio Properties and Other Properties Owned by it or its
subsidiaries has been or is in violation of or liable under any
Environmental Law, except any such violations or liabilities which
singly or in the aggregate will not have a Material Adverse Effect;
and
(3) To the best knowledge of it and its subsidiaries, 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 it or its
subsidiaries 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.
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ARTICLE IV.
COVENANTS
FTNC hereby covenants to CBI, and CBI hereby covenants to FTNC, that:
(A) 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) In the case of CBI, 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 federal and state law and with its certificates of
incorporation or charter, as the case may be, and bylaws; and (4)
cooperate and consult with FTNC with respect to each of the foregoing
matters;
(C) 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) In the case of FTNC, it will advise CBI, promptly after FTNC
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 FTNC Common Stock issuable pursuant to this Agreement
for offering or sale in any jurisdiction, of the initiation or 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) In the case of FTNC, 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) Subject to its disclosure obligations imposed by 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 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) It shall promptly furnish the other party with copies of written
communications received by it, or any of its respective subsidiaries,
Affiliates or Associates (as such terms are defined in Rule 12b-2
under the Securities Exchange Act as in effect on the date hereof),
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) (1) Upon reasonable notice, it shall (and shall cause each of
its subsidiaries to) afford the other party hereto, and its officers,
employees, counsel, accountants and other authorized representatives
(collectively, such party's "Representatives") access, during normal
business hours, to all of its and its subsidiaries' properties, books,
contracts, tax returns, commitments and records; it shall enable the
other party's Representatives to discuss its business affairs,
condition (financial and otherwise), assets
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and liabilities with such third persons, including, without
limitation, its directors, officers, employees, accountants and
counsel, as the other party considers necessary or appropriate; and it
shall (and as to CBI, it shall cause each of its subsidiaries and as
to FTNC, it shall cause each of its Significant Subsidiaries to)
furnish promptly to the other party hereto (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,
1992, 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 Paragraph (H)
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) it will, upon request,
furnish the other party with all information concerning it, its
subsidiaries, directors, officers, partners and stockholders 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 FTNC, CBI 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; and
(3) it will not use any information obtained pursuant to this
Paragraph (H) 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, it will hold all
information and documents obtained pursuant to this Paragraph (H) in
confidence unless and until such time as such information or documents
otherwise become publicly available or as it is advised by counsel
that any such information or document is required by 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;
(I) Neither it nor any of its subsidiaries 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 it directly or owned by any of its subsidiaries), or
of a substantial equity interest in it or any business combination
with it or any of its subsidiaries other than as contemplated by this
Agreement, and it shall instruct its officers, directors, agents,
advisors and affiliates to comply with the above; provided, however,
in the case of FTNC, this covenant does not apply to a business
combination initiated by FTNC or in which FTNC or a company which is
its subsidiary following the transaction is as a practical matter the
surviving corporation. CBI agrees that it shall notify FTNC
immediately if any inquiries or proposals as described in this
paragraph are received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated with,
CBI or any of its subsidiaries; provided, however, CBI's duty is
limited to notifying FTNC of the existence of such inquiry or proposal
and CBI has no obligation to provide FTNC any additional information;
(J) 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) It 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 FTNC, submission of applications for approval of this
Agreement and the transactions contemplated hereby to the Board of
Governors of the Federal Reserve System (the
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"Federal Reserve Board") in accordance with the provisions of the Bank
Holding Company Act of 1956, as amended (the "BHC Act"), and to such
other regulatory agencies as required by law;
(L) It 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, 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;
(M) Prior to the Closing, CBI shall, consistent with generally
accepted accounting principles, modify and change its and each of its
subsidiaries' 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 FTNC; provided, however, that CBI shall not be obligated to
take any such action pursuant to this Paragraph (M) unless and until
FTNC acknowledges that all conditions to its obligation to consummate
the Merger have been satisfied;
(N) (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
CBI or any of its subsidiaries (the "Indemnified Parties") is, or is
threatened to be, made a party based in whole or in part on, or
arising in whole or in part out of, or pertaining to, 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 FTNC
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), (i) FTNC shall pay expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt
of any undertaking required by applicable law, (ii) the Indemnified
Parties may retain one firm of counsel satisfactory to them, and FTNC
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 FTNC, CBI or any other Indemnified
Party, then such Indemnified Party may employ separate counsel to
represent or defend it or any other person entitled to indemnification
and reimbursement hereunder with respect to any such claim, action,
suit, proceeding or investigation in which it or such other person may
become involved or is named as defendant and FTNC shall pay the
reasonable fees and expenses of such counsel and (iii) FTNC will use
its best efforts to assist in the vigorous defense of any such matter,
provided that FTNC shall not be liable for any settlement effected
without its prior written consent (which consent shall not be
unreasonably withheld), and provided further that FTNC shall have no
obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such
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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 FTNC shall be
reimbursed by such Indemnified Party for all expenses advanced on its
behalf by FTNC. Any Indemnified Party wishing to claim
indemnification under this Paragraph (N) of Article IV hereof upon
learning of any such claim, action, suit, proceeding or investigation,
shall notify FTNC thereof, provided that the failure to so notify
shall not affect the obligations of FTNC under this Paragraph (N) of
Article IV hereof except to the extent such failure to notify
materially prejudices FTNC. 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 CBI or any Indemnified
Party;
(2) FTNC and CBI agree that all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Parties
as provided in CBI'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 (a "claim") asserted
or made within such period shall continue until the final disposition
of such Claim;
(3) This Paragraph (N) of Article IV is intended to benefit the
Indemnified Parties and shall be binding on all successors and assigns
of FTNC;
(4) In the event FTNC 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
FTNC assume the obligations set forth in this Paragraph (N) of Article
IV.
(O) CBI and FTNC will each use its best efforts to cause the Merger
to qualify for pooling-of-interests accounting treatment and none of
CBI, FTB nor FTNC shall take any action which would cause the Merger
not to qualify for pooling-of-interests accounting treatment;
(P) In the case of CBI, it shall use its best efforts to cause each
person who is on the date hereof an "affiliate" of CBI (as that term
is defined in Section (B)(7) of Article V hereof) to execute and
deliver to FTNC the written undertakings in substantially the form
attached hereto as EXHIBIT "IV(P)" on the date this Agreement is
executed and shall use its best efforts to cause any other person who
subsequently becomes an "affiliate" to execute and deliver such
written undertakings not later than forty (40) days prior to the
Effective Date.
(Q) It shall not 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 law, rules or regulations;
(R) It shall not take any action unless otherwise required by law,
rules or regulations, that would materially adversely affect the
ability of either party or any of its subsidiaries 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 Paragraph (A)(2) and (A)(3) of
Article V.
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(S) Following the Merger, the employees of CBI, Community First
Bank and the subsidiaries of Community First Bank as set forth on
Exhibit III(C)(2) shall be entitled to participate, to the same extent
and on the same terms as the employees of FTNC, in any qualified
pension, profit sharing and stock bonus plans in effect at such time
for employees of FTNC, and employees of CBI, Community First Bank and
Community First Bank's subsidiaries shall receive service credit from
their hire date for employment at CBI, Community First Bank or
Community First Bank's subsidiaries for purposes of eligibility and
vesting requirements under FTNC's retirement savings plan and defined
benefit pension plan, and service credit from the Effective Date for
purposes of benefit calculation under FTNC's defined benefit pension
plan. All employees of CBI, Community First Bank and Community First
Bank's subsidiaries who become regular full time employees of FTNC
will be entitled to credit for service with CBI, Community First Bank
and Community First Bank's subsidiaries for purposes of vesting in
long-term disability benefits pursuant to FTNC's plan. Immediately
prior to the Effective Date, CBI shall terminate its self-insured
medical benefit plan (the "CBI Medical Plan"); however, the CBI
Medical Plan shall remain liable for all claims incurred through the
Effective Date. Upon the Effective Date, FTNC or FTB employees who
were CBI, Community First Bank or Community First Bank's subsidiaries
employees immediately prior to the Effective Date shall be eligible
for group hospitalization, medical, life and disability benefits on
the same terms and conditions as other FTNC or FTB employees holding
comparable positions. Service by such employees with CBI, Community
First Bank and Community First Bank's subsidiaries shall be credited
for purposes of FTNC's Short-Term Disability Plan and vacation policy
from the employee's date of employment by CBI, Community First Bank or
Community First Bank's subsidiaries.
ARTICLE V.
CONDITIONS TO CONSUMMATION
(A) The respective obligations of FTNC and CBI 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 CBI in
accordance with applicable law;
(2) The procurement of approval of this Agreement and the
transactions contemplated hereby by the Federal Reserve Board, 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 Paragraphs (A)(2)
and (A)(3) of this Article V shall be deemed to have been received if
it shall include any conditions or requirements which would reduce the
benefits of the transactions contemplated hereby to such a degree that
FTNC 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, CBI
shall have received the opinion of Attkisson, Carter & Akers,
Incorporated to the effect that in the opinion of such firm, the terms
of the transaction are fair to the shareholders of CBI from a
financial point of view;
(5) The satisfaction of all other requirements prescribed by law
which are necessary to the consummation of the transactions
contemplated by this Agreement;
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(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 FTNC or CBI 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) Heiskell, Donelson, Bearman, Adams, Williams & Caldwell 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 FTNC or
CBI as a result of the Merger, (ii) no gain or loss will be recognized
by the shareholders of CBI who exchange their shares of CBI Common
Stock solely for shares of FTNC Common Stock pursuant to the Merger
(except with respect to cash received in lieu of a fractional share
interest in FTNC Common Stock); (iii) the tax basis of the shares of
FTNC Common Stock received by shareholders who exchange all of their
shares of CBI Common Stock solely for shares of FTNC Common Stock in
the Merger will be the same as the tax basis of the shares of CBI
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 FTNC Common Stock
received in the Merger will include the period during which the shares
of CBI Common Stock surrendered in exchange therefor were held,
provided such shares of CBI Common Stock were held as capital assets
at the Effective Time. In rendering such opinion, counsel may require
and rely upon representations contained in certificates of officers of
CBI, FTNC and others.
(B) The obligation of FTNC to effect the Merger shall be subject to
the satisfaction prior to the Effective Time of the following additional
conditions:
(1) FTNC and its directors and officers who sign the Registration
Statement shall have received from CBI's independent certified public
accountants "cold comfort" letters, dated (i) the date of the mailing
of the Proxy Statement/Prospectus to CBI's shareholders and (ii)
shortly prior to the Effective Date, with respect to certain financial
information regarding CBI in the form customarily issued by such
accountants at such time in transactions of this type;
(2) FTNC shall have received an opinion, dated the Effective Date, of
CBI'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 CBI, subject to the disclosure letter of CBI 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 CBI which do not specifically refer to Material Adverse
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Effect, for breaches which are not material and FTNC shall have
received a certificate signed by the Chief Executive Officer of CBI,
dated the Effective Date, to such effect. Any effect on CBI as a
result of action taken by CBI pursuant to Paragraph (M) of Article III
shall be disregarded for purposes of determining the truth or
correctness of any representation or warranty of CBI and for purposes
of determining whether any conditions are satisfied;
(4) FTNC shall have received all state securities laws and "Blue Sky"
permits and other authorizations necessary to consummate the
transactions contemplated hereby;
(5) No litigation or proceeding is pending which (i) has been brought
against FTNC or CBI or any of their subsidiaries by any governmental
agency seeking to prevent consummation of the transactions
contemplated hereby or (ii) in the reasonable judgement of the Chief
Executive Officer of CBI will have a Material Adverse Effect on CBI;
and
(6) Each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act and for
purposes of qualifying for "pooling-of-interests" treatment as
described below) of CBI shall have delivered to FTNC a written
agreement satisfactory to FTNC providing, among other matters, that
such person will not sell, pledge, transfer or otherwise dispose of or
take any action to reduce his risk with respect to any shares of CBI
Common Stock held by such "affiliate" or the shares of FTNC Common
Stock to be received by such "affiliate" in the Merger (1) in the case
of shares of FTNC Common Stock only, except in compliance with the
applicable provisions of the Securities Act and the rules and
regulations thereunder, and (2) during the periods during which any
such sale, pledge, transfer or other disposition or action would,
under generally accepted accounting principles or the rules,
regulations or interpretations of the SEC, disqualify the Merger for
pooling-of-interests accounting treatment. The parties understand
that such periods in general encompass the period commencing 30 days
prior to the Merger and ending at the time of the publication of
financial results covering at least 30 days of combined operations of
FTNC and CBI within the meaning of Section 201-01 of the SEC's
Codification of Financial Reporting Policies.
(7) FTNC shall have received a letter dated as of the Effective Date
from its independent certified public accountants to the effect that
the Merger will qualify for pooling of interests accounting treatment
if closed and consummated in accordance with this Agreement (the
"Pooling Letter"); provided that FTNC may not refuse to consummate the
Merger because FTNC's independent certified public accountants are
unable to deliver the Pooling Letter as a result of actions taken by
FTNC or an "affiliate" of FTNC.
(8) On the Effective Date CBI's shareholders' equity (calculated
without giving effect to (i) unrecognized gains or losses on
"available for sale" securities as provided in FASB 115 and consistent
with CBI's prior practices, (ii) Transaction Expenses (as defined in
Paragraph (F) of Article VII), (iii) adjustments under Paragraph (M)
of Article IV), (iv) 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 FTNC, and (v)
breaches of the representations, warranties and covenants of CBI
contained in this Agreement to the extent they in the aggregate do not
exceed $360,000 on an after-tax basis) shall not be less than
$22,200,000.
(C) The obligation of CBI to effect the Merger shall be subject to
the satisfaction or prior to the Effective Time of the following additional
conditions:
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(1) CBI shall have received an opinion, dated the Effective Date, of
FTNC'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 FTNC, subject to the disclosure letter of FTNC 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 FTNC which do not specifically refer to Material Adverse
Effect, for breaches which are not material and CBI shall have
received a certificate signed by the Chief Executive Officer or Chief
Financial Officer of FTNC, dated the Effective Date, to such effect;
and
(3) No litigation or proceeding is pending which (i) has been brought
against FTNC or CBI 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 Chief
Executive Officer will have a Material Adverse Effect on FTNC.
(4) FTNC shall have received the Pooling Letter; provided that CBI
may not refuse to consummate the Merger because FTNC's independent
certified public accountants are unable to deliver the Pooling Letter
as a result of actions taken by CBI or an "affiliate" of CBI.
ARTICLE VI.
TERMINATION
This Agreement may be terminated prior to the Effective Date, either
before or after its approval by the stockholders of CBI:
(A) By the mutual consent of FTNC and CBI, if the Board of Directors
of each so determines by vote of a majority of the members of its entire Board;
(B) By FTNC or CBI, if its Board of Directors so determines by vote
of a majority of the members of its entire Board, in the event of the failure
of the shareholders of CBI 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;
(C) By FTNC or CBI, if its Board of Directors so determines by vote
of a majority of the members of its entire Board, in the event that the Merger
is not consummated by April 30, 1995, unless the failure to so consummate by
such time is due to the breach of this Agreement by the party seeking to
terminate; or
(D) By FTNC, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, if the FTNC Common Stock Average
Price is less than $41 per share by written notice (an "Article VI, Paragraph
(D) Termination Notice") to CBI delivered within three (3) business days after
the last day of the Calculation Period. If FTNC delivers an Article VI,
Paragraph (D) Termination Notice to CBI, and CBI elects to exercise its right
to require FTNC to consummate the Merger as provided in Paragraph (B)(1)(iv) of
Article I, CBI must give written notice of such election to FTNC not later than
the close of business on the third (3rd) business day following receipt of the
Article VI, Paragraph (D) Termination Notice.
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(E) By CBI, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, if the FTNC Common Stock Average
Price is greater than $53.50, by written notice (an "Article VI, Paragraph (E)
Termination Notice") to FTNC within three (3) business days after the last day
of the Calculation Period. If CBI delivers an Article VI, Paragraph (E)
Termination Note to FTNC, and FTNC elects to exercise its right to require CBI
to consummate the Merger as provided in Paragraph (B)(1)(v) of Article I, FTNC
must give written notice of such election to CBI not later than the close of
business on the third (3rd) business day following receipt of the Article VI,
Paragraph (E) Termination Notice.
(F) Subject to the provisions of Paragraph (G) of this Article VI and
Paragraph (B) of Article VIII, in the event of the termination of this
Agreement by either FTNC or CBI, 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.
(G) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to a Termination Event as described in this paragraph and notwithstanding
any other provision of this Agreement to the contrary, CBI will pay to FTNC
liquidated damages in the amount of $2,000,000.
For purposes of this Paragraph (G), the following terms shall have the
indicated meaning: The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(1) CBI shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person
(other than FTNC or a subsidiary of FTNC), or the board of directors
of CBI shall have recommended that the stockholders of CBI approve or
accept any Acquisition Transaction (other than that contemplated by
this Agreement). The term "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving CBI or
any of its subsidiaries, (y) a purchase, lease or other acquisition of
all or any substantial part of the assets of CBI or any of its
subsidiaries or (z) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of CBI. The term
"person" for purposes of this Paragraph shall have the meaning
assigned thereto in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations
thereunder;
(2) Any person (other than FTNC, a subsidiary of FTNC or any
fiduciary acting under any employee benefit plan for FTNC or any of
its subsidiaries) shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the
outstanding shares of the CBI Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the Exchange Act, and the rules and
regulations thereunder) in a tender offer or that results in or is
part of an Acquisition Transaction;
(3) Any person (other than FTNC or a subsidiary of FTNC)
shall have made a proposal (in writing or orally) to CBI or any one or
more of its shareholders owning 10% or more (singly or in the
aggregate) of the outstanding shares of CBI Common Stock that results
in or is a part of an Acquisition Transaction;
(4) After a proposal is made by any person (other than FTNC
or a subsidiary of FTNC) to CBI or its stockholders to engage in an
Acquisition Transaction, CBI shall have breached any covenant or
obligation contained in this Agreement and such breach would entitle
FTNC to terminate the Merger
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Agreement (without regard to the cure periods provided for therein)
and such breach shall not have been cured within twenty (20) days
after written notice; or
(5) Any person (other than FTNC or a subsidiary of FTNC),
shall have filed an application or notice with the Federal Reserve
Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval
to engage in an Acquisition Transaction and which results in an
Acquisition Transaction.
"Subsequent Triggering Event" shall mean either of the following
events or transactions occurring after the date hereof:
(1) The acquisition by any person of beneficial ownership of
25% or more of the then outstanding CBI Common Stock; or
(2) The occurrence of the Initial Triggering Event described
in clause (1) of the definition of "Initial Triggering Event" of this
Paragraph (G), except that the percentage referenced in clause (z)
shall be 25%.
"Termination Event" shall mean each of the following: (i) the
Effective Date of the Merger, (ii) termination of this Agreement in accordance
with the provisions hereof if such termination occurs prior to the occurrence
of an Initial Triggering Event or (iii) the passage of 12 months after
termination of this Agreement if such termination follows the occurrence of an
Initial Triggering Event.
CBI shall notify FTNC promptly in writing of the occurrence of any
Initial Triggering Event and of any Subsequent Triggering Event.
ARTICLE VII.
EFFECTIVE DATE AND EFFECTIVE TIME
On the last business day of the 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 FTNC'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, a
certificate of merger or articles of merger, as appropriate, shall be executed
in accordance with all appropriate legal requirements and shall be filed as
required by law, and the Merger provided for herein shall become effective upon
such filing or on such date as may be specified in such certificate of merger.
The date of such filing or such later effective date is herein called 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).
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) "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
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as to the representations and warranties made by CBI in Article III,
Section (U)(1), (2) and (3), a Material Adverse Effect shall have
occurred if the reasonably projected costs of remediation and/or the
cost of all fines, penalties, costs or expenses to which CBI is or may
be subject under Environmental Laws as a result of any one or more
breaches of such representations and warranties exceed $1,000,000 in
the aggregate calculated on a pre-tax basis and as to all other
representations, warranties and covenants of CBI, 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 $550,000 in the
aggregate calculated on a pre-tax basis.
(2) "Person" includes an individual, corporation, partnership,
limited liability company, association, trust or unincorporated
organization.
(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. If this Agreement shall be terminated, the
agreements of the parties in Paragraph (H)(3) of Article IV, in Paragraphs (D),
(E), (F) and (G) of Article VI and Paragraphs (F) and (G) of this Article shall
survive such termination.
(C) Amendment; Modification; Waiver. Prior to the Effective Date,
any provision of this Agreement may be (i) waived by the party benefitted 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 CBI,
Paragraph (B) of Article I 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.
(E) Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Tennessee.
(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"). CBI agrees that its
Transaction Expenses will not exceed $400,000.
(G) Disclosure. Each of the parties and its respective agents,
attorneys and accountants will maintain the confidentiality of all information
provided in connection herewith which has not been publicly disclosed as
permitted under Paragraph (F) of Article IV unless it is advised by counsel
that any such information is required by law to be disclosed.
(H) Notices. All notices, requests, acknowledgements and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram or telex
(confirmed in writing) to such party at its address set forth below or such
other address as such party may specify by notice to the other party hereto.
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IF TO CBI, TO: COMMUNITY BANCSHARES, INC.
2175 Germantown Road South
Suite 104
Germantown, Tennessee 38138
ATTN: John D. Ferguson, Chairman
Telecopy No.: 901/757-6203
With Copies to: McDonnell Dyer
Suite 650, Crescent Center
6075 Poplar Avenue
Memphis, Tennessee 38177-5000
ATTN: R. Nash Neyland
Telecopy No.: 901/537-1010
IF TO FTNC, TO: FIRST TENNESSEE NATIONAL CORPORATION
165 Madison Avenue
Memphis, Tennessee 38103
ATTN: Elbert L. Thomas, Jr.
Telecopy No.: 901/523-4614
With Copies to: HEISKELL, DONELSON, BEARMAN,
ADAMS, WILLIAMS & CALDWELL
165 Madison Avenue, 20th Floor
Memphis, Tennessee 38103
ATTN: Charles T. Tuggle, Jr.
Telecopy No.: 901/577-2303
FIRST TENNESSEE NATIONAL CORPORATION
165 Madison Avenue
Memphis, Tennessee 38103
ATTN: Harry A. Johnson, III
Telecopy No.: 901/523-4248
(I) 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.
(J) 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.
(K) Assignment. This Agreement may not be assigned by any party
hereto without the written consent of the other parties.
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(L) Directors' Shares. To the extent that directors' qualifying
shares shall exist with respect to Community First Bank, Community First Bank
shall take such action with respect to such shares as FTNC shall reasonably
request.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers as of the day and
year first above written.
FIRST TENNESSEE NATIONAL CORPORATION
By: /s/ Elbert L. Thomas, Jr.
---------------------------------
Title: Senior Vice President
------------------------------
FTNC
COMMUNITY BANCSHARES, INC.
By: /s/ John D. Ferguson
---------------------------------
Title: Chairman
------------------------------
CBI
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APPENDIX "B"
ATTKISSON, CARTER & AKERS
INCORPORATED
3060 PEACHTREE ROAD, NW
SUITE 1475
ATLANTA, GEORGIA 30305
404/364-2070
US WATS 1/800-848-9555
FAX 404/364-2079
September 21, 1994
Board of Directors
Community Bancshares, Inc.
2175 Germantown Road South
Germantown, TN 38138
Dear Members of the Board:
You have asked us to advise you with respect to the fairness to the
shareholders of Community Bancshares, Inc. (the "Company"), from a financial
point of view, of the exchange ratio (the "Exchange Ratio") provided for in the
Agreement and Plan of Merger (the "Merger Agreement") dated as of September 22,
1994 between the Company and First Tennessee National Corporation ("First
Tennessee"). The Merger Agreement provides for a merger (the "Merger") of the
Company and First Tennessee pursuant to which each share of common stock of the
Company will be converted into the right to receive 0.39067 shares of common
stock of First Tennessee, subject to adjustment. The Exchange Ratio will
adjust, as described in the Agreement, in the event the average trading price
of First Tennessee for a defined 20 day period prior to the effective date of
the Merger is outside of the range of $43.52 and $51.00 per share. Further,
termination rights to the Merger are available (i) to First Tennessee if the
average trading price of its stock is below $41.00 per share and (ii) to the
Company if the average trading price of First Tennessee stock is above $53.50
per share. In the event of exercise of either of these termination rights, the
Company can require First Tennessee to consummate the Merger with an Exchange
Ratio of 0.41468 and First Tennessee can require the Company to consummate the
Merger with an Exchange Ratio of 0.37241. On September 21, 1994 the closing
price of First Tennessee common stock was $45.75.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to First Tennessee and the Company.
We have also reviewed certain other information, including financial
forecasts, provided to us by First Tennessee and the Company, and have met with
First Tennessee's and the Company's managements to discuss the business and
prospects of First Tennessee and the Company.
84
We have also considered certain financial and stock market data of First
Tennessee and the Company, and we have compared that data with similar data for
other publicly held bank holding companies and we have considered the financial
terms of certain other comparable transactions which have recently been
effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
we deemed relevant.
In connection with our review, we have not independently verified any of the
foregoing information and have relied on its being complete and accurate in all
material respects. With respect to the financial forecasts we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of First Tennessee's and the Company's
managements as to the future financial performance of First Tennessee and the
Company. In addition, we have not made an independent evaluation or appraisal
of the assets of First Tennessee or the Company. We were requested to and did
solicit third party indications of interest in acquiring the Company. The
results of this solicitation were taken into consideration in arriving at our
opinion.
It should be noted that this opinion is based on market conditions and other
circumstances existing on the date hereof, and this opinion does not represent
our opinion as to what the value of the First Tennessee common stock
necessarily will be when the First Tennessee common stock is issued to the
stockholders of the Company upon consummation of the Merger.
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger.
It is understood that this opinion may be included in its entirety in any
communication by the Company or the Board of Directors to the shareholders of
the Company. The opinion may not, however, be summarized, excerpted from or
otherwise publicly referred to without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that as of the date
hereof, the Exchange Ratio is fair to the common shareholders of the Company
from a financial point of view.
Very truly yours,
Attkisson, Carter & Akers Incorporated
- --------------------------------------
ATTKISSON, CARTER & AKERS INCORPORATED
85
APPENDIX "C"
Section 48-23-101 et seq. of the Tennessee Code Annotated, as amended
BUSINESS CORPORATIONS--DISSENTERS' RIGHTS
PART 1 - RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
48-23-101. DEFINITIONS. -- (1) "Beneficial shareholder" means the
person who is a beneficial owner of shares held by a nominee as the record
shareholder;
(2) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent
before the corporate action under Section 48-23-102 and who exercises that
right when and in the manner required by Sections 48-23-201 -- 48-23-209;
(4) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporation action;
(5) "Interest" means interest from the effective date of the
corporate action that gave rise to the shareholder's right to dissent until the
date of payment, at the average auction rate paid on United States treasury
bills with a maturity of six (6) months (or the closest maturity thereto) as of
the auction date for such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are
registered in the records of the corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation; and
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
48-23-102. RIGHT TO DISSENT. -- (a) A shareholder is entitled to
dissent from, and obtain payment of the fair value of his shares in the event
of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If shareholder approval is required for the merger by
Section 48-23-103 or the charter and the shareholder is entitled to
vote on the merger; or
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(B) If the corporation is a subsidiary that is merged
with its parent under Section 48-23-104;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale pursuant to
court order or a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one (1) year after the date of the sale;
(4) An amendment of the charter that materially and adversely
affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the
shares;
(B) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder
of the shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on
any matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(E) Reduces the number of shares owned by the shareholder
to a fraction of a share, if the fractional share is to be acquired
for cash under Section 48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to
the extent the charter, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his
shares under this chapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder of the corporation.
(c) Notwithstanding the provisions of subsection (a), no
shareholder may dissent as to any shares of a security which, as of the date of
the effectuation of the transaction which would otherwise give rise to
dissenters' rights, is listed on an exchange registered under Section 6 of the
Securities Exchange
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Act of 1934, as amended, or is a "national market system security," as defined
in rules promulgated pursuant to the Securities Exchange Act of 1934, as
amended.
48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS. -- (a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection
are determined as if the shares as to which he dissents and his other shares
were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares of any one (1) or more classes held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of the same class of
which he is the beneficial shareholder or over which he has power to direct the
vote.
PART 2 -- PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
48-23-201. NOTICE OF DISSENTERS' RIGHTS. -- (a) If proposed corporate
action creating dissenters' rights under Section 48- 23-102 is submitted to a
vote at a shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights under this
chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under Section
48-23-102 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Section
48-23-203.
(c) A corporation's failure to give notice pursuant to this
section will not invalidate the corporate action.
48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT.-- (a) If proposed
corporate action creating dissenters' rights under Section 48-23-102 is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights:
(1) Must deliver to the corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
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(2) Must not vote his shares in favor of the proposed action. No
such written notice of intent to demand payment is required of any shareholder
to whom the corporation failed to provide the notice required by Section
48-23-201.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for his shares under this chapter.
48-23-203. DISSENTERS' NOTICE. -- (a) If proposed corporate action
creating dissenters' rights under Section 48-23-102 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of Section 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10)
days after the corporation action was authorized by the shareholder or
effectuated, whichever is the first to occur, and must;
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received.
(3) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the principal terms
of the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership of
the shares before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than one (1) nor more than two (2) months
after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation
has not previously sent a copy of this chapter to the shareholder pursuant to
Section 48-23-201.
48-23-204. DUTY TO DEMAND PAYMENT. -- (a) A shareholder sent a
dissenters' notice described in Section 48-23-203 must demand payment, certify
whether he acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to Section 48-23-203(b)(3),
and deposit his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by
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the effectuation of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this chapter.
(d) A demand for payment filed by a shareholder may not be
withdrawn unless the corporation with which it was filed, or the surviving
corporation, consents thereto.
48-23-205. SHARE RESTRICTIONS. -- (a) The corporation may restrict
the transfer of uncertificated shares from the date the demand for their
payment is received until the proposed corporate action is effectuated or the
restrictions released under Section 48-23-207.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the effectuation of the proposed corporate
action.
48-23-206. PAYMENT. -- (a) Except as provided in Section 48-23-208,
as soon as the proposed corporate action is effectuated, or upon receipt of a
payment demand, whichever is later, the corporation shall pay each dissenter
who complied with Section 48-23-204 the amount the corporation estimates to be
the fair value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenters' rights to demand payment under
Section 48-23-209; and
(5) A copy of this chapter if the corporation has not previously
sent a copy of this chapter to the shareholder pursuant to Section 48-23-201 or
Section 48-23-203.
48-23-207. FAILURE TO TAKE ACTION. -- (a) If the corporation does not
effectuate the proposed action that gave rise to the dissenters' rights within
two (2) months after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
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release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing
transfer restrictions, the corporation effectuates the proposed action, it must
send a new dissenters' notice under Section 48-23-203 and repeat the payment
demand procedure.
48-23-208. AFTER-ACQUIRED SHARES. (a) A corporation may elect to
withhold payment required by Section 48-23-206 from a dissenter unless he was
the beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders
of the principal terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after effectuating the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest
was calculated, and a statement of the dissenter's right to demand payment
under Section 48-23-209.
48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. -- (a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under Section 48-23-206), or reject
the corporation's offer under Section 48-23-208 and demand payment of the fair
value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under Section
48-23-206 or offered under Section 48-23-208 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Section 48-23-206
within two (2) months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within two (2) months after the
date set for demanding payment.
(b) A dissenter waives his right to demand payment under this
section unless he notifies the corporation of his demand in writing under
subsection (a) within one (1) month after the corporation made or offered
payment for his shares.
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PART 3 -- JUDICIAL APPRAISAL OF SHARES
48-23-301. COURT ACTION. -- (a) If a demand for payment under
Section 48-23-209 remains unsettled, the corporation shall commence a
proceeding within two (2) months after receiving the payment demand and
petition the court to determine the fair value of the shares and accrued
interest. If the corporation does not commence the proceeding within the
two-month period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in a court of
record having equity jurisdiction in the county where the corporation's
principal office (or, if none in this state, its registered office) is located.
If the corporation is a foreign corporation without a registered office in this
state, it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled, parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The court may appoint
one (1) or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other civil
proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment:
(1) For the amount, if any, by which the court finds the fair
value of his shares, plus accrued interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of his
after-acquired shares for which the corporation elected to withhold payment
under Section 48-23-208.
48-23-302. COURT COSTS AND COUNSEL FEES. -- (a) The court in an
appraisal proceeding commenced under Section 48-23-301 shall determine all
costs of the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess costs against all
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or some of the dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or not in good
faith in demanding payment under Section 48-23-209.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply with the
requirements of Sections 48-23-201--48-23-209; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be paid
out of the amounts awarded to the dissenters who were benefitted.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Tennessee Code Annotated Sections 48-18-501 through 48-18-509
authorize a corporation to provide for the indemnification of officers,
directors, employees and agents in terms sufficiently broad to permit
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended. FTNC has adopted the provisions of the Tennessee statute pursuant
to Article XXVIII of its Bylaws. Also, FTNC has a "Directors' and Officers'
Liability Insurance Policy" which provides coverage sufficiently broad to
permit indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended.
Tennessee Code Annotated, Section 48-12-102, permits the inclusion in
the charter of a Tennessee corporation of a provision, with certain exceptions,
eliminating the personal monetary liability of directors to the corporation or
its shareholders for breach of the duty of care. FTNC has adopted the
provisions of the statute in Article 13 of its charter.
The shareholders of FTNC have approved an amendment to Article XXVIII
of the Bylaws pursuant to which FTNC is required to indemnify each director and
any officers designated by the FTNC Board, and advance expenses, to the maximum
extent not prohibited by law. In accordance with the foregoing, the FTNC Board
is authorized to enter into individual indemnity agreements with the directors
and such officers. Such indemnity agreements have been approved for all of the
directors and certain officers.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Number Description
------ -----------
2 Agreement and Plan of Merger (included as Appendix "A" to the Proxy Statement-Prospectus)
3(i) Restated Charter of FTNC, as amended, attached as Exhibit 3(i) to FTNC's registration statement on Form S-4 (No.
33-53331) filed April 28, 1994 and incorporated herein by reference.
3(ii) Bylaws of FTNC, as amended, attached as Exhibit 3(ii) to FTNC's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 and incorporated herein by reference.
4(a) Form of Common Stock Certificate, incorporated herein by reference to exhibit 4(a) to FTNC's registration statement
on Form S-4 (No. 33-51223) filed November 30, 1993.
4(b) Shareholder Protection Rights Agreement, dated as of September 7, 1989, between FTNC and FTB as Rights Agent,
incorporated by reference to FTNC's Registration Statement on Form 8-A, filed September 8, 1989
4(c) Indenture, dated as of June 1, 1987, between FTNC and Security Pacific National Trust Company (New York), Trustee
incorporated by reference to FTNC's Annual Report on Form 10-K for the fiscal year ended December 31, 1991
4(d) FTNC and certain of its consolidated subsidiaries have outstanding certain long-term debt. See Note 13 in FTNC's
1993 Annual Report to Shareholders. None of such debt exceeds 10% of the total assets of FTNC and its consolidated
subsidiaries. Thus, copies of constituent instruments defining the rights of holders of such debt are not required
to be included as exhibits. FTNC agrees to furnish copies of such instruments to the SEC upon request.
5 Opinion Regarding Legality
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94
8 Opinion Regarding Tax Matters
23(a) Consent of Arthur Andersen LLP
23(b) Consent of KPMG Peat Marwick LLP
23(c) Consent of Baylor and Backus
23(d) Consent of Ernst & Young LLP
23(e) Consent of Attkisson, Carter & Akers, Incorporated
23(f) Consents of Baker, Donelson, Bearman & Caldwell included in Exhibit 8
23(g) Consent of Clyde A. Billings, Jr. included in Exhibit 5.
24 Powers of Attorney
99(a) Opinion of Attkisson, Carter & Akers, Incorporated (included as Appendix "B" to the Proxy Statement-Prospectus)
99(b) Form of Proxy for Special Meeting of Shareholders of Community
(b) Financial Statement Schedules--Not applicable
(c) Not Applicable
Item 22. Undertakings
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales of the
securities are being made, a post-effective amendment to this Registration
Statement:
(i) to include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect any facts or events arising after the effective
date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
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95
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this Registration Statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(e) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (d) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(f) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the Proxy
Statement-Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Memphis, State of
Tennessee, on December 1, 1994.
FIRST TENNESSEE NATIONAL CORPORATION
By: James F. Keen
----------------------------------------
James F. Keen, Senior Vice President and
Controller
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Ralph Horn* Chief Executive Officer (principal December 1, 1994
- ----------------------- executive officer) and a Director
Ralph Horn
Susan Schmidt Bies* Executive Vice President and December 1, 1994
- ----------------------- Chief Financial Officer (principal
Susan Schmidt Bies financial officer)
James F. Keen* Senior Vice President and December 1, 1994
- ----------------------- Controller (principal
James F. Keen accounting officer)
Jack A. Belz* Director December 1, 1994
- -----------------------
Jack A. Belz
Robert C. Blattberg* Director December 1, 1994
- -----------------------
Robert C. Blattberg
J. R. Hyde, III* Director December 1, 1994
- -----------------------
J. R. Hyde, III
Director December __, 1994
- -----------------------
R. Brad Martin
Joseph Orgill* Director December 1, 1994
- -----------------------
Joseph Orgill, III
Richard E. Ray* Director December 1, 1994
- -----------------------
Richard E. Ray
Vicki G. Roman* Director December 1, 1994
- -----------------------
Vicki G. Roman
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Michael D. Rose* Director December 1, 1994
- -------------------------
Michael D. Rose
William B. Sansom* Director December 1, 1994
- -------------------------
William B. Sansom
Gordon P. Street, Jr.* Director December 1, 1994
- -------------------------
Gordon P. Street
Ronald Terry* Director December 1, 1994
- -------------------------
Ronald Terry
*By: Clyde A. Billings, Jr. December 1, 1994
----------------------
Clyde A. Billings, Jr.
As Attorney-in-Fact
[The Power of Attorney is included herein as Exhibit 24.]
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Exhibits Page
Number Description Number
- ------ ----------- ------
2 Agreement and Plan of Merger (included as Appendix "A" to the Proxy
Statement-Prospectus)
3(i) Restated Charter of FTNC, as amended, attached as Exhibit 3(i) to
FTNC's registration statement on Form S-4 (No. 33-53331) filed
April 28, 1994, and incorporated herein by reference.
3(ii) Bylaws of FTNC, as amended, attached as Exhibit 3(ii) to FTNC's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994
and incorporated herein by reference.
4(a) Form of Common Stock Certificate, incorporated herein by reference to
exhibit 4(a) to FTNC's registration statement on Form S-4 (No. 33-51223)
filed November 30, 1993.
4(b) Shareholder Protection Rights Agreement, dated as of September 7, 1989,
between FTNC and FTB as Rights Agent, incorporated by reference to FTNC's
Registration Statement on Form 8-A, filed September 8, 1989
4(c) Indenture, dated as of June 1, 1987, between FTNC and Security Pacific
National Trust Company (New York), Trustee incorporated by reference to
FTNC's Annual Report on Form 10-K for the fiscal year ended December 31, 1991
4(d) FTNC and certain of its consolidated subsidiaries have outstanding certain
long-term debt. See Note 13 in FTNC's 1993 Annual Report to Shareholders.
None of such debt exceeds 10% of the total assets of FTNC and its consolidated
subsidiaries. Thus, copies of constituent instruments defining the rights
of holders of such debt are not required to be included as exhibits. FTNC
agrees to furnish copies of such instruments to the SEC upon request.
5 Opinion Regarding Legality
8 Opinion Regarding Tax Matters
23(a) Consent of Arthur Andersen LLP
23(b) Consent of KPMG Peat Marwick LLP
23(c) Consent of Baylor and Backus
23(d) Consent of Ernst & Young LLP
23(e) Consent of Attkisson, Carter & Akers, Incorporated
23(f) Consents of Baker, Donelson, Bearman & Caldwell included in Exhibit 8
23(g) Consent of Clyde A. Billings, Jr. included in Exhibit 5.
99
24 Powers of Attorney
99(a) Opinion of Attkisson, Carter & Akers, Incorporated (included as Appendix "B" to the Proxy
Statement-Prospectus)
99(b) Form of Proxy for Special Meeting of Shareholders of Community