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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8K
CURRENT REPORT
Current Report Pursuant
to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: May 22, 1995
Date of earliest event reported: May 17, 1995
FIRST AMERICAN CORPORATION
(Exact name of registrant as specified in its charter)
TENNESSEE
(State or other jurisdiction of incorporation)
0-6198 62-0799975
(Commission File Number) (I.R.S. Employer
Identification No.)
FIRST AMERICAN CENTER, NASHVILLE, TENNESSEE 37237-0700
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 748-2000
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Item 5. Other Event
First American has entered into a definitive agreement under
which all of the outstanding shares of Charter Federal Savings
Bank will, subject to certain terms and conditions, be
exchanged for .38 shares of First American Corporation common
stock, or approximately $67 million. See the press release
dated May 17, 1995 which is attached hereto as exhibit 20.
Exhibit No. Description
2. Agreement and Plan of Reorganization dated May 17,
1995 by and between Charter Federal Savings Bank and
First American Corporation.
20. Press Release dated May 17, 1995.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST AMERICAN CORPORATION
--------------------------
(Registrant)
Date: May 22, 1995 /s/ Mary Neil Price
--------------------------------------
Name: Mary Neil Price
Title: Senior Vice President and
Assistant Secretary
3
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EXHIBIT INDEX
Exhibit No: Description
----------- -----------
2 Agreement and Plan of Reorganization dated May 17,
1995 by and between Charter Federal Savings Bank and
First American Corporation.
20 Press Release dated May 17, 1995
4
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EXHIBIT 2
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P R I V I L E G E D AND C O N F I D E N T I A L
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
CHARTER FEDERAL SAVINGS BANK
AND
FIRST AMERICAN CORPORATION
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TABLE OF CONTENTS
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PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE - TRANSACTIONS AND TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 TIME AND PLACE OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE TWO - TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 BUSINESS OF SURVIVING BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 ASSUMPTION OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 CHARTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE THREE - MANNER OF CONVERTING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 ANTI-DILUTION PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 SHARES HELD BY CHARTER OR FAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 NO DISSENTERS' RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 MARKET VALUE OF FAC COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE FOUR - EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 EXCHANGE PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 RIGHTS OF FORMER CHARTER STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 TERMINATION OF EXCHANGE AGENT RELATIONSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE FIVE - REPRESENTATIONS AND WARRANTIES OF CHARTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 ORGANIZATION, STANDING, AND POWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 AUTHORITY; NO BREACH BY AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 CHARTER SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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5.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6 DEPOSIT ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.7 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.9 ADEQUACY OF RESERVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.10 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.11 ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.12 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.13 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.14 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.15 LABOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.16 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.17 MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.18 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.19 REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.20 STATEMENTS TRUE AND CORRECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.21 ACCOUNTING, TAX, AND REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.22 CHARTER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.23 OWNERSHIP OF FAC COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.24 QUALIFIED THRIFT LENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.25 PERMISSIBLE ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.26 LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.27 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.28 RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.29 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.30 LIQUIDATION ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE SIX - REPRESENTATIONS AND WARRANTIES OF FAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 ORGANIZATION, STANDING, AND POWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 AUTHORITY; NO BREACH BY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.8 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10 STATEMENTS TRUE AND CORRECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.11 AUTHORITY OF CHARTER INTERIM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.12 ACCOUNTING, TAX AND REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.13 NO VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.14 CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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ARTICLE SEVEN - CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 AFFIRMATIVE COVENANTS OF CHARTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 NEGATIVE COVENANTS OF CHARTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 COVENANTS OF FAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 ADVERSE CHANGES IN CONDITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE EIGHT - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; STOCKHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . 31
8.2 NASDAQ STOCK MARKET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 APPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.5 INVESTIGATION AND CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.6 PRESS RELEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.7 CERTAIN ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.8 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.9 AGREEMENTS OF AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.10 TRANSITION OF CERTAIN EMPLOYEE BENEFIT PLANS; EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . 34
8.11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.12 CHARTER STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.13 FAIRNESS OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.14 AGREEMENTS RELATING TO POOLING-OF-INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE NINE - CONDITIONS PRECEDENT TO OBLIGATIONS
TO CONSUMMATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2 CONDITIONS TO OBLIGATIONS OF FAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3 CONDITIONS TO OBLIGATIONS OF CHARTER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE TEN - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE ELEVEN - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.3 BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.4 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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11.5 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.6 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.7 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.8 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.11 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.12 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION
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1. Form of Plan of Merger and Combination between
Charter and Charter Interim. (Section Section
1.1, 11.1).
2. Form of agreement of affiliates of Charter.
(Section 8.9).
3. Form of legal opinion of counsel to Charter.
(Section 9.2(g)).
4. Form of legal opinion of counsel to FAC (Section
9.3(d)).
5. Form of Stock Option Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of May 17, 1995, by and between CHARTER FEDERAL SAVINGS
BANK ("Charter"), a federal stock savings bank organized and existing under the
laws of the United States, with its principal office located in Bristol,
Virginia; and FIRST AMERICAN CORPORATION ("FAC"), a corporation organized and
existing under the laws of the State of Tennessee with its principal office
located in Nashville, Tennessee.
PREAMBLE
The Boards of Directors of Charter and FAC are of the opinion that the
transactions described herein are in the best interests of the parties and
their respective stockholders. This Agreement provides for the acquisition of
Charter by FAC pursuant to the merger of a newly formed first tier, interim
federal savings bank subsidiary of FAC ("Charter Interim") with and into
Charter. At the Effective Time of such Merger, the outstanding shares of the
common stock of Charter shall be converted into shares of the common stock of
FAC (except as provided herein). As a result, stockholders of Charter shall
become stockholders of FAC. It is the intention of the Parties that such
additional transactions also be effectuated immediately following the Merger as
may be necessary or appropriate to result in (a) the Charter branches located
in Tennessee and in Bristol, Virginia becoming and being operated as branches
of First American National Bank, Nashville, Tennessee, a wholly-owned,
first-tier national bank subsidiary of FAC ("First American National Bank"),
and Charter continuing to conduct the business and operations of the remaining
Charter branches as a wholly-owned, first-tier federal savings bank subsidiary
of FAC (the "Primary FAC Objective Transactions") or (b) if the transactions
contemplated by (a) can not or do not receive all necessary regulatory
approvals, then the Charter branches located in Tennessee becoming and being
operated as branches of First American National Bank and Charter continuing to
conduct the business and operations of the Charter branches located in Virginia
as a wholly-owned, first-tier federal savings bank subsidiary of FAC (the
"Alternative FAC Objective Transactions"). The transactions described in this
Agreement are subject to the approvals of the stockholders of Charter, and all
necessary regulatory approvals as may be required by the Office of Thrift
Supervision, the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Office of the Comptroller of the Currency
and such state regulatory authorities as may be appropriate to effectuate the
intentions of the parties hereto, and the satisfaction of certain other
conditions described in this Agreement. It also is the intention of the
parties to this Agreement that the Merger for federal income tax purposes shall
qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code, and that the exchange of Charter common stock to the
extent exchanged for FAC common stock will not give rise to gain or loss to the
holders of Charter common stock with respect to such exchange. In
consideration of the execution of this Agreement by FAC, Charter is granting to
FAC an option to acquire up to 19.99% of the authorized but unissued common
stock on the terms and in the form attached hereto as Exhibit 5.
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Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
ARTICLE ONE
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time as hereinafter defined, Charter Interim shall be merged
with and into Charter in accordance with and with the effect provided in Title
12, United States Code, Section 1467a(s) and 12 C.F.R. Section 552.13(1) (the
"Merger"). Charter shall be the Surviving Bank resulting from the Merger and
shall be a wholly-owned, first tier federal savings bank Subsidiary of FAC and
shall continue to be governed by the Laws of the United States. As a result of
the Merger, FAC will acquire 100% of the capital stock of Charter in accordance
with Title 12, United States Code, Section 1467(a)(e). The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved
and adopted or authorized by the respective Boards of Directors of Charter and
FAC, and the terms of a Plan of Merger to be entered into by Charter and
Charter Interim. Immediately following the Merger, such transactions as are
necessary or advisable to effectuate the Primary FAC Objective Transactions or
the Alternative FAC Objective Transactions shall be consummated. Charter
agrees to cooperate with FAC in all material respects and to use its best
efforts to obtain such regulatory approvals as may be required to allow the
Primary FAC Objective Transactions or the Alternative FAC Objective
Transactions to be consummated.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00
A.M. on the last business day of the calendar quarter in which the satisfaction
of all conditions precedent specified in Article Nine hereof occurs or at such
other time that the Parties, acting through their chief executive officers or
principal financial officers, shall mutually agree. The place of Closing shall
be at the offices of FAC, or such other place as may be mutually agreed upon by
the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time of
endorsement of the Articles of Combination filed with the OTS or on such other
date and at such other time as the OTS declares the Merger effective (the
"Effective Time"). Subject to the terms and conditions hereof, unless
otherwise mutually agreed upon in writing by the chief executive officers or
principal financial officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur at the end of the last
day of the calendar quarter during which the Closing takes place, or such later
date within thirty (30) days of such date as shall be mutually agreed upon by
FAC and Charter.
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ARTICLE TWO
TERMS OF MERGER
2.1 BUSINESS OF SURVIVING BANK. The business of the Surviving Bank
from and after the Effective Time shall continue to be that of a federal stock
savings bank organized under the laws of the United States. The business shall
be conducted from its home office in Bristol, Virginia or such other location
as FAC shall designate at the Effective Time, and at its legally established
branches, which shall also include the main office and all branches, whether in
operation or approved but unopened, at the Effective Time.
2.2 ASSUMPTION OF RIGHTS. At the Effective Time, the separate
existence and corporate organization of Charter Interim shall be merged into
and continued in the Surviving Bank. All rights, franchises, and interests of
both Charter and Charter Interim in and to every type of property (real,
personal, and mixed), and all choses in action of both Charter and Charter
Interim shall be transferred to and vested in the Surviving Bank without any
deed or other transfer. The Surviving Bank, upon consummation of the Merger
and without any order or other action on the part of any court or otherwise,
shall hold and enjoy all rights of property, franchises, and interests,
including appointments, designations, and nominations, and all other rights and
interests as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, and committee of estates of
incompetent persons, and in every other fiduciary capacity, in the same manner
and to the same extent as such rights, franchises, and interests were held or
enjoyed by either Charter or Charter Interim at the Effective Time.
2.3 ASSUMPTION OF LIABILITIES. All liabilities and obligations of
both Charter and Charter Interim of every kind and description (including
without limitation the liquidation account established by Charter in connection
with its conversion to the stock form of organization, as in existence at the
Effective Time) shall be assumed by the Surviving Bank, and the Surviving Bank
shall be bound thereby in the same manner and to the same extent that Charter
and Charter Interim were so bound at the Effective Time.
2.4 CHARTER. The charter of Charter in effect immediately prior to
the Effective Time shall be the charter of the Surviving Bank until otherwise
amended or repealed.
2.5 BYLAWS. The bylaws of Charter in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Bank until otherwise
amended or repealed.
2.6 DIRECTORS AND OFFICERS. The directors of Charter Interim in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Bank from and after the Effective Time in accordance with the bylaws
of the Surviving Bank. The officers of Charter Interim in office immediately
prior to the Effective Time, together with such additional persons as may
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thereafter be elected, shall serve as the officers of the Surviving Bank from
and after the Effective Time in accordance with the bylaws of the Surviving
Bank.
ARTICLE THREE
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article
Three, at the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, the shares of the constituent corporations
shall be converted as follows:
(a) Each share of FAC Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Charter Interim Common Stock issued and
outstanding prior to the Effective Time shall at the Effective Time continue to
be issued and outstanding and shall be an identical outstanding share of the
Surviving Bank.
(c) Each share of Charter Common Stock issued and outstanding
at the Effective Time (excluding shares held by any Charter Company or by any
FAC Company, in each case other than in a fiduciary capacity or in satisfaction
of debts previously contracted, which shares shall be canceled as provided in
Section 3.3 of this Agreement) shall cease to be outstanding and shall be
converted into and exchanged for 0.3800 shares of FAC Common Stock (the "Common
Stock Exchange Ratio"); provided, however, that, in the event the FAC Market
Value at the Effective Time (determined as provided in Section 3.6 of this
Agreement) is greater than $39.75 per share, then the Common Stock Exchange
Ratio shall be reduced to such amount, rounded to the nearest one-ten
thousandth of a share, as shall equal $15.10 divided by the FAC Market Value;
and provided further, however, that, if FAC enters into a definitive agreement
of merger or reorganization with another entity as a result of which either FAC
is not the surviving entity or FAC's Chief Executive Officer will not become
the Chief Executive Officer of the surviving entity, then the Common Stock
Exchange Ratio shall be 0.3800 shares of FAC Common Stock for each share of
Charter Common Stock exchanged.
3.2 ANTI-DILUTION PROVISIONS. In the event Charter or FAC changes
the number of shares of Charter Common Stock or FAC Common Stock respectively,
issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, or similar recapitalization with respect to such stock
and the record date therefor shall be prior to the Effective Time, the Common
Stock Exchange Ratio shall be proportionately adjusted to reflect such stock
split, stock dividend or similar recapitalization.
3.3 SHARES HELD BY CHARTER OR FAC. Each of the shares of Charter
Common Stock held by any Charter Company or by any FAC Company, in each case
other than in a fiduciary capacity or in satisfaction of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
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3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of Charter Common Stock exchanged pursuant to
the Merger 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 at the Effective Time.
The market value of one share of FAC Common Stock at the Effective Time shall
be the closing price of such common stock as reported on the Nasdaq Stock
Market on the last trading day preceding the Effective Time. No such holder
will be entitled to dividends, voting rights, or any other rights as a
stockholder in respect of any fractional shares.
3.5 NO DISSENTERS' RIGHTS. The holders of Charter 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.
3.6 MARKET VALUE OF FAC COMMON STOCK. The market value of one share
of FAC Common Stock on the Effective Time (the "FAC Market Value") shall be the
average per share closing price of FAC Common Stock on the Nasdaq Stock Market
(as reported by The Wall Street Journal or other authoritative source) for the
twenty consecutive trading days ending on and including the third day
immediately preceding but not including the day of the Effective Time.
ARTICLE FOUR
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time but in
no event later than five (5) business days thereafter, FAC shall cause FAC
itself or such bank or trust company as FAC shall elect (which may be a
subsidiary of FAC), acting as the exchange agent (the "Exchange Agent"), to
mail to the former stockholders of Charter appropriate transmittal materials
(which shall specify that delivery shall be effected, and risk of loss and
title to the certificates theretofore representing shares of Charter Common
Stock shall pass, only upon proper delivery of such certificates to the
Exchange Agent). After the Effective Time, each holder of shares of Charter
Common Stock (other than shares to be canceled pursuant to Section 3.3 of this
Agreement) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent and
shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.4 of this Agreement, each holder of shares of Charter
Common Stock issued and outstanding at the Effective Time also shall receive,
upon surrender of the certificate or certificates representing such shares,
cash in lieu of any fractional share of FAC Common Stock to which such holder
may be otherwise entitled (without interest). FAC shall not be obligated to
deliver the consideration to which any former holder of Charter
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Common Stock is entitled as a result of the Merger until such holder surrenders
such holder's certificate or certificates representing the shares of Charter
Common Stock for exchange as provided in this Section 4.1. The certificate or
certificates of Charter Common Stock so surrendered shall be duly endorsed as
the Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither FAC, the Surviving Bank, nor the Exchange Agent shall
be liable to a holder of Charter Common Stock or FAC Common Stock, as the case
may be, for any amounts paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
4.2 RIGHTS OF FORMER CHARTER STOCKHOLDERS. At the Effective Time,
the stock transfer books of Charter shall be closed as to holders of Charter
Common Stock immediately prior to the Effective Time, and no transfer of
Charter Common Stock by any such holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section 4.1
of this Agreement, each certificate theretofore representing shares of Charter
Common Stock (other than shares to be canceled pursuant to Section 3.3 of this
Agreement) shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Sections 3.1 and 3.4 of
this Agreement in exchange therefor and when issued, such consideration shall
be deemed to have been issued in full satisfaction of all rights pertaining to
such shares of Charter Common Stock. Whenever a dividend or other distribution
is declared by FAC on the FAC Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares of FAC Common Stock issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of FAC Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any certificate representing shares of
Charter Common Stock issued and outstanding at the Effective Time until such
holder surrenders such certificate for exchange as provided in Section 4.1 of
this Agreement. However, upon surrender of such Charter Common Stock
certificate, both the FAC Common Stock certificate (together with all such
undelivered dividends or other distributions with a record date after the
Effective Time and a payment date at or prior to such surrender (without
interest)) and any undelivered cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate. If, after the Effective Time,
certificates representing Charter Common Stock are presented to the Surviving
Bank for any reason, they shall be surrendered and exchanged as provided in
Section 4.1.
4.3 TERMINATION OF EXCHANGE AGENT RELATIONSHIP. At any time
following one year after the Effective Time, FAC shall be entitled to terminate
the Exchange Agent relationship, and any stockholders of Charter who have not
theretofore surrendered their shares of Charter Common Stock pursuant to this
Article Four 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 (subject to
abandoned property, escheat or other similar laws).
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ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF CHARTER
Charter hereby represents and warrants to FAC as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Charter is a federal stock
savings bank duly organized, validly existing, and in good standing under the
Laws of the United States, and has the corporate power and authority to carry
on its business as now conducted and to own, lease, and operate its Assets.
Charter is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed will not
have, individually or in the aggregate, a Material Adverse Effect on Charter.
The minute books of Charter contain accurate records of all meetings and other
corporate actions since January 31, 1993 of its stockholders and Board of
Directors (including the committees of the Board of Directors).
5.2 AUTHORITY: NO BREACH BY AGREEMENT.
(a) Charter has the corporate power and authority necessary to
execute, deliver, and perform its obligations under, this Agreement and the
Plan of Merger and to consummate the transactions contemplated hereby and
thereby, subject to the approval of this Agreement and the Plan of Merger by
the holders of two-thirds of the outstanding shares of Charter Common Stock.
The execution, delivery, and performance of this Agreement and the Plan of
Merger have been approved by the Board of Directors of Charter and the
consummation of the transactions contemplated herein and therein, including the
Merger, have been or will be duly and validly authorized by all necessary
corporate action in respect thereof on the part of Charter, subject to the
approval of this Agreement and the Plan of Merger by the holders of two-thirds
of the outstanding shares of Charter Common Stock. Subject to such requisite
approval, this Agreement represents, and, when executed and delivered, the Plan
of Merger will represent, a legal, valid, and binding obligation of Charter,
enforceable against Charter in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement or
the Plan of Merger by Charter, nor the consummation by Charter of the
transactions contemplated hereby or thereby, nor compliance by Charter with any
of the provisions hereof or thereof, will (i) conflict with or result in a
breach of any provision of Charter's charter or bylaws except for possible
redesignation of Charter's home office, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of any Charter Company under, any Contract or Permit of
any Charter Company, or (iii) subject to
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receipt of the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any material Law or Order applicable to any Charter Company
or any of their respective Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
rules of the Nasdaq Stock Market, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings, or notifications
which, if not obtained or made, will not have, individually or in the
aggregate, a Material Adverse Effect on Charter. No notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
Charter of the Merger and the other transactions contemplated in this Agreement
and the Plan of Merger.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of Charter consists of (i)
50,000,000 shares of $.01 par value Charter Common Stock, of which 5,125,313
shares are issued and outstanding as of the date of this Agreement and not more
than 5,272,513 shares will be issued and outstanding at the Effective Time
which includes currently outstanding Charter Stock Options, excluding any
shares resulting from an adjustment pursuant to Section 3.2, and (ii) 7,500,000
shares of $.01 par value Charter Preferred Stock of which no shares of Charter
Preferred Stock are issued and outstanding as of the date of this Agreement or
will be issued and outstanding at the Effective Time. All of the issued and
outstanding shares of Charter Common Stock are duly authorized, validly issued
and fully paid and nonassessable. None of the outstanding shares of Charter
Common Stock has been issued in violation of any preemptive rights of the
current or past stockholders of Charter.
(b) Except as set forth in Section 5.3(a) of this Agreement,
or as disclosed in Section 5.3(b) of the Charter Disclosure Memorandum, there
are no shares of capital stock or other equity securities of Charter
outstanding and no outstanding options, warrants, scrip, rights to subscribe
to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of Charter or contracts, commitments, understandings, or
arrangements by which Charter is or may be bound to issue additional shares of
Charter Common Stock or options, warrants, or rights to purchase or acquire any
additional shares of its capital stock.
(c) 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 Charter were issued or outstanding.
(d) Since March 31, 1995, Charter 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 Charter or any of its
Subsidiaries, other than pursuant to and as required by the terms of any
Charter Stock Options; (B) repurchased, redeemed or otherwise acquired,
directly or
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indirectly through one or more of its Subsidiaries, any shares of capital stock
of Charter 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 Charter dividends or other distributions on the outstanding shares of
capital stock of Charter, other than regular quarterly cash dividends at a rate
not in excess of the regular quarterly cash dividends most recently declared by
Charter prior to the date hereof.
5.4 CHARTER SUBSIDIARIES. Charter has disclosed in Section 5.4 of
the Charter Disclosure Memorandum each of the Charter Subsidiaries and the
activities in which each of them engages as of the date of this Agreement.
Except as disclosed, Charter or one of its Subsidiaries owns all of the issued
and outstanding shares of capital stock of each Charter Subsidiary. No equity
securities of any Charter Subsidiary are or may become required to be issued by
reason of any options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of any such
Subsidiary, and there are no Contracts by which any Charter Subsidiary is bound
to issue additional shares of its capital stock or options, warrants, or rights
to purchase or acquire any additional shares of its capital stock or by which
any Charter Company is or may be bound to transfer any shares of the capital
stock of any Charter Subsidiary. There are no Contracts relating to the rights
of any Charter Company to vote or to dispose of any shares of the capital stock
of any Charter Subsidiary. All of the issued and outstanding shares of capital
stock of each Charter Subsidiary held by a Charter Company are duly authorized,
validly issued, and fully paid and nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the Charter Company free and clear of any Lien.
Each Charter Subsidiary is a corporation, and is duly organized, validly
existing, and in good standing under the Laws of the jurisdiction in which it
is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each Charter Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed, individually or in the aggregate, would not have a
Material Adverse Effect on it or Charter. Except as disclosed in Section 5.4
of the Charter Disclosure Memorandum, no Charter Company is a party to a joint
venture or is a partner in a general or limited partnership.
5.5 FINANCIAL STATEMENTS. Charter has disclosed in Section 5.5 of
the Charter Disclosure Memorandum, and has delivered to FAC copies of, all
Charter Financial Statements for periods ended prior to the date hereof, and
will deliver to FAC copies of all Charter Financial Statements prepared
subsequent to the date hereof, including monthly financial statements. The
Charter Financial Statements (as of the dates thereof and for the periods
covered thereby) (i) are or, if dated after the date of this Agreement, will be
in accordance with the books and records of the Charter Companies, which are or
will be, as the case may be, complete and correct and which have been or will
have been, as the case may be, maintained in accordance with good business
practices, (ii) present or will present, as the case
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may be, fairly the consolidated financial position of the Charter Companies as
of the dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows of the Charter Companies for the periods
indicated, in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of interim financial statements, to normal recurring year-end adjustments
that are not material), and (iii) as included in reports filed with the OTS
under the Securities Exchange Act of 1934 comply as to form in all material
respects with applicable accounting requirements and published rules and
regulations.
5.6 DEPOSIT ACCOUNTS. The deposit accounts of Charter are insured
by the Savings Association Insurance Fund of the FDIC to the maximum extent
permitted under Law, and Charter has paid all premiums and assessments and
filed all reports required to have been paid or filed under the Federal Deposit
Insurance Act.
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. No Charter Company has any
Liabilities that will have, individually or in the aggregate, a Material
Adverse Effect on Charter, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of Charter as of March 31, 1995
included in the Charter Financial Statements or reflected in the notes thereto.
No Charter Company has incurred or paid any Liability since March 31, 1995,
except for such Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and which will not have, individually or
in the aggregate, a Material Adverse Effect on Charter. Except as set forth in
Section 5.7 of the Charter Disclosure Memorandum, Charter has no off-balance
sheet financial instruments including but not limited to letters of credit,
unfunded commitments and derivative financial instruments. To Charter's
knowledge, there are no unasserted claims that are not disclosed in the Charter
Financial Statements that would have a Material Adverse Effect on Charter.
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1994,
except as disclosed in the Charter Financial Statements filed with the OTS
after such date and prior to the date of this Agreement, (i) no events or
changes have occurred or have been threatened which have had, will have or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect upon the Charter Companies considered as a whole, (ii) the Charter
Companies have not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of
this Agreement, would represent or result in a material breach or violation of
any of the covenants and agreements of Charter in this Agreement, and (iii)
neither Charter nor any of its Subsidiaries has suffered any loss or damage to
their respective properties, or Assets, whether or not insured, or union
activity that would have, individually or in the aggregate, a Material Adverse
Effect on the Charter Companies taken as a whole.
5.9 ADEQUACY OF RESERVES.
(a) The allowance for loan losses (the "Allowance") set forth
in Note 4 to the Charter Financial Statements dated March 31, 1995 was, and the
Allowance shown in the notes to the consolidated statements of financial
condition of Charter included in the Charter
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Financial Statements as of dates subsequent to the execution of this Agreement
will be, as of the dates thereof, adequate (within the meaning of GAAP and
applicable OTS requirements or guidelines) to provide for losses relating to or
inherent in the loan and lease portfolios (including accrued interest
receivables) of the Charter Companies and other extensions of credit (including
letters of credit and commitments to make loans or extend credit) by the
Charter Companies as of the dates thereof.
(b) The allowance for loss on real estate acquired in
settlement of loans ("REO Reserve") shown on Schedule SC to the Charter Thrift
Financial Report dated March 31, 1995 and filed with the OTS was, and the REO
Reserve shown on the consolidated statements of financial condition of Charter
included in the Charter Financial Statements or notes thereto or Schedule SC to
the Charter Thrift Financial Reports filed with the OTS as of dates subsequent
to the execution of this Agreement will be, as of the dates thereof, adequate
(within the meaning of GAAP and applicable OTS requirements or guidelines) to
provide for losses relating to or inherent in the other real estate owned
portfolios of the Charter Companies as of the dates thereof and the resulting
net assets are carried at the fair value less costs to sell.
5.10 TAX MATTERS.
(a) All Tax returns required to be filed on behalf of any of
the Charter Companies have been timely filed, or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 1993 and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time. All Taxes shown on filed returns and
all estimated Taxes for periods for which extensions have been requested have
been paid. No deficiencies for any Taxes have been proposed, asserted, or
assessed against Charter or any of its Subsidiaries that are not adequately
reserved for in the Charter Financial Statements dated prior to the date of
this Agreement, except for deficiencies that will not have a Material Adverse
Effect on Charter. Except with respect to claims for refunds, the Federal
income tax returns of Charter 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. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(b) None of the Charter Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination
by the Internal Revenue Service or other applicable Taxing authorities) that is
currently in effect.
(c) Adequate provisions for any current and deferred Taxes due
or to become due for any of the Charter Companies for the period or periods
through and including the date of the respective Charter Financial Statements
have been accrued and are reflected on such Charter Financial Statements.
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5.11 ASSETS. Except as disclosed in the Charter Financial Statements
and in Section 5.11 of the Charter Disclosure Memorandum, the Charter Companies
have good and marketable title, to all of their respective Assets that are
material to the business of the Charter Companies on a consolidated basis, and
such Assets are owned free and clear of all Liens. All material tangible
properties used in the businesses of the Charter Companies are in good
condition reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Charter's past practices. All Assets which
are material to the business of the Charter Companies, held under leases or
subleases by any of the Charter Companies, are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceedings may be brought), and each such Contract is in full
force and effect.
5.12 ENVIRONMENTAL MATTERS. Except as set forth in Section 5.12 of
the Charter Disclosure Memorandum and to Charter's Knowledge:
(a) The operations of Charter and its Subsidiaries have been
in the past and are now 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 Occupation Safety and
Health Act.
(b) Neither Charter 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 Charter 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 health or safety matters, or (z) any
statutory or commonlaw theory of liability involving environmental or health
and safety matters.
(c) No use, disposal, releases, burial, placement or migration
of any material regulated under or defined by any Environmental Law, including
without limitation, asbestos (collectively, "Hazardous Materials"), has
occurred on, in, at, or under any of the property owned, leased or operated at
any time by Charter or any Subsidiary.
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(d) There has been no disposal, release, burial or placement of
Hazardous Materials on any real property not owned, leased or operated by
Charter or any Subsidiary which may result or has resulted in contamination of
or beneath the property owned, leased or operated at any time by Charter or any
Subsidiary.
(e) All of the above-ground and underground storage tanks
presently on any real property owned, leased or operated by Charter or any
Subsidiary have been properly registered.
(f) No audit or investigation has been conducted as to
environmental matters relating to any property owned, leased or operated by
Charter or any Subsidiary by any governmental agency.
(g) 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 Charter or any Subsidiary
under any Environmental Law.
5.13 COMPLIANCE WITH LAWS. Charter is an "insured depository
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder. Each Charter Company has in effect all Permits
necessary for it to own, lease, or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which will
not have, individually or in the aggregate, a Material Adverse Effect on
Charter, and there has occurred no Default under any such Permit, other than
Defaults which will not have, individually or in the aggregate, a Material
Adverse Effect on Charter. None of the Charter Companies:
(a) Is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for violations
which will not have, individually or in the aggregate, a Material Adverse
Effect on Charter; and
(b) As of the date of this Agreement, 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 notification,
communication or extraordinary supervisory letter from, any governmental
authority or Regulatory Authority which asserts that any Charter Company is not
in compliance with any material Laws or material Orders where such
noncompliance will have individually or in the aggregate, a Material Adverse
Effect on Charter, restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit policies, its management, or
the payment of dividends, nor has Charter been advised by any Regulatory
Authority that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, condition,
notification, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission.
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5.14 INSURANCE. Each of Charter and its Subsidiaries is presently
insured, and since January 1, 1993 has been insured for reasonable amounts
against such material risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured. The
policies of fire, theft, liability, and other insurance maintained with respect
to the assets or businesses of Charter and its Subsidiaries provide adequate
coverage against loss, and the fidelity bonds in effect as to which any of
Charter or its Subsidiaries is a named insured are sufficient for their
purpose.
5.15 LABOR RELATIONS. No Charter Company is the subject of any
Litigation asserting that it or any other Charter Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state law) or seeking to compel it or any other Charter Company
to bargain with any labor organization as to wages or conditions of employment,
nor is any Charter Company a party to or bound by any collective bargaining
agreement, contract, or other agreement or understanding with a labor union or
labor organization, nor is there any strike or other labor dispute involving
any Charter Company, pending or threatened, or to its Knowledge, is there any
activity involving any Charter Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.16 EMPLOYEE BENEFIT PLANS.
(a) Charter has disclosed in Section 5.16(a) of the Charter
Disclosure Memorandum, and has delivered or made available to FAC prior to the
execution of this Agreement correct and complete copies in each case of, all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plans, all other written employee programs or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including, without limitation, "employee
benefit plans" as that term is defined in Section 3(3) of ERISA, currently or
previously adopted, maintained by, sponsored in whole or in part by, or
contributed to by any Charter Company for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries are eligible to participate
(collectively, the "Charter Benefit Plans"). Any of the Charter Benefit Plans
which is an "employee welfare benefit plan," as that term is defined in Section
3(1) of ERISA, or an "employee pension benefit plan," as that term is defined
in Section 3(2) of ERISA, is referred to herein as a "Charter ERISA Plan." On
or after September 26, 1980, neither Charter nor any Charter Company has
participated in or had an "obligation to contribute" (as defined in ERISA
Section 4212) to a "multiemployer plan" (as defined in ERISA Sections
4001(a)(3) and 3(37)(A)). Except as disclosed in Section 5.16(a) of the
Charter Disclosure Memorandum, with respect to each Charter Benefit Plan that
is subject to Title IV of ERISA, the present value of accrued benefits under
such plan based upon the actuarial assumptions used for funding purposes in the
most recent actuarial report prepared by such plan's actuary with respect to
such plan does not exceed the fair market value of the assets of such plan
allocable to such accrued benefits. If Charter and its Subsidiaries at any
time withdraw from participation as a contributing sponsor
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in any Charter Benefit Plan that is a plan described in Section 4063(a) of
ERISA, neither Charter nor any of its Subsidiaries would incur any liability to
such plan. Neither Charter nor any of its Subsidiaries is a "substantial
employer" within the meaning of Section 4001(a)(2) of ERISA, with respect to
any plan described in Section 4063(a) of ERISA.
(b) Except as disclosed in Section 5.16(b) of the Charter
Disclosure Memorandum, Charter has delivered or made available to FAC prior to
the execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such
Charter Benefit Plans (including insurance contracts), and all amendments
thereto, (ii) with respect to any such Charter Benefit Plans or amendments, all
determination letters, rulings, opinion letters, information letters, or
advisory opinions issued by the Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after December
31, 1974, (iii) annual reports or returns, audited or unaudited financial
statements, actuarial valuations and reports, and summary annual reports
prepared for any Charter Benefit Plan with respect to the most recent three
plan years, and (iv) the most recent summary plan descriptions and any material
modifications thereto.
(c) Except as disclosed in Section 5.16(c) of the Charter
Disclosure Memorandum, all Charter Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which would have, individually or in the
aggregate, a Material Adverse Effect on Charter. Each Charter ERISA Plan which
is intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal Revenue
Service, and Charter is not aware of any circumstances which will or could
result in revocation of any such favorable determination letter. Each trust
created under any Charter ERISA Plan has been determined to be exempt from Tax
under Section 501(a) of the Internal Revenue Code and Charter is not aware of
any circumstance which will or could result in revocation of such exemption.
Except as disclosed in Section 5.16(c) of the Charter Disclosure Memorandum,
with respect to each Charter Benefit Plan, no event has occurred which will or
could give rise to a loss of any intended Tax consequences under the Internal
Revenue Code or to any Tax under Section 511 of the Internal Revenue Code.
There is no material pending or threatened Litigation relating to any Charter
ERISA Plan. No Charter Company has engaged in a transaction with respect to
any Charter Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any Charter Company to a tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts which would have, individually or in the aggregate,
a Material Adverse Effect on Charter. No event that constitutes a "reportable
event", as defined in Section 4043 of ERISA has occurred with respect to any
Charter ERISA Plan. All Charter Benefit Plans that are group health plans as
defined in Section 5000(b) of the Internal Revenue Code have been operated in
compliance with the applicable requirements for continuation coverage of
Section 4980B of the Internal Revenue Code.
(d) Except as disclosed in Section 5.16(d) of the Charter
Disclosure Memorandum, no liability under Title IV of ERISA has been or is
expected to be incurred by
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any Charter Company with respect to any defined benefit plan currently or
formerly maintained by any of them or by any entity which is considered a
single employer with a Charter Company under Section 4001 of ERISA or Section
414 of the Internal Revenue Code (an "ERISA Affiliate").
(e) Except as disclosed in Section 5.16(e) of the Charter
Disclosure Memorandum, no defined benefit plan of a Charter Company or an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Internal Revenue Code or Section 302
of ERISA and no Charter Company or ERISA Affiliate has an outstanding funding
waiver. No Charter Company or ERISA Affiliate has provided, or is required to
provide, security to any plan of a Charter Company or an ERISA Affiliate
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(f) Except as disclosed in Section 5.16(f) of the Charter
Disclosure Memorandum, no Charter Company has any obligations for retiree
health and life benefits under any of the Charter Benefit Plans.
(g) Except as disclosed in Section 5.16(g) of the Charter
Disclosure Memorandum, no oral or written representation or communication with
respect to any aspect of the Charter Benefit Plans has been made to employees
of any of the Charter Companies prior to the date hereof which is not in
accordance with the written or otherwise preexisting terms and provisions of
such plans. All Charter Benefit Plan documents and annual reports or returns,
audited or unaudited financial statements, actuarial valuations, summary annual
reports, and summary plan descriptions issued with respect to the Charter
Benefit Plans are correct and complete and there have been no changes in the
information set forth therein.
(h) Except as disclosed in Section 5.16(h) of the Charter
Disclosure Memorandum, to the Knowledge of Charter, there are no issues or
disputes with respect to any Charter Benefit Plans, or the administration
thereof, currently between any trustee or other fiduciary thereunder, Charter
or any of its Subsidiaries and any governmental agency or, employee, which
would, individually or in the aggregate, have a Material Adverse Effect on
Charter.
5.17 MATERIAL CONTRACTS. Except as disclosed in Section 5.17 of the
Charter Disclosure Memorandum, none of the Charter Companies, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate
payments to any Person in any calendar year in excess of $10,000, (ii) any
Contract relating to the borrowing of money by any Charter Company or the
guarantee by any Charter Company of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, and Federal Home Loan Bank advances, trade payables, and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), (iii) any Contracts between or among Charter Companies, and (iv) any
other material Contract (together with all Contracts referred to in Sections
5.11 and 5.16(a) of this Agreement, the "Charter Contracts"). None of the
Charter Companies or, to Charter's
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Knowledge, any counterparty to a Charter Contract, is in Default under any
Charter Contract which, individually or in the aggregate, will have a Material
Adverse Effect on Charter. All contracts or amendments thereto that were
required to be filed as exhibits to Charter's Form 10-K filed for the fiscal
year ended June 30, 1994 and quarterly reports on Form 10-Q for quarters
subsequent thereto were filed as exhibits to such reports by Charter with the
OTS as of the date of this Agreement.
5.18 LEGAL PROCEEDINGS. Except to the extent specifically and
adequately reserved against in the Charter Financial Statements dated prior to
the date of this Agreement, there is no Litigation instituted or pending, or,
to the Knowledge of Charter, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any Charter Company, or against any Asset,
interest, or right of any of them, that will have, individually or in the
aggregate, a Material Adverse Effect on Charter. Charter has disclosed in
Section 5.18 of the Charter Disclosure Memorandum all Litigation pending or, to
the Knowledge of Charter, threatened as of the date of this Agreement where
there are claims against Charter.
5.19 REPORTS. Since January 1, 1993, or the date of organization if
later, each Charter Company has filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required
to file with (i) the OTS, including, but not limited to, Forms 10-K, Forms
10-Q, Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and
(iii) any applicable state securities or banking authorities (except, in the
case of state securities authorities, failures to file which will not have,
individually or in the aggregate, a Material Adverse Effect on Charter) and
have made available to FAC true and complete copies of all such reports. As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws and regulatory requirements. As of its
respective date, each such report and document did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
5.20 STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by any Charter Company or any Affiliate thereof for inclusion
in the Registration Statement to be filed by FAC with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect
to any material fact, or 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 in light of the circumstances in
which they were made. None of the information supplied or to be supplied by
any Charter Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to Charter's stockholders in connection with the
Stockholders' Meeting, and any other documents to be filed by a Charter Company
or any Affiliate thereof with the OTS or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement and any
and all supplements and amendments thereto, when first mailed to the
stockholders of Charter, be false or
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misleading with respect to any material fact, or 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, in light of the
circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of the Stockholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances in which they were made. All documents that any Charter Company
or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply
as to form in all material respects with the provisions of applicable Law.
5.21 ACCOUNTING, TAX, AND REGULATORY MATTERS. No Charter Company has
taken any action, or agreed to take any action, or has any Knowledge of any
fact or circumstance that will (i) prevent the transactions contemplated
hereby, including the Merger, from qualifying for pooling-of-interests
accounting treatment or treatment as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, or (ii) materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b)
of this Agreement. To the Knowledge of Charter, there exists no fact,
circumstance, or reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner without
imposition of any condition of the type described in the second sentence of
such Section 9.1(b).
5.22 CHARTER PROVISIONS. Each Charter Company has taken all action
so that the entering into of this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement (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 (other than a FAC Company) under the charter,
bylaws, or other governing instruments of any Charter Company or restrict or
impair the ability of FAC to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of any Charter Company that may be acquired
or controlled by it.
5.23 OWNERSHIP OF FAC COMMON STOCK. As of the date hereof, neither
Charter 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 an 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).
5.24 QUALIFIED THRIFT LENDER. Since the date of its conversion to
stock form, Charter has satisfied, and as of the date hereof satisfies, the
qualified thrift lender test under applicable regulations.
5.25 PERMISSIBLE ACTIVITIES. Except as set forth in Section 5.25 of
the Charter Disclosure Memorandum, all of the business activities conducted by
Charter and its
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Subsidiaries as of the date hereof are business activities in which a bank
holding company is permitted to engage under the federal BHC Act, as amended,
and Regulation Y promulgated thereunder and all business activities conducted
by Charter and its Subsidiaries as of the date hereof are business activities
in which national banks are permitted to engage under the rules and regulations
of the OCC.
5.26 LOANS. Each loan of each Charter Company (i) is evidenced by
notes, agreements or other evidences of indebtedness which are true, genuine
and what they purport to be, (ii) to the extent secured, has been secured by
valid liens and security interests which have been perfected, and (iii) is the
legal, valid and binding obligation of the obligor named therein, enforceable
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally. All loans and extensions of credit that have been
made by Charter, and either (a) are outstanding as of the date of this
Agreement and as of the Effective Time, or (b) as to which applicable statutes
of limitations have not run, comply with all applicable Laws and regulations.
5.27 CONDUCT OF BUSINESS. Since June 30, 1994, each of the Charter
Companies has conducted its business only in the ordinary course. For purposes
of the foregoing, none of the Charter Companies has in any material respect,
during the period since June 30, 1994, controlled expenses through the
elimination of employee benefits, deferral of routine maintenance of real
property or leased premises, elimination of reserves where the liability
related to such reserve has remained, reduction of capital improvements from
previous levels, failure to depreciate capital assets in accordance with past
practice or eliminate capital assets that are no longer used in the business of
Charter's Subsidiaries, capitalization of loan production other than in
accordance with Financial Accounting Standard 91 or extraordinary reduction or
deferral of ordinary or necessary expenses.
5.28 RELATED PARTY TRANSACTIONS. Except as disclosed in the Charter
SEC Documents filed prior to the date of this Agreement or as set forth in
Section 5.28 of the Charter Disclosure Memorandum, (i) there are no
transactions to which Charter or any Subsidiary was a party in which any
officer or director of Charter or any Subsidiary or any other entity controlled
by, under common control with or in control of Charter had a direct or indirect
interest and (ii) no Charter Company is a party to any loan, including any loan
guaranty, with any director, executive officer or 5% Stockholder of Charter or
any Affiliate of Charter.
5.29 INTELLECTUAL PROPERTY. To Charter's Knowledge the Charter
Disclosure Memorandum lists all patents, patent applications, inventions,
licenses, trade names, trademarks, service marks, brandmarks, copyrights or
registrations or applications therefore, franchises and other assets of like
kind (such assets and rights herein called "Rights"), used in the business of
Charter, or which are registered in the name of Charter, the ownership of all
the foregoing being separately stated. The expiration dates, if any, of each
of the Rights are also set forth in the Charter Disclosure Memorandum. Charter
owns and possesses all Rights used in the conduct of Charter's business; such
Rights are adequate for the conduct of Charter's business and will not be
adversely affected by the transactions contemplated hereby; and, to Charter's
Knowledge, are not being infringed or violated by any other person or entity.
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All Rights are, and upon the consummation of the transactions contemplated by
this Agreement will be, vested in FAC free of any equities, claims, liens,
encumbrances or restrictions and Charter has not granted any licenses
thereunder to others. No products sold by Charter infringe the Rights of
others. All licenses granted to Charter by other with respect to the business
of Charter are set forth in the Charter Disclosure Memorandum, and all such
licenses are freely assignable. No holder of any equity security, general or
limited partner, or director, officer, employee or agent of such owns, directly
or indirectly, in whole or in part, any Rights which the business of Charter
has used, or the use of which is necessary for the business of Charter as now
conducted. All technology, data, precesses, formulas, trade secrets and the
like used in the operation of Charter's business therein called "Know-How") are
owned exclusively by Charter, free of any equities, claims, liens or
encumbrances, and Charter has not granted any license or right thereto to
others.
5.30 LIQUIDATION ACCOUNT. At the time of conversion from a mutual to
a stock association, Charter established a liquidation account in an amount
equal to its equity as of the latest date prior to conversion, which amounted
to approximately $12,632,000 at September 30, 1983. In addition, at the time
of conversion of First Federal Savings and Loan Association of Danville,
Charter established a liquidation account which amounted to approximately
$1,960,000 at December 31, 1984. The liquidation account has been maintained
at the above stated levels in compliance with applicable Laws and regulations.
ARTICLE SIX
REPRESENTATIONS AND WARRANTIES OF FAC
FAC hereby represents and warrants to Charter as follows:
6.1 ORGANIZATION, STANDING, AND POWER. FAC is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Tennessee, and is a bank holding company registered under the BHC Act.
First American National Bank ("FANB") is a national banking organization
validly existing and in good standing under the laws of the United States.
Each of FAC and FANB has the corporate power and authority to conduct its
business as now conducted and to own, lease, and operate its Assets. Each of
FAC and FANB is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
current business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed will not
have, individually or in the aggregate, a Material Adverse Effect on FAC and
its Subsidiaries taken as a whole. All of the issued and outstanding capital
stock of FANB is owned by FAC. FANB is the only Significant Subsidiary of FAC.
6.2 AUTHORITY: NO BREACH BY AGREEMENT.
(a) FAC has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and FAC and
FANB have the corporate
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power and authority necessary to consummate the transactions contemplated
hereby except to the extent that FAC, which is not as of the date of this
Agreement qualified to do business in Virginia, may be required to be qualified
to do business in Virginia in order to carry out the provisions of this
Agreement. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Merger,
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of FAC and FANB. This Agreement represents a
legal, valid, and binding obligation of FAC, enforceable against FAC in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
FAC, nor the consummation by FAC and FANB of the transactions contemplated
hereby, nor compliance by FAC with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of FAC's or FANB's charter
or bylaws, or (ii) constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
FAC Company under, any Contract or Permit of any FAC Company, or (iii) subject
to receipt of the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any FAC Company or any of
their respective Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
rules of the Nasdaq Stock Market, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings, or notifications
which, if not obtained or made, will not have, individually or in the
aggregate, a Material Adverse Effect on FAC, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
FAC or Charter Interim of the Merger and the other transactions contemplated in
this Agreement.
6.3 CAPITAL STOCK.
(a) As of the date hereof, the authorized capital stock of FAC
consists of (i) 50,000,000 shares of $5.00 par value FAC Common Stock and (ii)
2,500,000 shares of no par value preferred stock ("FAC Preferred"). As of the
close of business on May 4, 1995, (A) 25,930,950 shares of FAC Common Stock
were outstanding, no shares of FAC Preferred Stock were outstanding, and (B)
806,248 shares of FAC Common Stock were reserved for issuance pursuant to FAC's
Dividend Reinvestment and Stock Purchase Plan, 3,018,279 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"), 908,859
shares of FAC Common Stock were reserved for transfer to the First American
Corporation First Incentive Reward Savings
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Thrift 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"). Pursuant to the repurchase
program authorized by the FAC Board of Directors on December 15, 1994, FAC is
authorized to repurchase up to 800,000 shares of the FAC Common Stock, and the
number of shares of FAC Common Stock issued and outstanding at the Effective
Time will be reduced by the number of shares repurchased pursuant to this
program. In addition, FAC has entered into an agreement with Heritage Federal
Bancshares Inc. pursuant to which FAC has agreed to acquire Heritage Federal
Bancshares Inc. in exchange for FAC Common Stock.
(b) All of the issued and outstanding shares of FAC Capital
Stock are, and all of the shares of FAC Common Stock to be issued in exchange
for shares of Charter Common Stock upon consummation of the Merger, when issued
in accordance with the terms of this Agreement, will be, duly authorized and
validly issued and outstanding and fully paid and nonassessable under the Laws
of the State of Tennessee. None of the outstanding shares of FAC Capital Stock
has been, and none of the shares of FAC Common Stock to be issued in exchange
for shares of Charter Common Stock upon consummation of the Merger will be,
issued in violation of any preemptive rights of the current or past
stockholders of FAC.
6.4 FINANCIAL STATEMENTS. FAC has delivered to Charter copies of
all FAC Financial Statements. The FAC Financial Statements (as of the dates
thereof and for the periods covered thereby) (i) are or, if dated after the
date of this Agreement, will be in accordance with the books and records of the
FAC Companies, which are or will be, as the case may be, complete and correct
and which have been or will have been, as the case may be, maintained in
accordance with good business practices, and (ii) present or will present, as
the case may be, fairly the consolidated financial position of the FAC
Companies as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows of the FAC Companies for the
periods indicated, in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in
the case of interim financial statements, to normal recurring year-end
adjustments that are not material).
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No FAC Company has any
Liabilities that will have, individually or in the aggregate, a Material
Adverse Effect on FAC, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of FAC as of March 31, 1995 included in the
FAC Financial Statements or reflected in the notes thereto. No FAC Company has
incurred or paid any Liability since March 31, 1995, except for such
Liabilities incurred or paid in the ordinary course of business consistent with
past business practice and which will not have, individually or in the
aggregate, a Material Adverse Effect on FAC. To FAC's Knowledge, there are no
unasserted claims that are not disclosed in the FAC Financial Statements that
will have a Material Adverse Effect on FAC.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1994,
except as disclosed in the FAC Financial Statements filed with the SEC after
such date and prior to the date of this Agreement, (i) no events or changes
have occurred or have been threatened which
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have had, will have or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the FAC Companies considered as a
whole, (ii) the FAC Companies have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material
breach or violation of any of the covenants and agreements of FAC in this
Agreement, and (iii) neither FAC nor any of its Subsidiaries has suffered any
loss or damage to their respective properties or Assets, whether or not
insured, or union activity that would have, individually or in the aggregate, a
Material Adverse Effect on the FAC Companies taken as a whole.
6.7 COMPLIANCE WITH LAWS. Each FAC Company has in effect all
Permits necessary for it to own, lease, or operate its Assets and to carry on
its business as now conducted, except for those Permits the absence of which
will not have, individually or in the aggregate, a Material Adverse Effect on
FAC, and there has occurred no Default under any such Permit, other than
Defaults which will not have, individually or in the aggregate, a Material
Adverse Effect on FAC. None of the FAC Companies:
(a) Is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for violations
which will not have, individually or in the aggregate, a Material Adverse
Effect on FAC; and
(b) As of the date of this Agreement, 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
notification, communication or extraordinary supervisory letter from, any
governmental authority or Regulatory Authority which asserts that any FAC
Company is not in compliance with any material Laws or material Orders where
such noncompliance will have, individually or in the aggregate, a Material
Adverse Effect on FAC, restricts materially the conduct of its business, or in
any manner relates to its capital adequacy, its credit policies, its
management, or the payment of dividends, nor has FAC been advised by any
Regulatory Authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, condition, notification, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission.
6.8 LEGAL PROCEEDINGS. Except to the extent reserved against in the
FAC Financial Statements, there is no Litigation instituted or pending, or, to
the Knowledge of FAC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any FAC Company, or against any Asset,
interest, or right of any of them, that will have, individually or in the
aggregate, a Material Adverse Effect on FAC.
6.9 REPORTS. Since January 1, 1993, FAC has filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K,
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and proxy statements, (ii) other Regulatory Authorities, and (iii) any
applicable state securities or banking authorities (except, in the case of
state securities authorities, failures to file which will not have,
individually or in the aggregate, a Material Adverse Effect on FAC) and have
made available to Charter true and complete copies of all such reports. As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws and regulatory requirements. As of its
respective date, each such report and document did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
6.10 STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by any FAC Company or any Affiliate thereof for inclusion in
the Registration Statement to be filed by FAC with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect
to any material fact, or contain any untrue statement of a material fact, or
omit to state any material fact required to be stated thereunder or necessary
to make the statements therein not misleading in light of the circumstances in
which they were made. None of the information supplied or to be supplied by
any FAC Company or any Affiliate thereof for inclusion in the Proxy Statement
and any and all Supplements and amendments thereto to be mailed to Charter's
stockholders in connection with the Stockholders' Meeting, and any other
documents to be filed by any FAC Company or any Affiliate thereof with the SEC
or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the stockholders of
Charter, be false or misleading with respect to any material fact or contain
any untrue statement of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the Stockholders'
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances in which they
were made. All documents that any FAC Company or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
6.11 AUTHORITY OF CHARTER INTERIM. Charter Interim upon its
formation and at the Effective Time will be a federal stock savings bank duly
organized, validly existing, and in good standing under the Laws of the United
States as a wholly-owned, first tier Subsidiary of FAC. Charter Interim upon
its formation will have, the corporate power and authority necessary to
execute, deliver, and perform its obligations under the Plan of Merger and to
consummate the transactions contemplated thereby. The execution, delivery, and
performance of the Plan of Merger and the consummation of the transactions
contemplated therein, including the Merger, will be duly and validly authorized
by all necessary corporate action in respect thereof on the part of Charter
Interim. When executed and delivered, the Plan of Merger will represent a
legal, valid, and binding obligation of Charter Interim, enforceable
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against Charter Interim in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
6.12 ACCOUNTING, TAX, AND REGULATORY MATTERS. No FAC Company thereof
has taken any action, or agreed to take any action, or has any Knowledge of any
fact or circumstance that will (i) prevent the transactions contemplated
hereby, including the Merger, from qualifying for treatment as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement. To the Knowledge of FAC,
there exists no fact, circumstance, or reason why the requisite Consents
referred to in Section 9.1(b) of this Agreement cannot be received in a timely
manner without imposition of any condition of the type described in the second
sentence of such Section 9.1(b).
6.13 NO VOTE REQUIRED. No vote of the stockholders of FAC is
required in order to enter into this Agreement or to consummate the Merger.
6.14 CONSIDERATION. FAC has reserved or will reserve for issuance
sufficient shares of FAC Common Stock for issuance in the Merger.
ARTICLE SEVEN
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF CHARTER.
(a) Unless the prior written consent of the chief executive
officer or principal financial officer of FAC shall have been obtained and
except as otherwise specifically contemplated or permitted by this Agreement,
Charter shall and shall cause each of its Subsidiaries to (i) operate its
business only in the usual, regular, and ordinary course (which, among other
things, does not include engaging in transactions involving derivatives), and
(ii) preserve intact its business organizations and Assets and deposits and
maintain its rights and franchises.
(b) Charter 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:
(i) as soon as reasonably practicable, but not later than
45 days after the date hereof, obtain and promptly provide to FAC a report of a
Phase I environmental assessment performed by an environmental expert retained
for such purpose by Charter and reasonably acceptable to FAC (the
"Environmental Expert") of (A) Charter's branch locations (other than space in
retail and similar establishments leased by Charter for automatic teller
machines), (B)
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other real estate owned, (C) all classified assets over $500,000 and all in
substance foreclosed assets disclosed in Section 7.1(b) of the Charter
Disclosure Memorandum, and (D) those credits over $500,000 identified on the
list previously provided to Charter by FAC. The Phase I assessment shall be
required to include a recommendation as to whether a Phase II assessment should
be prepared; if the Phase I assessment recommends the undertaking of a Phase II
assessment, and if such Phase II assessment is necessary in FAC's reasonable
opinion, Charter shall provide to FAC a report of a Phase II assessment
prepared by the Environmental Expert on such properties requiring such
additional study as promptly as practicable. FAC shall have 15 business days
from the receipt of any such Phase II assessment to notify Charter of any
objection to the contents of such report. Should the cost of taking all
remedial and corrective actions and measures required by applicable law, health
or safety concerns as reasonably estimated by the Environmental Expert, in the
aggregate, exceed an amount which would have a Material Adverse Effect on
Charter, or if the cost of such actions and measures cannot be so reasonably
estimated by such expert with any reasonable degree of certainty to be an
amount which would not have a Material Adverse Effect on Charter, FAC shall
have the right pursuant to Section 10.1(g) hereof, for a period of 10 business
days following receipt of such estimate or indication that the cost of such
actions and measures cannot be so reasonably estimated, to terminate this
Agreement, which shall be FAC's sole remedy in such event. With respect to
assessments of assets described in (C) and (D) of this subsection (b), provided
Charter shall have used its best efforts to obtain any necessary approvals or
access for the conduct of each assessment and shall have used its best efforts
to obtain amended loan documentation for this purpose if necessary, then
Charter shall not be required to obtain assessments on assets which it is not
legally possible for it to obtain;
(ii) coordinate Charter's CRA and Fair Lending program in
consultation with FAC's CRA officer for consistency purposes in transitioning
to FAC's program; and
(iii) cooperate and coordinate with FAC in good faith to
adopt and implement policies and procedures with respect to CRA and lending
(including documentation, appraisals and guaranties) consistent with those of
FAC and FAC's Affiliates and in accordance with guidelines previously provided
by FAC to Charter.
(c) Within ten (10) days after the end of each month commencing
on June 10, 1995 and continuing to the Effective Time, Charter 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 tasks set forth in Section
7.1(b).
(d) Prior to the Effective Time, Charter agrees to take any
action that may be necessary, including seeking injunctive or equitable relief,
to enforce the provisions of certain confidentiality agreements between Charter
and third parties that participated in the bidding process pursuant to which
Charter received FAC's bid to enter into this Agreement and the Plan of Merger.
Charter recognizes FAC as a third party beneficiary to each such
confidentiality agreement.
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(e) Charter shall coordinate with FAC the declaration of any
dividends in respect of Charter Common Stock and the record dates and payment
dates relating thereto, it being the intention of Charter and FAC that holders
of Charter Common Stock shall not receive two dividends, or fail to receive one
dividend, for any single calendar quarter with respect to their shares of
Charter Common Stock and any shares of FAC Common Stock any such holder
received in exchange therefor in the Merger.
(f) Prior to the Closing, Charter 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 Bank's plans with respect to the conduct
of Charter'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, Charter also
will adjust loan loss and REO 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
Charter assets. The parties agree to cooperate in preparing for the
implementation of the adjustments contemplated by this provision. On the date
of Closing, Charter will take such actions as are necessary to complete the
payments, expenses and adjustments contemplated by this provision.
Notwithstanding the foregoing, Charter shall not be obligated to take in any
respect any such action pursuant to this Section 7.1(f) (other than pursuant to
the preceding sentence) unless and until FAC acknowledges in writing all
conditions to its obligations to consummate the Merger have been satisfied.
(g) Charter shall, at its own expense, recompute the
liquidation account and subaccount balances and make the adjustment to the
amount disclosed in Section 5.30 of this Agreement in the manner provided in 12
C.F.R. Section 563b.3(f)(5) (without regard to the second sentence following
subsection 563b.3(f)(5)(ii), which provides that such amount need not be
recomputed by an association if the association has maintained records
sufficient to make any necessary computations in the event of a complete
liquidation or other event requiring such a computation) so that the balances
accurately reflect the balances that would have been computed in such
liquidation account and subaccounts, in each case as of the latest annual
closing date of the conversion prior to the Closing.
7.2 NEGATIVE COVENANTS OF CHARTER. Except as specifically
contemplated or permitted by this Agreement or disclosed in Section 7.2 of the
Charter Disclosure Memorandum, from the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Charter
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 or principal
financial officer of FAC:
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(a) amend the charter, bylaws, or other governing instruments
of any Charter Company; or
(b) incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money except in the
ordinary course of the business of Charter Companies consistent with past
practices (which shall include, for Charter, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Home Loan Bank of Atlanta
or the Federal Reserve Bank, and entry into repurchase agreements fully secured
by U.S. government or agency securities), or, forgive any such indebtedness of
any Person to any Charter Company, or impose, or suffer the imposition, on any
share of stock held by any Charter Company of any Lien or permit any such Lien
to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any Charter Company, or declare or pay any
dividend or make any other distribution in respect of any Charter Common Stock;
provided that: (i) Charter may (to the extent legally and contractually
permitted to do so), but shall not be obligated to, declare and pay one regular
cash dividend per quarter on the shares of Charter Common Stock at a rate not
in excess of $0.10 per share (in accordance with Section 7.2(e)) with usual and
regular record and payment dates in accordance with past practice; or
(d) except 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, 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 Charter Common Stock or any other capital stock of any
Charter Company, 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
any Charter Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Charter Common Stock or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber any shares of
capital stock of any Charter Subsidiary (unless any such shares of stock are
sold or otherwise transferred to another Charter Company).
(f) acquire direct or indirect control over, or invest in
equity securities of, any Person, other than in connection with (i)
foreclosures in the ordinary course of business, or (ii) acquisitions of
control by Charter in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the
employees or officers of any Charter Company except in the ordinary course of
business and disclosed in Section 7.2(g) of the Charter Disclosure Memorandum
or as required by Law; 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 and disclosed in Section 7.2(g) of the Charter Disclosure
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Memorandum; enter into or amend any severance agreements with officers of any
Charter Company except as disclosed in Section 7.2(g) of the Charter Disclosure
Memorandum; grant any increase in fees or other increases in compensation or
other benefits to directors of any Charter Company except as disclosed in
Section 7.2(g) of the Charter Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any
Charter Company and any Person (unless such amendment is required by Law) that
the Charter Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time on
or after the Effective Time; or
(i) except as disclosed in Section 7.2(i) of the Charter
Disclosure Memorandum, adopt any new employee benefit plan or program of any
Charter Company or make any material change in or to any existing employee
benefit plans or programs of any Charter Company other than any such change
that is required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan; or
(j) make any change with respect to loan or lease loss
reserves, REO Reserves, or make any significant change in any accounting
methods, principles, or practices or systems of internal accounting controls,
except as may be necessary to reflect actual developments with respect to
Assets such as downgrades in classification or to conform to changes in
regulatory accounting requirements or GAAP and except for those set forth in
Section 7.1(f); or
(k) commence or settle any Litigation, other than immaterial
Litigation, in accordance with past practice; provided, that, except to the
extent specifically reserved against in the Charter Financial Statements dated
prior to the date of this Agreement, no Charter Company shall settle any
Litigation involving any Liability of any Charter Company for money damages in
excess of $10,000 or restrictions upon the operations of any Charter Company;
or
(l) except in the ordinary course of business, 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 as disclosed pursuant to Sections 7.2(g), (h), or (i) of
the Charter Disclosure Memorandum; or
(m) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentence of Section 9.1(b) or in 9.1(c) of this Agreement, or materially
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement, or materially adversely affect the accounting
treatment of the Merger as a pooling-of-interests under Accounting Principles
Board Opinion No. 16; or
(n) liquidate or sell or dispose of any material Assets or
acquire any material Assets, except as disclosed in Section 7.2(n) of the
Charter Disclosure Memorandum, make any capital expenditures in excess of
$10,000 in the aggregate, establish new branches or other similar facilities or
enter into or modify any leases or other Contracts that involve annual
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payments by any Charter Company that exceed $10,000 or that are not terminable
on 30 days' notice, except as required by Section 7.1(b); or
(o) change its lending, investment, asset/liability management
or other material banking policies in any material respect except as may be
required by changes in applicable law, regulation or regulatory directives, and
except as may be required pursuant to Section 7.1 hereof; or
(p) restructure any Asset over $250,000 classified by Charter
or identified in a list previously provided to Charter by FAC.
7.3 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 shall, and shall cause each of its Subsidiaries to
(i) continue to conduct its business and the business of its Subsidiaries in
the usual, regular and ordinary course; (ii) take no action which would (x)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c) of this Agreement, or (y) materially adversely affect
the ability of any Party to perform its covenants and agreements under this
Agreement; provided, that the foregoing shall not prevent FAC or any FAC
Company from discontinuing or disposing of any of its Assets or business, or
entering into or consummating any additional agreements to acquire any assets
or businesses or engage in any merger, whether material or immaterial to FAC,
if such action is, in the judgment of FAC, desirable in the conduct of the
business of FAC and its Subsidiaries and such discontinuance or disposition
would not represent a material portion of the Assets of the FAC Companies, and
(iii) amend the charter or bylaws of FAC, in each case, in any manner which is
adverse to, and discriminates against, the holders of Charter Common Stock.
7.4 ADVERSE CHANGES IN CONDITION. Each Party 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) is reasonably likely to
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.
7.5 REPORTS. Each Party 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, in the case of FAC, or
the OTS, in the case of Charter, 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
stockholders' 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
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respective dates, such reports filed with the SEC or the OTS, as the case may
be, 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 applicable to
such reports.
ARTICLE EIGHT
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; STOCKHOLDER APPROVAL.
FAC shall use its reasonable efforts to file as soon as reasonably practicable
after the execution of this Agreement, the Registration Statement with the SEC,
provided Charter has provided, on a reasonably timely basis, all information
concerning Charter necessary for inclusion in the Registration Statement, and
shall use its reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act as soon as reasonably practicable after the filing
thereof and, at FAC's option, of an amendment to include audited Financial
Statements for the fiscal year ending on June 30, 1995, and take any action
required to be taken under the applicable state Blue Sky or securities Laws in
connection with the issuance of the shares of FAC Common Stock upon
consummation of the Merger. Charter shall promptly furnish all information
concerning it and the holders of its capital stock as FAC may reasonably
request in connection with such action. Charter shall call a Stockholders'
Meeting, Charter and FAC shall coordinate and cooperate with respect to the
timing of such meeting, which shall be held as soon as practicable after the
Registration Statement is declared effective by the SEC and, for the purpose of
voting upon approval of (i) this Agreement and the Plan of Merger and (ii)
such other related matters as it deems appropriate. In connection with the
Stockholders' Meeting, (i) Charter shall file the Proxy Statement (which shall
be included in the Registration Statement) with the OTS and mail it to its
stockholders, (ii) the Parties shall furnish to each other all information
concerning them that they may reasonably request in connection with such Proxy
Statement, (iii) the Board of Directors of Charter shall recommend (subject to
compliance with their fiduciary duties as advised by counsel in writing to such
Board) to its stockholders the approval of this Agreement and the Plan of
Merger, and (iv) the Board of Directors and officers of Charter shall use their
reasonable efforts to obtain such stockholders' approval (subject to compliance
with their fiduciary duties as advised in writing by counsel to such Board).
8.2 NASDAQ STOCK MARKET. FAC shall file with the Nasdaq Stock
Market a notification for trading on the Nasdaq Stock Market relating to the
proposed issuance of the shares of FAC Common Stock to be issued to the holders
of Charter Common Stock pursuant to the Merger.
8.3 APPLICATIONS. As soon as reasonably practicable after execution
of this Agreement, FAC and its Subsidiaries shall prepare and file, and Charter
shall cooperate in all respects in the preparation and, where appropriate,
filing of, applications with all Regulatory
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Authorities having jurisdiction over the transactions contemplated by this
Agreement (including the Primary FAC Objective Transactions or the Alternative
FAC Objective Transactions) including but not limited to the OTS, the Board of
Governors of the Federal Reserve System, the FDIC, the Office of the
Comptroller of the Currency and such state regulatory authorities as may be
appropriate, seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement (including the Primary FAC
Objective Transactions or the Alternative FAC Objective Transactions). FAC and
its Subsidiaries shall use all reasonable efforts to obtain the requisite
Consents of all Regulatory Authorities as soon as reasonably practicable after
the filing of the appropriate applications.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective at the
earliest practicable date, the transactions contemplated by this Agreement and
the Plan of Merger (including the Primary FAC Objective Transactions or the
Alternative FAC Objective Transactions), including, without limitation, using
its reasonable efforts to lift or rescind any Order adversely affecting its
ability to consummate the transactions contemplated herein and to cause to be
satisfied the conditions applicable to such Party referred to in Article Nine
of this Agreement. Each Party shall use, and shall cause each of its
Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement (including the Primary FAC Objective Transactions or the Alternative
FAC Objective Transactions). In addition, each Party agrees to use its best
efforts after the Effective Time to take or cause to be taken, and to cause its
respective Subsidiaries to take or cause to be taken any such further action as
may be necessary or desirable to carry out the purposes of this Agreement or to
vest the Surviving Bank with full title to all properties, assets, approvals,
immunities and franchises of the Charter Companies.
8.5 INVESTIGATION AND CONFIDENTIALITY.
(a) Upon reasonable notice, Charter shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of FAC access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records (including individual credit and collateral files) and,
during such period, Charter shall make available to FAC all other information
concerning its businesses, properties and personnel as FAC may and reasonably
request and each of Charter and FAC shall (and shall cause each of the
respective Subsidiaries to) make available to the other 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). The Parties will hold in
confidence any or other such information which is nonpublic. No investigation
by either FAC or Charter shall affect the representations and warranties of the
other, except to the extent such
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representations and warranties are by their terms qualified by disclosures made
in writing made to such first party.
(b) Each Party shall, and shall cause its advisers and agents
to, maintain the confidentiality of all confidential information furnished to
it by the other Party concerning its and its Subsidiaries' businesses,
operations, and financial positions and shall not use such information for any
purpose except in furtherance of the transactions contemplated by this
Agreement. If this Agreement is terminated prior to the Effective Time, each
Party shall promptly return or destroy all documents and copies thereof, and
all work papers containing confidential information received from the other
Party and shall not be used by FAC in any way detrimental to Charter or any of
its Affiliates.
(c) Each Party agrees to give the other Party notice as soon
as practicable after any determination by it of any fact or occurrence relating
to the other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to represent,
either a material breach of any representation, warranty, covenant, or
agreement of the other Party or which has had or is reasonably likely to have a
Material Adverse Effect on the other Party.
8.6 PRESS RELEASES. Prior to the Effective Time, Charter and FAC
shall consult with each other as to the form and substance of any press release
or other public disclosure announcing this Agreement or any material change to,
or development with respect to, this Agreement; provided, however, that nothing
in this Section 8.6 shall be deemed to prohibit any Party from making any
disclosure which its counsel advises as necessary or advisable in order to
satisfy such Party's disclosure obligations imposed by Law.
8.7 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, no Charter Company nor any Affiliate thereof
nor any investment banker, attorney, accountant, or other representative
(collectively, "Representatives") retained by any Charter Company shall
directly or indirectly initiate contact with any person or entity in an effort
to solicit, initiate, or encourage any proposals or offers relating to any
Acquisition Proposal by or from any Person or enter into any agreement, letter
of intent or agreement in principle as to any Acquisition Proposal. Except to
the extent necessary to comply with the fiduciary duties of Charter's Board of
Directors as advised by counsel to such Board of Directors, Charter will not
authorize or permit (and shall use its reasonable efforts to prevent) any
Charter Company or any Affiliate or Representative thereof to cooperate with,
furnish or cause to be furnished any non public information that it is not
legally obligated to furnish, or to negotiate with respect to, any Acquisition
Proposal. Charter shall promptly notify FAC orally and in writing in the event
that it receives any inquiry or proposal relating to any such transaction.
Charter shall immediately cease and cause to be terminated as of the date of
this Agreement any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing.
8.8 TAX MATTERS. The Parties agree to use their reasonable efforts
to obtain a written opinion of Arnold & Porter reasonably acceptable to the
Parties to the effect that (i) the
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Merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, (ii) the exchange in the Merger of Charter Common
Stock for FAC Common Stock will not give rise to gain or loss to the
stockholders of Charter with respect to such exchange (except to the extent of
any cash received), and (iii) each of Charter, FAC, and Charter Interim will be
a party to that reorganization within the meaning of Section 368(b) of the
Internal Revenue Code ("Tax Opinions"). In rendering such Tax Opinions,
counsel shall be entitled to rely upon representations of officers of Charter
and FAC reasonably satisfactory in form and substance to such counsel. Each of
the Parties undertakes and agrees to use its reasonable efforts to cause the
Merger, and to take no action which would cause the Merger not, to qualify for
treatment as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code for Federal income tax purposes.
8.9 AGREEMENTS OF AFFILIATES. Charter has disclosed in Section 8.9
of the Charter Disclosure Memorandum each Person whom it reasonably believes is
an "affiliate" of Charter for purposes of Rule 145 under the 1933 Act. Charter
shall use its reasonable efforts to cause each such Person to deliver to FAC
not later than thirty (30) days prior to the Effective Time, a written
agreement, substantially in the form of Exhibit 2 to this Agreement, providing
that such Person will not sell, pledge, transfer, or otherwise dispose of the
shares of Charter Common Stock held by such Person except as contemplated by
such agreement or by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of FAC Common Stock to be received by such
Person upon consummation of the Merger except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder (and FAC
shall be entitled to place restrictive legends upon certificates for shares of
FAC Common Stock issued to affiliates of Charter pursuant to this Agreement to
enforce the provisions of this Section 8.9). FAC shall not be required to
maintain the effectiveness of the Registration Statement under the 1933 Act for
the purposes of resale of FAC Common Stock by such affiliates.
8.10 TRANSITION OF CERTAIN EMPLOYEE BENEFIT PLANS; EMPLOYEE MATTERS.
(a) FAC also shall cause Charter and its Subsidiaries to honor
in accordance with their terms all employment, severance, consulting, and other
compensation Contracts disclosed in Section 5.16 of the Charter Disclosure
Memorandum to FAC between any Charter Company and any current or former
director, officer, or employee thereof, and all provisions for vested benefits
or other vested amounts earned or accrued through the Effective Time under the
Charter Benefit Plans.
(b) The tax-qualified defined contribution and defined benefit
plans maintained by Charter or its Subsidiaries (other than any such plans that
are described in Section 4063(a) of ERISA), will be terminated by Charter on or
before the Effective Time and, subject to Section 8.10(d), the benefits
thereunder distributed to participants to the extent permitted under the Code,
ERISA and the respective plan provisions. 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, Charter or its Subsidiaries will, to the extent
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permitted by applicable funding rules under the Code and ERISA, contribute to
each Charter Benefit Plan that is subject to Title I, subtitle B, part 3 of
ERISA any amount required to cause the fair market value of the plan assets of
such plan to equal the plan termination labilities of such plan determined as
of a date within thirty (30) days of the Closing. Prior to the Effective Time,
Charter and its Subsidiaries shall take such actions as may be requested by FAC
with respect to the withdrawal of Charter and its Subsidiaries, effective
immediately prior to the Effective Time or at such later date as may be
specified by FAC, as contributing sponsors in any Charter Benefit Plan that is
described in Section 4063(a) of ERISA.
(c) Employees of Charter 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
pension plans maintained by FAC, employees of Charter or its Subsidiaries shall
be credited with service with Charter and its Subsidiaries to the extent
credited under the respective predecessor plans. Vesting service under the FAC
Benefit Plans will be in accordance with the rules of such plans governing
vesting service for employees of acquired employers and consistent with the
current policies of FAC in that regard. Employees of Charter 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 Charter and its
Subsidiaries for eligibility and vesting purposes, but not for benefit accrual
purposes, under the Retirement Plan. Subject to the usual rules applicable to
the vacation and short-term disability programs of FAC, service with Charter
and its Subsidiaries will be recognized in determining the vacation and
short-term disability benefits of employees of Charter and its Subsidiaries
after the Effective Time.
(d) Notwithstanding the provisions of Sections 8.10(b) and
8.10(c), FAC shall cause any Charter 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 Charter Benefit
Plans to FAC plans in a fair, equitable and administratively reasonable manner.
(e) The actions prescribed by this Section 8.10 are all
contingent upon obtaining such determinations and rulings from the IRS and, if
necessary, other governmental agencies as FAC may deem appropriate with respect
to the effect of such actions on the qualification of the plans involved and
the compliance of such actions with other applicable Law. If such
determinations or rulings cannot be obtained, Charter 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.
(f) From and after the Effective Time, all Charter employees
who are terminated within one year following the Merger, as a result of the
Merger or as a result of staff reductions or reorganizations, will be eligible
for benefits available under FAC's reduction in force policy as in effect as of
the date of this Agreement, which include but are not limited to: (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;
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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. For purposes of the foregoing and
for purposes of calculating benefits available under FAC's reduction in force
policy in effect after such one year period, Charter employees will receive
credit for service with Charter to the same extent and in the manner as if such
employees had been employed by FAC.
(g) From and after the Effective Time, FAC shall honor the
employment agreements between Charter and its senior officers as of the date
hereof, listed in Section 5.16(a) of the Charter Disclosure Memorandum, 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. Charter will make such officers
available to FAC to negotiate economic packages with those officers who stay
with FAC.
(h) To the extent not covered by the foregoing, from and after
the Effective Time, FAC shall provide generally to officers and employees of
the Charter Companies who at or after the Effective Time become employees of an
FAC Company, employee benefits under employee benefit plans on terms and
conditions which when taken as a whole are substantially the same as those
provided by the FAC Companies to their similarly situated officers and
employees. Nothing in this Section 8.10 shall create any third-party
beneficiary rights in any employee or former employee of any of the Charter
Companies or any of their beneficiaries or dependents.
8.11 INDEMNIFICATION.
(a) Subject to the conditions set forth in paragraph (c)
below, for a period of six (6) years after the Effective Time, FAC shall, and
shall cause the Surviving Bank to, indemnify, defend, and hold harmless each
person entitled to indemnification from a Charter Company (each, an
"Indemnified Party") against all Liabilities arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the same extent
and subject to the conditions set forth in applicable regulations of the OTS
(including all official interpretations thereof) and Charter's charter and
bylaws, in each case as in effect on the date hereof, including provisions
relating to advances of expenses incurred in the defense of any Litigation.
Without limiting the foregoing, in any case in which approval by the Surviving
Bank is required to effectuate any indemnification, FAC shall cause the
Surviving Bank to direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent counsel
mutually agreed upon between FAC and the Indemnified Party.
(b) FAC shall, or shall cause the Surviving Bank to, use its
reasonable efforts (and Charter shall cooperate prior to the Effective Time in
these efforts) to maintain in effect for a period of three (3) years after the
Effective Time Charter's existing directors' and officers' liability insurance
policy (provided, that FAC may substitute therefor (i) policies of at least the
same coverage and amounts containing terms and conditions which are
substantially
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no less advantageous or (ii) with the consent of Charter given prior to the
Effective Time, any other policy) with respect to claims arising from facts or
events which occurred prior to the Effective Time and covering persons who are
currently covered by such insurance; 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 Charter 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 Charter's directors' and
officers' insurance policies (or any substitute policies permitted by this
Section 8.11(b)).
(c) Any Indemnified Party wishing to claim indemnification
under paragraph (a), upon learning of any such Liability or Litigation, shall
promptly notify FAC thereof. In the event of any such Litigation (whether
arising before or after the Effective Time), (i) FAC or the Surviving Bank
shall have the right to assume the defense thereof and FAC shall not be liable
to such Indemnified Parties for any legal expenses of other counsel or any
other expenses subsequently incurred by such Indemnified Parties in connection
with the defense thereof, except that if FAC or the Surviving Bank elects not
to assume such defense or counsel for the Indemnified Parties advises that
there are substantive issues which raise conflicts of interest between FAC or
the Surviving Bank and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and FAC or the Surviving Bank shall pay
all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that FAC shall
be obligated pursuant to this paragraph (c) to pay for only one firm of counsel
for all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties
will cooperate to the extent practicable in the defense of any such Litigation,
and (iii) FAC shall not be liable for any settlement effected without its prior
written consent; and provided further, that the Surviving Bank shall not have
any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law.
(d) If the Surviving Bank or any of its successors or assigns
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consolidation or merger or shall
transfer all or substantially all of its assets to any Person, then and in each
case, proper provision shall be made so that the successors and assigns of the
Surviving Bank shall assume the obligations set forth in this Section 8.11.
8.12 CHARTER STOCK OPTIONS. At the Effective Time, Charter's plans
providing for the issuance of options for the purchase of Charter Common Stock
shall terminate; no options shall be granted under any such plans between the
date of this Agreement and the Effective Time. At the Effective Time, each
outstanding option to purchase shares of Charter Common Stock issued under such
plans or otherwise issued to any officers or directors of Charter shall be
exchanged for that number of shares of FAC Common Stock determined by dividing
the excess of (A) the product of (i) the number of shares of Charter Common
Stock subject to the option, (ii) the Common Stock Exchange Ratio, and (iii)
the FAC Market Value, over (B) the product of (i) the number of shares of
Charter Common Stock subject to the option, and (ii)
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the exercise price at which shares of Charter Common Stock can be purchased
pursuant to the option by the FAC Market Value, rounding down to the nearest
whole number.
8.13 FAIRNESS OPINION. Charter has received an opinion from Wheat
First Butcher Singer, Inc. ("Wheat First") dated the date of the approval of
this Agreement by the Charter Board of Directors to the effect that in the
opinion of such firm, the consideration to be received in the Merger by the
stockholders of Charter is fair to the stockholders of Charter from a financial
point of view. Nothing in this Agreement shall prevent Charter from obtaining
an updated opinion from Wheat First or such other financial advisor selected by
Charter as to whether the consideration to be received by the holders of
Charter Common Stock pursuant to the Merger is fair to such stockholders from a
financial point of view dated not more than five days prior to the date of the
Proxy Statement.
8.14 AGREEMENTS RELATING TO POOLING-OF-INTERESTS. If FAC elects to
account for the Merger as a purchase instead of as a pooling-of-interests,
those provisions of such written agreements relating solely to the ability of
FAC to account for the Merger as a pooling-of-interests shall not be required
and shall no longer be of any force and effect.
ARTICLE NINE
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.6 of this Agreement:
(a) STOCKHOLDER APPROVAL. The stockholders of Charter shall
have approved (i) this Agreement and the Plan of Merger, and (ii) the
consummation of the transactions contemplated hereby, including the Merger, as
and to the extent required by Law or by the provisions of any governing
instruments.
(b) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of (i) the Merger, (ii) either the Primary FAC Objective
Transactions or the Alternative FAC Objective Transactions, and (iii) the other
transactions contemplated by this Agreement and the Plan of Merger shall have
been obtained or made and shall be in full force and effect and all waiting
periods required by Law shall have expired. No Consent so obtained which is
necessary to consummate the transactions as contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable good faith
judgment of the Board of Directors of FAC would so materially adversely impact
the economic benefits of the transaction as contemplated by this Agreement so
as to render inadvisable the consummation of the Merger.
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(c) CONSENTS AND APPROVALS. Each Party shall have obtained
any and all other Consents required for consummation of (i) the Merger, (ii)
either the Primary FAC Objective Transactions or the Alternative FAC Objective
Transactions (other than those referred to in Section 9.1(b) of this Agreement)
or for the preventing of any Default under any Contract or Permit of such Party
which, if not obtained or made, is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on such Party.
(d) LEGAL PROCEEDINGS. No action or proceedings shall have
been instituted or threatened by any governmental authority or Regulatory
Authority against, and no order, decree or judgment of any court, agency,
commission or governmental authority shall be subsisting against FAC or Charter
or the officers or directors of FAC or Charter which seeks to, or would, render
it unlawful as of the Closing to effect the transactions contemplated by this
Agreement and the Plan of Merger, or seeking damages in a material amount by
reason of the transactions contemplated thereby.
(e) REGISTRATION STATEMENT. The Registration Statement shall
be effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit, proceeding,
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under state
securities Laws or the 1933 Act or 1934 Act relating to the issuance or trading
of the shares of FAC Common Stock issuable pursuant to the Merger shall have
been received.
(f) NASDAQ STOCK MARKET. The shares of FAC Common Stock
issuable pursuant to the Merger shall have been approved for trading on the
Nasdaq Stock Market.
(g) TAX MATTERS. Each Party shall have received a copy of the
Tax Opinion referred to in Section 8.8 of this Agreement. Each Party shall
have delivered to the other a Certificate, dated as of the Effective Time,
signed by its chief executive officer and principal financial officer, to the
effect that, to the Knowledge and belief of such officers, the statement of
facts and representations made on behalf of the management of such Party,
presented to the legal counsel delivering the Tax Opinion were at the date of
such presentation, true, correct, and complete, and are on the date of such
Certificate, to the extent contemplated by the presentation, true, correct, and
complete, as though such presentation had been made on the date of such
Certificate.
9.2 CONDITIONS TO OBLIGATIONS OF FAC. The obligations of FAC to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by FAC pursuant to Section 11.6(a) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Charter set forth or referred to in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided, that
representations and warranties which are confined to a specified date shall
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speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) as consented to in writing by FAC.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of
the agreements and covenants of Charter to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior
to the Effective Time shall have been duly performed and complied with in all
material respects.
(c) CERTIFICATES. Charter shall have delivered to FAC (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its principal financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.2(a) and 9.2(b) of
this Agreement have been satisfied, and (ii) certified copies of resolutions
duly adopted by Charter's Board of Directors and stockholders evidencing the
taking of all corporate action necessary to authorize the execution, delivery,
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, all satisfactory in form and substance to FAC and its
counsel acting reasonably and in good faith.
(d) AFFILIATE LETTERS. FAC shall have received a written
agreement from each affiliate of Charter, substantially in the form of Exhibit
2.
(e) POOLING LETTER. If it so requests, FAC shall have
received a letter from Peat Marwick, L.L.P. dated as of the Effective Time, to
the effect that the Merger will qualify for pooling-of-interests accounting
treatment under Accounting Principles Board Opinion No. 16 if closed and
consummated in accordance with this Agreement.
(f) ACCOUNTANT'S LETTER. FAC shall have received from Price
Waterhouse, LLP, a letter dated not more than five business days prior to the
date of the Closing, with respect to certain financial information regarding
Charter, in form and substance satisfactory to FAC and consistent with
applicable professional standards for letters delivered by independent public
accountants in connection with transactions of the nature contemplated by this
Agreement.
(g) LEGAL OPINION. FAC shall have received a written opinion,
dated as of the Effective Time, of counsel to Charter, in form reasonably
satisfactory to FAC, as to the matters set forth in Exhibit 3 to this
Agreement.
(h) 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 Regulatory Authority 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 Tennessee-based assets or
deposits of Charter, except for such actions that are reasonably attributable
to a Business Combination or other similar transaction entered into by FAC
subsequent to the date of this Agreement.
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(i) DOCUMENTS. FAC shall have received all documents required
to be received from Charter on or prior to the Closing, all in form and
substance satisfactory to FAC and its counsel.
9.3 CONDITIONS TO OBLIGATIONS OF CHARTER. The obligations of
Charter to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Charter pursuant to Section 11.6(b) of
this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of FAC set forth or referred to in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided, that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) as consented to in writing by Charter.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of
the agreements and covenants of FAC to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) CERTIFICATES. FAC shall have delivered to Charter (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its principal financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.3(a) and 9.3(b) of
this Agreement have been satisfied, and (ii) certified copies of resolutions
duly adopted by FAC's Board of Directors and Charter Interim's Board of
Directors and stockholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all
satisfactory in form and substance to Charter and its counsel acting reasonably
and in good faith.
(d) LEGAL OPINION. Charter shall have received a written
opinion of Martin E. Simmons, Esquire, Executive Vice President,
Administration, General Counsel and Secretary dated as of the Effective Time,
in form reasonably satisfactory to Charter, as to the matters set forth in
Exhibit 4 to this Agreement.
(e) DOCUMENTS. Charter shall have received all documents
required to be received from FAC on or prior to the Closing, all in form and
substance satisfactory to Charter and its counsel.
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ARTICLE TEN
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
stockholders of Charter, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent in writing of FAC and Charter; or
(b) By either Party in writing (provided, that the terminating
Party is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event of a breach by the
other Party of any representation or warranty contained in this Agreement which
cannot be or has not been cured within thirty (30) days after the giving of
written notice to the breaching Party of such breach and which breach would
provide the non-breaching Party the ability to refuse to consummate the Merger
under the standard set forth in Section 9.2(a) of this Agreement in the case of
FAC and Section 9.3(a) of this Agreement in the case of Charter; or
(c) By either Party in writing (provided, that the terminating
Party is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event of a material
breach by the other Party of any covenant or agreement contained in this
Agreement which cannot be or has not been cured within thirty (30) days after
the giving of written notice to the breaching Party of such breach; or
(d) By either Party in writing (provided, that the terminating
Party is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event (i) any Consent of
any Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final nonappealable
action of such authority or if any denial by such authority is not appealed
within the time limit for appeal or, in the case of FAC, if any Consent shall
be conditioned in the manner provided in the last sentence of Section 9.1(b) of
this Agreement, or (ii) the stockholders of Charter fail to vote their approval
of this Agreement, the Plan of Merger, and the transactions contemplated hereby
as required by the HOLA at the Stockholders' Meeting where the transactions
were presented to such stockholders for approval and voted upon; or
(e) By either Party in writing in the event that the Merger
shall not have been consummated by March 31, 1996, in each case only if the
failure to consummate the transactions contemplated hereby on or before such
date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By either Party in writing (provided, that the terminating
Party is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the Merger
cannot be satisfied or fulfilled by the date specified in Section
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10.1(e) of this Agreement as the date after which such Party may terminate this
Agreement; or
(g) By FAC in writing to the extent provided in Section
7.1(b)(i); or
(h) By Charter in writing if the FAC Market Value (determined
as provided in Section 3.6 of this Agreement) is more than $43.50.
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 10.1 of this Agreement, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article Eleven and Section 8.5(b) of this Agreement shall survive any
such termination, and (ii) a termination pursuant to Sections 10.1(b) or
10.1(c) of this Agreement shall not relieve the breaching Party from Liability
for an uncured willful breach of a representation, warranty, covenant, or
agreement giving rise to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. All
representations, warranties and covenants in this Agreement, or in any
instrument delivered pursuant hereto shall expire on, and be terminated and
extinguished at, the Effective Time other than covenants that by their terms
are to survive or be performed after the Effective Time, provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive FAC or Charter (or any director, officer or
controlling person thereof) of any defense in law or equity which otherwise
would be available against the claims of any person, including, without
limitation, any stockholder or former stockholder of either FAC or Charter, the
aforesaid representations, warranties and covenants being material inducements
to the consummation by FAC and Charter of the transactions contemplated herein.
ARTICLE ELEVEN
MISCELLANEOUS
11.1 DEFINITIONS. Except as otherwise provided herein, the
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:
"ACQUISITION PROPOSAL" with respect to Charter shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of the
stock or assets of, or other business combination involving Charter or any of
its Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, Charter or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by, or
under common control with such Person, (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any ten
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percent (10%) or greater equity or voting interest of such Person, or (iii) any
other Person for which a Person described in clause (ii) acts in any such
capacity.
"AGREEMENT" shall mean this Agreement and Plan of Reorganization, the
Preamble to this Agreement, including the Plan of Merger and each of the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"ALLOWANCE" shall have the meaning provided in Section 5.9 of this
Agreement.
"ALTERNATIVE FAC OBJECTIVE TRANSACTIONS" shall have the meaning set forth
in the Preamble of this Agreement.
"ARTICLES OF COMBINATION" shall mean the Articles of Combination to be
filed with the OTS relating to the Merger as contemplated by Section 1.3 of
this Agreement.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of such
Person or any Affiliate of such Person and wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"BUSINESS COMBINATION" shall mean an acquisition of, merger or
combination with, share exchange involving any class of voting stock of, sale
of more than fifty percent (50%) of the consolidated assets by, or other
business combination involving, or tender offer for or sale or issuance of any
equity securities involving an acquisition by a third-party of more than fifty
percent (50%) of the voting stock of, Charter, other than the formation of a
newly organized holding company for Charter in which the shares of Charter
Common Stock are exchanged for shares of the holding company on a basis that
does not cause the respective beneficial interests of each stockholder to
change or transactions with a FAC Company.
"CRA" shall mean the Community Reinvestment Act of 1977, 12 U.S.C.
Section 2901 et seq.
"CHARTER BENEFIT PLANS" shall have the meaning set forth in Section 5.14
of this Agreement.
"CHARTER CAPITAL STOCK" shall mean, collectively, the Charter Common
Stock the Charter Preferred Stock, and any other class or series of capital
stock of Charter.
"CHARTER COMMON STOCK" shall mean the $.01 par value common stock of
Charter.
"CHARTER COMPANIES" shall mean, collectively, Charter and all Charter
Subsidiaries.
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"CHARTER DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Charter Federal Savings Bank Disclosure Memorandum" delivered prior
to the date of this Agreement to FAC describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
"CHARTER FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Charter as of March
31, 1995, and as of June 30, 1994 and 1993, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended March
31, 1995, and for each of the three fiscal years ended June 30, 1994, 1993, and
1992, as disclosed by Charter in the Charter Disclosure Memorandum, and (ii)
the consolidated balance sheets of Charter (including related notes and
schedules, if any) and related consolidated statements of income, changes in
stockholders' equity, and cash flows (including related notes and schedules, if
any) with respect to periods ended subsequent to March 31, 1995.
"CHARTER INTERIM COMMON STOCK" shall mean the $1.00 par value common
stock of Charter Interim.
"CHARTER PREFERRED STOCK" shall mean the serial preferred stock par value
$.01 per share, of Charter.
"CHARTER SUBSIDIARIES" shall mean the Subsidiaries of Charter, which
shall include the Charter Subsidiaries described in Section 5.4 of this
Agreement and any corporation, bank savings association, or other organization
acquired as a Subsidiary of Charter in the future and owned by Charter at the
Effective Time.
"CLOSING" shall mean the closing of the transactions contemplated hereby,
as described in Section 1.2 of this Agreement.
"COMMON STOCK EXCHANGE RATIO" shall have the meaning provided in Section
3.1(c) of this Agreement.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under any
Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the
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giving of notice would give rise to a right to terminate or revoke, change the
current terms of, or renegotiate, or to accelerate, increase, or impose any
Liability under, any Contract, Order, or Permit.
"EFFECTIVE TIME" shall mean the date and time at which the Merger becomes
effective as defined in Section 1.3 of this Agreement.
"ERISA PLAN" shall have the meaning provided in Section 5.14 of this
Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE AGENT" shall have the meaning provided in Section 4.1 of this
Agreement.
"EXHIBITS" 1 through 4, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"FAC CAPITAL STOCK" shall mean, collectively, the FAC Common Stock, the
FAC Preferred Stock, and any other class or series of capital stock of FAC.
"FAC COMMON STOCK" shall mean the $5.00 par value common stock of FAC.
"FAC COMPANIES" shall mean, collectively, FAC and all FAC Subsidiaries.
"FAC FINANCIAL STATEMENTS" shall mean (i) the consolidated statements of
condition (including related notes and schedules, if any) of FAC as of March
31, 1995, and as of December 31, 1994 and 1993, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
March 31, 1995, and each of the three years ended December 31, 1994, 1993 and
1992, as filed by FAC in SEC Documents and (ii) the consolidated statements of
condition of FAC (including related notes and schedules, if any) and related
consolidated statements of income, changes in stockholders' equity, and cash
flows (including related notes and schedules, if any) included in SEC Documents
filed with respect to periods ended subsequent to March 31, 1995.
"FAC MARKET VALUE" shall have the meaning set forth in Section 3.6 of
this Agreement.
"FAC SUBSIDIARIES" shall mean the Subsidiaries of FAC.
"FDIC" shall mean Federal Deposit Insurance Corporation.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
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"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" or "BEST KNOWLEDGE" as used with respect to a Person shall
mean the knowledge after due inquiry under the circumstances, of the chairman,
president, principal financial officer, chief accounting officer, chief credit
officer, general counsel, any assistant or deputy general counsel, or any
senior or executive vice president of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting, or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities, or business, including, without limitation, those promulgated,
interpreted, or enforced by any of the Regulatory Authorities.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including,
without limitation, costs of investigation, collection, and defense), claim,
deficiency, guaranty, or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute, or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention,
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institutions, pledges to secure deposits and
other Liens incurred in the ordinary course of the banking business, and (iii)
Liens which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
"LITIGATION" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability, but shall not include regular, periodic examinations of depository
institutions and their Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned by the Party in question or
by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or
occurrence which, together with any other event, change, or occurrence, has or
is reasonably likely to have a material adverse impact on (i) the financial
position, business, prospects, or results of
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operations of such Party and its Subsidiaries, taken as a whole, or (ii) the
ability of such Party to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this Agreement,
provided, that "material adverse impact" shall not be deemed to include the
impact of (x) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (y) changes in
GAAP or regulatory accounting principles generally applicable to banks and
savings associations and their holding companies, or (z) changes effected at
the request of the FAC Companies pursuant to Section 7.1(b).
"MATERIAL" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided, that any
specific monetary amount stated in this Agreement shall determine materiality
in that instance.
"MERGER" shall mean the merger of Charter Interim with and into Charter
referred to in Section 1.1 of this Agreement.
"NASDAQ STOCK MARKET" shall mean the National Market System of the Nasdaq.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"OTS" shall mean the Office of Thrift Supervision (including its
predecessor, the Federal Home Loan Bank Board).
"PARTY" shall mean either Charter or FAC and "PARTIES" shall mean both
Charter and FAC.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets,
or business.
"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 liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PLAN OF MERGER" shall mean the Agreement and Plan of Merger and
Combination, in substantially the form of Exhibit 1 to this Agreement, to be
entered into by Charter and, upon its organization, Charter Interim setting
forth the terms of the Merger.
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"PROXY STATEMENT" shall mean the proxy statement used by Charter to
solicit the approval of its stockholders of the transactions contemplated by
this Agreement and the Plan of Merger, and shall include the prospectus of FAC
relating to the shares of FAC Common Stock to be issued to the stockholders of
Charter.
"PRIMARY FAC OBJECTIVE TRANSACTIONS" shall have the meaning set forth in
the Preamble of this Agreement.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC by FAC under the 1933 Act in
connection with the transactions contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the OTS, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, all state regulatory
agencies having jurisdiction over the Parties and their respective
Subsidiaries, the Nasdaq Stock Market, and the SEC.
"SEC DOCUMENTS" shall mean all reports and registration statements filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder, including the
regulations of the OTS included in 12 C.F.R. Part 563g.
"SIGNIFICANT SUBSIDIARY" shall mean any present or future consolidated
Subsidiary of the Party in question, the assets of which constitute ten percent
(10%) or more of the consolidated assets of such Party as reflected on such
Party's consolidated statement of condition prepared in accordance with GAAP.
"STOCKHOLDERS' MEETING" shall mean the meeting of the stockholders of
Charter to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"SUBSIDIARY" or collectively "SUBSIDIARIES" shall mean all those
corporations, banks, associations, or other entities of which the entity in
question owns or controls fifty percent (50%) or more of the outstanding equity
securities either directly or through an unbroken chain of entities as to each
of which fifty percent (50%) or more of the outstanding equity securities is
owned directly or indirectly by its FAC; provided, however, there shall not be
included any such entity acquired through foreclosure or any such entity the
equity securities of which are owned or controlled in a fiduciary capacity.
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"SURVIVING BANK" shall mean Charter, as the surviving federal savings
bank resulting from the Merger.
"TAX" or "TAXES" shall mean any federal, state, county, local or foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise, occupancy, and other taxes, assessments,
charges, fares, or impositions, of any nature whatsoever, including interest,
penalties, and additions imposed thereon or with respect thereto.
11.2 EXPENSES. Each of the Parties shall bear and pay all direct
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel, except that
FAC shall bear and pay the filing fees payable in connection with the
Registration Statement, the Proxy Statement, and all applications filed with
the Regulatory Authorities and FAC and Charter will share equally the printing
and mailing costs incurred in connection with the Registration Statement and
the Proxy Statement. Notwithstanding the foregoing, in the event that Charter
terminates this Agreement pursuant to Section 10.1(h), Charter shall pay to FAC
an amount equal to all costs and expenses incurred by FAC in connection with
the transactions contemplated hereunder, including filing, registration and
application fees, printing fees, mailing costs, and fees and expenses of FAC's
financial or other consultants, investment bankers, accountants and counsel;
such payment shall be made in immediately available funds within five business
days after such termination.
11.3 BROKERS AND FINDERS. Except for Wheat First as to Charter and
Merrill, Lynch, Pierce, Fenner & Smith, Inc. as to FAC, each of the Parties
represents and warrants that neither it nor any of its officers, directors,
employees, or Affiliates has employed any broker or finder or incurred any
Liability for any financial advisory fees, investment bankers' fees, brokerage
fees, commissions, or finders' fees in connection with this Agreement or the
transactions contemplated hereby. In the event of a claim by any broker or
finder based upon his or its representing or being retained by or allegedly
representing or being retained by Charter or FAC, each of Charter and FAC, as
the case may be, agrees to indemnify and hold the other Party harmless of and
from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. Nothing in this
Agreement, expressed or implied, is intended to, or shall, confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in Section 8.11 of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of
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Directors of each of the Parties; provided, however, that after any such
approval by the holders of Charter Common Stock, there shall be made no
amendment to the consideration to be received by Charter stockholders without
the further approval of such stockholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, FAC, acting through its
Board of Directors, chief executive officer, president, or other authorized
officer, shall have the right at any time (whether before or after approval of
the Plan of Merger by the Charter stockholders) to waive on behalf of it and
Charter Interim any Default in the performance of any term of this Agreement by
Charter, to waive or extend the time for the compliance or fulfillment by
Charter of any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of FAC under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of FAC.
(b) Prior to or at the Effective Time, Charter, acting through
its Board of Directors, chief executive officer, president, or other authorized
officer, shall have the right (whether before or after approval of the Plan of
Merger by the Charter stockholders) to waive any Default in the performance of
any term of this Agreement by FAC, to waive or extend the time for the
compliance or fulfillment by FAC or Charter Interim of any and all of their
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Charter under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law.
No such waiver shall be effective unless in writing signed by a duly authorized
officer of Charter.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. 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.
11.8 NOTICES. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid,
or by courier or overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided, hereunder), and shall he
deemed to have been delivered as of the date so received:
Charter: Charter Federal Savings Bank
110 Piedmont Avenue
Bristol, Virginia 24201
Attention: Cecil R. McCullar
President and Chief Executive Officer
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Copy to Mary M. Sjoquist
Counsel: Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
FAC: First American Corporation
615 First American Center
Nashville, TN 37237
Attention: Dennis C. Bottorff
Chairman of the Board and
Chief Executive Officer
Copy to Catherine C. McCoy
Counsel: Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Tennessee, without regard
to any applicable conflicts of Laws, except to the extent that the federal laws
of the United States may apply to the Merger.
11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
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ATTEST: CHARTER FEDERAL SAVINGS BANK
By: /s/ Robert J. Bartel By: /s/ Cecil R. McCullar
---------------------- --------------------------------
[Name] Cecil R. McCullar
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: FIRST AMERICAN CORPORATION
By: /s/ Mary C. Price By: /s/ Dennis C. Bottorff
---------------------- --------------------------------
[Name] Dennis C. Bottorff
Assistant Secretary Chairman of the Board
and Chief Executive Officer
[CORPORATE SEAL]
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EXHIBIT 1
AGREEMENT AND PLAN OF MERGER AND COMBINATION
THIS AGREEMENT AND PLAN OF MERGER AND COMBINATION (this "Plan of
Merger") is made and entered into as of the __ day of ___________, 1995, by
and between CHARTER FEDERAL SAVINGS BANK ("Charter"), a federal stock savings
bank organized and existing under the laws of the United States, with its home
office located in Bristol, Virginia, and CHARTER INTERIM FEDERAL SAVINGS BANK
("Charter Interim"), an interim federal stock savings bank organized and
existing under the laws of the United States, with its home office located in
Bristol, Virginia.
Preamble
Each of the Boards of Directors of Charter and Charter Interim deems
it advisable and in the best interests of their respective institutions and the
stockholders thereof for Charter Interim to be merged with and into Charter
(the "Merger") on the terms and conditions provided in this Plan of Merger.
This Plan of Merger is made and entered into pursuant to an Agreement and Plan
of Reorganization, dated as of May __, 1995 ("Agreement"), by and between
Charter and First American Corporation ("FAC"). At the Effective Time of the
Merger, the outstanding shares of Charter Common Stock (as defined herein)
shall be converted into the right to receive shares of FAC Common Stock
(subject to certain exceptions as set forth in the Agreement). As a result,
stockholders of Charter shall become stockholders of FAC and Charter shall
continue to conduct its business and operations as a wholly-owned, first tier
federal savings bank subsidiary of FAC. It is intended that the Merger for
federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Code, and that the exchange of Charter Common
Stock, to the extent exchanged for FAC Common Stock, will not give rise to gain
or loss to the holders of Charter Common Stock with respect to such exchange.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Charter and Charter Interim
hereby made, adopt, and approve this Plan of Merger in order to set forth the
terms and conditions of the merger of Charter Interim into Charter.
ARTICLE ONE
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth
below (in their singular and plural forms, as applicable) shall have the
meanings set forth in the Agreement and Plan of Reorganization, dated as of May
__, 1995, by and between Charter and FAC, including each of the supporting
agreements and the other exhibits delivered pursuant thereto and incorporated
therein by reference.
<PAGE> 61
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ARTICLE TWO
TERMS OF MERGER
2.1 MERGER. Subject to the terms of this Plan of Merger and the
Agreement, at the Effective Time, Charter Interim shall be merged with and into
Charter in accordance with and with the effect provided in Title 12, United
States Code, Section 1467a(s) and 12 C.F.R. Section 552.13(l). Charter shall
be the Surviving Bank resulting from the Merger, shall be a wholly-owned, first
tier subsidiary of FAC and shall continue to be governed by the laws of the
United States as a federal stock savings bank operating under the name "Charter
Federal Savings Bank." The Merger shall be consummated pursuant to the terms
of this Plan of Merger.
2.2 SURVIVING BANK. The business of the Surviving Bank from and
after the Effective Time shall continue to be that of a federal stock savings
bank organized under the laws of the United States. The business shall be
conducted from its office located in [Bristol, Virginia], and its legally
established branches as listed on the attached Exhibit A, which shall also
include the main office and all branches of Charter, whether in operation or
approved but unopened, at the Effective Time.
2.3 ASSUMPTION OF RIGHTS. At the Effective Time, the separate
existence and corporate organization of Charter Interim shall be merged into
and continued in the Surviving Bank. All rights, franchises, and interests of
both Charter and Charter Interim in and to every type of property (real,
personal, and mixed), and all choses in action of both Charter and Charter
Interim shall be transferred to and vested in the Surviving Bank without any
deed or other transfer. The Surviving Bank, upon consummation of the Merger
and without any order of other action on the part of any court or otherwise,
shall hold and enjoy all rights of property, franchises, and interests,
including appointments, designations, and nominations, and all other rights and
interests as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, and committee of estates of
incompetent persons, and in every other fiduciary capacity, in the same manner
and to the same extent as such rights, franchises, and interests were held or
enjoyed by either Charter or Charter Interim at the Effective Time.
2.4 ASSUMPTION OF LIABILITIES. All liabilities and obligations of
both Charter and Charter Interim of every kind and description (including
without limitation the liquidation account established by Charter in connection
with its conversion to the stock form of organization, and the liquidation
account assumed by Charter Federal in connection with its merger conversion
with First Federal Savings and Loan Association of Danville, as in existence at
the Effective Time) shall be assumed by the Surviving Bank, and the Surviving
Bank shall be bound thereby in the same manner and to the same extent that
Charter and Charter Interim were so bound at the Effective Time.
2.5 SAVINGS ACCOUNTS AND DEPOSITS. All savings accounts and deposits
of Charter shall be and continue to be savings accounts and deposits of the
Surviving Bank, without change in their respective terms, maturity, minimum
required balances or withdrawal value. As of the Effective Time, each savings
accounts or deposit of Charter shall be considered for dividend or interest
purposes as a savings account or deposit of the Surviving Bank from the time
said savings account or deposit was opened in Charter and at all times
thereafter until such account or deposit ceases to be a savings account or
deposit of the Surviving Bank.
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2.6 CHARTER. The charter of Charter in effect immediately prior to
the Effective Time shall be the Charter of the Surviving Bank until otherwise
amended or repealed.
2.7 BYLAWS. The bylaws of Charter in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Bank until otherwise
amended or repealed.
2.8 BOARD OF DIRECTORS. Upon the Effective Time, the Board of
Directors of the Surviving Bank shall consist initially of the following
[number] individuals, each of whom shall serve for one-year terms:
Name RESIDENCE ADDRESS
________________________
________________________
________________________
________________________
________________________
2.9 OFFICES. The main office of the Surviving Bank after the
Effective Time will be located at the main office of the Surviving Bank in
[Bristol, Virginia]. The Surviving Bank's offices will after the Effective
Time be located at the locations set forth in Exhibit A to this Plan of Merger.
ARTICLE THREE
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article
Three, at the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, the shares of the constituent corporations
shall be converted as follows:
(a) Each share of Charter Interim Common Stock issued and
outstanding prior to the Effective Time shall at the Effective Time continue to
be issued and outstanding and shall be an identical outstanding share of the
Surviving Bank.
(b) Each share of Charter Common Stock issued and outstanding
at the Effective Time (excluding shares held by any Charter Company or by any
FAC Company, in each case other than in a fiduciary capacity or in satisfaction
of debts previously contracted, which shares shall be canceled as provided in
Section 3.3 of this Plan of Merger) shall cease to be outstanding and shall be
converted into and exchanged for 0.3800 shares of FAC Common Stock (the "Common
Stock Exchange Ratio"); provided, however, that, in the event the FAC Market
Value at the Effective Time (determined as provided in Section 3.6 of this Plan
of Merger) is greater than $39.75 per share, then the Common Stock Exchange
Ratio shall be reduced to such amount, rounded to the nearest one-ten
thousandth of a share, as shall equal $15.10 divided by the FAC Market Value;
and provided further, however, that, if FAC enters into a definitive agreement
of merger or reorganization with another entity as a result of which either FAC
is not the surviving entity or FAC's Chief Executive Officer will not become
the Chief Executive Officer of the surviving entity,
<PAGE> 63
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then the Common Stock Exchange Ratio shall be 0.3800 shares of FAC Common Stock
for each share of Charter Common Stock exchanged.
3.2 ANTI-DILUTION PROVISIONS. In the event Charter or FAC changes
the number of shares of Charter Common Stock or FAC Common Stock, respectively,
issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, or similar recapitalization with respect to such stock
and the record date therefor shall be prior to the Effective Time, the Common
Stock Exchange Ratio shall be proportionately adjusted to reflect such stock
split, stock dividend or similar recapitalization, as the case may be.
3.3 SHARES HELD BY CHARTER OR FAC. Each of the shares of Charter
Common Stock held by any Charter Company or by any FAC Company, in each case
other than in a fiduciary capacity or in satisfaction of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
Plan of Merger, each holder of shares of Charter Common Stock exchanged
pursuant to the Merger 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 at
the Effective Time. The market value of one share of FAC Common Stock at the
Effective Time shall be the closing price of such common stock as traded on the
Nasdaq Stock Market on the last trading day preceding the Effective Time. No
such holder will be entitled to dividends, voting rights, or any other rights
as a stockholder in respect of any fractional share.
3.5 NO DISSENTERS' RIGHTS. The holders of Charter Common Stock
will not have dissenters' rights of appraisal as a result of the Merger or any
other event or transaction contemplated by this Plan of Merger.
3.6 MARKET VALUE OF FAC COMMON STOCK. The market value of one share
of FAC Common Stock on the Effective Time (the "FAC Market Value") shall be the
average per share closing price of FAC Common Stock on the Nasdaq Stock Market
(as reported by The Wall Street Journal or other authoritative source) for the
twenty consecutive trading days ending on and including the third day
immediately preceding but not including the day of the Effective Time.
ARTICLE FOUR
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, but in
no event later than five (5) business days thereafter, FAC shall cause FAC
itself or such bank or trust company as FAC shall elect (which may be a
subsidiary of FAC) acting as the exchange agent (the "Exchange Agent") to mail
to the former stockholders of Charter appropriate transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to
the certificates theretofore representing shares of Charter Common Stock shall
pass, only upon proper delivery of such certificates to the Exchange Agent).
After the Effective Time, each holder of shares of Charter Common Stock (other
than shares to be canceled pursuant to Section 3.3 of this Plan of Merger)
issued and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1 of this Plan of Merger, together with all undelivered dividends
or distributions in respect of such shares (without interest thereon)
<PAGE> 64
- 5 -
pursuant to Section 4.2 of this Plan of Merger. To the extent required by
Section 3.4 of this Plan of Merger, each holder of shares of Charter Common
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional share of FAC Common Stock to which such holder may be
otherwise entitled (without interest). FAC shall not be obligated to deliver
the consideration to which any former holder of Charter Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of Charter Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates of
Charter Common Stock so surrendered shall be duly endorsed as the Exchange
Agent may require. Any other provision of this Plan of Merger notwithstanding,
neither FAC, the Surviving Bank, nor the Exchange Agent shall be liable to a
holder of Charter Common Stock or FAC Common Stock, as the case may be, for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property, escheat or similar law.
4.2 RIGHTS OF FORMER CHARTER STOCKHOLDERS. At the Effective Time,
the stock transfer books of Charter shall be closed as to holders of Charter
Common Stock immediately prior to the Effective Time, and no transfer of
Charter Common Stock by any such holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section 4.1
of this Plan of Merger, each certificate theretofore representing shares of
Charter Common Stock (other than shares to be canceled pursuant to Section 3.3
of this Plan of Merger) shall from and after the Effective Time represent for
all purposes only the right to receive the consideration provided in Sections
3.1 and 3.4 of this Plan of Merger in exchange therefor, and when issued, such
consideration shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Charter Common Stock. Whenever a dividend
or other distribution is declared by FAC on the FAC Common Stock, the record
date for which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of FAC Common Stock issuable
pursuant to this Plan of Merger, but no dividend or other distribution payable
to the holders of record of FAC Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate representing
shares of Charter Common Stock issued and outstanding at the Effective Time
until such holder surrenders such certificate for exchange as provided in
Section 4.1 of this Plan of Merger. However, upon surrender of such Charter
Common Stock certificate, both the FAC Common Stock certificate (together with
all such undelivered dividends or other distributions without interest with a
record date after the Effective Time and a payment date at or prior to such
surrender (without interest)) and any undelivered cash payments to be paid for
fractional share interests (without interest) shall be delivered and paid with
respect to each share represented by such certificate. If after the Effective
Time, certificates representing Charter Common Stock are presented to the
Surviving Bank for any reason, they shall be surrendered and exchanged as
provided in Section 4.1 of this Plan of Merger.
4.3 TERMINATION OF EXCHANGE AGENT RELATIONSHIP. At any time
following one year after the Effective Time, FAC shall be entitled to terminate
the Exchange Agent relationship, and any stockholders of Charter who have not
theretofore surrendered their shares of Charter Common Stock pursuant to this
Article Four 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 (subject to
abandoned property, escheat or other similar laws).
<PAGE> 65
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ARTICLE FIVE
CLOSING AND EFFECTIVE DATE
5.1 TIME AND PLACE OF CLOSING. The closing of the Merger ("Closing")
will take place at 9:00 a.m. on the last business day of the calendar quarter
in which the satisfaction of all conditions precedent specified in Article Nine
of the Agreement occurs or at such other time as the Parties to the Agreement,
acting through their chief executive officers or chief financial officers,
shall mutually agree. The place of Closing shall be at the offices of FAC, or
such other place as may be mutually agreed upon by the Parties to the
Agreement.
5.2 EFFECTIVE TIME. The Merger and other transactions contemplated
by this Plan of Merger shall become effective on the date and at the time of
endorsement of the Articles of Combination filed with the OTS or on such other
date and at such other time as the OTS declares the Merger effective (the
"Effective Time"). Subject to the terms and conditions hereof, unless
otherwise mutually agreed upon in writing by the chief executive officers or
principal financial officers of each party to the Agreement, the parties to the
Agreement shall use their reasonable efforts to cause the Effective Time to
occur on the first business day of the first calendar quarter following the
Closing, or such later date within thirty (30) days of such date as shall be
mutually agreed upon by FAC and Charter.
ARTICLE SIX
EFFECTIVENESS
6.1 CONDITIONS PRECEDENT. Consummation of the Merger is conditioned
upon the approval of the Merger by the stockholders of Charter and the sole
stockholder of Charter Interim, as and to the extent required by law, and the
receipt of the requisite regulatory approvals as set forth in the Agreement.
The Merger shall not be consummated unless and until approved by the OTS.
Additionally, consummation of the Merger is conditioned upon the fulfillment of
the conditions precedent set forth in Article Nine of the Agreement or the
waiver of such conditions as provided in Section 11.6 of the Agreement.
6.2 TERMINATION. This Plan of Merger may be terminated at any time
prior to the Effective Time by the parties hereto at any time simultaneously
with the termination of the Agreement as provided in Article Ten of the
Agreement.
6.3 AMENDMENTS. To the extent permitted by law, this Plan of Merger
may be amended by a subsequent writing signed by each of the parties upon the
approval of the Boards of Directors of each of the parties; provided, however,
that after any such approval by the holders of Charter Common Stock, there
shall be made no amendment decreasing the consideration to be received by
Charter stockholders without the further approval of such stockholders.
ARTICLE SEVEN
MISCELLANEOUS
7.1 NOTICES. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid,
or by courier or overnight carrier, to the persons at the addresses set forth
in Section 11.8 of the Agreement (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
received;
<PAGE> 66
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provided, however, that notice of termination of this Plan of Merger shall be
effective only upon actual delivery of such notice to the party entitled to the
same.
7.2 GOVERNING LAW. This Plan of Merger shall be governed by and
construed in accordance with the laws of the State of Tennessee, without regard
to any applicable conflicts of laws, except to the extent that the federal laws
of the United States may apply to the Merger.
7.3 COUNTERPARTS. This Plan of Merger may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7.4 INCONSISTENT PROVISIONS. The parties agree that, to the extent
any of the provisions of this Plan of Merger shall conflict or be inconsistent
with any provision of the Agreement, the provisions of the Agreement shall
control and prevail and the parties hereto agree to execute such amendments to
this Plan of Merger to conform the provisions hereof to the provisions of the
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Plan of Merger
to be executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto duly authorized all as of the day and year first
above written.
ATTEST: CHARTER FEDERAL SAVINGS BANK
By: By:
----------------------------- ---------------------------------
[Name] Cecil R. McCullar
Secretary President and Chief Executive
Officer
ATTEST: CHARTER INTERIM FEDERAL SAVINGS BANK
By: By:
----------------------------- ---------------------------------
[Name] [Name]
Secretary [Title]
<PAGE> 67
EXHIBIT 2
First American Corporation
First American Center
Nashville, Tenn. 37237
RE: AGREEMENT AND PLAN OF REORGANIZATION, DATED
MAY __, 1995 (THE "AGREEMENT"), BETWEEN FIRST
AMERICAN CORPORATION ("FAC") AND CHARTER
FEDERAL SAVINGS BANK ("COMPANY")
Gentlemen:
I have been advised that I may be deemed to be an affiliate of the
Company, as that term is defined for purposes of paragraphs (c) and (d) of Rule
145 ("Rule 145") of the Rules and Regulations of the Securities and Exchange
Commission (the "Commission") promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
Pursuant to the terms and conditions of the Agreement, each share of
common stock of the Company owned by me as of the effective time of the merger
contemplated by the Agreement (the "Merger") may be converted into the right to
receive shares of common stock of FAC and cash in lieu of any fractional share.
As used in this letter, the shares of common stock of the Company owned by me
as of ____________ (the date 30 days prior to the anticipated effective time of
the Merger) are referred to as the "Pre-Merger Shares" and the shares of common
stock of FAC which may be received by me in the Merger in exchange for my
Pre-Merger Shares are referred to as the "Post-Merger Shares." This letter is
delivered to FAC pursuant to Section 8.9 of the Agreement.
A. I represent and warrant to FAC and agree that:
1. I shall not make any sale, transfer or other disposition of
the Post-Merger Shares I receive pursuant to the Merger in violation of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder except by operation of law, by will or under laws of descent and
distribution.
2. I understand that the issuance of the Post-Merger Shares to me
pursuant to the Merger will be registered with the Commission under the
Securities Act. I also understand that because I may be deemed an "affiliate"
of the Company and because any distributions by me of the Post-Merger Shares
will not be registered under the Securities Act, such Post-Merger Shares must
be held by me unless (i) the sale, transfer or other distribution has been
registered under the Securities Act, (ii) the sale, transfer or other
distribution of such Post-Merger Shares is made in accordance with the
provisions of Rule 145, or (iii) in the opinion of counsel acceptable to FAC
some other exemption from registration under the Securities Act is available
with respect to any such proposed distribution, sale, transfer, or other
disposition of such Post-Merger Shares.
3. I have not, as of the date hereof, sold or otherwise
transferred or reduced my risk relative to the Pre-Merger Shares, and in no
event will I sell the Pre-Merger Shares or the Post-Merger Shares, as the case
may be, or otherwise transfer or reduce my risk relative to the Pre-Merger
Shares or Post-Merger Shares, as the case may be, during the period beginning
30 days prior to the date on which the Merger is consummated and ending on the
date that FAC has published financial results covering at least
-1-
<PAGE> 68
30 days of the combined operations of FAC and the Company.
B. I understand and agree that:
1. Stop transfer instructions will be issued with respect to the
Post-Merger Shares and there will be placed on the certificates representing
such Post-Merger Shares, or any certificate delivered in substitution therefor,
a legend stating in substance:
"The shares represented by this Certificate were issued in a
transaction to which Rule 145 of the Securities Act of 1933,
as amended, applied. The shares represented by this
certificate may be transferred only in accordance with the
terms of a letter agreement dated ____________, 1995, by the
registered holder in favor of First American Corporation, a
copy of which agreement is on file at the principle offices of
First American Corporation.
2. Unless the transfer by me of the Post-Merger Shares is a sale
made in compliance with the provisions of Rule 145(d) or made pursuant to an
effective registration statement under the Securities Act, FAC reserves the
right to place the following legend on the Certificates issued to my
transferee:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, and
were acquired from a person who received such shares in a
transaction to which Rule 145 under the Securities Act of
1933, as amended, applied. The shares have not been acquired
by the holder with a view to, or for resale in connection
with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended, and may not be sold,
pledged, or otherwise transferred unless the shares have been
registered under the Securities Act of 1933, as amended, or an
exemption from registration is available."
I understand and agree that the legends set forth in paragraphs 1 and
2 above shall be removed by delivery of substitute Certificates without any
legend if I deliver to FAC a copy of a letter from the staff of the Commission,
or an opinion of counsel in form and substance satisfactory to FAC, to the
effect that no such legend is required for the purpose of the Securities Act
or, at FAC's option, a certificate reasonably satisfactory to FAC and signed by
me to the effect that the proposed transfer, sale or disposition of Post-Merger
Shares evidenced by such certificate is permitted by and in accordance with
Rule 145.
I have carefully read this letter and the Agreement and understand the
requirements of each and the limitations imposed upon the distribution, sale,
transfer or other disposition of Pre-Merger Shares or Post-Merger Shares by me.
It is understood and agreed that this letter shall terminate and be of
no further force and effect if the Agreement is terminated pursuant to the
terms thereof.
Very truly yours,
-2-
<PAGE> 69
EXHIBIT 3
MATTERS TO BE ADDRESSED
IN
OPINION OF MULDOON, MURPHY & FAUCETTE
1. Charter Federal Savings Bank is a duly organized federal stock
savings bank validly existing under the laws of the United States, with full
corporate power and authority to carry on its business as described in its
Annual Report on Form 10-K for the year ended June 30, 1995, and to the best of
our knowledge, is duly qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such qualification.
2. The authorized capital stock of Charter consists of (i)
50,000,000 shares of the $.01 par value common stock of Charter (the "Charter
Common Stock"), of which ____________ shares are issued and outstanding and
(ii) 7,500,000 shares of Charter Preferred Stock, of which no shares are issued
and outstanding. All of the issued and outstanding shares of Charter Common
Stock are duly authorized, validly issued and fully paid and nonassessable. To
the best of our knowledge, except for such options as are set forth in Section
5.3(b) of the Charter Disclosure Memorandum, there are no Rights authorized,
issued or outstanding with respect to the capital stock of Charter. Charter's
charter has never provided for preemptive rights.
3. To the best of our knowledge, Charter does not own, directly
or indirectly, 5% or more of the outstanding capital stock or other voting
securities of any corporation, bank, savings association or other organization
except for Highlands Service Corporation and Charter Financial Services
Corporation.
4. Charter has all requisite corporate power and authority to
enter into and perform all of its obligations under the Reorganization
Agreement and the Plan of Merger. The execution and delivery of the
Reorganization Agreement and the Plan of Merger and the consummation of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of Charter.
5. The Reorganization Agreement and the Agreement of Merger
constitute legal, valid and binding obligations of Charter enforceable against
it in accordance with their respective terms, except as enforceability thereof
may be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights generally or
the rights of a creditor of an insured depository institution or by general
equity principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
6. Neither the execution and delivery of the Reorganization
Agreement or the Plan of Merger, nor the consummation of the transactions
contemplated thereby, nor compliance by Charter with any of the provisions
thereof shall (i) conflict with or result in a breach of any provision of the
charter or bylaws of Charter, (ii) to the best of our knowledge constitute or
result in a breach of any term, condition or provision of, or constitute a
default under, or give rise to any right of termination,
1
<PAGE> 70
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Charter pursuant to,
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which Charter is a party, except where such breach, default,
right or creation would not have a material adverse effect on the Charter
Companies taken as a whole, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to any Charter Company.
7. The Proxy Statement, and any supplement or amendment thereto,
on the date of the mailing thereof and on the date of the special meeting of
stockholders of Charter, complied as to form in all material respects with the
applicable provisions of law with respect to information provided for inclusion
therein by Charter.
8. No facts have come to our attention, with respect to
information provided for inclusion therein by Charter, which would lead us to
believe that the Proxy Statement, and any supplement or amendment thereto, on
the date of the mailing thereof and on the date of the special meeting of
stockholders of Charter, contained any untrue statement of a material fact or
omitted to state any 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 (it being understood that such counsel need express
no opinion with respect to the fairness opinion, financial statements and notes
thereto and other financial, statistical and accounting information included in
the Proxy Statement); provided, however, that we have not independently
verified the accuracy, completeness or fairness of the statements contained in
the Proxy Statement, and the limitations inherent in our participation in the
preparation of the Proxy Statement and the knowledge available to us are such
that we are unable to assume, and do not assume, responsibility for the
accuracy, completeness or fairness of the statements contained in the Proxy
Statement.
9. To the best of our knowledge, there are no material actions,
suits or proceedings instituted, pending or threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome), against Charter or against
any asset, interest or right of Charter. To the best of our knowledge, there
are no actual or threatened actions, suits or proceedings which present a claim
to restrain or prohibit the transactions contemplated in the Reorganization
Agreement or the Plan of Merger, or to impose upon Charter or its Subsidiaries
any material cost or obligation in connection therewith. To the best of our
knowledge, there are no actions, suits or proceedings instituted, pending or
threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an unfavorable
outcome) against any present or former director or officer of Charter that
could be reasonably likely to give rise to a claim for indemnification by such
present or former director or officer that, if determined adversely to Charter,
would have a material adverse effect on Charter.
10. No consent, approval or authorization of, or declaration, notice,
filing or registration with, any applicable governmental or regulatory
authority, is required to be made or obtained by Charter on or prior to the
Closing in connection with the execution, delivery and performance of the
Reorganization Agreement, the Plan of Merger or the consummation of the
transactions contemplated thereby that has not been made or obtained.
2
<PAGE> 71
EXHIBIT 4
MATTERS TO BE ADDRESSED
IN
OPINION OF COUNSEL TO FIRST AMERICAN CORPORATION
1. FAC is a duly organized corporation, validly existing, and in
good standing under the laws of the State of Tennessee, with full corporate
power and authority to carry on its business as now conducted, and to my
knowledge, is duly qualified to do business in the states of the United States
and foreign jurisdictions where its ownership or leasing of property or the
conduct of its business requires such qualification. FAC is registered as a
bank holding company under the Bank Holding Company Act. First American
National Bank ("FANB") is a national banking organization validly existing and
in good standing under the laws of the United States. All issued and
outstanding capital stock of FANB is owned by FAC.
2. All of the issued and outstanding shares of FAC Common Stock
are duly authorized, validly issued, fully paid and nonassessable.
3. FAC and FANB have all requisite corporate power and authority
to enter into and perform all of their respective obligations under the
Reorganization Agreement and the Plan of Merger. The execution and delivery of
the Reorganization Agreement and the Plan of Merger and the consummation of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the FAC Companies.
4. The Reorganization Agreement and the Agreement of Merger
constitute legal, valid and binding obligations of FAC enforceable against it
in accordance with their respective terms, except as enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights generally
(or the rights of a creditor of an insured depository institution) or by
general equity principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
5. Neither the execution and delivery of this Reorganization
Agreement or the Plan of Merger, nor the consummation of the transactions
contemplated thereby, nor compliance by FAC with any of the provisions thereof
shall (i) conflict with or result in a breach of any provision of the charter
or bylaws of FAC or FANB, (ii) constitute or result in a breach of any term,
condition or 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 asset
of FAC pursuant to, any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which any FAC Company is a party, except
where such breach, default, right or creation would not have a material adverse
effect on the FAC Companies taken as a whole, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to any FAC Company.
1
<PAGE> 72
6. Charter Interim is a federal stock savings bank duly organized
and validly existing under the laws of the United States. Charter Interim has
the corporate power and authority necessary to execute, deliver and perform its
obligations under the Plan of Merger and to consummate the transactions
contemplated thereby. The execution, delivery and performance of the Plan of
Merger and the consummation of the transactions contemplated therein, including
the Merger, has been duly and validly authorized by all necessary corporate
action in respect thereof on the part of Charter Interim. When executed and
delivered, the Plan of Merger will represent the legal, valid and binding
obligation of Charter Interim, enforceable against Charter Interim in
accordance with its terms (except as enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the enforcement of creditors' rights generally or by general equity principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law).
7. The Registration Statement, insofar as it contains information
relating to the FAC Companies, complies in all material respects as to form
with the requirements of the 1933 Act as in effect on the date of effectiveness
of the Registration Statement. The Prospectus included therein, including any
supplements or amendments thereto, at the time of the mailing thereof or at the
time of the stockholders meeting complied as to form in all material respects
with the applicable provisions of law with respect to information provided for
inclusion therein by FAC.
8. Nothing has caused me to believe that the information provided
by FAC to Charter for use in the Proxy Statement, and the information in the
Registration Statement, and any supplements or amendments thereto, on the date
of the mailing of the Proxy Statement, and on the date of the special meeting
of stockholders of Charter, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
9. To the best of my knowledge, there are no actual or threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated in the Reorganization Agreement or the Plan of
Merger.
10. No consent, approval or authorization of, or declaration, notice,
filing or registration with, any governmental or regulatory authority, is
required to be made or obtained by any FAC Company on or prior to the Closing
in connection with the execution, delivery and performance of the
Reorganization Agreement, the Plan of Merger or the consummation of the
transactions contemplated thereby that has not been made or obtained.
11. The shares of the $5.00 par value common stock of FAC to be
issued to the stockholders of Charter as contemplated by the Agreement have
been duly and validly authorized for issuance, have been registered under the
Securities Act of 1933, as amended, and when the certificates therefor are duly
countersigned by FAC (or FAC's transfer agent) and delivered to the
stockholders of Charter pursuant to the Agreement following consummation of the
Merger will be duly and validly issued, fully paid and nonassessable, free of
any preemptive or similar rights.
2
<PAGE> 73
EXHIBIT 5
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Option Agreement") dated as of May
__, 1995 by and between FIRST AMERICAN CORPORATION ("FAC"), a Tennessee
corporation, and CHARTER FEDERAL SAVINGS BANK ("Charter"), a federal stock
savings bank organized and existing under the laws of the United States.
WITNESSETH
WHEREAS, the Boards of Directors of FAC and CHARTER have
authorized or approved an Agreement and Plan of Reorganization ("Reorganization
Agreement") providing for certain transactions pursuant to which FAC would
acquire Charter pursuant to the merger of a newly formed first tier, interim
federal savings bank subsidiary of FAC ("Charter Interim") with and into
Charter;
WHEREAS, as a condition to FAC's entry into the Reorganization
Agreement and to induce such entry, Charter has agreed to grant to FAC the
option set forth herein to purchase authorized but unissued shares of Charter
Common Stock;
NOW, THEREFORE, in consideration of the premises herein
contained, the parties agree as follows:
1. Definitions.
Capitalized terms defined in the Reorganization Agreement and
used herein shall have the same meanings as in the Reorganization Agreement.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Charter
hereby grants to FAC an option ("Option") to purchase up to the amount
comprising 19.99% of the issued and outstanding shares of Charter Common Stock,
at a price of $9.08 per share payable in cash as provided in Section 4 hereof;
provided, however, that in the event Charter issues or agrees to issue any
shares of Charter Common Stock (other than as permitted under the
Reorganization Agreement) at a price less than $9.08 per share (as adjusted
pursuant to Section 6 hereof), the exercise price shall be equal to such lesser
price.
3. Exercise of Option.
a. Unless FAC shall have breached in any material respect any
material covenant, agreement or representation contained in the Reorganization
Agreement and such breach has not been cured within the period provided for in
the Reorganization Agreement, FAC may exercise the Option, in whole or part, at
any time or from time to time if a Purchase Event (as defined below) shall have
occurred and be continuing; provided that to the extent the Option shall not
have been exercised, it shall terminate and be of no further
<PAGE> 74
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force and effect (i) upon the Effective Time of the Merger or (ii) upon
termination of the Reorganization Agreement in accordance with the provisions
thereof (other than a termination resulting from a willful breach by Charter of
a Specified Covenant (as defined herein) or, following the occurrence of a
Purchase Event, failure of Charter's stockholders to approve the Reorganization
Agreement by the vote required under applicable law), or (iii) six months after
termination of the Reorganization Agreement due to a willful breach by Charter
of a Specified Covenant or, following the occurrence of a Purchase Event,
failure of Charter's stockholders to approve the Reorganization Agreement by
the vote required under applicable law; and provided further that any such
exercise shall be subject to compliance with applicable provisions of law.
b. As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) any person (other than Charter or any Charter
Company, FAC or any affiliate of FAC) shall have
commenced (as such term is defined in Rule 14d-2
under the Securities Exchange Act of 1934 ("Exchange
Act")) a bona fide tender or exchange offer to
purchase shares of Charter Common Stock such that
upon consummation of such offer such person would own
or control 15% or more of the outstanding shares of
Charter Common Stock;
(ii) Charter or any Charter Company, without having
received FAC's prior written consent, shall have
entered into an agreement with any person (other than
FAC or any subsidiary or affiliate of FAC), or shall
have filed an application or notice with any federal
or state regulatory agency for clearance or approval,
to (x) merge or consolidate, or enter into any
similar transaction, with any such person, (y) sell,
lease or otherwise dispose of all or substantially
all of the assets of Charter or (z) sell or otherwise
dispose of (including by way of merger,
consolidation, share exchange or any similar
transaction) securities representing 15% or more of
the voting power of Charter;
(iii) any person (other than Charter, Charter in a
fiduciary capacity, FAC, affiliates of FAC or
subsidiaries of FAC in a fiduciary capacity) shall
have acquired beneficial ownership or the right to
acquire beneficial ownership of 15% or more of the
outstanding shares of Charter Common Stock (the term
"beneficial ownership" for purposes of this Option
Agreement having the meaning assigned thereto in
Section 13(d) of the Exchange Act and the regulations
promulgated thereunder); provided, however, that the
acquisition prior to the date hereof of either such
beneficial ownership or the right to acquire such
beneficial ownership by any director or officer of
Charter shall not constitute a Purchase Event;
<PAGE> 75
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(iv) any person other than FAC shall have made a bona fide
proposal to Charter by public announcement or written
communication that is or becomes the subject of
public disclosure to (x) acquire Charter by merger,
consolidation, purchase of all or substantially all
of its assets or any other similar transaction, or
(y) make an offer described in clause (i) above and
Charter's Board of Directors shall have failed to
recommend, or shall have withdrawn its
recommendation, to Charter stockholders that they
approve of the Reorganization Agreement and Plan of
Merger with FAC; or
(v) Charter shall have willfully breached a Specified
Covenant which breach would entitle FAC to terminate
the Reorganization Agreement and such breach has not
been cured within the period provided for in the
Reorganization Agreement prior to the Notice Date (as
defined below).
If more than one of the transactions giving rise to a Purchase Event under this
Section 3(b) is undertaken or effected, then all such transactions shall give
rise only to one Purchase Event, which Purchase Event shall be deemed
continuing for all purposes hereunder until all such transactions are
abandoned. As used in this Option Agreement, "person" shall have the meanings
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
c. In the event FAC wishes to exercise the Option, it shall
send to Charter a written notice (the date of which being herein referred to as
"Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier than three
business days nor later than 60 business days from the Notice Date for the
closing of such purchase ("Closing Date"); provided that if prior notification
to or approval of any federal or state regulatory agency is required in
connection with such purchase, FAC shall promptly file the required notice or
application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification period has expired or
been terminated or such approval has been obtained and any requisite waiting
period shall have passed.
d. As used herein, "Specified Covenant" means any covenant or
agreement contained in Sections 7.2(a), (c), (d), (e), (m) and (n), or Sections
8.1, 8.3, 8.4 and 8.7, of the Reorganization Agreement.
4. Payment and Delivery of Certificates.
a. At the closing referred to in Section 3(c) hereof, FAC
shall pay to Charter the aggregate purchase price for the shares of Charter
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by a wire transfer to a bank account designated by Charter.
<PAGE> 76
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b. At such closing, simultaneously with the delivery of funds
as provided in subsection (a), Charter shall deliver to FAC a certificate or
certificates representing the number of shares of Charter Common Stock
purchased by FAC, and FAC shall deliver to Charter a letter agreeing that FAC
will not offer to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Option Agreement.
c. Certificates for Charter Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend which shall read
substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an agreement
between the registered holder hereof and Charter Federal
Savings Bank and to resale restrictions arising under
applicable federal law, as amended, a copy of which agreement
is on file at the principal office of Charter Federal Savings
Bank. A copy of such agreement will be provided to the holder
hereof without charge upon receipt by Charter Federal Savings
Bank of a written request."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if FAC shall have delivered to
Charter a copy of a letter from the staff of the Office of Thrift Supervision,
or an opinion of counsel, in form and substance reasonably satisfactory to
Charter, to the effect that such legend is not required for purposes of
applicable federal law.
5. Representations.
Charter hereby represents, warrants and covenants to FAC as
follows:
a. Charter shall at all times maintain sufficient authorized
but unissued shares of Charter Common Stock so that the Option may be exercised
without authorization of additional shares of Charter Common Stock.
b. The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization.
In the event of any change in Charter Common Stock by reason
of stock dividends, split-ups, mergers, recapitalizations, combinations,
exchanges of shares or the like, the type and number of shares subject to the
Option, and the purchase price per share, as the case may be, shall be adjusted
appropriately. In the event that any additional shares of Charter Common Stock
are issued or otherwise become outstanding after the date of this Option
Agreement (other than pursuant to this Option Agreement), the number of shares
of Charter Common Stock subject to the Option shall be adjusted so
<PAGE> 77
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that, after such issuance, it equals 19.99% of the number of shares of Charter
Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this Section 6
shall be deemed to authorize Charter to breach any provision of the
Reorganization Agreement.
7. Repurchase.
a. At the request of FAC at any time during the nine months
immediately following the later to occur of both a Purchase Event set forth in
Section 3(b)(ii), 3(b)(iv) or 3(b)(v) and the termination of the Reorganization
Agreement pursuant to the terms thereof ("Repurchase Period"), Charter shall
repurchase the Option from FAC together with any shares of Charter Common Stock
purchased by FAC pursuant thereto, at a price (the "Option Repurchase Price")
equal to the sum of:
(i) The exercise price paid by FAC for any shares
of Charter Common Stock acquired pursuant to the Option;
(ii) The difference between the "market/tender
offer" price for shares of Charter Common Stock (defined as the highest of (i)
the highest price per share at which a tender or exchange offer has been made,
(ii) the price per share, whether in cash or the value of securities or other
property or a combination thereof, of Charter Common Stock to be paid by any
third party pursuant to an agreement with Charter, (iii) the price at which FAC
has agreed to acquire Charter Common Stock pursuant to the Reorganization
Agreement, or (iv) the highest reported sale price for shares of Charter Common
Stock within that portion of the Repurchase Period preceding the date FAC gives
notice of the required repurchase under this Section 7) and the exercise price
as determined pursuant to Section 2 hereof, multiplied by the number of shares
of Charter Common Stock with respect to which the Option has not been
exercised, but only if the market/tender offer price is greater than such
exercise price; and
(iii) The difference between the market/tender offer
price (as defined in Section 7(b) hereof) and the exercise price paid by FAC
for any shares of Charter Common Stock purchased pursuant to the exercise of
the Option, multiplied by the number of shares so purchased, but only if the
market/tender offer price is greater than such exercise price.
b. To the extent that Charter is prohibited under applicable
law or regulation from repurchasing in full the Option, and any shares of
Charter Common Stock purchased by FAC pursuant thereto, Charter shall
immediately so notify FAC and thereafter deliver or cause to be delivered, from
time to time, to FAC, the portion of the Option Repurchase Price that it is no
longer prohibited from delivering, within five business days after the date on
which Charter is no longer so prohibited; provided, however, that if Charter at
any time after delivery of a notice of repurchase is prohibited under
applicable law or regulation from delivering to FAC the Option Repurchase Price
in full (and Charter hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable
<PAGE> 78
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in order to accomplish such repurchase), FAC may revoke its notice of
repurchase of the Option, or any shares of Charter Common Stock purchased by
FAC pursuant thereto, either in whole or to the extent of the prohibition,
whereupon, in the latter case, Charter shall promptly: (i) deliver to FAC that
portion of the Option Repurchase Price that Charter is not prohibited from
delivering; and (ii) at FAC's option, either: (A) deliver to FAC a new Option
Agreement evidencing the right of FAC to purchase that number of shares of
Charter Common Stock obtained by multiplying the number of shares of Charter
Common Stock for which the surrendered Option Agreement was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Option Repurchase Price less the portion thereof theretofore
delivered to FAC and the denominator of which is the Option Repurchase Price,
or (B) make provision for payment of the remainder of the Option Repurchase
Price at such time as Charter is not so prohibited under applicable law or
regulation.
c. In addition to the limitation set forth in Section 7(b) on
Charter's obligation to repurchase the Option, and any shares of Charter Common
Stock purchased by FAC pursuant thereto, if the repurchase in full of the
Option, and any shares of Charter Common Stock purchased by FAC pursuant
thereto, by Charter would reduce Charter's Tier 1 capital ratio as defined in
12 C.F.R. Section 565.2(g) ("Tier 1 Capital") to less than 5%, then Charter
shall be obligated to repurchase the Option, and any shares of Charter Common
Stock purchased by FAC pursuant thereto, only to the extent that such
repurchase will not reduce Charter's Tier 1 capital to less than 5%. To the
extent that Charter is temporarily excused under the immediately preceding
sentence from repurchasing all or any portion of the Option, or any shares of
Charter Common Stock purchased by FAC pursuant thereto, Charter shall
immediately so notify FAC and thereafter deliver or cause to be delivered, from
time to time, to FAC, the portion of the Option Repurchase Price that it is no
longer excused from delivering, within five business days after the date on
which Charter is no longer so excused; provided, however, that if Charter at
any time after delivery of a notice of repurchase is excused under this Section
7(c) from delivering to FAC the Option Repurchase Price in full (and Charter
hereby undertakes to use its best efforts to maintain its Tier 1 capital at
such levels as may be necessary in order to permit it to accomplish such
repurchase), FAC may revoke its notice of repurchase of the Option, or any
shares of Charter Common Stock purchased by FAC pursuant thereto, either in
whole or to the extent that Charter is excused from repurchasing the same,
whereupon, in the latter case, Charter shall promptly: (i) deliver to FAC that
portion of the Option Repurchase Price that Charter is not excused from
delivering; and (ii) at FAC's option, either (A) deliver to FAC a new Option
Agreement evidencing the right of FAC to purchase that number of shares of
Charter Common Stock obtained by multiplying the number of shares of Charter
Common Stock for which the surrendered Option Agreement was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Option Repurchase Price less the portion thereof theretofore
delivered to FAC and the denominator of which is the Option Repurchase Price,
or (B) make provision for payment of the remainder of the Option Repurchase
Price at such time as Charter is not so excused under this Section 7(c).
<PAGE> 79
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d. In the event FAC exercises its right to require the
repurchase of the Option, or any shares of Charter Common Stock purchased by
FAC pursuant thereto, Charter shall, within ten business days thereafter, pay
the required amount to FAC in immediately available funds and FAC shall
surrender the Option to Charter and the certificates evidencing the shares of
Charter Common Stock purchased thereunder; provided that if prior notification
to or approval of the Federal Reserve Board or other regulatory agency is
required in connection with such purchase, Charter shall promptly file the
required notice or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification period has
expired or been terminated.
8. Registration Rights.
Charter shall, if requested by FAC, as expeditiously as
possible file a registration statement on a form of general use as required by
the Office of Thrift Supervision if necessary in order to permit the sale or
other disposition of the shares of Charter Common Stock that have been acquired
upon exercise of the Option in accordance with the intended method of sale or
other disposition requested by FAC. FAC shall provide all information
reasonably requested by Charter for inclusion in any registration statement to
be filed hereunder. Charter will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 270 days from the day such registration
statement first becomes effective as may be reasonably necessary to effect such
sales or other dispositions. The first registration effected under this
Section 8 shall be at Charter's expense except for underwriting commissions and
the fees and disbursements of FAC's counsel attributable to the registration of
such Charter Common Stock. A second registration may be requested hereunder at
FAC's expense. In no event shall Charter be required to effect more than two
registrations hereunder. The filing of any registration statement hereunder
may be delayed for such period of time as may reasonably be required to
facilitate any public distribution by Charter of Charter Common Stock. If
requested by FAC, in connection with any such registration, Charter will become
a party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements. Upon receiving any request from FAC or assignee
thereof under this Section 8, Charter agrees to send a copy thereof to FAC and
to any assignee thereof known to Charter, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies.
9. Severability.
If any term, provision, covenant or restriction contained in
this Option Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Option Agreement shall remain in full force and effect, and shall in no
way be affected, impaired or invalidated. If for any
<PAGE> 80
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reason such court or regulatory agency determines that the Option will not
permit the holder to acquire the full number of shares of Charter Common Stock
provided in Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is
the express intention of Charter to allow the holder to acquire such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
10. Miscellaneous.
a. Expenses. Except as otherwise provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
b. Entire Agreement. Except as otherwise expressly provided
herein, this Option Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereto, written or oral.
The terms and conditions of this Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. Nothing in this Option Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Option Agreement, except as expressly provided herein.
c. Assignment. Neither of the parties hereto may assign any
of its rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing, FAC may assign in whole or in part its rights and obligations
hereunder; provided, however, that to the extent required by applicable
regulatory authorities, FAC may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private placement in
which no one party acquires the right to purchase in excess of 2% of the voting
shares of Charter, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on FAC's behalf, or (iv) any other manner approved by applicable
regulatory authorities.
d. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
in the manner and to the addresses provided for in or pursuant to Section 11.8
of the Reorganization Agreement.
e. Counterparts. This Option Agreement may be executed in
any number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.
f. Specific Performance. The parties agree that damages
would be an inadequate remedy for a breach of the provisions of this Option
Agreement by either
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party hereto and that this Option Agreement may be enforced by either party
hereto through injunctive or other equitable relief.
g. Governing Law. This Option Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee, without
regard to applicable conflicts of laws, except to the extent that the federal
laws of the United States may apply to the Merger.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Option Agreement as of the day and year first written above.
FIRST AMERICAN CORPORATION
By /s/ Dennis C. Bottorff
-----------------------------
Dennis C. Bottorff
Chairman of the Board
and Chief Executive Officer
CHARTER FEDERAL SAVINGS BANK
By /s/ Cecil R. McCullar
-----------------------------
Cecil R. McCullar
President and Chief
Executive Officer
<PAGE> 1
EXHIBIT 20
Press Release dated May 17, 1995
<PAGE> 2
Financial Contact: Carroll Kimball, Telephone 615/748-2455, Fax 615/748-2755
Media Contact: Vicki Kessler, 615/748-2912, Fax 615/748-2535
Charter Federal Contact: C.R. McCullar, 703/645-5220, Fax 703/645-5222
FOR IMMEDIATE RELEASE
FIRST AMERICAN CORPORATION TO ACQUIRE CHARTER FEDERAL
NASHVILLE, TENN., MAY. 17, 1995 -- First American Corporation
(NASDAQ:FATN) and Charter Federal Savings Bank (NASDAQ:CHFD) today announced
plans for First American to acquire Charter in a stock-for-stock exchange
valued at approximately $67 million.
Charter Federal is a $740 million savings bank headquartered in
Bristol, Va. Charter's 26 branches are located in Knoxville, Tenn. (8), the
Tri-Cities area (3) and southwestern Virginia (15). On a pro-forma basis the
combined company will have the second largest market share (20 percent) in the
Knoxville MSA and the leading market share (20 percent) in the Tri-Cities MSA.
The pro-forma market share includes the effect of First American's pending
acquisition of Heritage Federal Bancshares (NASDAQ:HFBS), which is a $520
million savings bank also headquartered in the Tri-Cities area. Both
acquisitions are scheduled to be completed in the fourth quarter of 1995,
subject to appropriate shareholder and regulatory approvals.
According to Dennis C. Bottorff, First American chairman and CEO, "The
acquisition of Charter Federal strengthens our presence in vitally important
areas of the Tennessee trade area. With this acquisition, our market share
moves to a strong number two position in Knoxville and number one in the
Tri-Cities area."
First American has entered into a definitive agreement to acquire all
of the
--more--
<PAGE> 3
FIRST AMERICAN ACQUISITION OF CHARTER FEDERAL SAVINGS BANK - PAGE 2
outstanding shares of Charter Federal in a tax-free exchange. If the average
price of First American common stock (for the 20 business days preceding and
including the third business day prior to consummation) is less than or equal
to $39.75, a fixed exchange rate of .38 shares of First American will be
exchanged for each share of Charter (resulting in approximately 1.94 million
First American shares being exchanged). If the First American common stock
average is greater than $39.75 but less than or equal to $43.50, a fixed price
of $15.10 will be exchanged for each share of Charter. If the average price of
the First American common stock is greater than $43.50, Charter may elect to
terminate the transaction. Based on First American's stock price at the close
of trading on May 16, 1995, of $35.00 per share, the consideration paid to
Charter's shareholders would equal $13.30 per share. First American intends to
repurchase, in open market transactions, up to 100 percent of its shares
necessary to effect this transaction.
The transaction is expected to add to earnings in the first full year
after consummation. The purchase price equals 11.2 times Charter's last twelve
month's earnings ending March 31, 1995 (excluding the $2.4 million gain on the
sale of branch assets) and 1.4 times March 31, 1995 book value. Cost synergies
representing approximately 25 percent of Charter's non interest expenses are
anticipated in the first full year following consummation.
"We are pleased at the prospect of becoming a part of First American
Corporation," said Robert J. Bartel, chairman of the board of directors of
Charter Federal. "Our board of directors believes that this transaction
considerably enhances the outlook for our shareholders. We are also enthused
about the greater resources of First American, which will enable our customers
to be better served with a wider array of financial products and services."
--more--
<PAGE> 4
FIRST AMERICAN ACQUISITION OF CHARTER FEDERAL SAVINGS BANK - PAGE 3
Based on an evaluation of the financial implications of the combined
Charter and Heritage transactions, First American intends to account for its
previously announced Heritage acquisition as a pooling of interests and to
account for Charter as a purchase.
As a result of the pooling accounting treatment for Heritage, First
American anticipates incurring a one-time charge, estimated at approximately
$4.5 million, net of taxes, in the fourth quarter of 1995. Approximately $6
million of cost savings (45 percent of Heritage's non interest expense) are
anticipated during 1996 as a result of its integration into First American.
First American plans to consolidate Charter Federal's Tennessee and
Bristol, Virginia, branches into First American National Bank, subject to
regulatory approval. First American intends to operate the remaining Virginia
branches as First American Savings Bank, a separate subsidiary of First
American Corporation.
Charter Federal's net income was $5.2 million for the nine months
ended March 31, 1995 (excluding a $2.4 million gain on the sale of branch
assets). Its return on average assets was 1.02 percent, its return on average
equity was 17.06 percent, and the equity to assets ratio equaled 6.25 percent
at March 31, 1995. Nonperforming assets to total assets equaled 1.77 percent
at March 31, 1995.
At March 31, 1995, First American's total assets were $7.6 billion;
loans net of unearned discount, $5.0 billion; deposits, $5.9 billion; and
shareholders' equity, $629.8 million.
First American Corporation is the Nashville-based parent company of
First American National Bank, First American National Bank of Kentucky and
First American Trust Company. Approximately 3,300 people work for First
American in 143 banking offices.
###
