1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 21, 1995
BETWEEN
FIRST AMERICAN CORPORATION
AND
HERITAGE FEDERAL BANCSHARES, INC.
2
TABLE OF CONTENTS
Page
----
ARTICLE I - The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Effective Time of the Merger . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - Effect of the Merger on the Capital Stock
of the Constituent Corporations; Exchange
of Certificates . . . . . . . . . . . . . . . . . . . . . 2
2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . 2
2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . 4
ARTICLE III - Representations and Warranties . . . . . . . . . . . . . . 6
3.1 Representations and Warranties of HFB . . . . . . . . . . . . . 6
3.2 Representations and Warranties of FAC . . . . . . . . . . . . . 18
ARTICLE IV - Covenants Relating to Conduct of Business . . . . . . . . . 24
4.1 Covenants of Both Parties . . . . . . . . . . . . . . . . . . . 24
4.2 Covenants of HFB . . . . . . . . . . . . . . . . . . . . . . . 24
4.3 Covenants of FAC . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . 27
4.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.6 Affirmative Covenants of HFB . . . . . . . . . . . . . . . . . 27
4.7 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V - Additional Agreements . . . . . . . . . . . . . . . . . . . . 28
5.1 Preparation of S-4 and the Proxy Statement . . . . . . . . . . 28
5.2 Letter of HFB's Accountants . . . . . . . . . . . . . . . . . . 29
5.3 Letter of FAC's Accountants . . . . . . . . . . . . . . . . . . 29
5.4 Access to Information . . . . . . . . . . . . . . . . . . . . . 29
5.5 HFB Stockholders Meeting . . . . . . . . . . . . . . . . . . . 30
5.6 Legal Conditions to Merger . . . . . . . . . . . . . . . . . . 30
5.7 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.8 NASDAQ Listing . . . . . . . . . . . . . . . . . . . . . . . . 31
5.9 Transition of Certain Employee Benefit Plans;
i
3
Employment Matters . . . . . . . . . . . . . . . . . . . . 31
5.10 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.12 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . 35
5.13 Governance; Name . . . . . . . . . . . . . . . . . . . . . . . 36
5.14 Indemnification; Directors' and Officers' Insurance . . . . . . 36
5.15 Coordination of Dividends . . . . . . . . . . . . . . . . . . . 37
5.16 HFB Accruals and Reserves . . . . . . . . . . . . . . . . . . . 37
5.17 Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.18 Additional Agreements . . . . . . . . . . . . . . . . . . . . . 38
5.19 Enforcement of Agreements . . . . . . . . . . . . . . . . . . . 38
5.20 Cooperation Generally . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VI - Conditions Precedent . . . . . . . . . . . . . . . . . . . . 38
6.1 Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . . . . . . . . . . . 38
6.2 Conditions to Obligations of FAC . . . . . . . . . . . . . . . 39
6.3 Conditions to Obligations of HFB . . . . . . . . . . . . . . . 43
ARTICLE VII - Termination and Amendment . . . . . . . . . . . . . . . . . 47
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.2 Rights an Obligations upon Termination . . . . . . . . . . . . 48
7.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 49
7.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VIII - General Provisions . . . . . . . . . . . . . . . . . . . . 51
8.1 Nonsurvival of Representations, Warranties
and Agreements . . . . . . . . . . . . . . . . . . . . . . 51
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 52
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.5 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership . . . . . . . . . . . . . . . . . . . 52
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.7 Injunctive Relief; Limitations on Remedies . . . . . . . . . . 53
8.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.10 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.11 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ii
4
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER dated as of February 21,
1995 (the "Agreement"), between First American Corporation, a Tennessee
corporation ("FAC") and Heritage Federal Bancshares, Inc., a Tennessee
corporation ("HFB").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of FAC and HFB have approved,
and deem it advisable and in the best interests of their respective
stockholders to consummate, the business combination transaction provided for
herein in which HFB would merge with and into FAC (the "Merger"); and
WHEREAS, FAC and HFB desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger; and
WHEREAS, as soon as practicable after the execution and
delivery of this Agreement, it is contemplated that First American National
Bank, a national bank and a wholly owned subsidiary of FAC ("FANB") and
Heritage Federal Bank for Savings, a Federal savings association and wholly
owned subsidiary of HFB ("HFBS") will enter into a Bank Plan of Merger of HFBS
with and into FANB, and it is intended that the Bank Plan of Merger will be
consummated immediately after consummation of the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that
the Merger and the Bank Plan of Merger shall qualify as a reorganization under
the provisions of Section 368 of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
The Merger
1.1 Effective Time of the Merger. Subject to the
provisions of this Agreement, articles of merger (the "Articles of Merger")
including a plan of merger
1
5
consistent with this Agreement shall be duly prepared, executed and
acknowledged by the Surviving Corporation (as defined in Section 1.3(b)) and
thereafter delivered to the Secretary of State of the State of Tennessee, for
filing, as provided in the Tennessee Business Corporation Act (the "TBCA"), as
soon as practicable on or after the Closing Date (as defined in Section 1.2).
The Merger shall become effective upon the filing of the Articles of Merger
with the Secretary of State of the State of Tennessee or at such time
thereafter as it provided in the Articles of Merger (the "Effective Time"), but
in either event the parties intend that the Effective Time shall be 12:01 a.m.
of the first calendar day of the month immediately following the month in which
the Closing occurs.
1.2 Closing. The closing of the Merger (the "Closing")
will take place at 10:00 a.m. Central Time on the first day which is (a) the
last business day of a calendar quarter or the last business day of a calendar
month if after October 1, 1995 and (b) at least two business days after
satisfaction (or waiver) of each of the conditions set forth in Sections 6.1,
6.2 and 6.3 (other than the delivery of the officers' certificate referred to
in Sections 6.2(b) and 6.3(b) (provided that the other closing conditions set
forth in Article VI have been met or waived as provided in Article VI at or
prior to the Closing (the "Closing Date"), at the offices of FAC, First
American Center, Nashville, Tennessee 37237, unless another time, date or place
is agreed to in writing by the parties hereto.
1.3 Effects of the Merger. (a) At the Effective Time,
(i) the separate existence of HFB shall cease and HFB shall be merged with and
into FAC, (ii) the charter of FAC as in effect immediately prior to the
Effective Time shall be the charter of the Surviving Corporation and (iii) the
By-laws of FAC as in effect immediately prior to the Effective Time shall be
the By-laws of the Surviving Corporation.
(b) As used in this Agreement, "Constituent Corporation"
shall mean FAC and HFB and "Surviving Corporation" shall mean FAC.
(c) At and after the Effective Time, the Merger will have
the effects set forth in Section 48-21-108 of the TBCA.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
2.1 Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of any
shares of HFB Common Stock:
2
6
(a) Cancellation of Stock. All shares of the $1.00 par
value common stock of HFB (the "HFB Common Stock") that are owned by FAC or any
Subsidiary of FAC (other than shares in trust accounts, managed accounts,
custodial accounts and the like that are beneficially owned by third parties
(any such shares, "trust account shares")) shall be canceled and retired and
shall cease to exist and no stock of FAC or other consideration shall be
delivered in exchange therefor. All shares of $5.00 par value common stock of
FAC (the "FAC Common Stock") that are owned by HFB or any Subsidiary (other
than trust account shares) shall become authorized but unissued stock of FAC.
As used in this Agreement, the word "Subsidiary" when used with respect to any
party means any corporation or other organization, whether incorporated or
unincorporated, of which such party or any other Subsidiary of such party is a
general partner or of which at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party and/or by any one or more of its Subsidiaries.
(b) Conversion of HFB Common Stock. Subject to Section
2.2(a), each issued and outstanding share of HFB Common Stock (other than
shares to be canceled in accordance with Section 2.1(a)) shall, by virtue of
this Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for the right to receive the number of fully
paid and nonassessable shares of FAC Common Stock rounded to the nearest
thousandth of a share, determined by dividing $28.00 by the Average Closing
Price, as defined below (the "Exchange Ratio") including the corresponding
number of rights associated with the FAC Common Stock pursuant to the FAC
Rights Agreement (as defined in Section 3.2(b)). The Average Closing Price
shall mean the average closing sale price per share of FAC Common Stock on the
NASDAQ national market system (as reported in The Wall Street Journal, or if
not reported thereby, any other authoritative source) for the twenty (20)
consecutive trading days ending on and including the third day immediately
preceding, but not including the Effective Time; provided, that the Exchange
Ratio shall not exceed 1.098 shares of FAC Common Stock per share of HFB Common
Stock and shall not be less than 0.8116 shares of FAC Common Stock per share of
HFB Common Stock unless prior to the Effective Time the outstanding shares of
FAC Common Stock have been increased, decreased, changed into or exchanged for
a different number or kind of shares through a reorganization,
reclassification, stock dividend, stock split, reverse stock split or other
similar change in which case applicable adjustments shall be made to the
Average Closing Price and the maximum and minimum number of shares to be
exchanged.
All such shares of HFB Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any such shares shall
thereafter represent the shares of FAC Common Stock into which HFB Common Stock
has been converted
3
7
and the right to cash payment for fractional shares, if any. Certificates
previously representing shares of HFB Common Stock shall be exchanged for
certificates representing whole shares of FAC Common Stock issued in
consideration therefor and cash for fractional shares, if any, upon the
surrender of such certificates in accordance with Section 2.2.
(c) No Dissenters Rights. Pursuant to Section 48-23-102
of the TBCA, holders of HFB Common Stock will not have dissenters' rights of
appraisal as a result of the Merger or any other event or transaction
contemplated by this Agreement.
(d) Shares of FAC Common Stock. Each share of FAC Common
Stock outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
2.2. Exchange of Certificates. (a) Exchange Agent. As
of the Effective Time, FAC shall deposit, or shall cause to be deposited, with
an exchange agent selected by FAC and reasonably acceptable to HFB, (the
"Exchange Agent"), for the benefit of the holders of shares of HFB Common
Stock, for exchange in accordance with this Article II, through the Exchange
Agent, certificates representing the shares of FAC Common Stock (such
certificates for shares of FAC Common Stock together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.1 in exchange for outstanding
shares of HFB Common Stock and cash for fractional shares.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, but in no event later than five (5)
business days thereafter, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of HFB Common Stock (the
"Certificates") whose shares were converted into shares of FAC Common Stock
pursuant to Section 2.1, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as FAC and HFB may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of FAC Common
Stock and cash for fractional shares, if any. Upon surrender of a Certificate
for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of FAC Common Stock which such holder has the right to receive in
respect of the Certificate surrendered pursuant to the provisions of this
Article II (after taking into account all shares of HFB Common Stock then held
by such holder), and cash for fractional shares, if any, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of HFB Common Stock which is not
4
8
registered in the transfer records of HFB, a certificate representing the
proper number of shares of FAC Common Stock may be issued to a transferee if
the Certificate representing such HFB Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the certificate representing shares of FAC
Common Stock and cash in lieu of any fractional shares of FAC Common Stock as
contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to FAC Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of FAC Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.2(e)
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares
of FAC Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable with respect to a
fractional share of FAC Common Stock to which such holder is entitled pursuant
to Section 2.2(e) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of FAC Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of FAC Common Stock.
(d) No Further Ownership Rights in HFB Common Stock. All
shares of FAC Common Stock issued upon conversion of shares of HFB Common Stock
in accordance with the terms hereof (including any cash paid pursuant to
Section 2.2) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of HFB Common Stock, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by HFB on such shares of HFB Common Stock in accordance
with the terms of this Agreement on or prior to the Effective Time and which
remain unpaid at the Effective Time, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of HFB Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article II.
5
9
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of FAC Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder of
FAC including without limitation the right to receive dividends. Each holder of
HFB Common Stock who would otherwise have been entitled to receive a fraction
of a share of FAC Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of FAC Common
Stock multiplied by the market value of one share of FAC Common Stock on the
day immediately prior to the Effective Time. The market value of one share of
FAC Common Stock on the day immediately prior to the Effective Time shall be
the closing price of such stock on the NASDAQ national market system (as
reported in The Wall Street Journal, or if not reported thereby, any other
authoritative source) on the last trading day preceding the Effective Time. As
soon as practicable after the determination of the amount of cash, if any, to
be paid to holders of HFB Common Stock with respect to any fractional share
interests, the Exchange Agent shall make available such amounts to such holders
of HFB Common Stock subject to and in accordance with the terms of Section
2.2(b).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the stockholders of HFB for one
year after the Effective Time shall be delivered to FAC, upon demand, and any
stockholders of HFB who have not theretofore complied with this Article II
shall thereafter look only to FAC for payment of their claim for FAC Common
Stock, any cash in lieu of fractional shares of FAC Common Stock and any
dividends or distributions with respect to FAC Common Stock.
(g) No Liability. Neither FAC nor HFB shall be liable to
any holder of shares of HFB Common Stock or FAC Common Stock, as the case may
be, for such shares (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of HFB. HFB
represents and warrants to FAC as follows (except with respect to matters
disclosed in the HFB Disclosure Schedule delivered by HFB to FAC concurrently
with or prior to the execution of this Agreement, and reference to a matter in
a section of the Disclosure Schedule shall also be deemed a reference to such
matter in any other section of the Disclosure Schedule whether or not
specifically disclosed therein):
6
10
(a) Organization, Standing and Power. HFB is a Tennessee
corporation and a savings and loan holding company subject to regulations with
the Office of Thrift Supervision and the Department of the Treasury. Heritage
Federal Bank for Savings, a federal stock savings bank ("HFBS"), is a wholly
owned Subsidiary of HFB. Each of HFB and its Subsidiaries is a federal savings
bank or corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failure to
so qualify would not have a material adverse effect on HFB.
(b) Capital Structure. (i) As of the date hereof, the
authorized capital stock of HFB consists of 8,000,000 shares of HFB Common
Stock, $1.00 par value ("HFB Common Stock") and 2,000,000 shares of $1.00 par
value serial preferred stock ("HFB Preferred Stock"). At the close of business
on February 9, 1995, 3,179,181 shares of HFB Common Stock were outstanding, no
shares of HFB Preferred Stock were outstanding, options for 422,532 shares of
HFB Common Stock were outstanding, 477,000 shares of HFB Common Stock were
reserved for issuance upon the exercise of outstanding stock options and for
restricted stock awards and no shares of HFB Common Stock were held by HFB in
treasury or by its Subsidiaries.
(ii) As of the date hereof, no bonds, debentures,
notes or other indebtedness having the right to vote (or convertible into or
exercisable for securities having the right to vote) on any matters on which
stockholders may vote ("Voting Debt") of HFB were issued or outstanding. All
outstanding shares of HFB capital stock are validly issued, fully paid and
nonassessable and not subject to preemptive rights.
(iii) As of the date of this Agreement, except for
this Agreement, the HFB Stock Plans and HFB Stock Options (both as defined in
Section 5.10) and except as disclosed in the HFB Disclosure Schedule, there are
no options, warrants, calls, rights, commitments or agreements of any character
to which HFB or any Subsidiary of HFB is a party or by which it is bound
obligating HFB or any Subsidiary of HFB to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or any Voting
Debt of HFB or of any Subsidiary of HFB or obligating HFB or any Subsidiary of
HFB to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. Assuming compliance by FAC with Section 5.10, after
the Effective Time, there will be no other option, warrant, call, right or
agreement obligating HFB or any Subsidiary of HFB to issue, deliver or sell, or
cause to be issued, delivered or sold, any shares of capital stock or any
Voting Debt of HFB or any Subsidiary of HFB, or obligating HFB or any
Subsidiary of HFB to grant, extend or enter into any such option, warrant,
call, right or
7
11
agreement. As of the date hereof, there are no outstanding contractual
obligations of HFB or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of HFB or any of its
Subsidiaries.
(iv) Since December 31, 1994, except as permitted
by this Agreement, HFB has not (A) issued or permitted to be issued any shares
of capital stock, or securities exercisable for or convertible into shares of
capital stock, of HFB or any of its Subsidiaries, other than pursuant to and as
required by the terms of any HFB Stock Options or HFB Stock Plans; (B)
repurchased, redeemed or otherwise acquired, directly or indirectly through one
or more of its subsidiaries, any shares of capital stock of HFB or any of its
Subsidiaries (other than the acquisition of trust account shares); or (C)
declared, set aside, made or paid to the stockholders of HFB dividends or other
distributions on the outstanding shares of capital stock of HFB, other than
regular quarterly cash dividends at a rate not in excess of the regular
quarterly cash dividends most recently declared by HFB prior to the date
hereof.
(c) Authority. (i) HFB has all requisite corporate power
and authority to enter into this Agreement and, subject to approval of this
Agreement and an amendment to Article XIV of the HFB Charter (to make
inapplicable to FAC the restrictions therein) by the stockholders of HFB, to
consummate the transactions contemplated hereby. HFBS has all requisite
corporate power and authority to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of HFB, subject in the case of this Agreement to
such approval of this Agreement by the stockholders of HFB. This Agreement has
been duly executed and delivered by HFB and constitutes the valid and binding
obligation of HFB, enforceable in accordance with its terms.
(ii) Except as disclosed in the HFB Disclosure
Schedule, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, (A) conflict
with, or result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or the creation of a lien, pledge, security interest, charge or
other encumbrance on assets (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation")
pursuant to, any provision of the charter or By-laws of HFB, HFBS or any other
Subsidiary of HFB (other than an amendment to Article XIV of the HFB Charter as
contemplated hereby) or (B) subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, result in any Violation of any loan or
credit agreement, note, mortgage, indenture, lease, Benefit Plan (as defined in
Section 3.1(j)) or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule
8
12
or regulation applicable to HFB, HFBS or any other Subsidiary of HFB or their
respective properties or assets which Violation would have a material adverse
effect on HFB and HFBS taken as a whole.
As used in this Agreement, (i) any reference to any event,
change or effect being "material" with respect to any entity means an event,
change or effect which is material in relation to the financial condition,
properties, assets, liabilities, businesses, prospects or results of operations
of such entity and its Subsidiaries taken as a whole and (ii) the term
"material adverse effect" means, with respect to HFB or FAC, a material adverse
effect on the business, prospects, assets, results of operations or financial
condition of such party and its Subsidiaries taken as a whole or on the ability
of such party to perform its obligations hereunder.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality (a
"Governmental Entity"), is required by or with respect to HFB, HFBS or any
other Subsidiary of HFB in connection with the execution and delivery of this
Agreement and the transactions contemplated hereby the failure to obtain which
would have a material adverse effect on HFB or any Subsidiary thereof, except
for (A) the filing of applications with the Board of Governors of the Federal
Reserve System (the "Federal Reserve") under the BHC Act and the Federal
Deposit Insurance Act ("FDIA") and with the U. S. Comptroller of the Currency
(the "OCC") and the U.S. Office of Thrift Supervision ("OTS") and approval of
same, (B) the filing with the SEC of (1) a proxy statement in definitive form
relating to the meeting of HFB's stockholders to be held in connection with the
Merger (the "Proxy Statement") and (2) such reports under Sections 13(a),
13(d), 13(g) and 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated hereby and the obtaining from HFB of such orders as
may be required in connection therewith, (C) the filing of Articles of Merger
with the Secretary of State of the State of Tennessee and appropriate documents
with the relevant authorities of other states in which HFB is qualified to do
business, (D) the filing of such applications, filings, authorizations, orders
and approvals as may be required under Tennessee banking laws, and with and of
state banking authorities and approval of same ("State Banking Approval") and
pursuant to state takeover or change in control laws ("State Takeover
Approval"), (E) consents, authorizations, approvals, filings or exemptions in
connection with compliance with the applicable provisions of federal and state
securities laws relating to the regulation of broker-dealers or investment
advisers, and federal commodities laws relating to the regulation of future
commission merchants and the rules and regulations thereunder and of any
applicable industry self-regulatory organization, and the rules of NASDAQ, or
which are required under consumer finance, mortgage banking an other similar
laws, (F) notices under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (G) such filings, notifications and approvals
as are required
9
13
in order to terminate the ESOP and other HFB Benefit Plans as hereinafter
defined and described, and (I) filings, notifications and approvals under state
insurance laws and regulations.
(d) SEC Documents. HFB has made available to FAC a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by HFB with the SEC (other than reports filed
pursuant to Section 13(d) or 13(g) of the Exchange Act) since June 30, 1994
including the Form 10-Q for the quarter ended December 31, 1994 (the "HFB
Second Quarter 10-Q") (as such documents have since the time of their filing
been amended, the "HFB SEC Documents"), which are all the documents (other than
preliminary material and reports required pursuant to Section 13(d) or 13(g) of
the Exchange Act) that HFB was required to file with the SEC since such date.
HFB has made available to FAC true and complete copies of HFB's most recent
quarterly OTS financial reports and the HFB annual and quarterly reports on
Form H-(b)11 ("OTS Reports") filed with the OTS. As of their respective dates,
the OTS Reports complied in all material respects with the applicable
regulatory requirements (including regulatory accounting practices). As of
their respective dates, the HFB SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such HFB SEC Documents, and
none of the HFB SEC Documents 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 therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of HFB
included in the HFB SEC Documents comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q of the
SEC or normal recurring year-end adjustments) and fairly present the
consolidated financial position of HFB and its consolidated Subsidiaries at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended. All material agreements, contracts and other
documents required to be filed as exhibits to any of the HFB SEC Documents have
been so filed. Except as set forth in the HFB Disclosure Schedule, HFB has no
off-balance sheet financial instruments including but not limited to letters of
credit, unfunded commitments and derivative financial instruments, and will
have no off-balance sheet financial instruments as of the Effective Time. To
HFB's knowledge, there are no unasserted claims that are not disclosed in the
HFB SEC Documents that would reasonably be expected to have, individually or in
the aggregate, a material adverse effect on HFB and its Subsidiaries, taken as
a whole.
10
14
(e) Information Supplied. None of the information
supplied pursuant to this Agreement or to be supplied by HFB for inclusion or
incorporation by reference in (i) the registration statement on Form S-4 (or
other applicable form) to be filed with the SEC by FAC in connection with the
issuance of shares of FAC Common Stock in the Merger (the "S-4") will, at the
time the S- 4 is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Proxy Statement will, at the
date of mailing to stockholders and at the times of the meeting of stockholders
to be held in connection with the Merger, 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 were made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to FAC) will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
(f) Compliance with Applicable Laws. HFB and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are material to the operation of
the businesses of HFB and its Subsidiaries, taken as a whole (the "HFB
Permits"). HFB and its Subsidiaries are in compliance with the terms of the
HFB Permits, except where the failure as to comply would not have a material
adverse effect on HFB and its Subsidiaries, taken as a whole. Except as
disclosed in the HFB SEC Documents filed prior to the date of this Agreement or
in the HFB Second Quarter 10-Q, the businesses of HFB and its Subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity except for possible violations which individually or in the
aggregate do not, and, insofar as reasonably can be foreseen, in the future
will not, have a material adverse effect on HFB and its Subsidiaries, taken as
a whole. Except for routine examinations by Federal or state Governmental
Entities charged with the supervision or regulation of thrifts or thrift
holding companies or engaged in the insurance of bank deposits ("Bank
Regulators"), as of the date of this Agreement, to the knowledge of HFB, no
investigation by any Governmental Entity with respect to HFB or any of its
Subsidiaries is pending or threatened.
(g) Litigation. As of the date of this Agreement, except
as disclosed in the HFB SEC Documents filed prior to the date of this Agreement
there is no suit, action or proceeding pending or, to the knowledge of HFB,
threatened, against or affecting HFB or any Subsidiary of HFB that would
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on HFB and its Subsidiaries, taken as a whole, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against HFB or any Subsidiary of HFB having, or which
would reasonably be expected to have any such effect.
11
15
(h) Taxes. HFB and each of its Subsidiaries have filed
all tax returns required to be filed by any of them and have paid (or HFB has
paid on their behalf), or have set up an adequate reserve for the payment of,
all taxes required to be paid as shown on such returns, and the most recent
consolidated financial statements contained in the HFB SEC Documents reflect an
adequate provision for current and deferred taxes payable by HFB and its
Subsidiaries accrued through the date of consolidated such financial
statements, except in each case where a failure to do so would not have a
material adverse effect on HFB. No deficiencies for any taxes have been
proposed, asserted or assessed against HFB or any of its Subsidiaries that are
not adequately reserved for, except for deficiencies that would not have a
material adverse effect on HFB. Except with respect to claims for refund, the
Federal income tax returns of HFB and each of its Subsidiaries consolidated in
such returns have been examined by and settled with the United States Internal
Revenue Service (the "IRS"), or the statute of limitations with respect to such
years has expired (and no waiver extending the statute of limitations has been
requested or granted), for all years through 1990. No Federal income tax
returns of HFB and each of its Subsidiaries consolidated are currently under
examination by the IRS. For the purpose of this Agreement, the term "tax"
(including, with correlative meaning, the terms "taxes" and "taxable") shall
include, except where the context otherwise requires, all Federal, state, local
and foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts.
(i) Certain Agreements. Except as set forth in the HFB
Disclosure Schedule, or as disclosed in the HFB SEC Documents filed prior to
the date of this Agreement, and except for this Agreement, as of the date
hereof, neither HFB nor any of its Subsidiaries is a party to any oral or
written agreement not terminable on 30 days' or less notice or involving the
payment of more than $25,000 per annum.
(j) Benefit Plans. Neither HFB nor any of its
Subsidiaries maintains for the benefit of its employees any "employee benefit
plans" (each a "HFB Benefit Plan"), as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or other
profit-sharing, deferred compensation, bonus stock option, stock purchase,
employee benefit plans or arrangements, except as set forth in the HFB
Disclosure Schedule. HFB has made available to FAC a true and complete copy of
each HFB Benefit Plan and any related funding agreements, including all
amendments, supplements, and modifications thereto, all of which are legally
valid and binding and in full force and effect, and not in default in any
respect. HFB will also make available to FAC a true and complete copy of the
most recent annual report (Form 5500) and actuarial report, if any, for each
HFB Benefit Plan, and the most recent IRS determination letter, if any, for
each HFB Benefit Plan. All contributions required to be made to each HFB
Benefit Plan under the terms of that HFB Benefit Plan, ERISA, or other
applicable law have been timely made. Except as set forth in
12
16
the HFB Disclosure Schedule, in the case of each HFB Benefit Plan that is
subject to Title I, subtitle B, part 3 of ERISA, the net fair market value of
the assets held to fund that HFB Benefit Plan exceed the actuarial present
value (based on the actuarial assumptions used by HFB and its Subsidiaries for
funding) of all accrued benefits, both vested and nonvested under that HFB
Benefit Plan. To the knowledge of HFB, each HFB Benefit Plan complies
currently, and has complied in the past, in form and operation, with the
applicable provisions of ERISA, the Internal Revenue Code of 1954, as amended
(the "Code"), and other applicable law in all material respects. Each HFB
Benefit Plan intended to be a qualified plan and exempt trust under the
provisions of Sections 401 and 501 of the Code has been the subject of an IRS
determination letter to that effect and except as set forth on the HFB
Disclosure Schedule HFB knows of no facts or circumstances that are likely to
adversely affect the qualified status of any HFB Benefit Plan. HFB will make
any amendments required to be made to each HFB Benefit Plan to comply with
applicable legislation or regulations prior to the Effective Time. To the
knowledge of HFB, there have been no "prohibited transactions" (as defined in
Section 4975(c)(1) of the Code or Section 406 of ERISA) that would subject any
of the HFB Benefit Plans, any fiduciary thereof or any party dealing with the
HFB Benefit Plans to the tax on prohibited transactions imposed by Section 4975
of the Code or to a civil penalty imposed by Section 502 of ERISA. No amount
is due or owing from HFB and or any of its Subsidiaries to the Pension Benefit
Guaranty Corporation under Title IV of ERISA for any reason. To the knowledge
of HFB, no event which constitutes a "reportable event" as defined in Section
4043 of ERISA has occurred with respect to any HFB Benefit Plan that is covered
by ERISA. Since September 2, 1974, HFB has not terminated any employee benefit
plan subject to Title IV of ERISA for which a Notice of Sufficiency has not
been issued by the Pension Benefit Guaranty Corporation. To the knowledge of
HFB, there are no issues or disputes with respect to any HFB Benefit Plan, or
the administration thereof, currently existing between any trustee or other
fiduciary thereunder, HFB or any of its Subsidiaries and any governmental
agency, employee, former employee or beneficiary of any employee or former
employee of HFB or any of its Subsidiaries. Except as set forth in the HFB
Disclosure Schedule, neither HFB nor any of its Subsidiaries has previously,
currently or will prior to the Effective Time (i) participate in or contribute
to any multi-employer plan as such term is defined in Section 4001(a) of ERISA
or (ii) agree to provide any post-retirement welfare benefits to its former
employees. All group health plans of HFB and its Subsidiaries have been
operated in good faith compliance with the applicable requirements for group
health plan continuation coverage of Section 4980B of the Code.
(k) Subsidiaries. Exhibit 21 to HFB's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994, includes all the
Subsidiaries of HFB as of the date of this Agreement and indicates for each
such Subsidiary as of such date the jurisdiction of incorporation. Except as
set forth on such Exhibit, neither HFB nor any Subsidiary of HFB owns any
equity interest in any other corporation, association, partnership or other
entity other than the Federal Home Loan Bank of Cincinnati. HFBS is the only
Subsidiary of HFB that is a depository institution and HFBS is an "insured
13
17
depository institution" as defined in the FDIA and applicable regulations
thereunder. All of the shares of capital stock of each of the Subsidiaries
held by HFB or by another Subsidiary of HFB are fully paid and nonassessable
and are owned by HFB or a Subsidiary of HFB free and clear of any claim, lien
or encumbrance.
(l) Agreement with Bank Regulators. As of the date of
this Agreement, neither HFB nor any Subsidiary of it is a party to any written
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or is subject to any condition imposed in
writing, order or directive by, or is a recipient of any extraordinary
supervisory letter from, any Bank Regulator which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy, its
credit policies or its management, nor has HFB 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, decree, condition,
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar submission.
(m) Absence of Certain Changes or Events. Except as
disclosed in the HFB SEC Documents filed prior to the date of this Agreement,
since June 30, 1994, HFB and its Subsidiaries have not incurred any material
liability, except in the ordinary course of their business consistent with
their past practices, nor has there been any change, nor has there occurred any
event involving a prospective change, in the business, assets, financial
condition or results of operations of HFB or any of its Subsidiaries which has
had, or is reasonably likely to have, a material adverse effect on HFB (other
than as a result of changes in banking or thrift laws or regulations of general
applicability or interpretations thereof, changes in generally accepted
accounting principles or regulatory accounting practices or interpretations
thereof, changes in general economic conditions including but not limited to
changes in interest rates, and changes that could, under the circumstances,
reasonably have been anticipated in light of disclosures made in writing by HFB
to FAC prior to execution of this Agreement, changes effected on FAC's request
pursuant to Section 5.16 hereof or the settlement or disposition of any
litigation pending as of the date hereof and set forth on the HFB Disclosure
Schedule by HFB or any Subsidiary).
(n) Vote Required. The affirmative vote of the holders
of a majority of the outstanding shares of HFB Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of HFB capital
stock necessary to approve this Agreement and the transactions contemplated
hereby. Without limitation of the foregoing, HFB affirmatively represents and
warrants that Article XIV Section (A) of the HFB charter may be amended to
exclude FAC from its restrictions upon the affirmative vote of the holders of a
majority of the outstanding shares of HFB Common Stock entitled to vote
thereon.
14
18
(o) Properties. Except as disclosed in the HFB SEC
Documents filed prior to the date of this Agreement, HFB or one of its
Subsidiaries (i) has good, clear and marketable title to all the properties and
assets which are material to HFB's business on a consolidated basis and are
reflected in the latest audited consolidated balance sheet included in the HFB
SEC Documents as being owned by HFB or one of its Subsidiaries or acquired
after the date thereof (except properties sold or otherwise disposed of since
the date thereof), free and clear of all claims, liens, charges, security
interests or encumbrances of any nature whatsoever except (A) statutory liens
securing payments not yet due, (B) liens on assets of Subsidiaries of HFB
incurred in the ordinary course of their business and (C) such imperfections or
irregularities of title, claims, liens, charges, security interests or
encumbrances as do not affect the use of the properties or assets subject
thereto or affected thereby or otherwise materially impair business operations
at such properties, in either case in such a manner as to have a material
adverse effect on HFB and its Subsidiaries, taken as a whole and (ii) is the
lessee of all leasehold estates which are material to HFB's business on a
consolidated basis and are reflected in the latest audited consolidated
financial statements included in the HFB SEC Documents or acquired after the
date thereof (except for leases that have expired by their terms or as to which
HFB has agreed to terminate since the date thereof) and is in possession of the
properties purported to be leased thereunder, and each such lease is valid
without default thereunder by the lessee or, to HFB's knowledge, the lessor,
other than defaults that do not or would not have a material adverse effect on
HFB.
(p) Ownership of FAC Common Stock. As of the date
hereof, neither HFB nor, any of its affiliates or associates (as such terms are
defined under the Exchange Act), (i) beneficially owns, directly or indirectly,
or (ii) are parties to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each case, shares of
capital stock of FAC, which in the aggregate, represent 10% or more of the
outstanding shares of capital stock of FAC entitled to vote generally in the
election of directors (other than trust account shares).
(q) Allowance for Possible Loan Losses. The allowance
for possible loan losses shown on the statement of financial condition of HFBS
as of December 31, 1994 was in the opinion of management of HFB, consistent
with applicable regulations and adequate in all material respects to provide
for all known and reasonably anticipated possible losses, net of recoveries
relating to loans previously charged off, on loans and leases outstanding and
accrued interest receivable on non-performing loans as of December 31, 1994 and
as of January 31, 1995 and as of the Effective Time will be in the opinion of
management of HFB, consistent with applicable regulations and adequate in all
material respects to provide for all known and reasonably anticipated possible
losses, net of recoveries relating to loans previously charged off, on loans
and leases outstanding and accrued interest receivable on non-performing loans
as of the Effective Time.
15
19
(r) Certain Transactions with Affiliated Persons. Except
as disclosed in the HFB SEC Documents filed prior to the date of this Agreement
or as set forth in the HFB Disclosure Schedule, there are no transactions to
which HFB or any Subsidiary was a party in which any officer or director of HFB
or any Subsidiary or any other entity controlled by, under common control with
or in control of HFB had a direct or indirect interest.
(s) Qualified Thrift Lender. Since its conversion to
stock form, HFBS has at all times satisfied, and as of the date hereof
satisfies, the qualified thrift lender test as in effect from time to time.
(t) Permissible Activities. Except as set forth in the
HFB Disclosure Schedule, all of the business activities conducted by HFB and
its Subsidiaries as of the date hereof are business activities in which a bank
holding company is permitted to engage under the federal Bank Holding Company
Act of 1956, as amended, and Regulation Y promulgated thereunder and all
business activities conducted by HFBS as of the date hereof are business
activities in which national banks are permitted to engage under the rules and
regulations of the OCC.
(u) Environmental Matters. Except as set forth in the HFB
Disclosure Schedule:
(i) The operations of HFB and its Subsidiaries
have been in the past and are now to its knowledge in compliance with all
federal, state and local laws, rules and regulations and other governmental
restrictions relating to pollution or protection of the environment or public
or employee health and safety (collectively, the "Environmental Laws")
including, without limitation, those relating to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq. ("CERCLA"); the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Section 6901 et seq. ("RCRA"), the Hazardous Materials
Transportation Act, as amended by the Solid Waste Disposal Act and as further
amended, 49 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251 et seq., the Safe Water Drinking Act,
42 U.S.C. Section 300f-300j; the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; and the Occupational Safety and Health Act.
(ii) Neither HFB nor any Subsidiary have been
notified of an Environmental Laws violation; and are not otherwise aware that
it is considered potentially liable under the Environmental Laws; and neither
HFB nor any Subsidiary have received any requests for information or other
correspondence (including, without limitation consent orders, consent decrees,
judgments, orders or injunctions) by or from any governmental authority or
private party concerning any site, facility or operation relating to (x) the
Environmental Laws, (y) environmental protection and
16
20
health or safety matters, or (z) any statutory or common law theory of
liability involving environmental or health and safety matters.
(iii) To HFB's knowledge, no use, disposal,
releases, burial or placement of any material regulated under or defined by any
Environmental Law, including without limitation, asbestos (collectively,
"Hazardous Materials") has occurred on, in, at, under or about any of the
property owned, leased or operated at any time by HFB or any Subsidiary.
(iv) There has been no disposal, release, burial
or placement of Hazardous Materials on any real property not owned, leased or
operated by HFB or any Subsidiary which may result or has resulted in
contamination of or beneath the property owned, leased or operated at any time
by HFB or any Subsidiary.
(v) All of the above-ground and underground
storage tanks presently on any real property owned, leased or operated by HFB
or any Subsidiary have been properly registered.
(vi) No audit or investigation has been conducted
as to environmental matters relating to any property owned, leased or operated
by HFB or any Subsidiary by any governmental agency.
(vii) There are no civil or criminal actions, suits
or proceedings, or demands, claims, notices or investigations (including,
without limitation, notices, demand letters or requests for information from
any environmental agency) instituted or pending, or threatened relating to the
liability of any properties owned or operated by HFB or any Subsidiary under
any Environmental Law.
(v) Charter Provisions and State Anti-Takeover Laws. HFB
and each of its Subsidiaries has taken or will take all actions necessary so
that the entering into this Agreement and the consummation of the transactions
contemplated hereby (i) are exempt from any applicable state takeover law and
(ii) do not and will not result in the grant of any rights to any person under
the charter, bylaws or other governing instrument of HFB or any Subsidiary
thereof or restrict or impair the right of FAC to vote or otherwise to exercise
the rights of a shareholder with respect to shares of HFB or any Subsidiary
thereof that may be acquired or controlled by FAC pursuant to this Agreement or
the consummation of the transactions contemplated hereby.
For purposes of this Agreement, the term "knowledge" as used with respect to
any person shall mean the knowledge after due inquiry of the chairman,
president, chief financial officer, chief credit officer, or general counsel.
The term "person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited
17
21
liability company, trust, business association, group acting in concert, or any
person acting in a representative capacity.
3.2. Representations and Warranties of FAC. FAC
represents and warrants to HFB as follows:
(a) Organization, Standing and Power. FAC is a Tennessee
corporation and a bank holding company registered under the Bank Holding
Company Act. First American National Bank ("FANB") is a national banking
association and a wholly owned Subsidiary of FAC. Each of FAC and its
Subsidiaries is a national bank, corporation or partnership duly organized,
validly existing and, in the case of banks or corporations, in good standing
under the laws of its jurisdiction of incorporation or organization, has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failure so
to qualify would not have a material adverse effect on FAC and its
Subsidiaries, taken as a whole.
(b) Capital Structure. (i) As of the date hereof, the
authorized capital stock of FAC consists of 50,000,000 shares of FAC Common
Stock $5.00 par value ("FAC Common Stock") and 2,500,000 shares of preferred
stock without par value (the "FAC Preferred"). As of the close of business on
February 9, 1995 (A) 26,160,563 shares of FAC Common Stock were outstanding, no
shares of FAC Preferred Stock were outstanding, and (B) 836,216 shares of FAC
Common Stock were reserved for issuance pursuant to FAC's Dividend Reinvestment
and Stock Purchase Plan, 3,190,244 shares of FAC Common Stock were reserved for
issuance upon the exercise of stock options pursuant to the First American
Corporation 1991 Employee Stock Incentive Plan, the First American Corporation
STAR Award Plan and the First American Corporation 1993 Non-Employee Director
Stock Option Plan, (the "FAC Stock Plans"), 926,547 shares of FAC Common Stock
were reserved for transfer to the First American Corporation First Incentive
Reward Savings Thrift Plan (Section 401(k) Plan (the "FIRST Plan")) and
2,500,000 shares of FAC Preferred were reserved for issuance under the First
American Shareholder Rights Plan dated December 14, 1988 (the "FAC Rights
Agreement").
(ii) As of the date hereof, no Voting Debt of FAC
was issued or outstanding. All outstanding shares of FAC capital stock are,
and the shares of FAC Common Stock (A) to be issued pursuant to or as
specifically contemplated by this Agreement and (B) when issued in accordance
with this Agreement upon exercise of the HFB Stock Options, as the case may be,
will be validly issued, fully paid and nonassessable and not subject to
preemptive rights.
18
22
(iii) As of the date of this Agreement, except for
this Agreement, FAC Stock Plans, and the FAC Rights Agreement, there are no
options, warrants, calls, rights, commitments or agreements of any character to
which FAC or any Subsidiary of FAC is a party or by which it is bound
obligating FAC or any Subsidiary of FAC to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or any Voting
Debt of FAC or of any Subsidiary of FAC or obligating FAC or any Subsidiary of
FAC to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement.
(c) Authority. (i) FAC has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. FANB has all requisite corporate power and
authority to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of FAC. This Agreement has been duly executed and delivered by FAC
and constitutes a valid and binding obligation of FAC, enforceable in
accordance with its terms.
(ii) The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will
not, (A) conflict with, or result in any Violation pursuant to any provision of
the charter or By-laws of FAC, FANB or any other Subsidiary of FAC or (B)
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
result in any Violation of any loan or credit agreement, note, mortgage,
indenture, lease, Benefit Plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to FAC, FANB or any other Subsidiary
of FAC or their respective properties or assets which Violation would have a
material adverse effect on FAC and its Subsidiaries, taken as a whole.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to FAC, FANB or any other Subsidiary of FAC in
connection with the execution and delivery of this Agreement or the
consummation by FAC of the transactions contemplated hereby, the failure to
obtain which would have a material adverse effect on FAC, except for (A) the
filing of applications with the Federal Reserve under the BHC Act and the FDIA
and with the OCC and the OTS and approval of same, (B) the filing with the SEC
of the S-4 in connection with this Agreement and the transactions contemplated
hereby and the obtaining from the SEC of such orders as may be required in
connection therewith, (C) such filings and approvals as are required to be made
or obtained under the securities or blue sky laws of various states in
connection with the transactions contemplated by this Agreement, (D) the filing
of the Articles of Merger with the Secretary of State of the State of Tennessee
and appropriate documents with the relevant authorities of other states in
which FAC is
19
23
qualified to do business, (E) the State Banking Approvals and State Takeover
Approvals, (F) consents, authorizations, approvals, filings or exemptions in
connection with compliance with the applicable provisions of federal and state
securities laws relating to the regulation of broker-dealers or investment
advisers and federal commodities laws relating to the regulation of futures
commission merchants and the rules and regulations thereunder and of any
applicable industry self-regulatory organization, and the rules of NASDAQ, or
which are required under consumer finance, mortgage banking and other similar
laws, (G) notices under the HSR Act, and (H) filings, notifications and
approvals under state insurance laws and regulations.
(d) SEC Documents. FAC has made available to HFB a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by FAC with the SEC (other than reports filed
pursuant to Section 13(d) or 13(g) of the Exchange Act) since December 31, 1993
(the "FAC SEC Documents"), which are all the documents (other than preliminary
material and reports required pursuant to Section 13(d) or 13(g) of the
Exchange Act) that FAC was required to file with the SEC since such date. FAC
has made available to HFB true and complete copies of its most recent annual
and quarterly Consolidated Reports of Condition and Income ("Call Reports")
filed with the OCC. As of their respective dates, the Call Reports complied in
all material respects with the applicable regulatory requirements (including
regulatory accounting practices). As of their respective dates, the FAC SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such FAC SEC Documents, and
none of the FAC SEC Documents 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 therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of FAC
included in the FAC SEC Documents comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q of the
SEC or normal recurring year-end adjustments) and fairly present the
consolidated financial position of FAC and its consolidated Subsidiaries as at
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. All material agreements, contracts and other
documents required to be filed as exhibits to any of the FAC SEC Documents have
been so filed. To FAC's knowledge, there are no unasserted claims that are not
disclosed in the FAC SEC Documents that would reasonably be expected to have,
individually or in the aggregate, a material adverse effect on FAC.
(e) Information Supplied. None of the information
supplied pursuant to this Agreement or to be supplied by FAC for inclusion or
incorporation by reference
20
24
in the S-4 (or other applicable form) will, at the time the S-4 is filed with
the SEC, at the time it becomes effective under the Securities Act, at the time
it is mailed to the shareholders of HFB in connection with the meeting of
shareholders to vote on the Merger and at all times subsequent to such mailing
up to and including the time of such meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The S-4 will comply
as to form with all applicable requirements.
(f) Compliance with Applicable Laws. FAC and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are material to the operation of
the businesses of FAC and its Subsidiaries, taken as a whole (the "FAC
Permits"). FAC and its Subsidiaries are in compliance with the terms of the
FAC Permits and all applicable laws and regulations, except where the failure
so to comply would not have a material adverse effect on FAC. Except as
disclosed in the FAC SEC Documents filed prior to the date hereof, the
businesses of FAC and its Subsidiaries are not being conducted in violation of
any law, ordinance or regulation of any Governmental Entity, except for
possible violations which individually or in the aggregate do not, and, insofar
as reasonably can be foreseen, in the future will not, have a material adverse
effect on FAC. Except for routine examinations by Bank Regulators, as of the
date of this Agreement, to the knowledge of FAC, no investigation by any
Governmental Entity with respect to FAC or any of its Subsidiaries is pending
or threatened, other than, in each case, those the outcome of which, as far as
reasonably can be foreseen, will not have a material adverse effect on FAC.
(g) Litigation. As of the date of this Agreement, except
as disclosed in the FAC SEC Documents filed prior to the date of this
Agreement, there is no suit, action or proceeding pending or, to the knowledge
of FAC, threatened, against or affecting FAC or any Subsidiary of FAC that
would reasonably be expected to have, individually or in the aggregate, a
material adverse effect on FAC, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against FAC
or any Subsidiary of FAC having, or which would reasonably be expected to have,
any such effect.
(h) Absence of Certain Changes or Events. Except as
disclosed in the FAC SEC Documents filed prior to the date of this Agreement,
since December 31, 1993 there has not been any change or any event involving a
prospective change, in the business, assets, financial condition, prospects or
results of operations of FAC or any of its Subsidiaries which has had, or is
reasonably likely to have, a material adverse effect on FAC (other than as a
result of changes in banking laws or regulations of general applicability or
interpretations thereof, changes in generally accepted accounting principles or
regulatory accounting practices or interpretations thereof, changes in general
economic conditions including but not limited to, changes in interest rates,
and changes that could, under the circumstances, reasonably have
21
25
been anticipated in light of disclosures made in writing by FAC to HFB prior to
execution of this Agreement).
(i) No Vote Required. Under Section 48-21-103 of the
TBCA, no vote of the stockholders of FAC is required in order to enter into
this Agreement or to consummate the Merger.
(j) Consideration. FAC has reserved or will reserve for
issuance sufficient shares of FAC Common Stock for issuance in the Merger;
however, it is FAC's current intention to repurchase up to 80% of such number
of shares prior to or substantially concurrent with the consummation of the
Merger pursuant to Rule 10b-18 of the SEC and in a manner which does not
prohibit FAC from entering into pooling transactions within two years from such
repurchases.
(k) Governmental Approvals and Other Conditions. FAC is
unaware of any reason why (i) the Requisite Regulatory Approvals (as defined in
Section 6.1(c) that are required to be obtained by FAC in connection with the
transactions contemplated herein should not be granted, or (ii) such Requisite
Regulatory Approvals should be subject to a condition which would have a
material adverse effect on FAC as contemplated in Section 6.2 (e) or (iii) any
of the conditions precedent as specified in Article VI to the obligations of
either FAC or HFB to consummate the transactions contemplated herein are
unlikely to be fulfilled within the applicable time period or periods required
for satisfaction of such condition or conditions.
(l) Taxes. FAC and each of its Subsidiaries have filed
all tax returns required to be filed by any of them and have paid (or FAC has
paid on their behalf), or have set up an adequate reserve for the payment of,
all taxes required to be paid as shown on such returns, and the most recent
financial statements contained in the FAC SEC Documents reflect an adequate
provision for current and deferred taxes payable by FAC and its Subsidiaries
accrued through the date of such financial statements, except in each case
where a failure to do so would not have a material adverse effect on FAC. No
deficiencies for any taxes have been proposed, asserted or assessed against FAC
or any of its Subsidiaries that are not adequately reserved for, except for
deficiencies that would not have a material adverse effect on FAC. Except with
respect to claims for refund, the Federal income tax returns of FAC and each of
its Subsidiaries consolidated in such returns have been examined by and settled
with the IRS, or the statute of limitations with respect to such years has
expired (and no waiver extending the statute of limitations has been requested
or granted), for all years through 1990. The Federal income tax returns of FAC
and each of its Subsidiaries consolidated in such returns for the years 1991
through 1993 are subject to audit by the IRS.
(m) Agreements with Bank Regulators. As of the date of
this Agreement, neither FAC nor any Subsidiary of it is a party to any written
agreement
22
26
or memorandum of understanding with, or a party to any commitment letter or
similar undertaking to, or is subject to any condition imposed in writing, or
is subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, any Bank Regulator which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy, its
credit policies or its management, nor has FAC 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, decree, condition,
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar submission.
(n) Properties. Except as disclosed in the FAC SEC
Documents filed prior to the date of this Agreement, FAC or one of Subsidiaries
(i) has good, clear and marketable title to all the properties and assets which
are material to FAC's business on a consolidated basis and are reflected in the
latest audited balance sheet included in the FAC SEC Documents as being owned
by FAC or one of its Subsidiaries or acquired after the date thereof (except
properties sold or otherwise disposed of since the date thereof), free and
clear of all claims, liens, charges, security interests or encumbrances of any
nature whatsoever except (A) statutory liens securing payments not yet due, (B)
liens on assets of Subsidiaries of FAC incurred in the ordinary course of their
business and (C) such imperfections or irregularities of title, claims, liens,
charges, security interests or encumbrances as do not affect the use of the
properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties, in either case in
such a manner as to have a material adverse effect on FAC, and (ii) is the
lessee of all leasehold estates which are material to FAC's business on a
consolidated basis and are reflected in the latest audited financial statements
included in the FAC SEC Documents or acquired after the date thereof (except
for leases that have expired by their terms or as to which FAC has agreed to
terminate since the date thereof) and is in possession of the properties
purported to be leased thereunder and each such lease is valid without default
thereunder by the lessee or, to FAC's knowledge, the lessor, other than
defaults that would not have a material adverse effect on FAC.
(o) Allowance for Possible Loan Losses. The allowance
for possible loan losses shown on the statement of financial condition of FANB
as of December 31, 1994 is in the opinion of management of FAC consistent with
applicable regulations and adequate in all material respects to provide for
possible losses , net of recoveries relating to loans previously charged off,
on loans and leases outstanding, accrued interest receivable on nonperforming
loans as of December 31, 1994 and as of January 31, 1995 and as of the
Effective Time will be in the opinion of management of HFB, consistent with
applicable regulations and adequate in all material respects to provide for all
known and reasonably anticipated possible losses, net of recoveries relating to
loans previously charged off, on loans and leases outstanding and accrued
interest receivable on non-performing loans as of the Effective Time.
23
27
ARTICLE IV
Covenants Relating to Conduct of Business
-----------------------------------------
4.1 Covenants of Both Parties. Unless prior written
consent of the other party shall have been obtained, and except as otherwise
expressly contemplated herein, prior to the Effective Time each of FAC and HFB
shall and shall cause each of its Subsidiaries to (a) operate its business only
in the usual, regular, and ordinary course, (b) preserve intact its business
organizations and assets and maintain its rights and franchises, and (c) take
no action which would materially (i) adversely affect the ability of any party
to obtain any consents required for the transactions contemplated hereby, or
(ii) adversely affect the ability of any party to perform its covenants and
agreements under this Agreement in all material respects and to consummate the
Merger; or (iii) prevent or impede the transactions contemplated herein from
qualifying as a reorganization under Section 368 of the Code; provided, that
the foregoing shall not prevent FAC or any of its Subsidiaries from acquiring
additional assets or businesses or discontinuing or disposing of any of its
assets or businesses if such action is, in the judgment of FAC, desirable in
the conduct of the business of FAC and its Subsidiaries so long as any of such
actions does not materially delay receipt of the Requisite Regulatory Approvals
(as defined herein) or adversely affect FAC's ability to consummate the Merger
or have a material adverse effect on FAC. Neither FAC nor HFB shall
intentionally take or cause to be taken any action, that would disqualify the
Merger as a "reorganization" within the meaning of Section 368(a) of the Code.
4.2 Covenants of HFB. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
HFB covenants and agrees that it will not do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer of
FAC or the president of FANB (which consent shall not be unreasonably
withheld):
(a) amend the Charter (other than the amendment
to Article XIV as contemplated hereby), Bylaws, or other governing
instruments of HFB or any Subsidiary; or
(b) incur, guarantee, or otherwise become
responsible for, any additional debt obligation or other obligation
for borrowed money (other than indebtedness of a HFB or any Subsidiary
thereof to another Subsidiary) except in the ordinary course of the
business of HFB and its Subsidiaries consistent with past practices,
or impose or suffer the imposition, on any share of capital stock held
by HFB or any Subsidiary of any lien or encumbrance or permit any such
lien or encumbrance to exist; or
24
28
(c) repurchase, redeem, or otherwise acquire or
exchange, directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of any HFB or any
Subsidiary, or declare or pay any dividend or make any other
distribution in respect of HFB's capital stock other than regular
quarterly cash dividends not in excess of $0.095 per share of HFB
Common Stock; or
(d) except for this Agreement, or pursuant to the
exercise of stock options outstanding as of the date hereof and
pursuant to the terms thereof in existence on the date hereof or
required by the terms of the HFB Stock Plans in amounts not to exceed
75,000 shares of HFB Common Stock between the date hereof and the
Effective Time, issue, sell, pledge, encumber, authorize the issuance
of, enter into any contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding,
any additional shares of HFB Common Stock or any other capital stock
of any HFB or any Subsidiary, or any stock appreciation rights, or any
option, warrant, conversion, or other right to acquire any such stock,
or any security convertible into any such stock; or
(e) adjust, split, combine, or reclassify any
capital stock of HFB or any Subsidiary or issue or authorize the
issuance of any other securities in respect of or in substitution for
shares of HFB capital stock (other than as permitted under Section
4.2(d) or sell, lease, mortgage, or otherwise dispose of or otherwise
encumber any shares of capital stock of any HFB Subsidiary or any
assets other than in the ordinary course of business for reasonable
and adequate consideration; or
(f) acquire direct or indirect control over, or
invest in equity securities of, any person (other than the Federal
Home Loan Bank of Cincinnati), other than in connection with
foreclosures in the ordinary course of business; or
(g) grant any increase in compensation or
benefits to the employees or officers of HFB or any Subsidiary except
as required by law or except as is consistent with FAC's current
matrix for salary increases; pay any bonus except pursuant to the
provisions of any applicable program or plan adopted by its Board of
Directors prior to the date of this Agreement; enter into or amend any
severance agreements with officers of HFB or any Subsidiary; grant any
increase in fees or other increases in compensation or other benefits
to directors of any HFB or any Subsidiary; or
(h) enter into or amend any employment contract
between HFB or any Subsidiary and any person that HFB or any
Subsidiary does not have the
25
29
unconditional right to terminate without liability at any time on or
after the Effective Time; or
(i) adopt any new employee benefit plan or
program or make any material change in or to any existing employee
benefit plans or programs of any HFB or any Subsidiary except as
required by law, except as contemplated by Section 5.9 herein or
except with respect to the 1992 Plan and the 1994 Plan and the
Director Incentive Plan (A) to permit transfer of non-qualified
options to family members or non-profit charitable organizations or
(B) to permit exercise of such non-qualified options at any time
during the term thereof irrespective of service with HFB (or any
Subsidiary thereof) or any successor thereto; or make any
discretionary matching contributions or discretionary contributions to
any employee benefit plan of HFB or any Subsidiary thereof; or
(j) commence any litigation other than in
accordance with past practice, settle any litigation involving any
liability of HFB or any Subsidiary for money damages or restrictions
upon the operations of HFB or any Subsidiary, or, except in the
ordinary course of business, modify, amend, or terminate any material
contract or waive, release, compromise, or assign any material rights
or claims; or
(k) enter into or terminate any material contract
or make any change in any material lease or contract, other than
renewals of leases and contracts without material adverse changes of
terms or pursuant to Sections 4.2(g), (h), or (i) of this Agreement;
or
(l) except as contemplated by Section 5.16, change
its methods of accounting in effect at June 30, 1994, except as
required by changes in generally accepted accounting principles
concurred in by HFB's independent auditors or change its fiscal year.
Without limitation of the foregoing, the parties agree that from the
date of this Agreement through the earlier of the Effective Time or the
termination hereof, the terms of the employment agreements between HFB or a
Subsidiary thereof and its five senior officers in effect as of the date hereof
shall not be renewed or extended.
4.3 Covenants of FAC. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
FAC covenants and agrees that it will not, without the prior written consent of
the chief executive officer of HFB, amend the Charter or Bylaws of FAC or the
FAC Rights Agreement or other applicable governing documents, in each case, in
any manner which is adverse to, and discriminates against, the holders of HFB
Common Stock.
26
30
4.4 Adverse Changes in Condition. Each of HFB and FAC
agrees to give written notice promptly to the other party upon becoming aware
of the occurrence or impending occurrence of any event or circumstance relating
to it or any of its Subsidiaries which (i) is reasonably likely to have,
individually or in the aggregate, a material adverse effect on it or (ii) would
cause or constitute a material breach of any of its representations,
warranties, or covenants contained herein, and to use its reasonable efforts to
prevent or promptly to remedy the same.
4.5 Reports. Each of FAC and HFB and its Subsidiaries
shall file all reports required to be filed by it with Regulatory Authorities
between the date of this Agreement and the Effective Time and shall deliver to
the other party copies of all such reports promptly after the same are filed.
If financial statements are contained in any such reports filed with the SEC or
any other Regulatory Authority, such financial statements will fairly present
the consolidated financial position of the entity filing such statements as of
the dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not material). As of their respective
dates, such reports filed with Regulatory Authorities will comply in all
material respects with the securities laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with laws, rules and regulations applicable to such
reports.
4.6 Affirmative Covenants of HFB. HFB agrees to take
or cause to be taken commencing as soon as practicable following the execution
of this Agreement, and continuing thereafter as appropriate, the following
affirmative actions prior to the Effective Time:
(a) Coordination of HFBS' CRA program in
consultation with FAC's CRA officer for consistency purposes in transitioning
to FAC's program;
(b) Replacement of the missing securities
certificate issued in the original principal amount of $97,000; and
(c) Obtaining a Phase II environmental assessment
of HFB's Harriman, Tennessee property, and using its best efforts to obtain
clean closure with respect to the underground storage tanks previously removed
therefrom, from HFB's Fort Henry Drive property in Kingsport, Tennessee and
from HFB's formerly owned property in McMinnville, Tennessee;
27
31
(d) Implementation of the plans to facilitate the
actions with respect to loans contemplated in Section 5.16 in accordance with
the plans previously provided by FAC to HFB.
Within ten (10) days after the end of each month commencing March 31,
1995 and continuing to the Effective Time, HFB will provide a brief written
description of the actions taken during the preceding month, together with its
then current estimate of the out-of-pocket costs and expenses incurred or
reasonably accruable to accomplish the above items.
4.7 No Solicitation. HFB will not authorize or
permit any officer, director, employee, investment banker, financial
consultant, attorney, accountant or other representative of HFB or any HFB
Subsidiary, directly or indirectly, to initiate contact with any person or
entity in an effort to solicit, initiate or encourage any Competing Transaction
(as defined in Section 7.3 herein). Except as the fiduciary duties of HFB's
Board of Directors may otherwise require, HFB will not authorize or permit any
officer, director, employee, investment banker, financial consultant, attorney,
accountant or other representative of HFB or any HFB Subsidiary, directly or
indirectly, (A) to cooperate with, or furnish or cause to be furnished any
non-public information concerning its business, properties or assets to, any
person or entity in connection with any Competing Transaction; (B) to negotiate
any Competing Transaction with any person or entity; or (C) to enter into any
agreement, letter of intent or agreement in principle as to any Competing
Transaction. HFB will promptly give written notice to FAC upon becoming aware
of any Competing Transaction.
ARTICLE V
Additional Agreements
---------------------
5.1 Preparation of S-4 and the Proxy Statement.
(a) For purposes of (i) holding the HFB
shareholders' meeting to on vote on the Merger and other matters contemplated
herein, and (ii) registering the FAC Common Stock in connection with the Merger
with the SEC and with applicable state authorities, the parties hereto shall
cooperate in the preparation of the S-4, including the prospectus/proxy
statement satisfying all applicable requirements of applicable state laws, and
of the Securities Act and the Exchange Act and the rules and regulations
thereunder.
(b) FAC shall furnish such information concerning
FAC as is necessary in order to cause the S-4, insofar as it relates to FAC to
comply with Section 5.1(a) hereof. FAC agrees promptly to advise HFB if at any
time prior to the Effective Time any information provided by FAC in the S-4
becomes incorrect or incomplete in any material respect and to provide the
information needed to correct
28
32
such inaccuracy or omission. FAC shall furnish HFB with such supplemental
information as may be necessary in order to cause such S- 4, insofar as it
relates to FAC, to comply with Section 5.1(a).
(c) HFB shall furnish FAC with such information
concerning HFB as is necessary in order to cause the S-4, insofar as it relates
to the HFB, to comply with Section 5.1(a) hereof. HFB agrees promptly to advise
FAC if at any time prior to the Effective Time any information provided by HFB
in the S-4 becomes incorrect or incomplete in any material respect and to
provide FAC with the information needed to correct such inaccuracy or omission.
HFB shall furnish FAC with such supplemental information as may be necessary in
order to cause the S-4, insofar as it relates to HFB, to comply with Section
5.1 (a).
(d) HFB shall file with the SEC the Proxy
Statement and FAC shall file with the SEC the S-4, in which the Proxy Statement
will be included. FAC shall use all reasonable efforts to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing. FAC shall also take any action (other than qualifying to do
business in any jurisdiction in which it is now not so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of FAC Common Stock in the Merger and FAC Common Stock upon the
exercise of the HFB Stock Options, and HFB shall furnish all information
concerning HFB and the holders of HFB Common Stock as may be reasonably
requested in connection with any such action. FAC shall advise HFB promptly
when the S-4 has become effective and of any supplements or amendments thereto,
and FAC shall furnish HFB with copies of all such documents.
5.2 Letter of HFB's Accountants. HFB shall use all
reasonable efforts to cause to be delivered to FAC a consent letter of Coopers
& Lybrand, HFB's independent auditors, dated a date within two business days
before the date on which the S-4 shall become effective and addressed to FAC,
in form and substance reasonably satisfactory to FAC, and in scope and
substance consistent with applicable professional standards for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4.
5.3 Letter of FAC's Accountants. FAC shall use all
reasonable efforts to cause to be delivered to HFB a consent letter of KPMG
Peat Marwick LLP, FAC's independent auditors, dated a date within two business
days before the date on which the S-4 shall become effective and addressed to
HFB, in form and substance reasonably satisfactory to HFB, and in scope and
substance consistent with applicable professional standards for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4.
5.4 Access to Information. Upon reasonable notice, HFB
and FAC shall each (and shall cause each of their respective Subsidiaries to)
afford to the
29
33
officers, employees, accountants, counsel and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, each of HFB and FAC shall (and shall cause
each of their respective Subsidiaries to) make available to the other (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of Federal
securities laws or Federal or state banking laws (other than reports or
documents which such party is not permitted to disclose under applicable law)
and (b) all other information concerning its business, properties and personnel
as such other party may reasonably request. The parties will hold any or other
such information which is nonpublic in confidence to the extent required by,
and in accordance with the Confidentiality Agreement dated December 15, 1994,
between HFB and FAC (the "Confidentiality Agreement"). HFB agrees to hold, and
to cause its agents and representatives to hold, all such information obtained
with respect to FAC and/or its Subsidiaries in confidence to the same degree as
required of FAC under the Confidentiality Agreement. No investigation by either
FAC or HFB shall affect the representations and warranties of the other, except
to the extent such representations and warranties are by their terms qualified
by disclosures made in writing made to such first party.
5.5 HFB Stockholders' Meeting. HFB shall call a meeting
of its stockholders to be held as promptly as practicable on a mutually
agreeable date for the purpose of voting upon the approval of this Agreement.
HFB will, through its Board of Directors, recommend to its stockholders
(subject to the fiduciary duties of the HFB Board of Directors and to the
receipt of a fairness opinion as provided herein), and each of the Directors
has individually agreed to vote his shares for, approval of this Agreement and
all related matters necessary to the consummation of the transactions
contemplated hereby including the amendment of the HFB Charter with respect to
Article XIV, Section (A) thereof. HFB and FAC shall coordinate and cooperate
with respect to the timing of such meeting and HFB shall use its best efforts
to hold such meeting as soon as practicable after the date on which the S- 4
becomes effective.
5.6 Legal Conditions to Merger. Each of HFB and FAC
shall, and shall cause its Subsidiaries to, use all reasonable efforts (i) to
take, or cause to be taken, all actions necessary to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger and to consummate the transactions contemplated by this
Agreement, subject to the appropriate vote of stockholders of HFB, and (ii) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and or any other public or private third party which is required to be
obtained or made by such party or any of its Subsidiaries in connection with
the Merger, and the transactions contemplated by this Agreement. Each of HFB
and FAC will promptly cooperate with and furnish information to the
30
34
other in connection with any such burden suffered by, or requirement imposed
upon, any of them or any of their Subsidiaries in connection with the
foregoing. FAC shall, as soon as practicable following execution of this
Agreement, prepare and file with the appropriate authorities such documents as
may be necessary in order to consummate the transactions contemplated hereby.
FAC agrees to use its best efforts to file such documents within 45 days of the
execution of this Agreement. HFB shall cooperate with FAC in the preparation,
execution and filing of such documents and in responding to any comments made
by any governmental authorities with respect to any such document. In this
connection, HFB agrees to provide comments to FAC (through counsel) regarding
such documents or in response to such comments within three business days
following receipt of such documents or comments.
5.7 Affiliates. Prior to the HFB shareholders meeting
regarding the Merger, HFB shall deliver to FAC a letter identifying all persons
who are, at the time this Agreement is submitted for approval to the
stockholders of HFB, "affiliates" of HFB for purposes of Rule 145 under the
Securities Act. HFB shall use all reasonable efforts to cause each person
named in the letter delivered by it to deliver to the other party prior to the
shareholders meeting a written "affiliates" agreement, in customary form,
restricting the disposition by such person of the FAC Common Stock to be
received by such person in the Merger.
5.8 NASDAQ Listing. FAC shall use all reasonable efforts
to cause the shares of FAC Common Stock to be issued in the Merger and the
shares of FAC Common Stock to be reserved for issuance upon exercise of HFB
Stock Options (as defined below) to be approved for listing on the NASDAQ
national market system prior to the Closing Date.
5.9 Transition of Certain Employee Benefit Plans;
Employment Matters.
(a) As soon as practicable after the execution of this
Agreement and Plan of Merger, HFB and FAC will cooperate to cause the Heritage
Federal Bank for Savings Employee Stock Ownership Plan and Trust (the "ESOP")
to be amended and other action taken in a manner reasonably acceptable to HFB
and FAC to provide (i) that each participant in the ESOP will become fully
vested in his or her ESOP account as of the Effective Time, (ii) that the ESOP
will terminate upon the Effective Time, (iii) that the outstanding exempt loan
to the ESOP will be repaid on or after the Effective Time with proceeds from
the sale of FAC Common Stock to be held in the Loan Suspense Account (as
defined in the ESOP) of the ESOP as a result of the conversion, pursuant to the
Merger, of HFB Common Stock into FAC Common Stock and (iv) that, pending such
sale and repayment, no additional employer contributions will be made to the
ESOP other than such contributions as may be required to make the quarterly
principal and interest payments due under the outstanding exempt loan. The
ESOP amendment and other action taken will provide that, upon the repayment of
the exempt loan, the remaining shares in the Loan Suspense Account will be
allocated (to
31
35
the extent permitted by Section 415 of the Code and other applicable laws and
regulations) to ESOP participants (as determined under the terms of the ESOP).
As soon as practicable after the later of the Effective Time or the receipt of
a favorable determination letter from the IRS with respect to the qualification
of the ESOP upon its termination, HFB and FAC agree that participants in the
ESOP will receive lump sum distributions of their ESOP accounts and each ESOP
participant who becomes a participant in the FIRST Plan (as defined below) will
have the right to roll over his or her ESOP account into the First American
Corporation First Incentive Reward Savings Thrift Plan (the "FIRST Plan").
The amendments to the ESOP and actions related thereto will be
adopted conditioned upon the consummation of the Merger and upon receiving a
favorable determination letter from the IRS with regard to the continued
qualification of the ESOP after any required amendments and any private letter
ruling that FAC and HFB shall deem appropriate. FAC and HFB will cooperate in
submitting appropriate requests for such determination letter and ruling to the
IRS and will use their best efforts to seek the issuance of such letter and
ruling as soon as practicable following the date hereof. FAC and HFB will
adopt such additional amendments to the ESOP as may be reasonably required by
the IRS as a condition to granting such determination letter and ruling
provided that such amendments do not substantially change the terms outlined
herein.
Except as provided herein, HFB will make no further
contributions to the ESOP and will not cause the ESOP to make any further
payments on the exempt loan without the prior written approval of FAC. No
amendment or termination of, or distribution from, the ESOP or sale by the ESOP
of HFB Common Stock or FAC Stock will be made without the prior written
approval of FAC which shall not be unreasonably withheld and shall be given to
the extent HFB acts in accordance herewith.
(b) The other tax-qualified defined contribution and
defined benefit plans maintained by HFB or its Subsidiaries will be terminated
by HFB on or before the Effective Time, subject to the third paragraph of this
Section 5.9(b), (and FAC and HFB agree that participants in said plans who
become participants in the FIRST Plan shall be given the right to roll over
their accounts to the FIRST Plan) and the benefits thereunder distributed to
participants to the extent permitted under the Code and ERISA. To the extent
that such benefits may not be distributed to participants such plans will be
merged into corresponding FAC plans or will be maintained as a separate plans.
No such distribution of benefits will be made before the receipt of an
appropriate favorable determination letter from the IRS as to the effect of the
termination of the plan on the qualification of the plan involved. At or
immediately prior to the Effective Time, HFB or its Subsidiaries will, to the
extent permitted by applicable funding rules under the Code and ERISA,
contribute to each HFB Benefit Plan that is subject to Title I, subtitle B,
part 3 of ERISA any amount required to cause
32
36
the fair market value of the plan assets of such plan to equal the plan
termination liabilities of such plan determined as of a date within thirty (30)
days of the Closing Date.
Employees of HFB and its Subsidiaries shall be eligible to
participate in the pension and welfare plans maintained by FAC after the
Effective Time, subject to the eligibility requirements of these plans. For
purposes of determining eligibility to participate in the qualified plans
maintained by FAC, employees of HFB or its Subsidiaries shall be credited with
service with HFB and its Subsidiaries to the extent credited under the
respective predecessor plans. Vesting service under the FIRST Plan will be in
accordance with the rules of the FIRST Plan governing vesting service for
employees of acquired employers and consistent with the current policies of FAC
in that regard. Employees of HFB and its Subsidiaries will participate in the
First American Corporation Master Retirement Plan (the "Retirement Plan") in
accordance with its terms. Such participants will be credited with prior
service with HFB and its Subsidiaries for eligibility and vesting purposes, but
with no prior benefit service, under the Retirement Plan. Subject to the
usual rules applicable to the vacation and short-term disability programs of
FAC, service with HFB and its Subsidiaries will be recognized in determining
the vacation and short-term disability benefits of employees of HFB and its
Subsidiaries after the Effective Time.
The tax qualified defined contribution and defined benefit
plan of HFB or its Subsidiaries (including the ESOP, the HFB Profit Sharing
Plan and the HFB Pension Plan) shall be maintained separately from FAC's
Benefit Plans through the date on which participants in said plans receive
final distributions of their benefits. FAC and HFB may agree on or before the
Effective Time to cause any HFB Benefit Plan in effect at the Effective Time
to remain in effect in lieu of a benefit plan maintained by FAC for an interim
period in order to coordinate the transition from such HFB Benefit Plans to FAC
plans in a fair, equitable and administratively reasonable manner.
FAC, HFB, HFB's Subsidiaries and the executive officers of
FAC, HFB or HFB's Subsidiaries will communicate with employees of HFB or its
Subsidiaries concerning the matters set forth in this Section 5.9 only through
mutually agreed upon communications. The actions prescribed by this Section
5.9 are all contingent upon obtaining appropriate determinations and rulings
from the IRS and, if necessary, other governmental agencies as to the effect of
such actions on the qualification of the plans involved and the compliance of
such actions with other applicable law. If appropriate determinations or
rulings satisfactory to the parties cannot be obtained, HFB and FAC will adopt
an alternative course of action which, as nearly as practicable, achieves the
same economic results as the actions outlined herein and for which appropriate
approval may be obtained.
(c) From and after the Effective Time, all HFB employees
who are terminated within one year as the result of the Merger will be eligible
for benefits
33
37
available under FAC's reduction in force policy which currently include: (i) 30
days' notice, (ii) severance based on years of service (less than 1 year - one
week's pay; 1-10 years - one week's pay plus one week's pay for every year of
service; more than 10 years - 12 weeks' pay), (iii) continued paid health
benefits (less than 1 year - none, 1-10 years - three months, more than 10
years - six months), and (iv) outplacement assistance.
(d) From and after the Effective Time, FAC shall honor
the employment agreements between HFB and its five senior officers as of the
date hereof in accordance with their terms. Whether any individual officer
continues with FAC following the Effective Time will depend on the officer's
desire to stay with FAC and FAC's need for executive personnel. HFB will make
such officers available to FAC to negotiate economic packages with those
officers who stay with FAC.
5.10 Stock Options. For purposes of this Agreement the
term "HFB Stock Plans" means collectively the Heritage Federal Bancshares, Inc.
1992 Stock Option Plan (the "1992 Plan"), the Heritage Federal Bancshares, Inc.
1994 Stock Option Plan (the "1994 Plan"), the Heritage Federal Bancshares, Inc.
Incentive Compensation Plan for Senior Officers, the Heritage Federal Bank for
Savings Management Recognition Plan and the Heritage Federal Bancshares, Inc.
Incentive Compensation Plan for Non-Employee Directors (the "Director Incentive
Plan").
(a) At the Effective Time, each outstanding option to
purchase shares of HFB Common Stock (an "HFB Stock Option") issued pursuant to
the HFB Stock Plans shall be assumed by FAC. Each HFB Stock Option shall be
deemed to constitute an option to acquire, on the same terms and conditions as
were applicable under such HFB Stock Option and the plan under which it was
issued, the same number of shares of FAC Common Stock as the holder of such HFB
Stock Option would have been entitled to receive pursuant to the Merger had
such holder exercised such option in full immediately prior to the Effective
Time, at a price per share equal to (y) the aggregate exercise price for the
shares of HFB Common Stock otherwise purchasable pursuant to such HFB Stock
Option divided by (z) the number of full shares of FAC Common stock deemed
purchasable pursuant to such HFB Stock Option; provided, however, that in the
case of any option to which section 421 of the Code applies by reason of its
qualification under section 422 of the Code ("qualified stock options"), the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, FAC
shall deliver to the holders of HFB Stock Options appropriate notices setting
forth such holders' rights pursuant to the HFB Stock Plans and the agreements
evidencing the grants of such HFB Stock Options shall continue in effect on the
same terms and conditions (subject to the adjustments required by this Section
5.10 after giving effect to the
34
38
Merger and the assumption by FAC as set forth above). FAC shall comply with
the terms of the HFB Stock Plans and ensure, to the extent required by, and
subject to the provisions of, such Plans, that HFB Stock Options which
qualified as incentive stock options prior to the Effective Time continue to
qualify as incentive stock options of FAC after the Effective Time.
(c) FAC shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of FAC Common Stock for
delivery upon exercise of HFB Stock Options assumed by it in accordance with
this Section 5.10. As soon as practicable after the Effective Time, FAC shall
file a registration statement on Form S-3 or Form S-8, as the case may be (or
any successor or other appropriate forms), or another appropriate form with
respect to the shares of FAC Common Stock subject to such options and shall use
its best efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus
or prospectuses contained therein) for so long as such options remain
outstanding.
5.11 Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expense, except that expenses incurred in connection with
printing and mailing the Proxy Statement and the S-4 shall be shared equally by
FAC and HFB.
5.12 Brokers or Finders. Except as disclosed to the other
party prior to the date hereof, each of FAC and HFB represents, as to itself,
its Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except Trident
Financial Corporation, whose fees and expenses will be paid and expensed by HFB
prior to the Effective Time in accordance with HFB's agreement with such firm
(a copy of which has been delivered by HFB to FAC prior to the execution of
this Agreement), and each party agrees to indemnify the other party and hold
the other party harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted by
any person on the basis of any act or statement alleged to have been made by
such first party or its affiliate.
5.13 Governance; Name. (a) FAC shall take action to cause
the persons who are serving as members of the Board of Directors of HFB
immediately prior to the Effective Time to be appointed to serve as advisory
directors of FANB as may be mutually agreed upon by FANB and such persons.
Subject to the recommendation of the Nominating Committee of the Board of
Directors of FAC and the approval of the full Board of Directors of FAC in
accordance with its By-Laws, the parties contemplate
35
39
that one member of the Board of Directors of HFB immediately prior to the
Effective Time shall become a member of the Board of Directors of FAC following
the Merger.
(b) The name of the Surviving Corporation shall be First
American Corporation and the name of the Surviving Bank shall be First American
National Bank.
5.14 Indemnification: Directors' and Officers' Insurance.
(a) From and after the Effective Time, FAC shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer, director or
employee of HFB or any of its Subsidiaries (the "Indemnified Parties") against
all losses, claims, damages, costs, expenses (including attorneys' fees),
liabilities or judgments, or amounts that are paid in settlement with the
approval of FAC (which approval shall not be unreasonably withheld), of or in
connection with any claim, action, suit, proceeding or investigation in which
an Indemnified Party is, or is threatened to be made a party or witness, based
in whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of HFB or any Subsidiary of
HFB, whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), in each case to the full extent HFB
would have been permitted under Tennessee or federal law in effect as of the
date hereof or as amended applicable to a time prior to the Effective Time, and
its charter and By-laws or the charter and by laws of the HFB Subsidiary, as
applicable, to indemnify such person. Without limiting the foregoing, in the
event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Party (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Parties for any period after
the Effective Time shall be reasonably satisfactory to FAC; (ii) after the
Effective Time, FAC shall pay all reasonable fees and expenses of such counsel
and such other fees and expenses as are reasonable for the Indemnified Parties
promptly as statements therefor are received; and (iii) after the Effective
Time, FAC will use all reasonable efforts to assist in the vigorous defense of
any such matter, provided that FAC shall not be liable for any settlement of
any claim effected without its written consent, which consent, however, shall
not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.14, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify FAC (but the failure so
to notify FAC shall not relieve it from any liability which it may have under
this Section 5.14 except to the extent such failure materially prejudices FAC).
The Indemnified Parties as a group may retain only one law firm to represent
them with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(b) From and after the Effective Time and for a period of
six years thereafter, FAC shall use its best efforts to maintain in effect
directors' and officers'
36
40
liability insurance coverage which is at least as advantageous as to coverage
and amounts as maintained by HFB immediately prior to the Effective Time with
respect to claims arising from facts or events which occurred before the
Effective Time; provided, however, that FAC shall not be obligated to make
annual premium payments for such insurance to the extent such premiums exceed
1.5 times premiums paid as of the date hereof by HFB for such insurance.
Notwithstanding anything to the contrary contained elsewhere herein, FAC's
agreement set forth above shall be limited to cover claims only to the extent
that those claims are not covered under HFB's directors' and officers'
insurance policies (or any substitute policies permitted by this Section
5.14(b)).
(c) The provisions of this Section 5.14 are intended to
be for the benefit of, and shall be enforceable by, each Indemnified Party, and
each Indemnified Party's heirs and representatives.
5.15 Coordination of Dividends. HFB shall coordinate with
FAC the declaration of any dividends in respect of HFB Common Stock and the
record dates and payment dates relating thereto, it being the intention of HFB
and FAC that holders of HFB Common Stock shall not receive two dividends, or
fail to receive one dividend, for any single calendar quarter with respect to
their shares of HFB Common Stock and any shares of FAC Common Stock any such
holder received in exchange therefor in the Merger.
5.16 HFB Accruals and Reserves. Prior to the Closing
Date, HFB shall review and, to the extent determined necessary or advisable,
consistent with GAAP and the accounting rules, regulations and interpretations
of the SEC and its staff, modify and change its loan, accrual and reserve
policies and practices (including loan classifications and levels of reserves
and accruals and reserves to (i) reflect the Surviving Corporation's plans with
respect to the conduct of HFB's business following the Merger and (ii) make
adequate provision and accrue for the costs and expenses relating thereto
including without limitation expenses relating to taxes, stock option plans,
employment agreements, severance benefits and split dollar insurance premiums)
so as to be applied consistently on a basis with those of FAC. Prior to the
Closing, HFB also will adjust loan loss and OREO reserves as may be
appropriate, consistent with GAAP and the accounting rules, regulations and
interpretations of the SEC and its staff, in light of the then anticipated
post-Closing disposition of certain HFBS assets. The parties agree to
cooperate in preparing for the implementation of the adjustments contemplated
by this Section 5.16. Notwithstanding the foregoing, HFB shall not be
obligated to take in any respect any such action pursuant to this Section 5.16
(other than pursuant to the preceding sentence) unless and until FAC
acknowledges in writing that all conditions to its obligation to consummate the
Merger have been satisfied. But, upon such acknowledgement and on the Closing
Date, HFB will take such actions as are necessary to complete the payments,
expenses and adjustments contemplated by this Section.
37
41
5.17 Bank Merger. The parties agree to use their
reasonable efforts between the date of this Agreement and the Closing to take
all actions necessary or desirable, including the filing of any regulatory
applications, so that the merger (the "Bank Merger") of HFBS with and into
FANB, with FANB being the surviving depository institution, will occur as soon
as possible after the Effective Time. As soon as practicable after the
execution and delivery of this Agreement, HFBS and FANB shall enter into a Bank
Plan of Merger, mutually agreeable to the parties.
5.18 Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either of the Constituent Corporations, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
5.19 Enforcement of Agreements. Prior to the Effective
Time, HFB agrees to take any action that may be necessary, including seeking
injunctive or equitable relief, to enforce the provisions of certain agreements
between HFB (and/or Trident Financial Corporation as agent for HFB) and third
parties which agreements are substantially similar to the Confidentiality
Agreement.
5.20 Cooperation Generally. Between the date of this
Agreement and the Effective Time, FAC, HFB and their Subsidiaries shall use
their best efforts, and to take all actions necessary or appropriate, to
consummate the Merger and the other transactions contemplated by this Agreement
at the earliest practicable date.
ARTICLE VI
Conditions Precedent
--------------------
6.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) HFB Stockholder Approval. This Agreement shall have
been approved and adopted by the affirmative vote of the holders of a majority
of the outstanding shares of HFB Common Stock entitled to vote thereon.
(b) NASDAQ Listing. The shares of FAC Common Stock
issuable to HFB stockholders pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on the NASDAQ national market system.
38
42
(c) Other Approvals. Other than the filing provided for
by Section 1.1, all authorizations, consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods imposed
by, any Governmental Entity (all the foregoing, "Consents") which are necessary
for the consummation of the Merger, other than Consents the failure to obtain
which would have no material adverse effect on the consummation of the Merger
or on the Surviving Corporation and its Subsidiaries, taken as a whole, shall
have been filed, occurred or been obtained (all such permits, approvals,
filings and consents and the lapse of all such waiting periods being referred
to as the "Requisite Regulatory Approvals") and all such Requisite Regulatory
Approvals shall be in full force and effect. FAC shall have received all state
securities or blue sky permits and other authorizations necessary to issue the
FAC Common Stock in exchange for HFB Common Stock and to consummate the Merger.
(d) S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(e) No Injunctions or Restraints: Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition (an "Injunction") preventing the consummation of the Merger shall
be in effect, nor shall any proceeding by any Governmental Entity seeking any
of the foregoing be pending. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal.
6.2 Conditions to Obligations of FAC. The obligation of
FAC to effect the Merger is subject to the satisfaction of the following
conditions unless waived by FAC:
(a) Representations and Warranties: The representations
and warranties of HFB set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of another date) as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and FAC shall have received a certificate
signed on behalf of HFB by the President and Chief Executive Officer and by the
Chief Financial Officer of HFB to such effect.
(b) Performance of Obligations of HFB. HFB shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date (including without
limitation those of Section 5.16), and FAC shall have received a certificate
signed on behalf of HFB by
39
43
the President and Chief Executive Officer and by the Chief Financial Officer of
HFB to such effect.
(c) Consents Under Agreements. HFB shall have obtained
the consent or approval of each person (other than the Governmental Entities
referred to in Section 6.1(c)) whose consent or approval shall be required in
order to permit the succession by the Surviving Corporation pursuant to the
Merger to any obligation, right or interest of HFB or any Subsidiary of HFB
under any loan or credit agreement, note, mortgage, indenture, lease, license
or other agreement or instrument, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
material adverse effect on the Surviving Corporation and its Subsidiaries taken
as a whole or upon the consummation of the transactions contemplated hereby.
(d) Opinions. FAC shall have received the opinion of
KPMG Peat Marwick LLP, FAC's independent auditors, dated as of the Effective
Time, to the effect that 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 FAC and HFB will each be a party to that reorganization within the
meaning of Section 368(b) of the Code. FAC also shall have received the
opinions of Housley, Goldberg, Kantarian & Bronstein, and Wilson, Worley,
Gamble & Ward, PC, counsel to HFB, dated as of the Effective Time, in form
reasonably satisfactory to FAC, which shall cover the following matters:
(i) HFB and its Subsidiaries other than HFBS are
corporations duly organized, validly existing and in good standing under the
laws of the State of Tennessee;
(ii) HFBS is a federal savings bank duly
organized, validly existing, and in good standing under the laws of the United
States of America;
(iii) The Agreement and Plan of Merger has been
duly and validly authorized, executed and delivered by HFB (assuming that this
Agreement is a binding obligation of FAC) constitutes a valid and binding
obligation of HFB enforceable in accordance with its terms, subject as to
enforceability to applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and to
the application of equitable principles and judicial discretion;
(iv) The execution and delivery of this Agreement
and the consummation of the Merger and the Bank Merger have been duly and
validly authorized by the Boards of Directors of HFB and HFBS and no other
corporate action is necessary to authorize the Agreement or to consummate the
Merger and the Bank Merger by HFB or any Subsidiary thereof. To the actual
knowledge of such counsel,
40
44
no consent or approval, which has not already been obtained, from any
governmental authority is required for execution and delivery by HFB of the
Agreement or any of the documents to be executed and delivered by HFB in
connection therewith and the consummation of the Merger and the Bank Merger;
(v) Immediately prior to the Effective Time (1)
the authorized capital stock of HFB consists of 8,000,000 shares of HFB Common
Stock (2) to our actual knowledge, there are no agreements or understandings by
HFB with respect to the voting, sale or transfer of any shares of capital stock
of HFB or any Subsidiary other than as contemplated by this Agreement; (3) HFBS
and each other Subsidiary of HFB is wholly owned by HFB, directly or
indirectly; and (4) all shares of HFB Common Stock outstanding were duly
authorized, and nonassessable and were free of the preemptive right of any
shareholder;
(vi) Neither the execution, delivery and
performance of this Agreement by HFB nor the consummation of the Merger and the
Bank Merger will (a) conflict with or result in a breach of any provision of
the respective charters, articles of incorporation or bylaws of HFB or any
Subsidiary (b) constitute or result in the breach of any term, condition,
provision of or constitute a default under, or give rise to any right of
termination, cancellation, or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon, any property or assets of HFB
or any Subsidiary thereof pursuant to any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation included in the HFB
Disclosure Schedule to which HFB or any Subsidiary thereof is a party or by
which HFB or any Subsidiary thereof is bound or to which any of their
properties or assets may be subject, or (c) violate any order, judgment or
decree to which HFB or any Subsidiary thereof is a party or by which any of
them or any of their properties or assets is bound;
(vii) Except as set forth in the HFB Disclosure
Schedule, to the actual knowledge of such counsel, there is no litigation,
proceeding or governmental investigation pending or threatened against HFB or
any Subsidiary thereof, their properties, businesses or assets and neither HFB
nor any Subsidiary thereof has received any notification by any regulatory
agency asserting that it is not in compliance with any applicable laws,
statutes or regulations or that seeks to revoke any license, franchise, permit
or other governmental authorization which is necessary to conduct their
businesses as presently conducted.
Such opinion may (i) expressly rely as to matters of fact upon
certificates furnished by appropriate officers of HFB or HFBS or appropriate
government officials and (ii) incorporate, be guided by, and be interpreted in
accordance with, the Legal Opinion Accord of the ABA Section of Business Law
(1991).
41
45
(e) Burdensome Condition. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger by any Governmental Entity which, in connection
with the grant of a Requisite Regulatory Approval, imposes any requirement upon
FAC or its Subsidiaries to dispose of 10% or more of the assets or deposits of
HFB.
(f) No Material Adverse Change. There shall have been no
material adverse change in the business, financial condition, prospects or
results of operations or prospects of HFB or its Subsidiaries from that
reflected in the audited financial statements of HFB for the year ended June
30, 1994 and HFB or any of its Subsidiaries shall not have suffered any
substantial loss or damage to their respective properties, or assets whether or
not insured that would materially affect or impair the ability of HFB or its
Subsidiaries to conduct their business and operations except for such changes
that result from (i) changes in banking or thrift laws or regulations of
general applicability or interpretations thereof, (ii) changes in generally
accepted accounting principles or regulatory accounting principles or
interpretations thereof (iii) changes in general economic conditions including
changes in the general level of interest rates, (iv) changes effected on FAC's
request pursuant to Section 5.16 hereof; or (v) the settlement or disposition
of any litigation pending as of the date hereof and set forth on the HFB
Disclosure Schedule by HFB or any Subsidiary.
(g) Affiliate Agreements. FAC shall have received
written "affiliates" agreements, in customary form, as provided in Section 5.7
hereof.
(h) Accountants' Letter. FAC shall have received a
letter from Coopers & Lybrand, dated the Closing Date, in form and substance
satisfactory to FAC, stating in effect in respect of HFB and its Subsidiaries
that: (1) they have examined the consolidated financial statements of HFB as of
June 30, 1994, and June 30, 1995 and for each of the years then ended and have
made a limited review in accordance with the standards established by the
American Institute of Certified Public Accountants of the latest available
unaudited consolidated interim financial statements of HFB available after June
30, 1995; (2) on the basis of reading the latest available unaudited
consolidated interim financial statements of HFB; reading the minutes of the
meetings of the stockholders and the Board of Directors and committees thereof
of HFB for the period from June 30, 1995 to the Closing Date, and inquiries of
officers of HFB having responsibility for financial and accounting matters as
to whether the unaudited consolidated financial statements referred to in (1)
above are stated on a basis substantially consistent with that of the audited
consolidated financial statements as of June 30, 1994 and June 30, 1995 and for
the years then ended, nothing came to their attention which caused them to
believe that during the period from June 30, 1995 to a date specified not more
than three days prior to the date of the letter there were any changes in the
capital stock or the long term debt of HFB or any decreases in revenues, net
earnings or net assets of HFB have occurred or are expected to occur; and (3)
on the basis of (i) reading the latest
42
46
available interim consolidated financial statements which are referred to above
and (ii) inquiries of certain officials of HFB having responsibility for
financial and accounting matters concerning whether the unaudited consolidated
interim financial statements referred to in (1) above are presented fairly,
nothing came to their attention which caused them to believe that the latest
available consolidated interim financial statements are not fairly presented in
conformity with generally accepted accounting principles ("GAAP") applied on a
basis consistent with that followed in the audited consolidated financial
statements dated June 30, 1994 and June 30, 1995 and for the years then ended.
(i) FAC shall have received a certificate of the chief
executive officer of HFB certifying to FAC immediately prior to the Effective
Time (1) the number of shares of HFB Common Stock and HFB Preferred Stock
issued and outstanding; (2) the number of options for HFB Common Stock
outstanding, and shares of restricted stock outstanding and (3) that no other
shares of capital stock or securities convertible into or evidencing the right
to purchase or subscribe for any shares of capital stock of HFB are outstanding
and there are no other outstanding warrants, calls, subscriptions, rights,
commitments, stock appreciation rights, phantom stock or similar rights or any
other agreements of any character obligating HFB or any Subsidiary thereof to
issue any shares of capital stock or securities convertible into or evidencing
the right to purchase such stock; and (4) no shares of HFB Common Stock are
held by HFB in treasury or by its Subsidiaries.
6.3 Conditions to Obligations of HFB. The obligation of
HFB to effect the Merger is subject to the satisfaction of the following
conditions unless waived by HFB:
(a) Representations and Warranties. The representations
and warranties of FAC set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations speak as of an earlier date) as of the Closing Date
as though made on and as of the Closing Date, except as otherwise contemplated
by this Agreement, and HFB shall have received a certificate signed on behalf
of FAC by the Chairman or the President or a Vice Chairman and by the Chief
Accounting Officer of FAC to such effect.
(b) Performance of Obligations of FAC. FAC shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and HFB shall have
received a certificate signed on behalf of FAC by the Chairman, President and
Chief Executive Officer or a Vice Chairman and by the Chief Accounting Officer
of FAC to such effect.
(c) Consents Under Agreements. FAC shall have obtained
the consent or approval of each person (other than the Governmental Entities
referred to in Section
43
47
6.1(c)) whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse effect on the
Surviving Corporation and its Subsidiaries, taken as a whole, or upon the
consummation of the transactions contemplated hereby.
(d) Opinions. HFB shall have received the opinions of
Coopers and Lybrand, independent auditors of HFB and Housley, Goldberg,
Kantarian & Bronstein, P.C., counsel to HFB, dated the Closing Date, to the
effect that (i) the Merger (including the Bank Merger) will be treated for
Federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that FAC and HFB will each be a party to that
reorganization within the meaning of Section 368(b) of the Code; (ii) the
shareholders of HFB will not recognize any gain or loss to the extent that such
shareholders exchange shares of HFB Common Stock solely for shares of FAC
Common Stock in the Merger, (iii) the basis of the FAC Common Stock received by
an HFB shareholder who exchanges HFB Common Stock solely for FAC Common Stock
will be the same as the basis of the HFB Common Stock surrendered in exchange
therefor (subject to any adjustments required as the result of receipt of cash
in lieu of a fractional share of FAC Common Stock ), (iv) the holding period of
the FAC Common Stock received by a HFB shareholder receiving FAC Common Stock
will include the period during which the HFB Common Stock surrendered in
exchange therefor was held (provided that the HFB Common Stock of such HFB
shareholder was held as a capital asset at the Effective Time), and (v) cash
received by a HFB shareholder in lieu of a fractional share interest of FAC
Common Stock will be treated as having been received as a distribution in full
payment in exchange for the fractional share interest of FAC Common Stock which
such shareholder would otherwise be entitled to receive. HFB also shall have
received the opinions of Martin E. Simmons, Esq., General Counsel to FAC and of
outside counsel to FAC, dated as of the Effective Time, in form reasonably
satisfactory to HFB, which shall cover the following matters:
(i) FAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee;
(ii) FANB is a national banking association duly
organized, validly existing, and in good standing under the laws of the United
States of America;
(iii) The Agreement and Plan of Merger has been
duly and validly authorized, executed and delivered by FAC (assuming that this
Agreement is a binding obligation of HFB) constitutes a valid and binding
obligation of FAC enforceable in accordance with its terms, subject as to
enforceability to applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of
44
48
creditors' rights generally and to the application of equitable principles and
judicial discretion;
(iv) The execution and delivery of this Agreement
and the consummation of the Merger and the Bank Merger have been duly and
validly authorized by the joint Board of Directors of FAC and FANB and no other
corporate action is necessary to authorize the Agreement or to consummate the
Merger and the Bank Merger by FAC or any Subsidiary thereof. To the actual
knowledge of such counsel, no consent or approval, which has not already been
obtained, from any governmental authority is required for execution and
delivery by FAC of the Agreement or any of the documents to be executed and
delivered by FAC in connection therewith and the consummation of the Merger and
the Bank Merger; and
(v) Immediately prior to the Effective Time (1)
the authorized capital stock of FAC consists of 50,000,000 shares of FAC Common
Stock and 2,500,000 shares of FAC Preferred Stock; and there were sufficient
shares of FAC Common Stock reserved for issuance to HFB shareholders upon
consummation of the Merger and the Bank Merger; and the shares of FAC Common
Stock to be issued to the holders of HFB Common Stock pursuant hereto have been
duly authorized and when issued will be non-assessable.
Such opinion may (i) expressly rely as to matters of fact upon
certificates furnished by appropriate officers of FAC or FANB or appropriate
government officials and (ii) incorporate, be guided by, and be interpreted in
accordance with, the Legal Opinion Accord of the ABA Section of Business Law
(1991).
(e) Fairness Opinion. HFB shall have received an opinion
of Trident Financial Corporation dated as of the date of the approval of this
Agreement by the HFB Board of Directors to the effect that the consideration to
be received by the holders of HFB Common Stock pursuant to this Agreement upon
the consummation of the Merger is fair to such shareholders from a financial
point of view.
(f) Receipt of Consideration. The Exchange Agent shall
acknowledge in writing to HFB that it is in receipt of (i) certificates
representing the aggregate number of shares of FAC Common Stock to be issued to
the shareholders of HFB hereunder and (ii) sufficient cash to pay for
fractional shares and restricted HFB stock as provided herein.
(g) No Material Adverse Change. There shall have been no
material adverse change in the business, financial condition, prospects or
results of operations or prospects of FAC or its Subsidiaries from that
reflected in the audited financial statements of FAC for the year ended
December 31, 1993 and FAC or any of its Subsidiaries shall not have suffered
any substantial loss or damage to their respective properties, or assets
whether or not insured that would materially affect or impair the
45
49
ability of FAC or its Subsidiaries to conduct their business and operations
except for such changes that result from (i) changes in banking or thrift laws
or regulations of general applicability or interpretations thereof, (ii)
changes in generally accepted accounting principles or regulatory accounting
principles or interpretations thereof or (iii) changes in general economic
conditions including changes in the general level of interest rates.
(h) Accountants' Letter. HFB shall have received a
letter from Peat Marwick LLP, dated the Closing Date, in form and substance
satisfactory to HFB, stating in effect in respect of FAC and its Subsidiaries
that: (1) they have examined the consolidated financial statements of FAC as of
December 31, 1994, and December 31, 1993 and for each of the years then ended
and have made a limited review in accordance with the standards established by
the American Institute of Certified Public Accountants of the latest available
unaudited consolidated interim financial statements of FAC available after
December 31, 1994; (2) on the basis of reading the latest available unaudited
consolidated interim financial statements of FAC; reading the minutes of the
meetings of the stockholders and the Board of Directors and committees thereof
of FAC for the period from December 31, 1994 to the Closing Date, and inquiries
of officers of FAC having responsibility for financial and accounting matters
as to whether the unaudited consolidated financial statements referred to in
(1) above are stated on a basis substantially consistent with that of the
audited consolidated financial statements as of December 31, 1993 and December
31, 1994 and for the years then ended, nothing came to their attention which
caused them to believe that during the period from December 31, 1994 to a date
specified not more than three days prior to the date of the letter there were
any changes in the capital stock or the long term debt of FAC or any material
decreases in revenues, net earnings or net assets of FAC have occurred or are
expected to occur; and (3) on the basis of (i) reading the latest available
consolidated interim financial statements which are referred to above and (ii)
inquiries of certain officials of FAC having responsibility for financial and
accounting matters concerning whether the unaudited consolidated interim
financial statements referred to in (1) above are presented fairly, nothing
came to their attention which caused them to believe that the latest available
consolidated interim financial statements are not fairly presented in
conformity with GAAP applied on a basis consistent with that followed in the
audited consolidated financial statements dated December 31, 1993 and December
31, 1994 and for the years then ended.
46
50
ARTICLE VII
Termination and Amendment
-------------------------
7.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
shareholders of HFB:
(1) by mutual consent of FAC and HFB; or
(2) by either FAC or HFB if (i) the Merger shall not have
been consummated on or before January 31, 1996 (the "Termination Date")
provided the terminating party shall not have breached in any material respect
its obligations under this Agreement in a manner that proximately contributed
to the failure to consummate the Merger by such date, (ii) any governmental or
regulatory body, the consent of which is a condition to the obligations of FAC
and HFB to consummate the transactions contemplated hereby or by the Merger
Plan, shall have determined not to grant its consent and all appeals of such
determination shall have been taken and have been unsuccessful, or (iii) any
court of competent jurisdiction in the United States or any State shall have
issued an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment or decree shall have become final and nonappealable.
(3) By FAC:
(a) if any event shall have occurred as a result
of which any condition set forth in Sections 6.1 or 6.2 is no
longer capable of being satisfied; or
(b) if there has been a breach by HFB of any
representation or warranty contained in this Agreement which
would have or would be reasonably likely to have a material
adverse effect on the assets, liabilities, financial
condition, results of operations, business or prospects of HFB
and its Subsidiaries taken as a whole, or there has been a
material breach of any of the covenants or agreements set
forth in this Agreement on the part of HFB, which breach is
not curable, or, if curable, is not cured within 20 days after
written notice of such breach is given by FAC to HFB; or
(c) if HFB (or its Board of Directors) shall have
authorized, recommended, proposed or publicly announced its
intention to enter into a Competing Transaction (as
hereinafter defined) which has not been consented to in
writing by FAC; or
47
51
(d) if the Board of Directors of HFB shall have
withdrawn or materially modified its authorization, approval
or recommendation to the stockholders of HFB with respect to
the Merger or this Agreement in a manner adverse to FAC or
shall have failed to make the favorable recommendation
required by Section 5.5; or
(e) if the Average Closing Price exceeds $36.50
(subject to adjustment, if any, in accordance with the last
sentence in Section 2.1(b) herein).
(4) By HFB:
(a) if any event shall have occurred as a result
of which any condition set forth in Sections 6.1 or 6.3 is no
longer capable of being satisfied (provided that nothing
herein shall require HFB to hold more than one meeting at
which a quorum is present pursuant to Section 5.5 herein); or
(b) if there has been a breach by FAC of any
representation or warranty contained in this Agreement which
would have or would be reasonably likely to have a material
adverse effect on the assets, liabilities, financial
condition, results of operations, business or prospects of FAC
and its Subsidiaries taken as a whole, or there has been a
material breach of any of the covenants or agreements set
forth in this Agreement on the part of FAC which breach is not
curable or, if curable, is not cured within 20 days after
written notice of such breach is given by HFB to FAC; or
(c) if the Average Closing Price is less than
$23.50 (subject to adjustment, if any, in accordance with the
last sentence in Section 2.1(b) herein).
For purposes of this Agreement, the term "Competing Transaction" means any of
the following involving HFB (other than the transactions contemplated by this
Agreement): (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 15% or more of the assets of
HFB in a single transaction or series of transactions to the same person,
entity or group; or (iii) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
7.2 Rights and Obligations upon Termination. If this
Agreement is terminated as provided herein, each party will redeliver all
documents, work papers, and other materials of any other party relating to the
transactions contemplated
48
52
hereby, whether obtained before or after the execution hereof, to the party
furnishing the same including using its best efforts to obtain and redeliver
all such documents, work papers and materials, except to the extent previously
delivered to third parties in connection with the transactions contemplated
hereby, and all information received by any party hereto with respect to the
business of any other party shall not at any time be used for the advantage of,
or disclosed to third parties by, such party to the detriment of the party
furnishing such information; provided, however, that this Section 7.2 shall not
apply to any documents, work papers, material, or information which is a matter
of public knowledge or which heretofore has been or hereafter is published in
any publication for public distribution or filed as public information with any
governmental agency.
7.3 Fees and Expenses. HFB acknowledges that FAC has
spent, and will be required to spend, substantial time and effort in examining
the business, properties, affairs, financial condition and prospects of HFB and
its Subsidiaries, has incurred, and will continue to incur, substantial fees
and expenses in connection with such examination, the preparation of this
Agreement and the accomplishment of the transactions contemplated hereunder,
and will be unable to evaluate and, possibly, make investments in or acquire
other entities due to the limited number of personnel available for such
purpose and the constraints of time. Therefore, to induce FAC to enter this
Agreement,
(a) If FAC terminates this Agreement pursuant to:
(i) Section 7.1(3)(a) or (3)(b) by reason of the
failure to meet any condition contained in Section 6.2(a) or
(b) due to HFB's knowing and intentional misrepresentation or
knowing and intentional breach of warranty or breach of any
covenant or agreement and at the time of such knowing and
intentional misrepresentation or breach, HFB and/or a
Subsidiary thereof, had or had previously had between the date
hereof and such time, directly or indirectly, through any
officer, director, employee, agent, investment banker,
financial consultant, attorney, accountant or other
representative of HFB or any HFB Subsidiary, verbal or written
contact, dialogue or discussions with any third party
regarding a Competing Transaction;
(ii) Section 7.1(3)(d);
(iii) Section 7.1(3)(c) and within 12 months from
the date of termination a Competing Transaction is consummated
or HFB shall have entered into an agreement which if
consummated would constitute a Competing Transaction; or
49
53
(b) if HFB terminates this Agreement pursuant to Section
7.1(4) because this Agreement did not receive the requisite vote of the HFB
stockholders and within 12 months from the date of termination a Competing
Transaction is consummated or HFB shall have entered into an agreement which if
consummated would constitute a Competing Transaction;
then HFB shall pay to FAC a fee in the amount of $4,500,000 (the "Fee"), which
amount is inclusive of the FAC Expenses, not as a penalty but as full and
complete liquidated damages. Upon payment of the Fee, HFB shall have no
further liability to FAC at law or equity. The Fee shall be payable to FAC
notwithstanding that any action taken by the Board of Directors of HFB which
may give rise to the obligation to pay the Fee may have been taken in
accordance with the fiduciary duties of the Board of Directors. Any payment
required pursuant to this Section 7.3 shall be made as promptly as practicable,
but in no event later than two business days after the date due and shall be
made by wire transfer of immediately available funds to an account designated
by FAC. In the event that FAC is entitled to the Fee, HFB shall also pay to FAC
interest at the rate of 6% per year on any amounts that are not paid when due,
plus all costs and expenses in connection with or arising out of the
enforcement of the obligation of HFB to pay the Fee or such interest.
(c) in the event that FAC terminates this Agreement
pursuant to Section 7.1(3) by reason of the failure to meet the conditions
contained in Section 6.2 (a) or (b) due to HFB's knowing or intentional
misrepresentation or knowing and intentional breach of warranty or breach of
any covenant or agreement, and HFB is not obligated to pay the Fee either at
such time or in the future, then HFB shall pay (but not as liquidated damages
and HFB shall not be relieved or released from any other damages or liabilities
hereunder) FAC on demand, in same day funds, all reasonable out-of-pocket
expenses and fees (including, without limitation, fees and expenses payable to
all investment banking firms and their respective agents and counsel, and all
fees of counsel, accountants, experts and consultants to FAC) actually incurred
by FAC or on its behalf in connection with the Merger and all transactions
contemplated by this Agreement but in no event more than $500,000;
(d) In the event that HFB terminates this Agreement
pursuant to Section 7.1(4) by reason of the failure to meet any condition
contained in Section 6.3 (a) or (b) due to FAC's knowing and intentional
misrepresentation or knowing and intentional breach of warranty or breach of
any covenant or agreement, then FAC shall pay (but not as liquidated damages
and FAC shall not be relieved or released from any other damages or liabilities
hereunder) HFB on demand, in same day funds, all reasonable out-of-pocket
expenses and fees (including, without limitation, fees and expenses payable to
all investment banking firms and their respective agents and counsel, and all
fees of counsel, accountants, experts and consultants to HFB) actually incurred
by HFB or on its behalf in connection with the Merger and all transactions
contemplated by this Agreement, but in no event more than $500,000;
50
54
(e) In the event that FAC terminates this Agreement
pursuant to Section 7.1(3) by reason of the failure to meet the conditions
contained in Section 6.2 (e), and HFB is not obligated to pay the Fee either at
such time or in the future, then FAC shall pay HFB on demand, in same day
funds, the sum of $1,000,000 which amount is inclusive of the HFB Expenses, not
as a penalty but as full and complete liquidated damages. Upon payment of the
amount contemplated in this Section 7.3 (e), FAC shall have no further
liability to HFB at law or equity.
7.4 Effect of Termination. Except for such provisions of
this Agreement which by their terms expressly survive the termination hereof,
and the provisions of Sections 5.11, 8.8 7.2, 7.3, and this Section 7.4, which
shall survive any termination of this Agreement, in the event of the
termination of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no further effect, without any liability on the
part of any party hereto or its respective officers, directors or stockholders
except as set forth in this Article 7.
ARTICLE VIII
General Provisions
------------------
8.1 Nonsurvival of Representations, Warranties, and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for those agreements and covenants which by
their terms apply or are intended to be performed in whole or in part after the
Effective Time.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to FAC, to
First American Corporation
615 First American Center
Nashville, Tennessee 37237-0615
Attention: Dennis C. Bottorff, Chairman and Chief Executive Officer
51
55
with a copy to
Martin E. Simmons, Esq.
Executive Vice President-Administration,
General Counsel and Secretary
606 First American Center
Nashville, Tennessee 37237-0606
and
(b) if to HFB, to
Heritage Federal Bancshares, Inc.
110 East Center Street
Kingsport, Tennessee 37662-0484
Attention: William E. Kreis, President and Chief Executive Officer
with a copy to
Housley, Goldberg, Kantarian & Bronstein, P.C.
Suite 700 1220 19th Street, N.W.
Washington, D.C. 20036
Attention: Leonard S. Volin, Esq.
8.3 Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement, "the date hereof" and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
February 21, 1995.
8.4 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed
by each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement (including the documents and the instruments
referred to herein) (a) constitutes the entire agreement and supersedes all
prior agreements and
52
56
understandings, both written and oral, among the parties with respect to the
subject matter hereof other than the Confidentiality Agreement which shall
remain in full force and effect, and (b) except as expressly provided herein,
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder. The parties hereby acknowledge that, except as
hereinafter agreed upon in writing, no party shall have the right to acquire or
shall be deemed to have acquired shares of common stock of the other party
pursuant to the Merger until consummation thereof.
8.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Tennessee, without regard
to any applicable conflicts of law.
8.7 Injunctive Relief; Limitations on Remedies. The
parties hereto acknowledge and agree that since a remedy at law for any breach
or attempted breach of the provisions hereof shall be inadequate, FAC shall be
entitled to specific performance and injunctive or other equitable relief in
case of any such breach or attempted breach, in addition to whatever other
remedies may exist at law. The parties hereto also waive any requirement for
the securing or posting of any bond in connection with the obtaining of any
such injunctive or other equitable relief. Each party further agrees that,
should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or thereof or to any other remedy, including but not
limited to money damages, for breach hereof or thereof or of any other
provision of this Agreement or parts hereof as a result of such holding or
order. This provision is not intended to render null or unenforceable any
obligation hereunder that would be valid and enforceable if this provision were
not in this Agreement.
8.8 Publicity. Except as otherwise required by law or
the rules of NASDAQ, so long as this Agreement is in effect, neither HFB nor
FAC shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the
other party, which consent shall not be unreasonably withheld.
8.9 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
53
57
8.10 Consents. For purposes of any provision of this
Agreement requiring, permitting or providing for the consent of FAC or HFB, the
written consent of the Chief Executive Officer of FAC or HFB, as the case may
be, shall be sufficient to constitute such consent.
8.11 Disclosures. No fact or event shall be deemed to
have been disclosed by one party to the other party for purposes of this
Agreement unless such fact or event is disclosed in a writing delivered to such
party.
54
58
IN WITNESS WHEREOF, FAC and HFB have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of
February 21, 1995.
FIRST AMERICAN CORPORATION
BY: /s/ Dennis C. Bottorff
-----------------------------------
Dennis C. Bottorff
Chairman and Chief Executive Officer
Attest:
/s/ Mary C. Price
- --------------------------------------
Title: Assistant Secretary
--------------------------------
HERITAGE FEDERAL BANCSHARES, INC.
BY: /s/ William E. Kreis
-----------------------------------
William E. Kreis
President and Chief Executive Officer
Attest:
/s/ Richard Brumfield
- --------------------------------------
Title: /s/ Secretary
--------------------------------
55