<PAGE> 1
As filed with the Securities and Exchange Commission on May 24, 2000.
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BANCTENN CORP.
--------------
(Name of Small Business Issuer in its charter)
<TABLE>
<S> <C> <C>
TENNESSEE 6711 62-1225291
- ---------------------------- ---------------------------------- ------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Standard Industrial) Identification No.)
</TABLE>
301 EAST CENTER STREET
KINGSPORT, TENNESSEE 37660
(423) 378-9500
(Address, and telephone number
of principal executive offices)
WILLIAM C. ARGABRITE, ESQ. COPIES TO:
HUNTER, SMITH & DAVIS, LLP KATHRYN L. KNUDSON, ESQ.
1212 N. EASTMAN ROAD POWELL GOLDSTEIN FRAZER & MURPHY LLP
KINGSPORT, TENNESSEE 37664 191 PEACHTREE STREET, N.E., 16TH FLOOR
(423) 378-8829 ATLANTA, GEORGIA 30303
(Name, address, and (404) 572-6952
telephone number, of
agent for service)
Approximate date of proposed sale to the public: AS SOON AS PRACTICABLE AFTER
THE DATE OF THIS REGISTRATION STATEMENT.
If this Form is filed to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE:
- -----------------------------------------------------------------------------------------------------------------------------
Title of Each Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount to Offering Price Aggregate Registration
to be Registered be Registered per Unit Offering Price Fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $8.00 par 428,571 $28.00 $12,000,000 $3,168.00
value
=============================================================================================================================
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED
PRELIMINARY PROSPECTUS DATED __________, 2000; SUBJECT TO COMPLETION
428,571 SHARES
BANCTENN CORP.
COMMON STOCK
$28.00 PER SHARE
This is an offering of 428,571 shares of BancTenn Corp.'s common stock.
All of these shares are being sold by BancTenn Corp. We are offering this stock
first to our current shareholders who have preemptive rights to purchase new
shares issued by BancTenn Corp. If there are shares remaining after the
expiration of our shareholders' preemptive rights, we will sell the remaining
shares to persons whose subscriptions are accepted according to the terms of
this offering. Subject to the preemptive rights of our current shareholders, we
reserve the right to begin accepting subscriptions conditionally from the
general public. Except for shares acquired through the exercise of preemptive
rights, we reserve the right to accept or reject subscriptions in our
discretion.
Our officers and directors will offer and sell the common stock on a
best-efforts basis without compensation. Prior to this offering, there has been
no public trading market for the common stock.
INVESTING IN THE COMMON STOCK INVOLVES RISKS, WHICH ARE DESCRIBED IN
THE "RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
THE SHARES OF COMMON STOCK OFFERED ARE NOT DEPOSITS, SAVINGS ACCOUNTS,
OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public price $28.00 $12,000,000
Proceeds to us, before expenses $28.00 $12,000,000
</TABLE>
We will deposit the subscription proceeds in a noninterest-bearing
deposit account with Bank of Tennessee until the close of the offering. We plan
to close the offering on October 15, 2000, but reserve the right to extend the
offering through _______________, 2001. Additionally, we may choose to end the
offering sooner.
You must subscribe for at least 200 shares of common stock. Unless we
agree, you may not revoke or change your subscription after you have submitted
your signed subscription agreement. We may choose to reject your subscription
entirely or accept it for only a portion of the shares for which you subscribe.
See "The Offering" beginning on page 13 of this prospectus.
The date of this prospectus is _________, 2000.
<PAGE> 3
[INSIDE FRONT COVER]
[A map depicting BancTenn Corp.'s market area and banking
locations appears here.]
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<PAGE> 4
SUMMARY
This summary does not contain all the information you should consider
before investing in the common stock. You should read carefully the entire
prospectus.
Share information included in this prospectus has been restated to
reflect a six-for-five stock split which became effective on May 9, 1997 and a
five-for-four stock split which became effective on May 13, 1999. In addition,
unless otherwise indicated, all references to "we", "us", "our", and "BancTenn
Corp." in this prospectus refer to BancTenn Corp. and its subsidiary, Bank of
Tennessee, on a consolidated basis.
BANCTENN CORP.
BancTenn Corp. is a one-bank holding company headquartered in
Kingsport, Tennessee. As of March 31, 2000, we had total consolidated assets of
approximately $335.90 million, total deposits of $283.35 million, and
shareholders' equity of approximately $22.63 million. We are conducting this
offering to raise additional capital to support our subsidiary, Bank of
Tennessee, to retire debt, to pursue additional strategic opportunities, and for
other general corporate purposes.
Through our wholly owned subsidiary, Bank of Tennessee, we offer a
broad line of banking and financial products and services using a strategy of
combining large-bank products and services with small-bank service and
responsiveness. Based on June 30, 1999 call report data, we rank 27th in asset
size out of 202 FDIC-insured banks operating in Tennessee. Our growth over the
past several years has been generated through expansion of our market area and
our affiliate relationships with other financial institutions in the
Southeastern United States.
OFFICE LOCATIONS
We operate nine full-service banking locations and eight automated
teller machines that are located in six contiguous counties in northeast
Tennessee.
The address and phone number of our principal executive offices are:
301 East Center Street
Kingsport, Tennessee 37660
(423) 378-9500
We also have branch offices in the following locations:
<TABLE>
<CAPTION>
CITY COUNTY NUMBER OF BRANCHES
---- ------ ------------------
<S> <C> <C>
Kingsport Sullivan 3
Bristol Sullivan 1
Blountville Sullivan 1
Johnson City Washington 2
Jonesborough Washington 1
Erwin Unicoi 1
</TABLE>
As of December 31, 1999, our deposit market share was 8.79% in Sullivan
County, 5.01% in Washington County, and 24.04% in Unicoi County.
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<PAGE> 5
BUSINESS STRATEGY
Our commitment to excellence is defined by our mission:
- To enhance the quality of life of our customers and our
communities by providing superior financial services.
- To achieve excellence in the financial services field through
proper human resource development, utilization and reward.
- To maximize return on invested capital through appropriate
pricing, marketing and expense control.
- To expect and require our employees to maintain the highest
ethical conduct both in their business and personal endeavors.
LINES OF BUSINESS
We provide traditional banking products and services through
high-quality and personalized delivery systems. We offer a wide variety of
checking, savings, and certificates of deposit. We offer a broad range of
commercial, retail and personal loan products and credit arrangements.
Additionally, we offer credit and debit cards and limited forms of electronic
banking. We recognize the need to adapt as our customers and the financial
industry become more technologically driven. As a result, we expect to begin
offering Internet banking to our customers. To complement our traditional
banking products and services, we also offer investment and brokerage services.
In addition, we offer data processing and back-room support services to other
financial institutions and businesses.
MANAGEMENT
Our management team consists of:
BancTenn Corp.
--------------
- William B. Greene, Jr. - Tony L. Howell
Chairman Senior Vice President
- Colon A. Terrell, Jr. - Darla M. Scott
President and Chief Executive Vice President and
Officer Chief Financial Officer
- Roy L. Harmon, Jr. - Mary Mac Wilson
Executive Vice President Vice President
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<PAGE> 6
Bank of Tennessee
-----------------
- Colon A. Terrell, Jr. - Darla M. Scott
Chairman Senior Vice President and
Chief Financial Officer
- Roy L. Harmon, Jr. - Paul Holt
Chief Executive Officer Executive Vice President
- Kenneth H. Maloy - Mark Anderson
President Senior Vice President
- Mary Mac Wilson - Craig S. Denison
Executive Vice President Senior Vice President
- Tony L. Howell - Joe Carr
Executive Vice President Senior Vice President
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by BancTenn Corp............................. 428,571 shares
Common stock to be outstanding after the offering................. 1,897,172 shares
Use of proceeds................................................... We intend to use the net proceeds as
capital to support the asset growth of
Bank of Tennessee, to retire debt, to
pursue strategic opportunities, and for
other general corporate purposes. See
"The Offering" on page 13 and "Use of
Proceeds" on page 16.
</TABLE>
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated unaudited financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and related
notes included elsewhere in this prospectus. This information has been derived
from audited financial statements for 1997 through 1999 and from unaudited
financial statements for the three months ended March 31, 2000 and 1999. You
should not rely on the three-month information as being indicative of results
expected for the entire year.
<TABLE>
<CAPTION>
AT AND FOR THE THREE AT AND FOR THE
MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
-------------------------- ------------------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets $335,901 $264,746 $299,627 $254,691 $ 212,044
Loans, net 267,774 210,839 238,149 203,995 153,997
Total deposits 283,351 226,474 263,573 220,895 185,823
Investment securities available for sale 37,086 29,921 32,582 26,398 25,904
Investment securities held to maturity 2,377 3,241 3,019 3,361 5,229
Shareholders' equity 22,626 20,501 22,193 19,976 17,786
AVERAGE BALANCES:
Assets $308,228 $255,071 $269,552 $231,367 $198,824
Earning assets 286,762 235,395 248,660 212,544 181,403
Loans, net of unearned income 251,277 209,324 220,987 178,935 142,679
Shareholders' equity 20,395 18,279 19,115 17,825 15,572
SELECTED INCOME STATEMENT DATA:
Interest income $ 5,798 $ 4,606 $ 19,717 $ 17,268 $ 14,643
Interest expense 3,173 2,190 9,743 8,470 7,131
Net interest income 2,625 2,416 9,974 8,798 7,512
Provision for loan losses 215 150 665 611 345
Noninterest income 924 619 2,724 2,572 2,239
Noninterest expense 2,472 1,946 8,580 7,704 6,387
Income tax expense 294 335 1,218 1,112 1,103
Net income 567 604 2,235 1,943 1,916
PER SHARE DATA: (1)
Net income per share basic $ 0.39 $ 0.42 $ 1.56 $ 1.37 $ 1.37
Net income per share diluted 0.37 0.40 1.49 1.31 1.30
Dividends paid per share -- -- 0.04 0.04 0.03
Book value 15.40 14.37 15.11 14.00 12.59
Average common shares outstanding 1,469 1,427 1,435 1,417 1,400
Ending common shares outstanding 1,469 1,427 1,469 1,427 1,413
ASSET QUALITY RATIOS:
Net charge-offs to average loans outstanding 0.05% 0.11% 0.07% 0.15% 0.03%
Allowance to period end loans 0.96% 0.94% 1.00% 0.92% 1.00%
Allowance to non-performing assets 727.32% 912.84% 505.26% 1406.67% 2124.66%
SELECTED FINANCIAL RATIOS:
Interest rate spread 3.18% 3.41% 3.53% 3.51% 3.39%
Net interest margin 3.72% 4.01% 4.08% 4.20% 4.14%
Net income to average total assets 0.74% 0.95% 0.83% 0.84% 0.96%
Net income to average shareholders' equity 11.12% 13.22% 11.69% 10.90% 12.30%
Efficiency ratio (2) 69.65% 64.12% 67.57% 67.76% 65.50%
Average shareholders' equity to average
total assets 6.62% 7.17% 7.09% 7.70% 7.83%
</TABLE>
(1) All per share amounts have been adjusted for common stock splits, effected
in the form of dividends, to shareholders of record on May 13, 1999 and
May 9, 1997.
(2) Calculated by dividing total noninterest expense, excluding securities gains
and losses, by net interest income plus noninterest income.
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<PAGE> 8
RISK FACTORS
An investment in the common stock involves a significant degree of
risk. You should carefully consider the following risk factors and other
information in this prospectus before deciding to invest in the common stock.
The following paragraphs describe the risks that we believe are
material to your decision to invest in our common stock. You should also read
carefully the cautionary statement following these Risk Factors regarding the
use of forward-looking statements.
UNPREDICTABLE ECONOMIC CONDITIONS MAY HAVE AN ADVERSE EFFECT ON THE QUALITY OF
OUR LOAN PORTFOLIO AND OUR FINANCIAL PERFORMANCE.
Economic recession over a prolonged period or other economic problems
in our market areas could have a material adverse impact on the quality of our
loan portfolio and the demand for our products and services. For example, a
downturn in the local economy could make it more difficult for borrowers to
repay their loans, which could lead to loan losses for Bank of Tennessee. This
could in turn adversely affect our financial condition, results of operations
and cash flows. Our success depends to a significant extent upon economic
conditions in Tennessee and particularly in the counties in which we have
branches. The banking industry in Tennessee is affected by general economic
conditions such as inflation, recession, unemployment and other factors beyond
our control. See "Business of BancTenn Corp." on page 20.
WE COULD SUFFER LOAN LOSSES FROM A DECLINE IN CREDIT QUALITY.
We could sustain losses if borrowers, guarantors and related parties
fail to perform in accordance with the terms of their loans. Because we derive a
significant portion of our net income from our loan portfolio, our financial
condition, results of operations and cash flows could be materially adversely
affected if our borrowers are unable to repay their loans as scheduled. See
"Business of BancTenn Corp." on page 20.
CHANGES IN INTEREST RATES MAY DECREASE OUR NET INTEREST INCOME.
If we are unsuccessful in managing interest rate fluctuations, our net
interest income could decrease materially. Our operations depend substantially
on our net interest income, which is the difference between the interest income
earned on our interest-earning assets and the interest expense paid on our
interest-bearing liabilities. Like most depository institutions, our earnings
and net interest income are affected by changes in market interest rates and
other economic factors beyond our control. While we take measures to guard
against interest rate risk, these measures may not be effective in minimizing
our exposure to interest rate risk. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Interest Rate Sensitivity and
Liquidity" on page 44.
INDUSTRY COMPETITION MAY ADVERSELY AFFECT OUR PROFITABILITY.
The banking business is highly competitive, and our profitability
depends upon our ability to compete in our market areas. We compete with other
commercial banks, savings banks, savings and loan associations, credit unions,
mortgage companies, finance companies, mutual funds, insurance companies,
brokerage and investment banking firms, asset-based non-bank lenders, retail
stores and
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<PAGE> 9
other non-financial entities that maintain their own credit programs, and
governmental organizations. These competitors may attract customers by offering
more favorable interest rate or financing terms than we do. Many of these
competitors have greater financial and other resources than we have and compete
aggressively with us for market share. Moreover, some of these competitors are
not subject to the same degree of regulation as we are and may have greater
resources than are likely to be available to us. Competition from
non-traditional financial institutions may also affect our success due to the
Gramm-Leach-Bliley Act of 1999. In the future, the United States Congress or the
Tennessee legislature may enact other legislation that may further increase
competitive pressures on us. See "Business of BancTenn Corp.--Competition" on
page 24 and "Supervision and Regulation--Permitted Activities" on page 68.
DEPARTURES OF OUR KEY PERSONNEL MAY IMPAIR OUR OPERATIONS.
Each member of our management team is important to our success and the
unexpected loss of any of these persons could impair our day-to-day operations
as well as our strategic direction. Our management team includes William B.
Greene, Jr., chairman of BancTenn Corp.; Colon A. Terrell, Jr., president and
chief executive officer of BancTenn Corp.; Roy L. Harmon, Jr., executive vice
president of BancTenn Corp. and chief executive officer of Bank of Tennessee;
Tony L. Howell, executive vice president; Kenneth H. Maloy, president of Bank of
Tennessee; and Mary Mac Wilson, executive vice president of Bank of Tennessee.
Although we have change of control agreements with Mr. Terrell and Mr. Harmon
and key man life insurance on Mr. Terrell, Mr. Harmon, Mr. Howell, Mr. Maloy,
and Mrs. Wilson, we have not entered into employment agreements with any
employees. See "Directors and Executive Officers" on page 50.
IF PARAGON COMMERCIAL BANK EXPERIENCES FINANCIAL DIFFICULTIES, OUR PROFITABILITY
MAY BE ADVERSELY AFFECTED.
We own 19.11 % of the outstanding stock of Paragon Commercial Bank, a
North Carolina state-chartered bank with its principal place of business in
Raleigh, North Carolina. Together with our affiliates, we own 29.62% of
Paragon's outstanding stock. In addition, two of our directors are members of
Paragon's twelve person board of directors. Under applicable federal banking
law, these facts and circumstances cause the Federal Reserve to consider us a
"source of strength" for Paragon. This means that if Paragon experiences
financial difficulties and is required to raise additional capital, the Federal
Reserve may require us to provide the additional capital necessary to support
Paragon. If this were to occur, it might adversely affect our profitability by
interfering with our ability to support Bank of Tennessee and to otherwise
pursue our strategic plan.
OUR ABILITY TO PAY DIVIDENDS IS RESTRICTED BY FEDERAL AND STATE POLICIES AND
REGULATIONS.
Federal Reserve policy and Tennessee Department of Financial
Institutions regulations restrict our ability to pay dividends, and we cannot
assure that we will pay dividends on our common stock in the future. Federal
Reserve policy states that bank holding companies should pay cash dividends on
common stock only out of net income available over the past year and only if
prospective earnings retention is consistent with the organization's expected
future needs and financial condition. The policy provides that a bank holding
company should not maintain a level of cash dividends that undermines its
ability to serve as a source of strength to its banking subsidiaries. Our
ability to declare and pay dividends on the common stock depends upon our
earnings and financial condition, our liquidity and capital requirements, the
general economic and regulatory climate and other factors our board of directors
deems relevant.
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<PAGE> 10
Our principal source of funds to pay dividends is cash dividends that
we receive from our subsidiary, Bank of Tennessee. Tennessee law prohibits the
payment of dividends except from a bank's surplus profits. Additionally, FDIC
policies and regulations restrict Bank of Tennessee's ability to pay dividends.
See "Supervision and Regulation--Payment of Dividends" on page 70.
OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A MAJORITY OF OUR OUTSTANDING COMMON
STOCK AND WILL BE ABLE TO CONTROL THE OUTCOME OF CORPORATE ACTIONS THAT REQUIRE
SHAREHOLDER APPROVAL.
After the completion of the offering, our executive officers and
directors, collectively, will have the power to block business combinations and
to control the outcome of all matters required to be submitted to our
shareholders for approval. These matters include decisions relating to the
election of directors, the determination of day-to-day corporate and management
policies and other significant corporate transactions. The executive officers
and directors of BancTenn Corp. collectively will beneficially own approximately
1,068,544 or 53.7%, of the outstanding shares of common stock after completion
of the offering. Several of our charter provisions can be amended only with
two-thirds approval of our directors or two-thirds approval of our shareholders.
See "Principal Shareholders and Stock Ownership of Management" on page 48 and
"Description of Our Capital Stock" on page 61.
THE ARBITRARILY DETERMINED PUBLIC OFFERING PRICE MAY BE HIGHER OR LOWER THAN THE
MARKET PRICE OF OUR COMMON STOCK AFTER THE OFFERING.
The public offering price may not indicate the market price for the
common stock after the offering. Because an active trading market does not exist
for the common stock, we were unable to set an offering price that would reflect
the effect of an efficient market for the stock. Instead, we determined the
public offering price based on a variety of factors, including the prices at
which the common stock has most recently been sold, the history of, and
prospects for, the banking industry in our market areas, the price to earnings
and price to book value multiples represented by the offering price and by the
prices of publicity traded common stock of comparable companies, our historical
and prospective cash flow and earnings and that of comparable companies in
recent periods. See "The Offering--Determination of Offering Price" on page 15.
THERE HAS NOT BEEN A PUBLIC MARKET FOR OUR COMMON STOCK AND ONE IS NOT LIKELY TO
DEVELOP AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL YOUR SHARES OF
COMMON STOCK.
Prior to the offering, there has not been a public market for our
common stock, and one is not likely to develop after the offering. If an active
trading market does not develop or continue after the offering, you may not be
able to sell your shares at or above the public offering price. We presently do
not intend to cause our common stock to be listed on any stock exchange or
quoted through any recognized quotation system. Additionally, following this
offering, we will have a relatively small shareholder base and small number of
shares outstanding. You should consider carefully the limited liquidity of your
investment before purchasing any shares of common stock.
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<PAGE> 11
THE MARKET PRICE OF OUR COMMON STOCK WILL FLUCTUATE AND COULD FLUCTUATE
SIGNIFICANTLY.
If a market develops for our common stock after the offering, we may
experience significant fluctuations in the market price of our common stock.
Factors that may affect the price of our common stock include the depth and
liquidity of the market for the common stock, investor perception of our
financial strength, conditions in the banking industry such as credit quality
and monetary policies, and general economic and market conditions. Our quarterly
operating results, changes in analysts' earnings estimates, changes in general
conditions in the economy or financial markets or other developments affecting
us could cause the market price of the common stock to fluctuate substantially.
In addition, from time to time the stock market experiences extreme price and
volume fluctuations. This volatility may significantly affect the market price
of our common stock for reasons unrelated to our operating performance.
GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY AND
GROWTH.
Bank holding companies and banks are subject to extensive state and
federal government supervision and regulation. Changes in state and federal
banking laws and regulations or in federal monetary policies could adversely
affect our ability to maintain profitability and continue to grow. For example,
new legislation or regulation could limit the manner in which we may conduct our
business, including our ability to obtain financing, attract deposits, make
loans and achieve satisfactory interest spreads. Many of these regulations are
intended to protect depositors, the public and the FDIC, not shareholders. In
addition, the burden imposed by federal and state regulations may place us at a
competitive disadvantage compared to competitors who are less regulated. The
laws, regulations, interpretations and enforcement policies that apply to us
have been subject to significant, and sometimes retroactively applied, changes
in recent years, and may change significantly in the future. Future legislation
or government policy may also adversely affect the banking industry or our
operations. See "Supervision and Regulation" on page 67.
THE MARKET PRICE OF OUR COMMON STOCK COULD DROP SIGNIFICANTLY IF LARGE BLOCKS OF
OUR COMMON STOCK ARE SOLD IN THE PUBLIC MARKET.
The market price of our common stock could drop significantly if the
holders of our common stock sell or are perceived by the market as intending to
sell large blocks of shares. After this offering, we will have up to 1,897,172
outstanding shares of common stock. We estimate that our directors, executive
officers and principal shareholders will purchase approximately 44,965 shares in
this offering. Of the 1,897,172 shares, approximately 876,836 will be
immediately available for resale in the public market without restriction. The
remaining 1,020,336 outstanding shares will represent shares held by our
affiliates that are restricted under the federal securities laws. These shares
will become available for resale in the public market beginning 90 days after
the close of this offering, subject to the volume and other limitations under
federal securities laws. See "Shares Eligible for Future Sale" on page 66, for a
discussion of the resale limitations under federal securities laws.
WE MAY NOT ALLOCATE ALL OF THE NET PROCEEDS OF THIS OFFERING IN THE MOST
PROFITABLE MANNER.
Our management will have complete discretion in determining the use and
allocation of the net proceeds of the offering, which are estimated to be
$11,905,000. We intend to use the net proceeds as capital to support asset
growth at Bank of Tennessee, to retire debt, to pursue strategic opportunities,
and for other general corporate purposes. Our management will have discretion as
to
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<PAGE> 12
the timing and specific application of the net proceeds, and investors will not
have the opportunity to evaluate the economic, financial and other relevant
information that we will use in applying the proceeds. Although we intend to use
the net proceeds to serve BancTenn Corp.'s best interest, our allocation may not
ultimately reflect the most profitable application of these proceeds. See "Use
of Proceeds" on page 16.
IF OUR CHARTER DETERS A CHANGE IN CONTROL, YOU MAY BE DEPRIVED OF AN OPPORTUNITY
TO SELL YOUR SHARES AT A PREMIUM OVER MARKET PRICES.
Our charter contains provisions relating to the removal of directors
from our board that may make it more difficult and time consuming for a
potential acquiror to obtain control of BancTenn Corp. by replacing the board of
directors or management. Our charter also contains requirements and standards
that our board of directors must follow in evaluating any transaction proposing
a merger, sale or change of control of our organization. Our charter also
contains requirements and standards that our board of directors must follow when
evaluating any merger, sale or change of control involving BancTenn Corp. If
these provisions deter an attempt to change or gain control of BancTenn Corp.,
you may be deprived of opportunities to sell some or all of your shares at
prices that represent a premium over market prices. See "Important Provisions of
Our Charter and Bylaws" on page 62.
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<PAGE> 13
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" which include
information about possible or assumed future results of our operations or our
financial performance. Forward-looking statements may also include information
regarding our future plans and objectives. Forward-looking statements are based
on the belief of our management, as well as assumptions they have made and
information currently available to them. Words such as "expect," "estimate,"
"anticipate," "believe" and other similar expressions are intended to identify
forward-looking statements.
The cautionary statements in the "Risk Factors" section and elsewhere
in this prospectus identify important factors and possible events, which involve
risks and uncertainties, that could cause actual results to differ materially
from those contained in the forward-looking statements. If you are interested in
purchasing shares of the common stock, you should carefully consider these risk
factors, as well as factors discussed elsewhere in this prospectus, before
making a decision to invest in the common stock.
12
<PAGE> 14
THE OFFERING
GENERAL
BancTenn Corp. is offering 428,571 shares of common stock at a price of
$28.00 per share. Except for subscriptions tendered pursuant to the exercise of
preemptive rights, the minimum purchase for any one investor is 200 shares, and
the maximum purchase for any one investor is 20,000 shares unless BancTenn
Corp., in its sole discretion, accepts a subscription for a lesser or greater
number of shares. The shares are being offered through the best efforts of our
officers and directors until October 15, 2000 unless we decide to end the
offering sooner or extend the offering as described under "Expiration Date" on
page 14. Our officers and directors will not receive any commissions or other
compensation for soliciting sales of the common stock, but they will be
reimbursed for reasonable expenses they incur in the offering. THE OFFERING IS
NOT UNDERWRITTEN.
We are conducting this offering to raise additional capital necessary
to support the capital needs of Bank of Tennessee, to retire debt, to pursue
strategic opportunities, and for other general corporate purposes.
PREEMPTIVE RIGHTS
Under our charter our shareholders have preemptive rights. This means
that each of our shareholders is entitled to purchase a number of shares in this
offering that will enable him or her to maintain his or her current ownership
percentage. For example, if a shareholder currently owns 1% of our outstanding
stock, that shareholder would be entitled to purchase 4,285 shares of the
428,571 shares in this offering. It would be possible for this shareholder to
purchase more than 4,285 shares but any shares purchased in excess of 4,285
would be based upon the general subscription process rather than upon his or her
preemptive rights. There is no minimum number of shares that a current
shareholder must purchase when exercising his or her preemptive rights. We will
not issue any fractional shares, and when calculating preemptive right
entitlements, we will round down to the nearest whole share.
The preemptive rights offering will begin on _______________, 2000 and
will remain in effect until _______________, 2000 at which time all preemptive
rights to purchase shares in this offering will expire. Any shares not purchased
by our current shareholders by _______________, 2000 will be available for
purchase by the general public including our current shareholders who desire to
purchase more than their preemptive rights entitlement. Subject the expiration
of the preemptive rights offering, we reserve the right to begin receiving
subscriptions from the general public on _______________, 2000. As indicated in
"Discretion to Accept Subscriptions" on page 14, we reserve the right to accept
or reject any non-preemptive right subscription.
HOW TO PURCHASE SHARES
You may purchase shares of our common stock by delivering to BancTenn
Corp., 301 East Center Street, Kingsport, Tennessee 37660, Attn: Peggy Cole, the
following items:
- Your completed and signed subscription agreement for at least
200 shares of common stock; however, there is no minimum
number of shares required for the exercise of preemptive
rights; and
13
<PAGE> 15
- A check or a money order payable to BancTenn Corp. in the
amount of the total purchase price for the shares you wish to
purchase, calculated based on a price of $28.00 per share.
A blank subscription agreement accompanies this prospectus. Additional
forms are available upon request from Peggy Cole at the address listed above.
You may not revoke or change your subscription after you have submitted your
signed subscription agreement unless you receive our express permission to do
so. You must subscribe for at least 200 shares of common stock. Additionally, we
may reject any subscription or limit the number of shares sold to any
subscriber.
EXPIRATION DATE
This offering will expire at 5:00 p.m., Eastern Daylight Savings Time,
on October 15, 2000, unless we choose to end the offering sooner or extend the
offering period. Our decision to end or extend the offering will be based on
demand for the shares and the availability of attractive strategic investment
opportunities as described below. We will not extend the offering beyond
December 15, 2000. We will promptly publish a notice in various local newspapers
including The Kingsport Times-News or otherwise notify you if we change the
expiration date of the offering.
This offering contemplates that we will raise approximately $3,000,000
in new capital for investment in strategic opportunities including the
possibility that we will enhance our current investment in Paragon Commercial
Bank. Our analysis of these opportunities is ongoing. In the event that we
determine that some portion of this additional capital is not currently needed
for strategic investments, we reserve the right to conclude this offering before
completing the sale of all 428,571 shares.
ALLOCATION OF SUBSCRIPTIONS IF THE OFFERING IS UNDERSUBSCRIBED
Even if we receive subscriptions for less than 428,571 shares of common
stock, we intend to complete the sale of all shares for which subscriptions are
received, subject to our right to accept or reject any particular subscription,
other than preemptive right subscriptions. We will not accept subscriptions for
more than 428,571 shares of common stock. See "Discretion to Accept
Subscriptions" below.
DISCRETION TO ACCEPT SUBSCRIPTIONS
Except for shares purchased upon the exercise of preemptive rights, we
have the right, in our sole discretion, to accept or reject any subscription in
whole or in part. As a result, you may not receive any or all of the shares for
which you subscribe.
We will notify subscribers promptly after the expiration date as to
whether and to what extent their subscriptions have been accepted. If we do not
accept all or a portion of a subscription, we will return the unaccepted portion
of the subscription funds, without interest, to the subscriber.
ISSUANCE OF STOCK CERTIFICATES
Promptly after the expiration date described above, BancTenn Corp.,
acting as its own transfer agent, will issue stock certificates representing the
shares purchased by investors in this
14
<PAGE> 16
offering. We will follow the instructions contained in the accepted subscription
agreements when we issue stock certificates.
SUBSCRIPTION PROCEEDS
We will deposit all subscription proceeds as we receive them in a
noninterest-bearing deposit account with Bank of Tennessee. Promptly following
the expiration date of the offering, we will refund any amounts due to
subscribers whose subscriptions we did not accept as described under "Discretion
to Accept Subscriptions" on page 14. The remaining subscription proceeds due to
us will become immediately available for our use.
DETERMINATION OF OFFERING PRICE
Our board of directors established the offering price of $28.00 per
share. This price is equal to 1.85 times our consolidated book value per share
of $15.11 at December 31, 1999, and 17.95 times our net income per share of
$1.56 for the year ended December 31, 1999. The price of $28.00 per share is
also equal to 1.82 times our book value of $15.40 per share at March 31, 2000
and 18.06 times our annualized net income of $1.55 per share based upon our
actual net income of $567,804 for the quarter ended March 31, 2000. The Board
considered a number of factors in setting the price, including:
- the prices at which our common stock has most recently been
sold;
- the history of, and prospects for, the banking industry;
- the price-to-earnings and price-to-book value multiples
represented by the offering price and by the prices of
publicly traded common stock of comparable companies; and
- our historical and prospective cash flow and earnings and that
of comparable companies in recent periods.
See "Summary Consolidated Financial Information" on page 6 and "Market Price of
and Dividends on Common Stock" on page 17.
15
<PAGE> 17
USE OF PROCEEDS
We have lines of credit available from two commercial banks, AmSouth
and SunTrust. The AmSouth line of credit is in the amount of $5,000,000.
Interest is payable quarterly at the 90 day-LIBOR rate plus 1%. Principal is due
and payable in full at maturity on September 1, 2001. The SunTrust line of
credit is in the amount of $5,000,000. Interest is payable quarterly at the
30-day LIBOR rate plus 0.9%. Principal is due and payable in full at maturity on
July 31, 2000.
In 1999, we borrowed $3,000,000 under the AmSouth line to fund our
investment in Paragon Commercial Bank. This debt is still outstanding. In March
2000, we borrowed $2,500,000 under the SunTrust line to provide additional
capital to Bank of Tennessee. Prior to completion of this offering, we
anticipate borrowing an additional $2,500,000 under the Sun Trust line to
provide more capital to Bank of Tennessee.
Assuming we sell 428,571 shares of common stock in this offering, we
intend to use the net proceeds of this offering to retire these borrowings, to
pursue additional strategic investments, and for general working capital. We
estimate the expenses of this offering to be approximately $95,000 and the net
proceeds from this offering to be approximately $11,905,000. We intend to use
the net proceeds as follows:
$ 3,000,000 - retire debt under the AmSouth line for Paragon
investment
5,000,000 - retire debt under the SunTrust line for Bank of
Tennessee capital
3,000,000 - new strategic investments
905,000 - working capital
----------
$11,905,000
===========
If we do not sell all 428,571 shares of this offering, our first
priority will be to use the net proceeds to retire our existing debt. We intend
to use any net proceeds remaining after retirement of our existing debt to
pursue new strategic investments or for internal working capital as our
directors may approve from time to time.
16
<PAGE> 18
MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK
We had 360 shareholders of record on March 31, 2000. Prior to this
offering, our common stock has not been traded on an established public trading
market, and quotations for the common stock have not been reported on any
market. As a result, there has been no regular market for the common stock, and
the sales prices known to us do not necessarily reflect the prices that would be
paid for the common stock in an active market. Adjusted for stock splits, our
common stock traded at prices between $20.83 and $25.00 per share during 1997,
between $25.00 and $26.40 per share during 1998 and between $20.80 and $29.00
per share during 1999. As of March 31, 2000, the most recent trade we are aware
of was at $30.00 per share.
The following table sets forth the amount of annual dividends we have
paid on our common stock during the years indicated. We have adjusted all per
share dividend amounts to reflect the six-for-five stock split effective on May
9, 1997 and the five-for-four stock split effective on May 13, 1999.
<TABLE>
<CAPTION>
CASH DIVIDEND
FISCAL YEAR DATE PAID PER SHARE
----------- --------- -------------
<S> <C> <C>
1997 February 28, 1997 .033
1998 March 12, 1998 .040
1999 June 1, 1999 .040
</TABLE>
We currently pay cash dividends on an annual basis and have paid
dividends every year since 1991. BancTenn Corp. is a legal entity separate and
distinct from Bank of Tennessee, and BancTenn Corp.'s revenues depend primarily
on the dividends it receives from Bank of Tennessee. Because we intend to
maximize the capital available to support the continued growth of Bank of
Tennessee and to pursue other strategic opportunities from time to time, we do
not anticipate paying substantial dividends to the holders of our common stock
in the foreseeable future. In addition, banking regulations limit the amount of
dividends that Bank of Tennessee can pay and require that Bank of Tennessee
maintain specified minimum levels of capital which, in turn, further limits the
amount of dividends that Bank of Tennessee can pay. See "Supervision and
Regulation--Payment of Dividends" on page 70 and "Supervision and
Regulation--Capital Adequacy" on page 71.
17
<PAGE> 19
DILUTION
As of March 31, 2000, our net tangible book value was $15.41 per share.
"Net tangible book value per share" is tangible net worth, or total tangible
assets less total liabilities, divided by the number of shares of common stock
outstanding. After giving effect to the sale of the shares of common stock
offered by this prospectus and after deducting estimated offering expenses, the
pro forma net tangible book value at March 31, 2000 would have been $18.20 per
share. This represents an immediate increase in the net tangible book value of
$2.79 per share to existing shareholders and an immediate dilution of $9.80 per
share to new investors purchasing shares in this offering. The following table
illustrates this per share dilution to new investors:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share.................................................. $28.00
Net tangible book value per share at March 31, 2000....................................... $15.41
Increase in net tangible book value per share attributable to new investors............... 2.79
------
Pro forma net tangible book value per share after offering....................................... 18.20
------
Dilution in net tangible book value per share to new investors................................... $ 9.80
======
</TABLE>
18
<PAGE> 20
CAPITALIZATION
The following table shows our capitalization as of March 31, 2000, and
as adjusted to give effect to the receipt of the net proceeds from the sale of
428,571 shares of common stock in the offering. The as adjusted capitalization
assumes that we will sell 428,571 shares of common stock at $28.00 per share and
that the net proceeds from the offering, after deducting the estimated offering
expenses payable by us, will be approximately $11,905,000.
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------------------
ACTUAL AS ADJUSTED
------------- -----------
<S> <C> <C>
Shareholders' Equity:
Preferred stock; $1.00 par value; 250,000 shares
authorized; no shares issued $ -- $ --
Common stock; $8.00 par value; 6,000,000 shares
authorized; 1,468,601 actual shares issued and
outstanding and 1,897,172 shares issued and
outstanding, as adjusted 11,748,808 15,177,376
Additional paid-in capital 2,422,320 10,898,752
Retained earnings 8,857,390 8,857,390
Accumulated other comprehensive income (loss) (402,044) (402,044)
------------ ------------
Total Shareholders' Equity $ 22,626,474 $ 34,531,474
============ ============
</TABLE>
19
<PAGE> 21
BUSINESS OF BANCTENN CORP.
BACKGROUND
The principal business activity of BancTenn Corp. is its ownership of
100% of the outstanding stock of Bank of Tennessee, which is a Tennessee
state-chartered bank. Bank of Tennessee was founded in 1974 and has operated
continuously under that name since opening for business. In 1984, Bank of
Tennessee purchased two branches of the former First Security Bank in Erwin,
Tennessee from the Federal Deposit Insurance Corporation. In 1985, Bank of
Tennessee effected a reorganization to establish BancTenn Corp. as a one-bank
holding company owning 100% of the outstanding stock of Bank of Tennessee. Bank
of Tennessee continues to operate as a traditional community bank in the
communities it serves. As of March 31, 2000, we operate nine banking offices in
three counties with $331.35 million in total assets.
In addition to our ownership of Bank of Tennessee, we also invest in de
novo banks in Tennessee and North Carolina. In 1999, we were instrumental in
founding Paragon Commercial Bank, a North Carolina state-chartered bank with its
principal office in Raleigh, North Carolina. We own 19.11% of Paragon's
outstanding stock, and our affiliates own an additional 11.46%. We are
considered a "source of strength" for Paragon under federal banking law. See
"Risk Factors" on page 7. We also have minor investment positions in three other
banks in North Carolina and two other banks in Tennessee. We own approximately
7.76% of the outstanding stock of Independence Bank, Kernersville, North
Carolina, and 5.00% of Mountain National Bank, Gatlinburg, Tennessee. We own
less than 1% of Cornerstone Bancshares, Inc., Chattanooga, Tennessee, and less
than 2% of Cornerstone Bank, Wilson, North Carolina. We have subscribed to
purchase approximately 1% of New Century Bank (Proposed), Dunn, North Carolina.
We are also affiliated with Carter County Bancorp, Inc., a one-bank
holding company, which owns 100% of the outstanding stock of Carter County Bank,
a Tennessee state-chartered bank. Carter County Bank's principal offices are in
Elizabethton, Tennessee, about 35 miles from our principal offices in Kingsport,
Tennessee. Our chairman, William B. Greene, Jr., is also the chairman and chief
executive officer of Carter County Bancorp, Inc. as well as its largest
shareholder. Mr. Greene beneficially owns approximately 50% of our outstanding
stock and he beneficially owns approximately 87% of the outstanding stock of
Carter County Bancorp, Inc. By virtue of this commonality of ownership, we and
Carter County Bancorp, Inc. are considered affiliates for regulatory purposes.
Within applicable regulatory constraints, Bank of Tennessee and Carter County
Bank sell each other loan participations from time to time. Additionally, Carter
County Bancorp., Inc. and Carter County Bank purchase data processing and other
back-room support services from our corporate services area known as Tennessee
General. Another of our directors, John E. Seward, Jr., is also a director of
Carter County Bancorp, Inc. and Carter County Bank. Mr. Seward is also a
director of the Federal Reserve Bank of Atlanta, in Atlanta, Georgia.
LINES OF BUSINESS
Through Bank of Tennessee, we provide a full range of banking services
to our customers including accepting deposits and making loans. Brick and mortar
facilities with people-to-people banking has been our mainstay since 1974. As
the financial industry becomes more technology-driven, we have developed new
products and business lines to meet the changing needs and desires
20
<PAGE> 22
of our customers. Bank of Tennessee offers a wide variety of checking, savings,
certificates of deposit and loan accounts. We also offer credit and debit cards,
mortgage loans, lines of credit, and limited degrees of electronic banking. Bank
of Tennessee expects to begin offering Internet banking in late 2000. Through
our business unit known as BT Financial Services we offer brokerage services in
conjunction with UVEST Investment Services, Inc., a third-party provider of
transaction services. We also offer accounts receivable financing through our
business line known as Business Manager. We offer data processing and back-room
support services through our corporate services area known as Tennessee General.
The following paragraphs describe our services in more detail:
- - REAL ESTATE LENDING. Our real estate loans consist of commercial and
residential construction loans, residential first and second mortgage
loans, home equity lines of credit, and term loans secured by first and
second mortgages on the residences of borrowers for home improvements,
education and other personal expenditures. We make residential mortgage
loans with a variety of terms, including fixed and floating rates.
Generally, we retain floating rate loans and sell fixed rate mortgage
loans into the secondary market. Almost all of our loans for
acquisition, development and construction purposes are secured by
commercial real estate, single-family residences or residential
development property.
Risks associated with real estate lending include fluctuations in the
value of real estate, new job creation trends, and the borrower's
financial stability. Real estate loans are made consistent with our
real estate lending policies which prescribe underwriting guidelines.
Real estate lending represents 62.74% of our total loans. Approximately
47.80% of our real estate loans are fixed rate loans and 52.20% are
variable rate loans. We have purchased approximately 6.52% of our real
estate loans from our affiliate, Paragon Commercial Bank, Raleigh,
North Carolina. See "Background" on page 21.
- - CONSUMER LENDING. We offer consumer installment loans primarily to
individuals for personal, family, and household purposes. We also offer
credit cards and home equity lines of credit to consumers. Consumer
lending presents unique risks. Consumer loan repayments depend upon a
borrower's financial stability and are more likely to be adversely
affected by job loss, divorce, illness and other personal hardships. In
addition, collateral such as automobiles and other personal property
securing consumer loans depreciates rapidly and sometimes is an
inadequate repayment source if a borrower defaults. In evaluating these
loans, we require our lending officers to review the borrower's level
and stability of income, past credit history, and the impact of these
factors on the borrower's ability to repay the loan in a timely manner.
The Bank of Tennessee board of directors has approved lending policies
that prescribe the standards and procedures to be followed in making
consumer loans. Consumer loans represent 14.38% of our total loans.
Approximately 85.51% of our consumer loans are fixed rate loans and
14.49% are variable rate loans.
- - COMMERCIAL LENDING. Our commerciaL loan portfolio is dispersed among
various business lines. These loans include a wide variety of small
businesses, commercial real estate (both owner-occupied and investment
property), and acquisition and development and construction lending.
These loans are primarily for the financing of property and plants used
in the course of business by these business operators and, to a lesser
degree, for the financing of equipment, inventory and accounts
receivable. The remainder is made up of loans on properties that may be
deemed investment property.
21
<PAGE> 23
Commercial lending entails greater risks than traditional,
single-family residential lending. Commercial loans typically involve
larger loan balances concentrated among fewer borrowers. The analysis
of commercial loans, which requires expertise in evaluating a
commercial enterprise and its collateral, is generally more complex
than the analysis required for single family residential lending. Like
real estate and consumer loans, commercial loans are subject to adverse
conditions in the economy, as well as the market for the specific goods
and services sold by the commercial borrower. Loans secured by
commercial real estate can also be affected by trends in the local real
estate market. In making all these loans, we manage our credit risk by
actively monitoring measures such as cash flow, collateral value and
other appropriate credit factors. Commercial loans represent 22.88% of
our total loans. Approximately 59.02% of our commercial loans are fixed
rate loans and 40.98% are variable loans.
- - DEPOSITS AND OTHER BORROWINGS. Deposits are the key component of our
banking business, serving as the primary source of funding for lending
as well as for increasing customer account relationships. We offer
competitively priced deposit products, including checking, savings and
time deposit accounts, as we seek to increase core deposits and market
share in the counties where we operate. Borrowings, principally from
Federal Funds lines of credit with other banks, provide sources of
additional liquidity and funding.
- - BROKERAGE SERVICES/INVESTMENTS. We provide brokerage services through
BT Financial Services which offers our customers a wide variety of
investment options, including stocks and bonds, mutual funds,
annuities, 401(k) plans, life insurance, Individual Retirement Accounts
and Simplified Employee Pension Accounts, estate planning and financial
needs analysis. We contract with UVEST Investment Services, Inc. for
the transaction support necessary to provides these services.
- - ACCOUNTS RECEIVABLE. We provide accounts receivable financing through
the Business Manager program. Business Manager is a process through
which we finance existing receivables on a discounted basis and take
over the responsibility for billing our customer's clients and
collecting their payments. This service provides business owners with
needed liquidity. We hold reserves from our customers against their
accounts receivable, and we charge delinquent accounts receivable
against these reserves.
- - CORPORATE SERVICES. Through our corporate services area known as
Tennessee General, we provide data processing and support services to
other businesses. Support services include accounting, human resources,
loan administration and loan review. As of March 31, 2000, we provided
these services to eleven other financial institutions including our
affiliates, Paragon Commercial Bank and Carter County Bank, as well as
four nonbanking businesses. See "Business of BancTenn Corp. - Lines of
Business" on page 21.
22
<PAGE> 24
We have developed brokerage and accounts receivable services as a
strategy to retain existing customers, to attract additional customers from our
market areas, and to enhance our franchise by offering a broader scope of
financial services. We developed the data processing and related back-room
support services to take advantage of excess capacity in our data processing
capabilities and to offer fee-based services to other businesses.
Our operating revenues are derived primarily from interest earned from
our loan and investment securities portfolios and fee income from loan and
deposit products and corporate services. We do not depend upon a single
customer, or a few customers, the loss of any one or more of which would have a
material adverse effect on our financial condition or our results of operations.
Additionally, under the provisions of the Gramm-Leach-Bliley Act, which
became effective on March 11, 2000, a bank holding company may engage in
activities which are financial in nature or incidental or complementary to a
financial activity. While, at the present time, we have determined not to pursue
any expanded financial services, we will continue to evaluate how these
opportunities might fit our strategic plan. See "Supervision and Regulation -
Permitted Activities" on page 68.
MARKET AREAS
Based on call report data as of June 30, 1999, Bank of Tennessee ranked
27th in asset size out of 202 state and national FDIC-insured banks operating in
Tennessee. We operate principally in northeast Tennessee, and our branches are
located in Sullivan, Washington and Unicoi counties. We have a total of 9 branch
banking offices. Our primary market area is the three-county region in which we
have branches, and our secondary market includes counties contiguous to that
region. Bank of Tennessee also purchases loan participations from Paragon
Commercial Bank and other banks in North Carolina and Tennessee with which Bank
of Tennessee has an affiliate or service relationship. Our board of directors
has approved a policy whereby up to 20% of Bank of Tennessee's total loans can
in the form of loan participations from these banks.
The following chart describes the communities in which we operate.
Market share data is based on deposit information available from the FDIC as of
June 30, 1999. Population household and income figures are available from the
First Tennessee Development District as of 1998 [Demographics USA-County
Edition, Market Statistics, 1999 edition], and unemployment rates are January
31, 2000 estimates by the Tennessee Department of Labor.
<TABLE>
<CAPTION>
MEDIAN
HOUSEHOLD
EFFECTIVE BUYING UNEMPLOYMENT DEPOSIT MARKET
COUNTY POPULATION HOUSEHOLDS INCOME RATE SHARE
- ------ ---------- ---------- ------ ---- -----
<S> <C> <C> <C> <C> <C>
Sullivan 150,617 60,667 $32,591 3.3% 8.79%
Washington 102,211 40,547 30,673 4.0% 5.01%
Unicoi 17,216 7,007 24,314 8.0% 24.04%
</TABLE>
23
<PAGE> 25
COMPETITION
We compete with several local, regional and national commercial banks,
thrifts, credit unions and mortgage companies for deposits, loans, and other
banking-related financial services. There is intense competition in our market
areas from other financial institutions as well as other "non-bank" companies
that engage in similar activities. Some of our competitors are not subject to
the degree of regulatory review and restrictions that apply to us. In addition,
we must compete with much larger financial institutions that have greater
financial resources than we do and that compete aggressively for market share.
These competitors attempt to gain market share through their financial product
mix, pricing strategies and banking center locations. Legislative developments
related to financial holding companies which have expanded powers, interstate
branching and banking in general are creating more competitive pressure on
smaller financial institutions by providing large banking institutions easier
access to a broader marketplace. We also compete with insurance companies,
savings banks, consumer finance companies, investment banking firms, brokerage
houses, mutual fund managers, investment advisors, and credit unions. Retail
establishments compete for loans by offering credit cards and retail installment
contracts for the purchase of goods and merchandise.
We anticipate that competition from both bank and non-bank entities
will continue to grow. We have been able to compete effectively with other
financial institutions by:
- emphasizing customer service and local office decision-making;
- establishing long-term customer relationships and building
customer loyalty; and
- providing products and services designed to address the
specific needs of our customers.
EMPLOYEE RELATIONS
As of March 31, 2000, we had 149 employees, of whom 118 were full-time
and 31 were part-time. In addition to a bonus program, we currently maintain an
employee benefit program providing, among other benefits, a medical insurance
plan, a 401(k) retirement plan, and life and disability insurance. From time to
time we also grant options to some of our senior management officers to purchase
shares of stock in BancTenn Corp. under our Employee Stock Incentive Plan. We
have also adopted an Employee Stock Purchase Plan generally available to all of
our employees under which options are made available on an annual basis. We
consider these employee benefits, as a whole, to be generally competitive with
employee benefits provided by other employers in our market area. We believe our
future success depends, in part, on our ability to continue to attract and
retain skilled retail, technical, and managerial personnel in order to maintain
our quality delivery of financial and banking services. None of our employees is
subject to a collective bargaining agreement, and we have never experienced a
work stoppage.
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<PAGE> 26
FACILITIES
Our executive and main banking offices are located at 301 East Center
Street, Kingsport, Tennessee 37660. Our principal support and operational
functions are located at 320 Hanover Drive, Johnson City, Tennessee. All of our
offices are located in Tennessee.
The following chart shows the location of each office and indicates
whether each office is owned or leased.
<TABLE>
<CAPTION>
OWNED (O)
BANKING OFFICES LEASED (L)
--------------- ----------
<S> <C>
KINGSPORT
Main Office O
301 East Center Street
Kingsport, TN 37660-4801
Eastman Road Office O
1708 North Eastman Road
Kingsport, TN 37664
Colonial Heights Office O
4214 Fort Henry Drive
Kingsport, TN 37663-2224
JOHNSON CITY
112 Mountcastle Drive O
Johnson City, TN 37601-2522
1328 W. State of Franklin Road O
Johnson City, TN 37601
JONESBOROUGH
501 E. Jackson Blvd. O
Jonesborough, TN 37659
BRISTOL
308-B Eighth Street L
Bristol, TN 37620
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
OWNED (O)
BANKING OFFICES LEASED (L)
--------------- ----------
<S> <C>
ERWIN
1230 N. Main Street O
Erwin, TN 37650-1236
BLOUNTVILLE
3261 West Main Street O
Blountville, TN 37617
NONBANKING OFFICES
Corporate Offices O
301 East Center Street
Kingsport, TN 37660-4801
BT Financial Services O
112 Mountcastle Drive
Johnson City, TN 37601
Tennessee General O
3200 Hanover Road
Johnson City, TN 37604
</TABLE>
LEGAL PROCEEDINGS
In the ordinary course of operations, we are a party to various legal
proceedings. In the opinion of our management, there is no proceeding pending
or, to our knowledge, threatened in which an adverse decision would have a
material adverse effect on our financial condition or results of operations.
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations analyzes the major elements of our Consolidated Statements of
Financial Condition and Consolidated Statements of Income. This section should
be read in conjunction with our financial statements and accompanying notes and
other detailed information appearing elsewhere in this prospectus.
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
OVERVIEW
The three-month period ended March 31, 2000 was marked by continued
strong loan demand. Total loans increased $56.93 million or 27.0 %, compared to
March 31, 1999, as a result of the internal growth of our real estate
construction and mortgage loan portfolios.
Net income for the three months ended March 31, 2000 was $567,804,
which was $36,210 or 5.99% less than net income for the three months ended March
31, 1999. Basic and diluted earnings per common share were $.39 and $.37,
respectively, for the three months ended March 31, 2000 and $.42 and $.40,
respectively, for the three months ended March 31, 1999. Annualized return on
average assets and return on average common equity were .74% and 11.14%,
respectively, for the three months ended March 31, 2000 compared to .95% and
13.22%, respectively, for the same period in 1999. Our annualized efficiency
ratio, calculated by dividing total noninterest expense (excluding securities
gains and losses) by net interest income plus noninterest income, was 69.64% for
the three months ended March 31, 2000 and 64.12% for the three months ended
March 31, 1999. The adverse change in the efficiency ratio was primarily due to
increased compensation expense and the recognition of our share of Paragon
Commercial Bank's loss from operations. Paragon Commercial Bank began
operations in May, 1999 and, thus, had no impact on the first quarter 1999
results.
Total assets at March 31, 2000 increased to $335.90 million from
$264.75 million at March 31, 1999 and $299.63 million at December 31, 1999, an
increase of 26.88% and 12.10%, respectively. Deposits rose to $283.35 million at
March 31, 2000 from $226.47 million at March 31, 1999 and $263.57 million at
December 31, 1999, an increase of 25.11% and 7.51%, respectively. Total
shareholders' equity was $22.63 million at March 31, 2000, representing an
increase of 10.37% over total shareholders' equity at March 31, 1999 and 1.98%
over total shareholders' equity at December 31, 1999.
RESULTS OF OPERATIONS
NET INTEREST INCOME. Net interest income represents the amount by which
interest income on interest-earning assets, including securities and loans,
exceeds interest expense incurred on interest-bearing liabilities, including
deposits and other borrowed funds. Net interest income is the principal source
of our earnings. Interest rate fluctuations, as well as changes in the amount
and type of earning assets and liabilities, combine to affect net interest
income.
27
<PAGE> 29
Net interest income for the three months ended March 31, 2000 was $2.62
million compared to $2.42 million for the three months ended March 31, 1999, an
increase of $.20 million or 8.62%. Net interest income increased as a result of
significant loan growth. Loans, net of unearned income, increased to $267.77
million at March 31, 2000 from $210.84 million at March 31, 1999, an increase of
$56.93 million or 27.00%. The yield on average interest-earning assets increased
to 8.07% for the three months ended March 31, 2000 from 7.73% for the three
months ended March 31, 1999. The cost of interest-bearing liabilities increased
to 4.89% for the three months ended March 31, 2000 from 4.32% for the three
months ended March 31, 1999. Our net interest margin on a tax-equivalent basis
was 3.72% and 4.01% and our interest rate spread was 3.18% and 3.41% for the
periods ended March 31, 2000 and March 31, 1999, respectively. We were unable to
offset completely the increase in the cost of interest bearing liabilities
through rate increases on earning assets.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charged to
income to bring our allowance for loan losses to a level deemed appropriate by
management based on the factors discussed under "--Financial
Condition--Allowance for Loan Losses." The provision for loan losses was
$215,000 for the three months ended March 31, 2000 and $150,000 for the same
time period in 1999, an increase of $65,000 or 43.33%. This increase is
attributable to our loan growth.
NONINTEREST INCOME. Noninterest income is an important source of
revenue for financial institutions. Service charges on deposit accounts are the
largest component of noninterest income and a significant source of revenue for
us. Noninterest income for the three months ended March 31, 2000 was $924,664,
an increase of $305,700 or 49.0% from $618,964 for the same period in 1999. This
increase is primarily attributable to service charges on deposits and fee income
from services provided to other financial institutions.
NONINTEREST EXPENSE. In the three-month period ended March 31, 2000,
noninterest expense increased $525,996 or 27.03% to $2.47 million from $1.95
million for the period ended March 31, 1999. The increase reflected a 23.78%
increase in salaries and employee benefits due to several new positions added
for the new business lines.
INCOME TAXES. Income tax expense includes both federal income tax and
Tennessee state income tax. The amount of federal income tax expense is
influenced by the amount of taxable income, the amount of tax-exempt income, the
amount of non-deductible interest expense and the amount of other non-deductible
expenses. During the three months ended March 31, 2000, income tax expense was
$294,397 compared to $335,269 for the three months ended March 31, 1999. The
effective tax rate for the three months ended March 31, 2000 was 34.14% compared
to 35.69% for the same period of 1999.
IMPACT OF INFLATION. The effects of inflation on the local economy and
on our operating results have been relatively modest for the past several years.
Since substantially all of our assets and liabilities are monetary in nature,
such as cash, securities, loans and deposits, their values are less sensitive to
the effects of inflation than to changing interest rates, which do not
necessarily change in accordance with inflation rates. We try to control the
impact of interest rate fluctuations by managing the relationship between our
interest rate sensitive assets and liabilities. See "Financial
Condition--Interest Rate Sensitivity and Liquidity" on page 44.
28
<PAGE> 30
FINANCIAL CONDITION
LOAN PORTFOLIO. Loans, net of unearned income, were $267.77 million at
March 31, 2000, an increase of $56.93 million or 27.00% from $210.84 million at
March 31, 1999. Real estate construction loans increased to $8.64 million at
March 31, 2000 from $6.67 million at March 31, 1999, a $1.97 million or 29.47%
increase. Real estate mortgage loans increased to $159.35 million at March 31,
2000 from $123.08 million from March 31, 1999, a $36.27 million or 29.47%
increase. These loan portfolio increases have resulted from management's
implementation of a strategy to increase the loan portfolio by hiring additional
personnel.
NONPERFORMING ASSETS. We have several procedures in place to assist in
maintaining the overall quality of our loan portfolio. We have established
written guidelines contained in our lending policy for the collection of past
due loan accounts. These written guidelines explain in detail our policy on the
collection of loans over 30, 60, and 90 days delinquent. Generally, loans over
90 days delinquent are placed in a nonaccrual status. However, if the loan is
deemed to be in process of collection, it may be maintained on an accrual basis.
Management makes loan officers aware of our lending policy and the collection
policy contained in the lending policy on a continuous basis. Management has
also staffed our collection department with properly trained staff to assist
lenders with collection efforts and to maintain records and develop reports on
delinquent borrowers.
We have historically had strong asset quality. There were $.355 million
or 0.13% of total loans and other real estate in nonperforming assets at March
31, 2000 compared to $.218 million or 0.10% of total loans and other real estate
at March 31, 1999. Despite the increase during the period, nonperforming assets
remain less than 1% of total loans and other real estate. For the periods ended
March 31, 2000 and 1999, approximately $6,673 and $1,698 of interest income
would have been recorded on nonperforming loans, if all such loans had been
accruing interest at the original contract rate. We record real estate acquired
through foreclosure at the lesser of the outstanding loan balance or the fair
value at the time of foreclosure, less estimated cost to sell. We usually
dispose of real estate acquired through foreclosure within one year; however, if
we are unable to dispose of the foreclosed property, the property's value is
assessed annually and written down to its fair value less cost to sell.
29
<PAGE> 31
The following table presents information regarding nonperforming assets
at March 31, 2000 and March 31, 1999:
<TABLE>
<CAPTION>
MARCH 31,
2000 1999
(DOLLARS IN THOUSANDS)
----------------------
<S> <C> <C>
Nonperforming assets -
Nonaccrual loans $ -- $ --
Restructured loans -- --
Other real estate and repossessions 355 218
-------- --------
Total nonperforming assets $ 355 $ 218
======== ========
Loans past due 90 days or more and still
accruing $ 241 $ 107
======== ========
Ratio of past due loans to loans, net of unearned income (1) 0.34% 0.28%
Ratio of nonperforming assets to loans, net of unearned income and other
real estate 0.13% 0.10%
</TABLE>
(1) Excludes mortgage loans held for sale
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is a reserve
established through charges to earnings in the form of a provision for loan
losses. Management has established an allowance for loan losses which it
believes is adequate for inherent losses in our loan portfolio. Based on a
continuous credit evaluation of the loan portfolio, management presents a
monthly review of the allowance for loan losses to the board of directors. The
review that management has developed primarily focuses on risk by evaluating the
level of loans in certain risk categories. These categories have also been
established by management and take the form of loan grades. These loan grades
closely mirror regulatory classification guidelines and include pass categories
1 through 4 and special mention, substandard, doubtful, and loss categories of 5
through 8, respectively. By grading the loan portfolio in this manner,
management is able to effectively segregate the portfolio by risk, which
management believes is the most effective way to analyze the loan portfolio and
the adequacy of the reserve for loan losses. Also, management reviews activity
in the allowance for loan losses, such as charge-offs and recoveries, during a
quarter to identify trends.
We follow a loan review program to evaluate the credit risk in the loan
portfolio. Through the loan review process, we maintain an internally classified
loan list which, along with the delinquency list of loans, helps management
assess the overall quality of the loan portfolio and the adequacy of the
allowance for loan losses. Loans classified as "substandard" are those loans
with clear and defined weaknesses such as a highly-leveraged position,
unfavorable financial ratios, uncertain financial ratios, uncertain repayment
sources, or poor financial condition which may jeopardize recoverability of the
debt. Loans classified as "doubtful" are those loans that have characteristics
similar to substandard loans but have an increased risk of loss, or at least a
portion of the loan may require to be charged-off if liquidated. Loans
classified as "loss" are those loans that are in the process of being
charged-off.
30
<PAGE> 32
For the three months ended March 31, 2000, net charge-offs totaled
$33,000 or 0.05% (annualized) of average loans outstanding for the period
compared to $59,000 in net charge-offs or 0.11% (annualized) of average loans
outstanding at March 31, 1999. For the three months ended March 31, 2000, we
recorded a provision for loan losses of $215,000 compared to $150,000 for the
period ended March 31, 1999. At March 31, 2000 the allowance totaled $2.582
million and represented .96% of gross loans.
The following table presents an analysis of the allowance for loan
losses and other related data:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED MARCH 31,
2000 1999
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Average loans outstanding $251,277 $209,324
======== ========
Total loans, net of unearned income, at end of period $270,356 $212,829
======== ========
Allowance for loan losses at beginning of period $ 2,400 $ 1,899
Provision for loans losses 215 150
Charge-offs:
Commercial and industrial -- (34)
Real estate (30) --
Consumer (14) (45)
Recoveries:
Commercial and industrial -- 4
Real estate -- 8
Consumer 11 8
-------- --------
Net charge-offs $ (33) $ (59)
-------- --------
Allowance for loan losses at end of period $ 2,582 $ 1,990
======== ========
Ratio of allowance to end of period loans 0.96% 0.94%
Ratio of net charge-offs to average loans 0.01% 0.03%
Ratio of allowance to end of period nonperforming loans 543.58% 1474.07%
</TABLE>
31
<PAGE> 33
The following table describes the allocation of the allowance for loan
losses among various categories of loans and other information for the dates
indicated. The allocation is made for analytical purposes and is not necessarily
indicative of the categories in which losses may occur. The total allowance is
available to absorb losses from any segment of loans.
<TABLE>
<CAPTION>
MARCH 31, 2000 MARCH 31, 1999
--------------------- --------------------
PERCENT OF PERCENT OF
LOANS TO LOANS TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
--------------------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance of allowance for loan losses applicable to:
Commercial and industrial $1,332 22.66% $ 882 13.90%
Real estate 420 61.76% 199 60.97%
Consumer and other 450 15.58% 502 25.13%
Unallocated 380 -- 407 --
--------------------- ------------------
Total allowance for loan losses $2,582 100.00% $1,990 100.00%
===================== ==================
</TABLE>
We believe that the allocation of our allowance for loan losses is
reasonable. When management is able to identify specific loans or categories of
loans where specific amounts of reserve are required, allocations are assigned
to those categories. Federal and state bank regulators also require that a bank
maintain a reserve that is sufficient to absorb an estimated amount of
unidentified potential losses based on management's perception of economic
conditions, loan portfolio growth, historical charge-off experience and exposure
concentrations.
We believe that the allowance for loan losses at March 31, 2000 is
adequate to cover losses inherent in the portfolio as of such date. There can be
no assurance that we will not sustain losses in future periods, which could be
substantial in relation to the size of the allowance at March 31, 2000.
INVESTMENT SECURITIES. We use our securities portfolio both as a source
of income and as a source of liquidity. At March 31, 2000, investment securities
totaled $39.46 million, an increase of $6.30 million from $33.16 million at
March 31, 1999. At March 31, 2000, investment securities represented 11.75% of
total assets, compared to 12.53% of total assets at March 31, 1999. The average
yield on a fully taxable equivalent basis on the investment portfolio for the
three months ended March 31, 2000 was 5.89% compared to a yield of 5.54% for the
three months ended March 31, 1999.
Mortgage-backed securities are securities that have been developed by
pooling real estate mortgages and are principally issued by federal agencies
such as Fannie Mae and the Federal Home Loan Mortgage Corporation. These
securities are deemed to have high credit ratings, and minimum regular monthly
cash flows of principal and interest are guaranteed by the issuing agencies.
At March 31, 2000, 8.45% of the mortgage-backed securities we held had
contractual final maturities of more than ten years. However, unlike U.S.
Treasury and U.S. government agency securities, which have a lump sum payment at
maturity, mortgage-backed securities provide cash flows from regular principal
and interest payments and principal prepayments throughout the lives of the
securities. Mortgage-backed securities which are purchased at a premium will
generally suffer decreasing net yields as interest rates drop because home
owners tend to refinance their mortgages. Thus, the premium paid must be
amortized over a shorter period. Therefore, these securities
32
<PAGE> 34
purchased at a discount will obtain higher net yields in a decreasing interest
rate environment. As interest rates rise, the opposite will generally be true.
During a period of increasing interest rates, fixed rate mortgage-backed
securities do not tend to experience heavy prepayments of principal and
consequently, the average life of this security will not be unduly shortened. If
interest rates begin to fall, prepayments will increase.
We have adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("Statement
115"). At the date of purchase, we are required to classify debt and equity
securities into one of three categories: held-to-maturity, trading or
available-for-sale. At each reporting date, the appropriateness of the
classification is reassessed. Investments in debt securities are classified as
held-to-maturity and measured at amortized cost in the financial statements only
if management has the positive intent and ability to hold those securities to
maturity. Securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading and measured at fair
value in the financial statements with unrealized gains and losses included in
earnings. We do not have any securities classified as trading securities.
Investments not classified as either held-to-maturity or trading are classified
as available-for-sale and measured at fair value in the financial statements
with unrealized gains and losses reported, net of tax, in accumulated other
comprehensive income, a separate component of shareholders' equity, until
realized.
DEPOSITS. We offer a variety of deposit accounts having a wide range of
interest rates and terms. Our deposits consist of demand, savings, money market
and time accounts. We rely primarily on competitive pricing policies and
customer service to attract and retain these deposits. During all of 1999 and
the first quarter of 2000, we established pricing policies designed to generate
the significant deposit growth necessary to fund our lending and investment
activities.
Our lending and investing activities are funded principally by
deposits. Approximately 87.63% of our deposits are interest bearing and 12.37%
are non-interest bearing at March 31, 2000. Our total deposits at March 31, 2000
were $283.35 million, an increase of $56.88 million or 25.11% over total
deposits at March 31, 1999. Interest bearing deposits were $248.30 million at
March 31, 2000, an increase of $54.14 million or 27.88% from $194.16 million at
March 31, 1999. Non-interest bearing deposits were $35.06 million at March 31,
1999, an increase of $2.74 million or 8.48% from $32.32 million at March 31,
1999.
Our average total deposits at March 31, 2000 were $272.69 million, an
increase of 22.00% over average total deposits of $223.52 million at March 31,
1999. Average interest-bearing deposits through March 31, 2000 were $241.78
million, an increase of $50.90 million or 26.67% compared to $190.88 million for
the first three months of 1999. The average non-interest bearing deposits
through March 31, 2000 were $30.92 million, a decrease of $1.72 million or
- -5.28% compared to $32.64 million for the first three months of 1999.
Approximately 11.34% of total average deposits at March 31, 2000 were
non-interest bearing. As a result, our average cost of deposits was 4.33% for
the period ending March 31, 2000.
We expect that the majority of our certificates of deposit maturing
within one year will renew or be replaced. Should this not occur, management
believes that there will be sufficient cash to fund payments.
33
<PAGE> 35
OTHER BORROWINGS. Deposits are the primary source of funds for our
lending and investment activities. We also have borrowing ability from the
Federal Reserve discount window, backed by a portion of our commercial loan
portfolio. Our weighted average interest rate for the period ended March 31,
2000 was 5.5%. For a more detailed discussion of our borrowings, see note 16 to
the Consolidated Financial Statements included in this prospectus.
CAPITAL RESOURCES. Capital management consists of providing equity to
support both current and future operations. We are subject to capital adequacy
requirements imposed by the Federal Reserve, and Bank of Tennessee is subject to
capital adequacy requirements imposed by the FDIC and the Tennessee State
Department of Financial Institutions. Both the Federal Reserve and the FDIC have
adopted risk-based capital requirements for assessing bank holding company and
bank capital adequacy. These standards define capital and establish minimum
capital requirements in relation to assets and off-balance sheet exposure,
adjusted for credit risk. The risk-based capital standards currently in effect
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among bank holding companies and banks, to account
for off-balance sheet exposure and to minimize disincentives for holding liquid
assets. Assets and off-balance sheet items are assigned to broad risk
categories, each with appropriate relative risk weights. The resulting capital
ratios represent capital as a percentage of total risk-weighted assets and
off-balance sheet items.
The risk-based capital standards issued by the Federal Reserve require
all bank holding companies to have "Tier 1 capital" of at least 4.0% and "total
risk-based" capital of at least 8.0% of total risk-adjusted assets. "Tier 1
capital" generally includes common shareholders' equity and qualifying perpetual
preferred stock together with related surpluses and retained earnings, less
deductions for goodwill and various other intangibles. "Tier 2 capital" may
consist of a limited amount of intermediate-term preferred stock, a limited
amount of term subordinated debt, specified hybrid capital instruments and other
debt securities, perpetual preferred stock not qualifying as Tier 1 capital, and
a limited amount of the general valuation allowance for loan losses. The sum of
Tier 1 capital and Tier 2 capital is "total risk-based capital."
The Federal Reserve has also adopted guidelines which supplement the
risk-based capital guidelines with a minimum leverage ratio of Tier 1 capital to
average total consolidated assets of 3.0% for institutions that are generally
considered to be the strongest banking organizations, rated composite 1 under
applicable federal guidelines, and that are not experiencing or anticipating
significant growth. Other banking organizations are required to maintain a
leverage ratio of at least 4.0% to 5.0%. These rules further provide that
banking organizations experiencing internal growth or making acquisitions will
be expected to maintain capital positions substantially above the minimum
supervisory levels and comparable to peer group averages, without significant
reliance on intangible assets. Under Federal Reserve guidelines BancTenn Corp.
is classified as well capitalized.
Bank of Tennessee is subject to capital adequacy guidelines of the FDIC
that are substantially similar to the Federal Reserve's guidelines. Also, the
FDIC has promulgated regulations setting the levels at which an insured
institution such as Bank of Tennessee would be considered "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized"
and "critically undercapitalized" for purposes of prompt corrective action.
Under the FDIC's regulations, Bank of Tennessee is classified as "well
capitalized." See "Supervision and Regulation -- Prompt Corrective Action" on
page 73.
34
<PAGE> 36
Shareholders' equity increased to $22.63 million at March 31, 2000 from
$20.50 million at March 31, 1999, an increase of $2.13 million or 10.37%. This
increase was primarily the result of net income of $2.88 million, less dividends
paid on common stock of approximately $0.30 million, less change in unrealized
loss on securities available for sale of approximately $0.45 million.
YEAR 2000 COMPLIANCE
We have not experienced any material interruptions or operational
problems associated with Y2K concerns. To date, we are not aware of any
significant problems encountered by our customers or suppliers. Although January
1, 2000 was identified in the banking industry as potentially the most
troublesome date, industry experts have also identified other dates as
presenting possible threats. Based upon our experience to date and feedback we
have received from our borrowers, customers and suppliers, we do not anticipate
any material problems in the performance of our loan portfolio nor any material
interruptions in the services we provide to our customers or receive from our
suppliers.
35
<PAGE> 37
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
OVERVIEW
Net income was $2.23 million and $1.94 million for the years ended
December 31, 1999 and 1998, respectively. Basic earnings per share were $1.56
and $1.37 for these same periods whereas diluted earnings per share were $1.49
and $1.31. Earnings growth from 1997 to 1998 and from 1998 to 1999 resulted
principally from an increase in net interest income that primarily was driven by
strong loan demand and an increase in noninterest income as a result of the
addition and the continued growth of several fee-based lines of business. We
posted returns on average assets of .83% and .84% and returns on average equity
of 11.69% and 10.90% for the years ended December 31, 1999 and 1998,
respectively. Our efficiency ratio was 67.57% in 1999 and 67.76% in 1998.
Total assets at December 31, 1999 and 1998 were $299.63 million and
$254.69 million, respectively. Total deposits at December 31, 1999 and 1998 were
$263.57 million and $220.89 million, respectively. Loans, net of unearned income
and allowance for loan losses, were $238.15 million at December 31, 1999, an
increase of $34.16 million or 16.74% from $203.99 million at the end of 1998.
Loan growth not considering the increase in the allowance for loan losses was
16.74%. Shareholders' equity was $22.19 million and $19.98 million at December
31, 1999 and 1998, respectively.
RESULTS OF OPERATIONS
NET INTEREST INCOME. Net interest income for 1999 was $ 9.97 million,
compared to $8.80 million for 1998, an increase of $1.17 million or 13.30%. The
improvement in net interest income for 1999 was primarily due to the increase in
total interest earning assets, primarily in the loan portfolio. During 1999, the
yield on interest earning assets decreased 19 basis points to 8.00% in 1999 from
8.19% in 1998. The cost of funds decreased 22 basis points to 4.46% in 1999 from
4.68% in 1998. The net interest margin benefited from the declining interest
rate environment in 1998 and early 1999. In the middle part of 1999 the Federal
Reserve began raising interest rates that had the effect of decreasing our net
interest margin.
Our net interest income in 1998 was $8.80 million, an increase of
17.12% over the 1997 level of $7.51 million, due to loan growth and a stable net
interest margin. The improvement in net interest income for 1998 was primarily
due to the increase in total interest earning assets, primarily in the loan
portfolio. During 1998, the yield on interest earning assets increased 12 basis
points to 8.19% in 1998 from 8.07% in 1997 due to the decrease in volume of
higher yielding loans. The cost of funds remained constant at 4.68% in 1998 and
1997.
The following table presents the total dollar amount of average
balances, interest income from average interest-earning assets and the resulting
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. We had no nonaccrual loans at December 31,
1999 and 1998, respectively.
36
<PAGE> 38
<TABLE>
<CAPTION>
1999 1998
---------------------------------------- ------------------------------------
YIELD/ YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
---------------------------------------- ------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ASSETS
INTEREST-EARNING ASSETS:
Loans, net of unearned income(1) $218,875 $18,029 8.24% $177,215 $15,208 8.58%
Investment securities:
Taxable 21,939 1,343 6.12% 25,936 1,621 6.25%
Non-taxable(2) 7,184 472 6.57% 5,988 380 6.35%
Fed funds sold 662 34 5.13% 3,405 188 5.52%
----------------------- -----------------------
Total interest-earning assets 248,660 19,878 8.00% 212,544 17,397 8.19%
------- -------
Holding Company Debt 958 0
Cash and due from bank 11,030 9,523
Premises and Equipment 7,687 7,675
Other real estate owned 129 87
Other 2,047 1,538
-------- --------
Noninterest-earning assets 21,850 18,823
-------- --------
Total assets $270,510 $231,367
======== ========
AVERAGE LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Demand and money market deposits $ 59,434 1,824 3.07% $ 51,763 1,745 3.37%
Savings deposits 14,330 284 1.98% 14,018 330 2.35%
Time deposits 129,555 6,877 5.31% 106,323 5,995 5.64%
Federal funds and other borrowings 14,909 759 5.09% 8,949 400 4.47%
----------------------- -----------------------
Total interest-bearing liabilities 218,228 9,744 4.47% 181,053 8,470 4.68%
------- -------
Demand Deposits 31,598 31,114
Other 1,568 1,376
Non-interest-bearing liabilities 33,167 32,489
-------- --------
Total liabilities 251,395 213,542
Shareholders' equity 19,115 17,825
-------- --------
Total liabilities and
shareholders' equity $ 270,510 $ 231,367
========= =========
Net interest income $ 10,134 $ 8,927
======== =======
Interest rate spread 3.53% 3.51%
Net interest rate margin(3) 4.08% 4.20%
</TABLE>
(1) Fee income related to loans of $1,351,000 and $ 950,000 for the years
December 31, 1999 and 1998, respectively, is included in interest
income.
(2) In order to make pre-tax income and resulting yields on tax-exempt
investments comparable to those on taxable investments, a
tax-equivalent adjustment has been computed using a federal income tax
rate of 34%.
(3) The net interest margin is equal to net interest income divided by
average interest-earning assets.
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<PAGE> 39
The following schedule presents the dollar amount of changes in
interest income and interest expense for the major components of
interest-earning assets and interest-bearing liabilities and distinguishes
between the increase related to higher outstanding balances and the change in
interest rates. For purposes of this table, changes attributable to both rate
and volume that cannot be segregated have been allocated to rate.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
1999 vs. 1998 1998 vs. 1997
INCREASE/(DECREASE) DUE TO INCREASE/(DECREASE) DUE TO
VOLUME RATE TOTAL VOLUME RATE TOTAL
-------------------------------------- --------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $ 3,574 $(754) $ 2,820 $ 3,121 $(202) $ 2,919
Investment securities:
Taxable (250) (28) (278) (286) 10 (276)
Non-taxable 76 17 93 55 137 192
Federal funds sold (151) (3) (154) (83) 1 (82)
------- ----- ------- ------- ----- -------
Total increase/(decrease) in
interest income $ 3,249 $(768) $ 2,481 $ 2,807 $ (54) $ 2,753
------- ----- ------- ------- ----- -------
INTEREST-BEARING LIABILITIES:
Demand and money market
deposits $ 259 $(180) $ 79 $ 294 $ (37) $ 257
Savings deposits 7 (53) (46) (6) (37) (43)
Time deposits 1,310 (428) 882 1,175 5 1,180
Federal funds purchased
and other borrowings 266 93 359 (25) (32) (57)
------- ----- ------- ------- ----- -------
Total increase/(decrease) in
interest expense $ 1,842 $(568) $ 1,274 $ 1,438 $(101) $ 1,337
------- ----- ------- ------- ----- -------
Increase/(decrease) in net
interest income $ 1,407 $(200) $ 1,207 $ 1,369 $ 47 $ 1,416
======= ===== ======= ======= ===== =======
</TABLE>
PROVISION FOR LOAN LOSSES. The allowance for loan losses at December
31, 1999 was $2.4 million, representing 1.00% of outstanding loans. One year
earlier, this ratio was 0.92% of outstanding loans. The provision for loan
losses charged against earnings was $665,000 in 1999 compared to $611,000 in
1998. Net loans charged off in 1999 were $163,152 compared to $262,889 in 1998.
NONINTEREST INCOME. For 1999, noninterest income totaled $ 2.72
million, an increase of $152,955 or 5.95% versus $2.57 million in 1998. The
increase was primarily due to an increase of $213,071 in fees generated from
data processing and other operating services provided to other financial
institutions.
38
<PAGE> 40
The following table presents the major categories of noninterest
income:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Service charges on deposit accounts $ 1,435 $ 1,346
Service revenue from data processing and
other operating services for third parties 1,159 946
Brokerage fees 210 154
Other (79) 125
--------- ---------
Total noninterest income $ 2,724 $ 2,571
========= =========
</TABLE>
NONINTEREST EXPENSE. The following table presents the major categories
of noninterest expense:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Salaries and employee benefits $ 4,916 $ 4,262
Bank premises expense 532 522
Equipment rentals, depreciation
and maintenance 502 472
Furniture and fixtures depreciation 167 203
Professional fees 270 203
Regulatory assessments 107 62
Other 2,086 1,980
-------- --------
Total noninterest expense $ 8,580 $ 7,704
======== ========
</TABLE>
For 1999, noninterest expense totaled $ 8.58 million, an increase of
$876,326 or 11.38% over $7.70 million in 1998. Salaries and employee benefits
for 1999 totaled $ 4.92 million, an increase of $653,872 or 15.34% over $4.26
million for 1998. This was due to several new lending and operations positions
being added. In July 1999, we opened one new branch office in Bristol,
Tennessee. The additional occupancy, equipment and other expenses related to
this branch, together with the opening of Paragon Commercial Bank in Raleigh,
North Carolina, primarily account for the increase in 1999.
INCOME TAXES. In 1999 income tax expense was $1.22 million compared to
$1.11 million in 1998. The effective tax rates in 1999 and 1998, respectively,
were 35.28% and 36.40%.
39
<PAGE> 41
FINANCIAL CONDITION
LOAN PORTFOLIO. At December 31, 1999, loans, net of unearned income,
were $238.15 million, an increase of $34.15 million or 16.74% over net loans at
December 31, 1998 of $204.00 million. The growth in the loan portfolio is
attributable to our strategic focus on growth and to a strong lending market. At
December 31, 1999, real estate-construction loans increased $128,000 or 1.59%
and real estate-mortgage loans increased $40.24 million or 36.20% from December
31, 1998. At December 31, 1999, loans, net of unearned income, were 90.35% of
deposits and 79.48% of total assets.
The following table summarizes our loan portfolio by type of loan:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial and industrial $ 39,241 $ 30,764
Real estate-construction 8,169 8,041
Real estate-mortgage 151,425 111,182
Consumer and other 39,314 54,008
--------- ---------
$ 238,149 $ 203,995
========= =========
Percent of loans by category to total loans:
Commercial and industrial 16.48% 15.08%
Real estate-construction 3.43% 3.94%
Real estate-mortgage 63.58% 54.50%
Consumer and other 16.51% 26.48%
--------- ---------
100.00% 100.00%
========= =========
</TABLE>
The contractual maturity ranges of the commercial and industrial and
real estate-construction portfolios and the amount of such loans with
predetermined interest rates and floating rates in each maturity range as of
December 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
AFTER ONE
YEAR
ONE YEAR THROUGH AFTER FIVE
OR LESS FIVE YEARS YEARS TOTAL
------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial and industrial $16,273 $ 21,330 $ 272 $ 37,875
Real estate-construction 4,513 2,894 761 8,168
Real estate-mortgage 16,481 80,677 9,036 106,194
Consumer and other 49,390 34,316 2,206 85,912
------- -------- ------- --------
Total $86,657 $139,217 $12,275 $238,149
======= ======== ======= ========
Loans with a predetermined
interest rate $37,967 $ 81,229 $ 8,065 $127,261
Loans with a floating interest rate 48,690 57,988 4,210 110,888
------- -------- ------- --------
Total $86,657 $139,217 $12,275 $238,149
======= ======== ======= ========
</TABLE>
40
<PAGE> 42
NONPERFORMING ASSETS. Loan quality continued to be strong in 1999. We
had nonperforming assets of $475,000 and $135,000 as of December 31, 1999 and
1998, respectively. For 1999, the gross amount of interest income that would
have been recorded on nonperforming loans, if all such loans had been accruing
interest at the original contract rate, was approximately $14,129.
The following table presents information regarding nonperforming assets
at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonperforming assets
Nonaccrual loans $ 87 $ --
Other real estate and repossessions 388 135
------- -------
Total nonperforming assets $ 475 $ 135
======= =======
Loans past due 90 days or more and still
accruing $ 48 $ 93
======= =======
Ratio of past due loans to loans, net of
unearned income 0.37% 0.51%
Ratio of nonperforming assets to loans,
net of unearned income, and other real estate 0.20% 0.07%
</TABLE>
ALLOWANCE FOR LOAN LOSSES. For the year ended 1999, net charge-offs
totaled $163,152 or 0.07% of average loans outstanding for the period, compared
to $262,889 or 0.14% in net charge-offs during 1998. During 1999, we recorded a
provision for loan losses of $665,000 compared with $611,000 for 1998. At
December 31, 1999, the allowance for loan losses totaled $2.40 million, or 1.00%
of total loans, net of unearned income, compared to $1.90 million, or 0.92% of
total loans, net of unearned income, at December 31, 1998.
41
<PAGE> 43
The following table presents an analysis of the allowance for loan
losses and other related data:
<TABLE>
<CAPTION>
1999 1998
------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Average loans outstanding $ 220,987 $ 178,935
========= =========
Total loans, net of unearned income, at end of period $ 240,549 $ 205,894
========= =========
Allowance for loan losses at beginning of period $ 1,899 $ 1,551
Provision for loans losses 665 611
Charge-offs:
Commercial and industrial (34) (133)
Real estate (50) (33)
Consumer (171) (156)
Recoveries:
Commercial and industrial 35 32
Real estate 8 --
Consumer 48 27
--------- ---------
Net charge-offs $ (164) $ (263)
--------- ---------
Allowance for loan losses at end of period $ 2,400 $ 1,899
========= =========
Ratio of allowance to end of period loans 1.00% 0.92%
Ratio of net charge-offs to average loans 0.07% 0.15%
Ratio of allowance to end of period nonperforming loans 2758.62% --
</TABLE>
The following tables describe the allocation of the allowance for loan
losses among various categories of loans and certain other information. The
allocation is made for analytical purposes and is not necessarily indicative of
the categories in which future losses may occur. The total allowance is
available to absorb losses from any segment of loans.
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
----------------------- ---------------------
PERCENT PERCENT
OF LOANS OF LOANS
TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS
---------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance of allowance for loan losses
applicable to:
Commercial and industrial $1,149 16.48% $ 791 15.08%
Real estate 397 67.01% 218 58.44%
Consumer and other 464 16.51% 523 26.48%
Unallocated 390 367
------ ------ ------ ------
Total allowance for loan losses $2,400 100.00% $1,899 100.00%
====== ====== ====== ======
</TABLE>
42
<PAGE> 44
INVESTMENT SECURITIES. The following table summarizes the contractual
maturity of investment securities and their weighted average yields.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------------------------------------------------------------
AFTER ONE YEAR AFTER FIVE YEARS
WITHIN ONE BUT WITHIN FIVE BUT WITHIN TEN AFTER TEN
YEAR YEARS YEARS YEARS
-----------------------------------------------------------------------------------------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD TOTAL
-----------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $ -- 0.00% $ -- 0.00% $ -- 0.00% $ -- 0.00% $ --
U.S. government agencies --
and corporations 1,998 6.14% 13,157 6.50% 1,974 7.45% -- 0.00% 17,129
Mortgage-backed securities 299 5.31% 1,205 6.03% 2,375 6.20% 346 6.32% 4,225
States and political
Subdivisions 2,000 6.41% 865 7.01% 2,102 7.22% 4,365 4.54% 9,332
Restricted securities 801 7.08% -- 0.00% -- 0.00% -- 0.00% 801
Equity securities 4,115 0.00% -- 0.00% -- 0.00% -- 0.00% 4,115
------ ---- ------- ---- ------ ---- ------ ---- -------
Total $9,213 3.47% $15,227 6.50% $6,451 6.91% $4,711 4.67% $35,602
====== ==== ======= ==== ====== ==== ====== ==== =======
</TABLE>
The following table presents the amortized costs and fair value of
securities classified as available for sale and held-to-maturity at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------------------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD TO MATURITY SECURITIES
States and political subdivisions $ 1,922 $ 1,921 $ 1,925 $ 1,943
Mortgage-backed securities 1,097 1,076 1,436 1,436
------- -------
$ 3,019 $ 2,997 $ 3,361 $ 3,379
======= ======= ======= =======
AVAILABLE FOR SALE SECURITIES
U.S. Treasury securities $ -- $ -- $ 3,994 $ 4,031
U.S. government agencies and
corporations 17,441 17,129 10,996 11,061
States and political subdivisions 7,581 7,410 4,719 4,787
Mortgage-backed securities 3,168 3,127 4,753 4,797
Equity securities 4,115 4,115 1,017 1,017
Restricted securities 801 801 705 705
------- ------- ------- -------
$33,106 $32,582 $26,184 $26,398
======= ======= ======= =======
</TABLE>
At December 31, 1999, investment securities were $35.60 million, an
increase of $5.84 million from $29.76 million at December 31, 1998. At December
31, 1999, investment securities represented 13.51% of total deposits and 11.88%
of total assets. Approximately $9.21 million or 25.88% of our investment
securities reprice within one year. The average yield on a fully taxable
equivalent basis on the investment portfolio was 5.55% for 1999, compared to
6.28% for 1998.
43
<PAGE> 45
DEPOSITS. Deposits at December 31, 1999 were $263.57 million, an
increase of $42.68 million, or 19.32% from $220.89 million at December 31, 1998.
Noninterest-bearing deposits were $30.05 million at December 31, 1999, a
decrease of $ 4.05 million, or 11.88% from $34.10 million at December 31, 1998.
The daily average balances and weighted average rates paid on deposits
for each of the years ended December 31, 1999 and 1998 are presented below:
<TABLE>
<CAPTION>
1999 1998
---------------------- ---------------------
AMOUNT RATE AMOUNT RATE
---------------------- ---------------------
<S> <C> <C> <C> <C>
Demand and money market deposits $ 59,434 3.07% $ 51,763 3.37%
Savings deposits 14,330 1.98% 14,018 2.35%
Time deposits 129,555 5.31% 106,323 5.64%
-------- --------
Total interest-bearing deposits $203,319 4.42% $172,104 4.69%
======== ========
</TABLE>
The following table sets forth the amount of our certificates of
deposit that are $100,000 or greater by time remaining until maturity:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less $11,998
Over three through twelve months 27,722
Over twelve months 2,814
-------
Total $42,534
=======
</TABLE>
OTHER BORROWINGS. Deposits are the primary source of funds for our
lending and investment activities. Occasionally, we obtain additional funds from
the Federal Reserve and correspondent banks. At December 31, 1999, we had no
Federal Funds purchased, compared to Federal Funds purchased of $3.78 million at
December 31, 1998. At December 31, 1999, and 1998, we did not have any
borrowings under advances from the Federal Reserve.
At December 31, 1999, we also had a $5,000,000 line of credit with
AmSouth with outstanding borrowings under this line of credit of $3,000,000.
Our weighted average interest rate for the period ended December 31,
1999 was 7.00%. For a more detailed discussion of our borrowings, see notes 6
and 16 to the Consolidated Financial Statements included in this prospectus.
INTEREST RATE SENSITIVITY AND LIQUIDITY. Our asset/liability policy
provides management with the necessary guidelines for effective funds
management, and we have established a measurement system for monitoring our net
interest rate sensitivity position. We manage our sensitivity position within
established guidelines.
44
<PAGE> 46
Interest rate risk is managed by our asset/liability committee which is
composed of members of our senior management and members of our board of
directors. The asset/liability committee formulates strategies based on
appropriate levels of interest rate risk. In determining the appropriate level
of interest rate risk, the asset/liability committee considers the impact on
earnings and capital of the current outlook on interest rates, potential changes
in interest rates, regional economies, liquidity, business strategies and other
factors. The asset/liability committee meets quarterly to review, among other
things, the sensitivity of assets and liabilities to interest rate changes, the
book and market values of assets and liabilities, unrealized gains and losses,
purchase and sale activities, commitments to originate loans and the maturities
of investments and borrowings. Additionally, the asset/liability committee
reviews liquidity, cash flow flexibility, maturities of deposits and consumer
and commercial deposit activity.
Management uses an analysis of relationships between interest-earning
assets and interest-bearing liabilities and an interest rate shock simulation
model to manage interest rate risk.
We have traditionally managed our business to reduce our overall
exposure to changes in interest rates. We do this by structuring our balance
sheet in the ordinary course of business. We do not utilize interest rate swaps,
financial options, or financial future contracts in order to reduce interest
rate risk.
An interest rate sensitive asset or liability is one that, within a
defined time period, either matures or experiences an interest rate change in
line with general market interest rates. The management of interest rate risk is
performed by analyzing the maturity and repricing relationships between
interest-earning assets and interest-bearing liabilities at specific points in
time ("gap") and by analyzing the effects of interest rate changes on net
interest income over specific periods of time by projecting the performance of
the mix of assets and liabilities in varied interest rate environments. Interest
rate sensitivity reflects the potential effect on net interest income of a
movement in interest rates. A company is considered to be asset sensitive, or
having a positive gap, when the amount of its interest-earning assets maturing
or repricing within a given period exceeds the amount of its interest-bearing
liabilities also maturing or repricing within that time period. Conversely, a
company is considered to be liability sensitive, or having a negative gap, when
the amount of its interest-bearing liabilities maturing or repricing within a
given period exceeds the amount of its interest-earning assets also maturing or
repricing within that time period. During a period of rising interest rates, a
negative gap would tend to affect net interest income adversely, while a
positive gap would tend to result in an increase in net interest income. During
a period of falling interest rates, a negative gap would tend to result in an
increase in net interest income, while a positive gap would tend to affect net
interest income adversely. Based on our most recent gap analysis, we are
liability sensitive over the short term and asset sensitive over the longer
term.
45
<PAGE> 47
The following table sets forth an analysis of our interest rate
sensitivity at December 31, 1999:
<TABLE>
<CAPTION>
VOLUMES SUBJECT TO REPRICING
---------------------------------------------------------------------------
AFTER AFTER
90 DAYS ONE YEAR AFTER
WITHIN WITHIN WITHIN FIVE
90 DAYS ONE YEAR FIVE YEARS YEARS TOTAL
--------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Investment securities $ 2,868 $ 1,639 $ 15,356 $15,739 $ 35,602
Gross loans 26,408 61,732 140,678 11,747 240,565
Federal funds sold and short term
investments 2,094 -- -- -- 2,094
--------- --------- -------- ------- --------
Total interest-earning assets $ 31,370 $ 63,371 $156,034 $27,486 $278,261
--------- --------- -------- ------- --------
INTEREST-BEARING LIABILITIES:
Demand, money market and savings --
deposits $ 78,142 $ -- $ -- $ -- $ 78,142
Time deposits 38,069 101,641 15,675 -- 155,385
Borrowings 12,574 -- -- -- 12,574
--------- --------- -------- ------- --------
Total interest-bearing liabilities $ 128,785 $ 101,641 $ 15,675 $ -- $246,101
--------- --------- -------- ------- --------
Net repricing period gap $ (97,415) $ (38,270) $140,359 $27,486 $ 32,160
========= ========= ======== ======= ========
Net repricing cumulative gap $ (97,415) $(135,685) $ 4,674 $32,160
========= ========= ======== =======
Period gap as a percentage of total earning assets -35.01% -13.75% 50.44% 9.88%
Cumulative gap as a percentage of total earning assets -35.01% -48.76% 1.68% 11.56%
</TABLE>
Shortcomings are inherent in any gap analysis since some assets and
liabilities may not move proportionally as interest rates change. In addition to
gap analysis, we use an interest rate risk simulation model and shock analysis
to test the interest rate sensitivity of net interest income and the balance
sheet, respectively. Contractual maturities and repricing opportunities of loans
are incorporated in the model as are prepayment assumptions and maturity data
within the investment portfolio. Assumptions based on past experience are
incorporated into the model for nonmaturity deposit accounts. Based on our most
recent simulation analysis as of December 31, 1999, we estimate that a 200 basis
point rise or decline in rates over the next 12 month period would have an
impact of no more than 6% on our net interest income for the period. The change
is relatively small, despite our asset sensitive gap position.
As a financial institution, our primary component of market risk is
interest rate volatility. Fluctuations in interest rates will ultimately impact
both the level of income and expense recorded on most of our assets and
liabilities, and the market value of all interest-earning assets and
interest-bearing liabilities, other than those which have a short term to
maturity. Based upon the nature of our operations, we are not subject to foreign
exchange or commodity price risk. Most of our investment securities are
classified as available for sale.
Management reviews our exposure to market risk on a regular basis.
Interest rate risk is the potential of economic losses due to future interest
rate changes. These economic losses can be reflected as a loss of future net
interest income and/or a loss of current fair market values. The
46
<PAGE> 48
objective is to measure the effect on net interest income and to adjust the
balance sheet to minimize the inherent risk while at the same time maximizing
income.
Liquidity involves our ability to raise funds to support asset growth
or reduce assets to meet deposit withdrawals and other payment obligations, to
maintain reserve requirements and otherwise to operate on an ongoing basis.
During the past three years, our liquidity needs have primarily been met by
growth in core deposits, as previously discussed. The cash and federal funds
sold position, supplemented by amortizing investment and loan portfolios, have
generally created an adequate liquidity position.
CAPITAL RESOURCES. The following table provides a comparison of
BancTenn Corp.'s and Bank of Tennessee's leverage and risk-weighted capital
ratios as of December 31, 1999 to the minimum and well capitalized regulatory
standards:
<TABLE>
<CAPTION>
MINIMUM REQUIRED FOR TO BE WELL CAPITALIZED
CAPITAL ADEQUACY UNDER PROMPT CORRECTIVE ACTUAL RATIO AT
PURPOSES ACTION PROVISIONS DECEMBER 31, 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C>
BancTenn Corp.:
Leverage ratio 3.00%(1) 5.00% 7.80%
Tier 1 risk-based capital ratio 8.00% 6.00% 9.60%
Risk-based capital ratio 4.00% 10.00% 10.70%
Bank of Tennessee:
Leverage ratio 3.00%(2) 5.00% 7.14%
Tier 1 risk-based capital ratio 4.00% 6.00% 8.63%
Risk-based capital ratio 8.00% 10.00% 9.64%
</TABLE>
(1)The Federal Reserve may require us to maintain a leverage ratio of up to 200
basis points above the required minimum.
(2)The FDIC may require Bank of Tennessee to maintain a leverage ratio of up to
200 basis points above the required minimum.
Shareholders' equity increased to $22.19 million at December 31, 1999
from $19.98 million at December 31, 1998, an increase of $2.21 million or
11.06%. This increase was primarily the result of net income of $2.23 million,
less dividends declared on our common stock of $57,098.
47
<PAGE> 49
PRINCIPAL SHAREHOLDERS AND
STOCK OWNERSHIP OF MANAGEMENT
The following table lists, as of April 30, 2000, the number of shares
of common stock beneficially owned by:
- BancTenn Corp.'s current directors;
- BancTenn Corp.'s executive officers;
- each person or entity known to us to be the beneficial owner
of more than five percent of our outstanding common stock; and
- all of BancTenn Corp.'s directors and executive officers as a
group.
Information relating to beneficial ownership of common stock by our
principal shareholders and management is based upon information furnished by
each person using "beneficial ownership" concepts under the rules of the
Securities and Exchange Commission. Under these rules, a person is deemed to be
a beneficial owner of a security if that person has or shares voting power,
which includes the power to vote or direct the voting of the security, or
investment power, which includes the power to dispose or direct the disposition
of the security. The person is also deemed to be a beneficial owner of any
security which that person has a right to acquire within 60 days. Under
Securities and Exchange Commission rules, more than one person may be deemed to
be a beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which he or she may disclaim beneficial
ownership.
The percentages prior to the offering are calculated based on 1,468,601
shares issued and outstanding at April 30, 2000. Percentages after the offering
are based on 1,897,172 shares to be issued and outstanding after the close of
the offering. Unless otherwise indicated, each person is the record owner of and
has sole voting investment power with respect to his or her shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BEING SHARES BENEFICIALLY OWNED
THE OFFERING PURCHASED AFTER THE OFFERING
---------------------- ---------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT IN THE OFFERING NUMBER PERCENT
- ------------------------ ------ ------- --------------- ------ -------
<S> <C> <C> <C> <C> <C>
Directors and Executive
Officers
- -----------------------
William B. Greene, Jr. 789,572 (1) 52.9% 35,715 825,287 (1) 42.9%
Colon A. Terrell, Jr. 54,579 (2) 3.6% 650 55,229 (2) 2.8%
Roy L. Harmon, Jr. 50,445 (3) 3.4% 3,000 53,445 (3) 2.8%
C. B. Duke, IV 16,069 1.1% -- 16,069 *
William R. Garwood 863 * 1,000 1,863 *
John H. Poteat 95,956 (4) 6.5% 1,000 96,956 (4) 5.1%
John E. Seward, Jr. 19,695 (5) 1.3% -- 19,695 (5) 1.0%
</TABLE>
48
<PAGE> 50
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BEING SHARES BENEFICIALLY OWNED
THE OFFERING PURCHASED AFTER THE OFFERING
NAME OF BENEFICIAL OWNER NUMBER PERCENT IN THE OFFERING NUMBER PERCENT
- ------------------------ -------- ------- --------------- ------ -------
<S> <C> <C> <C> <C> <C>
All Directors and Executive
Officers as a Group (7 persons) 1,027,179 (6) 65.7% 41,365 1,068,544 53.7%
- -------------------------------
Additional Principal
Shareholder
- --------------------
Valerie G. Ketron 117,794 (7) 8.0% 3,600 121,394 (7) 6.4%
2340 Pendragon Road
Kingsport, TN 37660
</TABLE>
- -------------------------
* Less than 1%
(1) Includes the following:
<TABLE>
<CAPTION>
Number Manner
of Shares Held
--------- ------
<S> <C>
577,190 Owned directly
24,150 Vested options under BancTenn Corp.'s Employee Stock Incentive Plan
174,970 Held by family trusts of which Mr. Greene is trustee or co-trustee
13,262 Voted by Mr. Greene as custodian and trustee for his daughter
</TABLE>
Mr. Greene shares voting power with his sister, Valerie G. Ketron, as
co-trustees with respect to 75,505 shares held in the family trusts
referenced above.
(2) Includes vested options to purchase 40,750 shares under our Employee
Stock Incentive Plan and 1,233 shares under our Employee Stock Purchase
Plan.
(3) Includes vested options to purchase 26,750 shares under our Employee
Stock Incentive Plan and 1,014 shares under our Employee Stock Purchase
Plan. Also includes 12,431 shares held by Mr. Harmon jointly with his
wife and 1,491 shares held by Mr. Harmon as custodian for their son and
1,945 shares owned by Mr. Harmon's wife, as to which beneficial
ownership is shared.
(4) Includes 91,793 shares owned by Mr. Poteat and 4,163 shares owned by
his wife, as to which they share beneficial ownership.
(5) Includes 3,474 shares owned by Mr. Seward's wife as to which he
exercises voting and investment powers.
(6) Percentages of ownership are calculated assuming exercise of all vested
options outstanding under our Employee Stock Incentive Plan and our
Employee Stock Purchase Plan.
(7) Includes 38,023 shares owned by Mrs. Ketron and 75,705 shares as to
which she shares voting powers as co-trustee with her brother, William
B. Greene, Jr. This also includes a total of 4,066 shares held by Mrs.
Ketron as custodian for her daughter and grandchildren.
49
<PAGE> 51
DIRECTORS AND EXECUTIVE OFFICERS
BANCTENN CORP. The following table sets forth information as of April
30, 2000 concerning each of our directors and executive officers. Except for
William R. Garwood, all of the directors of BancTenn Corp. are also directors of
Bank of Tennessee.
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
- ---- --- -------------------------
<S> <C> <C>
William B. Greene, Jr. 62 Chairman of the Board
Colon A. Terrell, Jr. 52 Director, President and Chief Executive Officer
Roy L. Harmon, Jr. 45 Director and Executive Vice President
C. B. Duke, IV 64 Director
William R. Garwood 61 Director
John H. Poteat 87 Director
John E. Seward, Jr. 51 Director
</TABLE>
BANK OF TENNESSEE. The following table sets forth information as of
April 30, 2000, concerning the executive and senior officers of Bank of
Tennessee.
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD WITH BANK
---- --- -----------------------------------
<S> <C> <C>
Roy L. Harmon, Jr. 45 Vice-Chairman and Chief Executive Officer
Kenneth H. Maloy 40 President
Mary Mac Wilson 30 Executive Vice-President
Tony L. Howell 42 Executive President and Chief Credit Officer
Paul W. Holt 61 Executive Vice President
Darla M. Scott 34 Senior Vice President and Chief Financial Officer
Mark Anderson 46 Senior Vice President
Craig S. Denison 41 Senior Vice President
Joe Carr 42 Senior Vice President
</TABLE>
WILLIAM B. GREENE, JR. has been chairman of the board of BancTenn Corp.
since 1985. He served as president and chief executive officer from 1990 to
1992. He is also chairman of the board, president, and chief executive officer
of Carter County Bancorp., Inc., and chairman of Carter County Bank, each of
which is an affiliate of BancTenn Corp. Additionally, he is a director of JDN
Realty Corporation, a real estate investment trust, and a director of Lone Star
Steakhouse and Saloon, Inc., a restaurant company.
COLON A. TERRELL, JR. has served as president of BancTenn Corp. since
1992 and has served as chief executive officer since 1992. Mr. Terrell is a
director of BancTenn Corp. and chairman of the board of Bank of Tennessee. He
served as chief executive officer of Bank of Tennessee from 1992 through 1997.
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<PAGE> 52
ROY L. HARMON, JR. is an executive vice president of BancTenn Corp. and
vice chairman and chief executive officer of Bank of Tennessee. From 1998
through 1999 he served as president and chief executive officer of Bank of
Tennessee. He was president and chief operating officer of Bank of Tennessee
from 1995 through 1997. He has been employed by BancTenn Corp. and Bank of
Tennessee since 1991.
C. B. DUKE, IV is a director of BancTenn Corp. and Bank of Tennessee.
He was first elected as a director of Bank of Tennessee in 1989 and first
elected as a director of BancTenn Corp. in 1989. Mr. Duke is the chairman and
chief executive officer of Holston Glass Company, a glass fabricator, supplier
and installer headquartered in Kingsport, Tennessee.
WILLIAM R. GARWOOD is a director of BancTenn Corp. and was first
elected in 1997. Mr. Garwood is retired from Eastman Chemical Company where he
was president of Tennessee Eastman Company from 1989 to 1996. Mr. Garwood is a
director of Paragon Commercial Bank, an affiliate of BancTenn Corp. Mr. Garwood
resides in Hilton Head Island, South Carolina and is engaged in private
consulting to the chemical industry. Mr. Garwood served as a director of Bank of
Tennessee from 1991 to 1994.
JOHN H. POTEAT is a director of BancTenn Corp. and Bank of Tennessee.
He was first elected as director of Bank of Tennessee in 1974 and first elected
as director of BancTenn Corp. in 1985. He is engaged in land development and
farming. He previously served as president of Poteat Oil Company, an oil
distributorship.
JOHN E. SEWARD, JR. is a director of BancTenn Corp and Bank of
Tennessee. He was first elected a director of Bank of Tennessee in 1981 and
first elected as a director of BancTenn Corp. in 1985. Mr. Seward is a director
of Carter County Bancorp, Inc. and its subsidiary, Carter County Bank. Mr.
Seward is chairman of the board and chief executive officer of PLC, Inc., a
liquidator of retail and wholesale building supplies headquartered in Piney
Flats, Tennessee. Mr. Seward is also president of Lynn Air, Inc. an aircraft
leasing and brokerage company.
KENNETH H. MALOY is president and a director of Bank of Tennessee. He
joined Bank of Tennessee in 1998 as executive vice president. Prior to joining
Bank of Tennessee, he was executive vice president at First American National
Bank in Kingsport, Tennessee. He was with First American National Bank for a
total of 15 years with his most recent tenure being from 1993 to 1998.
MARY MAC WILSON is executive vice president of Bank of Tennessee. She
joined Bank of Tennessee in 1992 and has held a number of management positions
including senior vice president-commercial lending and senior vice
president-branch administration. She was elected executive vice president in
January, 2000.
PAUL W. HOLT is executive vice president of Bank of Tennessee and has
been with Bank of Tennessee since 1994. He was previously employed by Dominion
Bank and First Union National Bank in Bristol, Virginia from 1974 to 1994.
DARLA M. SCOTT is senior vice president and chief financial officer of
Bank of Tennessee and also is vice president and chief financial officer of
BancTenn Corp. She has been employed by Bank of Tennessee since 1988.
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<PAGE> 53
MARK ANDERSON is senior vice president in charge of Bank of Tennessee's
Tennessee General business division and related technology services. Mr.
Anderson has been employed by Bank of Tennessee since 1995. Prior to that time,
he was an owner of Tennessee General Corporation which was the predecessor to
our current Tennessee General business division.
CRAIG S. DENISON is senior vice president of Bank of Tennessee and
concentrates on our commercial banking relationships with professional practice
groups including physicians, attorneys, accountants and other professions. He
joined Bank of Tennessee in 1998. Prior to that time he was a senior vice
president with First American National Bank from 1994 to 1998.
JOE CARR is senior vice president of Bank of Tennessee and concentrates
on commercial lending in Johnson City and Washington County, Tennessee. He
joined Bank of Tennessee in 1990 and has held the position of Senior Vice
President since 1998.
Except for Mr. Greene, none of our directors holds any directorships in
companies with a class of securities registered under Section 12 of the
Securities Exchange Act or subject to the requirements of Section 15(d) of that
Act or any company registered as an investment company under the Investment
Company Act of 1940. Mr. Greene is a director of JDN Realty Corporation and Lone
Star Steakhouse & Saloon, Inc., each of which has securities registered under
Section 12 of the Securities Exchange Act.
BOARD COMMITTEES
BANCTENN CORP. Our board of directors acts a committee of the whole in
most matters. The board of directors has, however, established the following
committees:
AUDIT COMMITTEE. The audit committee of BancTenn Corp. is responsible
for establishing and monitoring the annual external audit engagement with our
independent auditors. The external audit function is required to include all
material activities of Bank of Tennessee and any other financial institution
with which BancTenn Corp. or Bank of Tennessee is considered to have an
affiliate or material business relationship for regulatory purposes including
Paragon Commercial Bank. The audit committee monitors the particular risk areas
incident to BancTenn Corp.'s operations and investments. The audit committee
also monitors the internal audit function of Bank of Tennessee and reviews
financial reports from Bank of Tennessee. The current voting members of the
audit committee are John E. Seward, Jr., chairman, C. B. Duke, IV, William R.
Garwood, and John H. Poteat, each of whom is an outside director. William B.
Greene, Jr., Colon A. Terrell, Jr. and Roy L. Harmon, the inside directors,
serve as non-voting members of the committee.
STOCK OPTIONS COMMITTEE. The stock options committee meets as needed to
review and approve proposed stock option grants under our Employee Stock
Incentive Plan and our Employee Stock Purchase Plan. Officers and employees of
both BancTenn Corp. and Bank of Tennessee are participants in these plans. The
current members of this committee are C. B. Duke, IV., chairman, John E. Seward,
Jr., William R. Garwood, and John H. Poteat, each of whom is an outside
director.
BANK OF TENNESSEE. In addition to the audit committee and stock options
committee of BancTenn Corp., the board of directors of Bank of Tennessee has
also established the following standing committees: the loan and investment
committee, the audit committee and the asset/liability committee.
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<PAGE> 54
LOAN AND INVESTMENT COMMITTEE. Under applicable limits of authority
delegated by the board of directors of Bank of Tennessee and subject to
applicable banking regulations, the loan and investment committee has the power
to examine and approve loans and extensions of credit and to monitor the Bank's
investment portfolio. The loan and investment committee is comprised of the
members of the Bank of Tennessee board of directors, and its current members are
Jo Anne Paty, chairman, Thomas Burleson, C. B. Duke, IV, Samuel T. Easley, Paul
Farnor, William B. Greene, Jr., Roy L. Harmon, Kenneth Maness, Richard W.
Pectol, Anne B. Pope, John H. Poteat, John E. Seward, Jr., Paul E. Stanton and
Colon A. Terrell, Jr.
AUDIT COMMITTEE. The responsibilities of the audit committee are to
monitor the internal operations of Bank of Tennessee as they pertain to the
Bank's internal financial controls and accounting, to make an annual examination
into the affairs of the Bank, and to report the results of this examination in
writing to the Bank's board of directors together with any recommendations the
committee deems advisable. The current members of the audit committee are John
E. Seward, Jr. chairman, Thomas Burleson, Richard W. Pectol, Anne B. Pope, John
H. Poteat, Colon A. Terrell, Jr., Roy L. Harmon, Jr., and Kenneth H. Maloy.
ASSET/LIABILITY COMMITTEE. The asset/liability committee meets
periodically to monitor the matching of Bank of Tennessee's interest rate
sensitive assets and interest rate sensitive liabilities and to make adjustments
where prudent to maintain appropriate compatibility between these two
components. The current members of the asset/liability committee are C. B. Duke
IV, chairman, Kenneth Maness, Samuel T. Easley, Paul Farnor, William B. Greene,
Jr., Roy L. Harmon, Jr., Kenneth H. Maloy, Jo Anne Paty, and Colon A. Terrell,
Jr.
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<PAGE> 55
COMPENSATION
DIRECTOR COMPENSATION
FEES. Directors of BancTenn Corp., including directors who are also
officers of BancTenn Corp., receive an annual fee of $6,000, payable in
quarterly installments of $1,500 each. They do not receive any additional fees
for meetings attended. Directors of Bank of Tennessee who are not also employees
of BancTenn Corp. or Bank of Tennessee, receive an annual retainer of $6,000,
payable in quarterly installments of $1,500 each. The chairman of the audit
committee receives a fee of $300 for each meeting attended, and other members of
the audit committee receive a fee of $200 for each committee meeting attended.
The chairman of the loan and investment committee and the chairman of the
asset/liability committee each receive a fee of $150 for each committee meeting
which they chair, and the other members of these committees receive a fee of
$100 for each meeting attended.
STOCK OPTIONS. Under our Directors Stock Option Plan, approved by our
shareholders at the 2000 annual shareholders meeting held on April 24, 2000,
directors of BancTenn Corp. and Bank of Tennessee are eligible to receive
options to purchase our common stock. The maximum annual award per director is
1,000 shares. A person who is a director of both BancTenn Corp. and Bank of
Tennessee is eligible to receive only one option grant per year. Option awards
are available to both employee and non-employee directors. The board has
reserved 50,000 shares of BancTenn Corp. common stock for issuance under options
that may be granted under the plan. The number of shares reserved for issuance
under the plan will be automatically adjusted for any stock split, stock
dividend or other reorganization or reclassification of our common stock.
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<PAGE> 56
EXECUTIVE COMPENSATION
The table below shows information concerning the compensation paid to
our chief executive officer and our other most highly compensated executive
officers for services to us in all capacities for the years ended 1999, 1998 and
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION(2)
---------------------------- ---------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(3) COMPENSATION(4)
- --------------------------- ---- --------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
William B. Greene, Jr. 1999 180,000 -- -- --
Chairman of the Board 1998 180,000 -- 12,500 --
1997 180,000 -- -- --
Colon A. Terrell, Jr. 1999 205,411 41,000 -- 14,007
President and Chief Executive 1998 190,082 37,000 8,750 9,704
Officer 1997 164,798 30,000 -- 9,496
Roy L. Harmon, Jr. 1999 159,377 33,000 -- 13,342
Executive Vice President 1998 136,125 28,000 6,250 12,169
1997 105,037 20,000 -- 11,615
Kenneth H. Maloy 1999 111,661 15,000 -- 7,817
President and Chief Operating 1998 85,598 12,000 5,000 --
Officer of Bank of Tennessee 1997 -- -- -- --
Tony L. Howell 1999 97,000 15,000 -- --
Senior Vice President and Chief 1998 88,425 13,500 3,125 --
Credit Officer 1997 66,739 12,000 -- --
</TABLE>
(1) We have omitted information on "perks" and other personal benefits because
the total value of these items does not meet the minimum amount required
for disclosure under Securities and Exchange Commission rules.
(2) BancTenn Corp. has not awarded restricted stock or long-term incentives
other than stock options. Accordingly, we have omitted columns relating to
these types of awards.
(3) Prior to this offering, there has been no public trading market for the
shares of BancTenn Corp. common stock. As a result, we determined the
value of the stock option awards listed above based on the per share sales
price of BancTenn Corp. common stock in the transactions known to
management to have occurred nearest to the grant date. All awards granted
in 1998 were granted on August 31, 1998 and have been adjusted for a
5-for-4 stock split on May 13, 1999. The nearest known transaction to
August 31, 1998 occurred on September 9, 1998 and the per share sales
price was $25.60 (adjusted for the 5-for-4 stock split on May 13, 1999).
The stock option awards vest at varying schedules measured from the grant
date.
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<PAGE> 57
(4) Includes the following contributions to the indicated person's 401(k)
plan account for the years indicated:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Mr. Terrell 4,422 4,016 3,808
Mr. Harmon 4,387 3,214 2,660
Mr. Maloy 3,347 1,938 --
Mr. Howell 2,474 1,681 1,156
</TABLE>
Includes the following premiums paid under split dollar life insurance
plan for each of the years indicated.
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Mr. Terrell 9,585 5,688 5,688
Mr. Harmon 8,955 8,955 8,955
Mr. Maloy 4,470 -- --
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants)
The following table sets forth information regarding grants of stock
options made under our Employee Stock Purchase Plan during the year ended
December 31, 1999. No options were granted under our Employee Stock Incentive
Plan during the year ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE
NAME GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE
---- ---------- ------------------ ----------- ---------------
<S> <C> <C> <C> <C>
William B. Greene -- -- -- --
Colon A. Terrell, Jr. 1,766 7.13 17.84 12/31/99
Roy L. Harmon, Jr. 1,316 5.31 17.84 12/31/99
Kenneth H. Maloy -- -- -- --
Tony L. Howell 855 3.45 17.84 12/31/99
</TABLE>
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<PAGE> 58
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table shows, for each named executive officer, the value
of options exercised in 1999, the number of shares of our stock covered by both
exercisable and unexercisable options as of December 31, 1999 and the year-end
value of exercisable and unexercisable options to purchase shares of our stock
as of December 31, 1999.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON VALUE AT FY-END(#) AT FY-END($)
NAME EXERCISE(#) REALIZED($) ---------------------- -----------------------------
- ---- ----------- ----------- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William B. Greene, Jr. 27,000 537,975 24,150 8,750 332,070 22,750
Colon A. Terrell, Jr. 1,766 19,709 40,750 7,000 779,412 35,000
Roy L. Harmon, Jr. 1,316 14,687 26,750 5,000 512,523 25,000
Kenneth H. Maloy -- -- 2,500 2,500 15,703 12,500
Tony L. Howell 855 9,542 6,025 2,500 118,025 12,500
</TABLE>
CHANGE OF CONTROL AGREEMENTS
We have entered into Change of Control Agreements with Colon A.
Terrell, Jr. and Roy L. Harmon, Jr. which provide they are entitled to receive
specified compensation in the event we undergo a "change of control" and either
of them experiences a substantial change in his work duties or responsibilities
within three years thereafter. Specifically, the arrangements provide that upon
the occurrence of a change of control, and if the executive terminates his
employment within three years thereafter, subject to specified exceptions, that
the executive will be entitled to receive from BancTenn Corp. an amount equal to
five times his average annual earnings. In addition, each executive would be
entitled to continued coverage, until his normal retirement age, under the
medical insurance and accident and disability insurance plans in effect as of
the date of termination. Each would also receive ownership of any split-dollar
life insurance policies that might then be in effect insuring his life as well
as ownership of any automobile and country club membership then assigned for his
use. If any automobile or club membership is not transferable or was already
owned by the executive prior to his employment with us, then we will pay a cash
amount reasonably equivalent to the fair market value of the automobile and
country club membership. Each executive would also continue to enjoy any
supplemental retirement benefits or incentive compensation benefits which might
have accrued and been earned prior to his termination.
Under the terms of these agreements, each executive agrees that, in the
event any third person initiates a tender offer or an exchange offer, circulates
a proxy to our shareholders, or takes other steps to effect a change of control,
he will not voluntarily leave his employment upon less than three months prior
written notice and will continue to perform all of his customary duties until
the
57
<PAGE> 59
third party has abandoned its efforts to effect a change of control or until a
change of control has occurred.
The benefits of the agreements are not triggered by the executive's
death, permanent disability, or attainment of normal retirement age. In
addition, the benefits would not be available in the event their employment is
terminated for cause which is defined as a felony conviction.
As used in the agreements the term "change of control" means, with
respect to BancTenn Corp. or Bank of Tennessee, the occurrence of any of the
following:
- The death of William B. Greene, Jr.;
- The permanent mental disability of William B. Greene, Jr.
which means that we have obtained a competent independent
medical opinion that he is incapable of managing his business
affairs and exercising the judgment and discretion reasonably
required to do so;
- If any person or entity, including a group as defined in
Section 11(d)(3) of the Securities Exchange Act of 1934, other
than (1) BancTenn Corp. or any of its wholly-owned
subsidiaries, or (2) any employee benefit plan of BancTenn
Corp. or any of its subsidiaries or (3) William B. Greene, Jr.
and his related interests, becomes the beneficial owner of
securities of BancTenn Corp. or Bank of Tennessee having more
than 50% of the combined voting power of the then outstanding
securities of BancTenn Corp. or Bank of Tennessee that may be
cast for the election of directors of BancTenn Corp. or Bank
of Tennessee other than as a result of issuing securities in
the ordinary course of business;
- If, as the result of or in connection with any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the
foregoing transactions, less than a majority of the combined
voting power of the then outstanding securities of BancTenn
Corp. or Bank of Tennessee, are held in the aggregate by the
holders of the securities entitled to vote generally in the
election of directors of BancTenn Corp. or Bank of Tennessee
immediately prior to such transaction; or
- If, during any period of two consecutive years, individuals
who at the beginning of the two-year period constituted the
board of directors of BancTenn Corp. or Bank of Tennessee
cease for any reason to constitute at least a majority of that
board, unless the election of each director when first elected
during the two-year period was approved by a vote of at least
two-thirds of the directors of BancTenn Corp. or Bank of
Tennessee, as the case may be, then in office.
As used in these agreements, the term "William B. Greene, Jr. and his
related interests" means William B. Greene, Jr., Greene Investment Corporation,
any trust of which Mr. Greene is a trustee, co-trustee, or beneficiary, and any
partnership, corporation or limited liability company of which Mr. Greene is an
officer, director, shareholder, member or equity owner.
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<PAGE> 60
EMPLOYEE STOCK INCENTIVE PLAN
The BancTenn Corp. Employee Stock Incentive Plan, adopted in May 1992,
provides for the grant of stock options and other stock-based awards as an
incentive to key employees. We have reserved a total of 279,600 shares to be
issued under the Employee Stock Incentive Plan. Under this plan, the board of
directors may grant options, restricted stock, or other stock-based compensation
to employees equal to the fair market value of the stock on the date of the
grant. As of April 30, 2000 and taking into account stock splits, there were
outstanding options to purchase 152,601 shares under the plan, and options for
30,662 shares had been exercised.
EMPLOYEE STOCK PURCHASE PLAN
We have reserved 125,000 shares of common stock for issuance under our
Employee Stock Purchase Plan. We adopted the plan in April 1996 under Section
423(b) of the Internal Revenue Code. Under the plan, employees are granted
options each year to purchase a pro-rata portion of a pool of shares which are
set aside under the plan on an annual basis. The options are awarded to eligible
employees in proportion to their relative levels of annual base compensation.
The option price is equal to 85% of the fair market value of our stock at the
date of each annual grant. The plan provides that for purposes of this formula
fair market value cannot be less than 150% of the book value of our stock as of
the end of the preceding calendar year. Any employee who owns more than 5% of
our stock is not eligible to participate in the plan. As of March 31, 2000 and
taking into account stock splits, employees had purchased a total of 64,539
shares under the plan. Additionally, we have awarded options for the year 2000
totaling 19,941 shares.
401(k) PLAN
We have a qualified 401(k) employee retirement plan under which our
employees are eligible, subject to statutory limitations, to have up to 15% of
their gross wages withheld on a tax-deferred basis and contributed to the plan.
The plan covers all of our employees and includes a vesting schedule for
matching contributions made by BancTenn Corp. The employer match is equal to
$.50 for each $1.00 contributed by an employee, up to the first 6% of the
employee's wages. The employer contributions are subject to a vesting schedule
under which 25% becomes vested after an employee completes 3 years of service,
50% after 4 years of service, and 100% after 5 years of service.
CASH BONUSES
Although we have not established a formal cash bonus plan, in the past
we have paid cash bonuses to our employees. The payment of these bonuses, and
the amount and frequency of these bonuses, is subject to the discretion of the
board of directors and there is no assurance that bonuses will be paid in any
given year.
COMPENSATION COMMITTEE
Matters related to executive compensation, including the award of stock
options, cash bonuses and other executive compensation benefits, are handled by
the disinterested members of BancTenn Corp.'s board of directors.
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<PAGE> 61
RELATED PARTY TRANSACTIONS
Our directors and the business organizations and individuals associated
with them are customers of and have banking transactions with Bank of Tennessee
and our banking affiliates in the ordinary course of business. These
transactions include loans, commitments, lines of credit and letters of credit.
All of these transactions were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and do not involve more than a normal risk of
collectibility or present any other unfavorable features. We also expect to have
additional transactions with these persons and businesses in the future.
Through our Tennessee General division, we provide data processing and
support services to our affiliates, Carter County Bank and Paragon Commercial
Bank. We also provide financial and consulting services to Paragon Commercial
Bank. These services are provided at rates which are comparable to the rates
customarily charged in the general marketplace for these types of services.
From time to time, we contract for the use an airplane owned by Carter
County Bank. We use this airplane in the ordinary course of our business,
particularly as it relates to monitoring our investment in Paragon Commercial
Bank located in Raleigh, North Carolina. We pay for the use of this airplane and
its pilots at a predetermined hourly charge which is consistent with the fair
market value of similar charter services.
Our chairman and largest shareholder, William B. Greene, Jr., is also
the chairman of the board and the largest shareholder of Carter County Bancorp.,
Inc. He controls approximately 87% of the outstanding stock of Carter County
Bancorp., Inc.
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<PAGE> 62
DESCRIPTION OF OUR CAPITAL STOCK
Our charter authorizes us to issue up to 6,000,000 shares of common
stock, par value $8.00 per share, of which up to 428,571 shares will be issued
in to this offering. As of April 30, 2000, there were 1,468,601 shares of our
common stock issued and outstanding.
COMMON STOCK. All shares of our common stock are entitled to share
equally in dividends from legally available funds, when, as and if declared by
our board of directors. Upon liquidation or dissolution of BancTenn Corp,
whether voluntary or involuntary, all shares of our common stock are entitled to
share equally in all assets available for distribution to the shareholders.
Except for cumulative voting in the election of directors, each holder of our
common stock is entitled to one vote for each share on all matters submitted to
the shareholders. See "Important Provisions of Our Charter and Bylaws Cumulative
Voting" on page 62. There is no redemption right, sinking fund provision or
right of conversion in existence with respect to our common stock. All shares of
the common stock issued in this offering will be fully paid and non-assessable.
Subject to preferences that may be applicable to any preferred stock outstanding
at the time, the holders of our outstanding common stock are entitled to receive
dividends out of legally available assets at times and in amounts as our board
of directors may determine from time to time. Upon liquidation, dissolution or
winding up of BancTenn Corp., the assets legally available for distribution to
shareholders are distributable ratably among the holders of our common stock
after payment of liquidation preferences, if any, on any outstanding preferred
stock and payment of other claims of creditors.
PREFERRED STOCK. Our charter authorizes us to issue up 250,000 shares
of preferred stock upon terms and conditions as our board of directors may
determine from time to time. No consent or approval of the holders of our common
stock is required in order for our board of directors to authorize the issuance
of a series of preferred stock. Our board of directors is authorized to issue
one or more series of preferred stock and to establish the dividend rate,
redemption terms, conversion rights and other similar rights, if any, of any
series of preferred stock. In the event of the liquidation of BancTenn Corp.,
the holders of preferred stock would have legal priority over the holders of our
common stock to the extent of the liquidation preferences of our preferred stock
as established by our board of directors. The issuance of preferred stock, while
providing flexibility in connection with the raising of additional capital or
possible acquisitions, could also have the effect of delaying, deferring or
preventing a change of control of BancTenn Corp. We do not have any shares of
preferred stock outstanding, and we have no current plans to issue any shares of
preferred stock.
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<PAGE> 63
IMPORTANT PROVISIONS OF OUR CHARTER AND BYLAWS
GENERAL
The Tennessee Business Corporation Act and our charter and bylaws
govern shareholders' rights and related matters. Our charter provides for
cumulative voting in the election of directors. Our charter also contains
certain provisions relating to the removal of our directors which could have the
effect of impeding an attempt to change or remove management or gain control of
BancTenn Corp. in a transaction not supported by our board of directors. In
addition, our charter also contains a provision which eliminates the potential
personal liability of directors for monetary damages, and our bylaws contain
provisions which provide indemnification for our directors. The provisions
relating to cumulative voting, removal of directors, elimination of liability,
and indemnification of directors are discussed more fully below.
PREEMPTIVE RIGHTS. Our charter reserves to each holder of our common
stock preemptive rights to acquire additional shares of our common stock when we
offer new shares for purchase. The purpose of preemptive rights is to allow each
shareholder to avoid having his or her ownership position diluted when we issue
new shares of common stock. Preemptive rights provide each shareholder the right
to purchase from us a number of shares that will enable the shareholder to
maintain his or her ownership percentage as of the time new shares are offered
for sale. A shareholder is not required to exercise all or any portion of his or
her preemptive rights and is not prohibited from acquiring additional shares in
excess of his or her preemptive rights entitlement. Under Tennessee law and our
charter, preemptive rights are not applicable with respect to:
- shares issued as compensation to our directors, officers,
agents or employees, or to those of our subsidiaries and
affiliates;
- shares issued to satisfy conversion or option rights created
to provide compensation to our directors, officers, agents or
employees and to those of our subsidiaries and affiliates; and
- shares sold other than for money.
Shares which are subject to preemptive rights but which are not acquired by our
shareholders within the time specified may be issued by us for a period of one
year after being to offered to our shareholders at a price not less than the
preemptive rights offering price.
CUMULATIVE VOTING. Under the terms of our charter, shareholders have
the right to exercise cumulative voting in the election of directors. This means
that each shareholder has the right to cast a total number of votes equal to the
product of the total number of shares which he or she is entitled to vote,
multiplied by the total number of directors to be elected. A shareholder may
cast all of his or her cumulative votes for any one director nominee or may
distribute his or her votes among various nominees as he or she deems
appropriate. A shareholder who wishes to exercise his or her right of cumulative
voting must comply with statutory notice requirements.
REMOVAL OF DIRECTORS. Under Tennessee law, one or more directors of a
corporation may be removed with or without cause by the affirmative vote of a
majority of the shares present at a meeting at which a quorum is represented and
entitled to vote, unless the charter or a bylaw adopted
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by the shareholders provides otherwise. Our charter provides, however, that our
directors may be removed during their terms only for cause, which is defined as
final conviction of a felony, declaration of unsound mind by court order,
adjudication of bankruptcy, nonacceptance of office, or conduct prejudicial to
our interests, or without cause only by the affirmative vote of the holders of
two-thirds of the issued and outstanding shares of common stock entitled to vote
in an election of directors.
This provision may make it more difficult and time consuming for a
potential acquiror to obtain control of BancTenn Corp. by replacing the board of
directors and management. Furthermore, this provision may also make it more
difficult for our shareholders to replace the board of directors or management,
even if a majority of the shareholders believes that replacing them would be in
our best interests. As a result, this provision may tend to perpetuate the
incumbent board of directors and management.
Although our management believes this provision is beneficial to our
shareholders, it also may tend to discourage some takeover bids that are not
supported by our board. As a result, our shareholders may be deprived of
opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices. On the other hand, defeating undesirable
acquisition offers can be a very expensive and time-consuming process. To the
extent that this provision discourages undesirable proposals, we may be able to
avoid those expenditures of time and money.
INDEMNIFICATION
Our bylaws contain indemnification provisions which provide that
directors, officers, employees or agents of BancTenn Corp., the insiders, will
be indemnified against expenses actually and reasonably incurred by them if they
are successful on the merits of a claim or proceeding.
When a case or dispute is not ultimately determined on its merits, for
example, if it is settled, the indemnification provisions provide that we will
indemnify insiders when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the insider acted in a manner he or she
in good faith believed to be in or not opposed to the best interests of BancTenn
Corp., and with respect to any criminal action or proceeding, if the insider had
no reasonable cause to believe his or her conduct was unlawful. Whether the
applicable standard of conduct has been met is determined by the board of
directors, the shareholders or independent legal counsel in each specific case.
Our bylaws also provide that the indemnification rights set forth in
the bylaws are not exclusive of other indemnification rights to which an insider
may be entitled under any bylaw, resolution or agreement, either specifically or
in general terms approved by the affirmative vote of the holders of a majority
of the shares entitled to vote. We can also provide for greater indemnification
than that set forth in the bylaws if we choose to do so, subject to approval by
our shareholders. We may not, however, indemnify an insider for liability
arising out of circumstances that constitute exceptions to limitation of an
insider's liability for monetary damages. See "--Limitation of Liability" on
page 64.
The indemnification provisions of our bylaws specifically provide that
we may purchase and maintain insurance on behalf of any insider against any
liability asserted against the insider and incurred by him or her in any such
capacity, whether or not we would have had the power to indemnify against the
liability.
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We are not aware of any pending or threatened action, suit or
proceeding involving any insiders for which indemnification from us may be
sought. We have acquired directors and officers liability insurance intended to
cover any indemnification liability we may have to our directors and officers.
To the extent indemnification for liabilities arising under the
Securities Act of 1933 is permitted to our insiders under the above provisions,
or otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against liabilities, other than the payment by us of
expenses incurred or paid by an insider in the successful defense of any action,
suit or proceeding, is asserted by an insider in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether the indemnification by us is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of the issue.
LIMITATION OF LIABILITY
Our charter, subject to the exceptions listed below, also eliminates
the potential personal liability of a director for monetary damages to us and to
our shareholders for breach of a fiduciary duty as a director. However, there is
no elimination of liability for:
- a breach of the duty of loyalty to us or to our shareholders;
- an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law; or
- liability for unlawful distributions of corporate property.
Our charter does not eliminate or limit our right or that of our shareholders to
seek injunctive or other equitable relief not involving monetary damages.
The Tennessee Business Corporation Act allows Tennessee corporations,
with the approval of their shareholders, to include in their charter a provision
eliminating or limiting the liability of directors, except in the circumstances
described above. We included the limitation of liability provision in our
charter to encourage qualified individuals to serve and remain as our directors.
While we have not experienced any problems in locating directors to date, we
could experience difficulty in the future as our business activities expand and
diversify. We also included the limitation of liability provision to enhance our
ability to secure liability insurance for our directors at a reasonable cost. We
believe that this provision has enabled us to secure this insurance on terms
more favorable than if this provision were not included in our charter.
MERGER TRANSACTIONS
Under our charter, any merger or sale, lease, exchange or other
disposition of all or substantially all of our assets in a transaction with a
person or entity who owns 5% or more of our outstanding shares requires the
affirmative vote of two-thirds of our outstanding shares entitled to vote. This
two-thirds shareholder approval requirement does not apply if:
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- prior to or at the time the person or entity acquired 5% or
more of our stock, our board of directors approved a
memorandum of understanding substantially consistent with the
transaction by which the person or entity acquired the
ownership position; or
- the transaction is approved by at least two-thirds of our
entire board of directors at any time prior to the transaction
being completed.
This charter provision may be amended only by two-thirds approval of our entire
board of directors or by two-thirds approval of all outstanding shares entitled
to vote on the amendment.
With respect to any merger or consolidation offer made by a third
party, and with respect to any tender offer or exchange offer to acquire any
equity security of BancTenn Corp. or any offer to acquire all or substantially
all of our assets, our charter requires that our board of directors, in
determining the best interests of BancTenn Corp. and our shareholders, give due
consideration to all relevant factors including, but not limited to:
- the short-term and long-term social and economic effects on
our employees, customers and other constituents and the
communities that we serve; and
- the consideration being offered by the other party in relation
to the then current value of our assets and our business in a
freely negotiated transaction and in relation to our board's
estimate of our future value as an independent entity.
This charter provision may be amended only by a two-thirds vote of our entire
board of directors by a two-thirds vote of our outstanding shares entitled to
vote on the amendment.
BYLAW AMENDMENTS
Our charter provides that our board of directors has the right to amend
our bylaws by the affirmative vote of a majority of our directors present at a
meeting at which a quorum is present, except that an amendment to change the
number of directors requires the affirmative vote of at least two-thirds of the
entire board of directors. This charter provision may be amended only by
two-thirds approval of our entire board of directors or by two-thirds approval
of our outstanding shares entitled to vote on the amendment.
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SHARES ELIGIBLE FOR FUTURE SALE
After the close of this offering, we will have up to 1,897,172 shares
of common stock outstanding. This includes approximately 876,836 shares that may
be immediately resold after the offering in the public market without
restriction. The remaining 1,020,336 shares of our outstanding common stock will
become available for resale in the public market at future dates after the close
of this offering subject to the resale limitations under the federal securities
laws and subject to other limitations in the case of shares issued under our
Employee Stock Incentive Plan and our Employee Stock Purchase Plan.
Rule 144 under the Securities Act of 1933 places volume and other
limitations on the resale of restricted shares and the resale of shares held by
our affiliates. Restricted shares, for Rule 144 purposes, are shares that have
been acquired within the last two years under an exemption from registration
under federal securities law. An affiliate is a person who directly or
indirectly controls, is controlled by, or is under common control with, the
BancTenn Corp. Affiliates of a company generally include its directors,
executive officers and principal shareholders.
Rule 144 provides that (1) holders of restricted shares who have held
their shares for at least one year, and (2) affiliates, will be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of one of the following amounts:
- 1% of the outstanding shares of common stock; or
- the average weekly trading volume during the four calendar
weeks preceding his or her sale.
Sales under Rule 144 are also subject to provisions regarding manner of
sale, notice requirements and the availability of current public information
about BancTenn Corp. Nonaffiliates who have held restricted shares for two years
are not subject to the volume and other limitations under Rule 144. Affiliates
will not be subject to the volume restrictions and other limitations under Rule
144 beginning 90 days after their status as an affiliate terminates, unless they
hold restricted shares. In that event, they must also have held their restricted
shares for two years.
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SUPERVISION AND REGULATION
The following discussion describes the material elements of the
regulatory framework that applies to banks and bank holding companies and
provides specific information related to us.
GENERAL
BancTenn Corp. is a bank holding company registered with the Board of
Governors of the Federal Reserve System under the Bank Holding Company Act of
1956. As a result, we and any future non-bank subsidiaries we establish are and
will be subject to the supervision, examination, and reporting requirements of
the Bank Holding Company Act and the regulations of the Federal Reserve.
ACQUISITIONS
The Bank Holding Company Act requires every bank holding company to
obtain the Federal Reserve's prior approval before:
- it may acquire direct or indirect ownership or control of any
voting shares of any bank if, after the acquisition, the bank
holding company will directly or indirectly own or control
more than 5% of the bank's voting shares;
- it or any of its non-bank subsidiaries may acquire all or
substantially all of the assets of any bank; or
- it may merge or consolidate with any other bank holding
company.
The Bank Holding Company Act also provides that the Federal Reserve may
not approve any transaction that would result in or tend to create a monopoly,
substantially lessen competition or otherwise function as a restraint of trade,
unless the anti-competitive effects of the proposed transaction are clearly
outweighed by the public interest in meeting the convenience and needs of the
community to be served. The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the communities
to be served. The Federal Reserve's consideration of financial resources
generally focuses on capital adequacy, which is discussed below.
Under the Riegle-Neal Interstate and Branching Efficiency Act, we, and
any other bank holding company located in Tennessee, may acquire a bank located
in any other state, and any bank holding company located outside of Tennessee
may acquire any Tennessee-based bank, regardless of state law to the contrary.
In either case, deposit-percentage, aging requirements, and other restrictions
apply. The legislation provides that unless an individual state has elected to
prohibit out-of-state banks from operating interstate branches within its
territory, adequately capitalized and managed bank holding companies will be
able to consolidate their multi-state banking operations into a single bank
subsidiary and to branch interstate through acquisitions. De novo branching by
an out-of-state bank is permitted only if it is expressly permitted by the laws
of the host state.
Under Tennessee law, any Tennessee bank or national bank domiciled in
Tennessee may establish branch offices at any location in any county in
Tennessee. An out-of-state bank that does
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not already maintain a branch in Tennessee may acquire an existing Tennessee
bank branch if the laws of the home state of the out-of-state bank permit
Tennessee banks to establish and maintain branches in that state through the
acquisition of branches under substantially the same terms and conditions as
Tennessee requires for similar transactions into Tennessee.
The Bank Holding Company Act generally prohibits us from engaging in
activities other than banking or managing or controlling banks or other
permissible subsidiaries. The Bank Holding Company Act also prohibits us from
acquiring or keeping direct or indirect control of any company engaged in any
activities other than those activities that the Federal Reserve determines to be
closely related to banking or managing or controlling banks. The
Gramm-Leach-Bliley Act has added additional financial-related activities that
may be conducted by a bank holding company that qualifies as a financial holding
company.
PERMITTED ACTIVITIES
On November 12, 1999 President Clinton signed the Gramm-Leach-Bliley
Act, which amends the Bank Holding Company Act and greatly expands the
activities in which bank holding companies and affiliates of banks are permitted
to engage. The Act eliminates many federal and state law barriers to
affiliations among banks and securities firms, insurance companies, and other
financial service providers. The provisions of the Act relating to permitted
activities of bank holding companies and affiliates of banks became effective on
March 11, 2000. The following discussion describes the activities in which
BancTenn Corp. will be permitted to engage under the Bank Holding Company Act,
as amended by the Gramm-Leach-Bliley Act.
Generally, if BancTenn Corp. qualifies and elects to become a financial
holding company, which is described below, it may engage in activities that are:
- financial in nature;
- incidental to a financial activity; or
- complementary to a financial activity and do not pose a
substantial risk to the safety or soundness of depository
institutions or the financial system generally.
In determining whether a particular activity is financial in nature or
incidental or complementary to a financial activity, the Federal Reserve must
consider (1) the purpose of the Bank Holding Company and Gramm-Leach-Bliley
Acts, (2) changes or reasonably expected changes in the marketplace in which
financial holding companies compete and in the technology for delivering
financial services, and (3) whether the activity is necessary or appropriate to
allow financial holding companies to effectively compete with other financial
service providers and to efficiently deliver information and services. The Act
expressly lists the following activities as financial in nature:
- lending, trust and other banking activities;
- insuring, guaranteeing, or indemnifying against loss or harm,
or providing and issuing annuities, and acting as principal,
agent, or broker for these purposes, in any state;
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- providing financial, investment, or advisory services;
- issuing or selling instruments representing interests in pools
of assets permissible for a bank to hold directly;
- underwriting, dealing in or making a market in securities;
- other activities that the Federal Reserve may determine to be
so closely related to banking or managing or controlling banks
as to be a proper incident to managing or controlling banks;
- foreign activities permitted outside of the United States if
the Federal Reserve has determined them to be usual in
connection with banking operations abroad;
- merchant banking through securities or insurance affiliates;
and
- insurance company portfolio investments.
To qualify to become a financial holding company, our depository
institution subsidiaries must be well capitalized and well managed and must have
a Community Reinvestment Act rating of at least "satisfactory." Additionally, we
must file an election with the Federal Reserve to become a financial holding
company and provide the Federal Reserve with 30 days written notice prior to
engaging in a permitted financial activity. Although we do not have any
immediate plans to file an election with the Federal Reserve to become a
financial holding company, one of the primary reasons we selected the holding
company structure was to have increased flexibility. Accordingly, if deemed
appropriate in the future, we may elect to become a financial holding company.
Under the Bank Holding Company Act, a bank holding company, which has
not qualified or elected to become a financial holding company, is generally
prohibited from engaging in or acquiring direct or indirect control of more than
5% of the voting shares of any company engaged in nonbanking activities unless,
prior to the enactment of the Gramm-Leach-Bliley Act, the Federal Reserve found
those activities to be so closely related to banking as to be a proper incident
to the business of banking. Activities that the Federal Reserve has found to be
so closely related to banking as to be a proper incident to the business of
banking include:
- factoring accounts receivable;
- acquiring or servicing loans;
- leasing personal property;
- conducting discount securities brokerage activities;
- performing selected data processing services;
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- acting as agent or broker in selling credit life insurance and
other types of insurance in connection with credit
transactions; and
- performing selected insurance underwriting activities.
Despite prior approval, the Federal Reserve may order a bank holding
company or its subsidiaries to terminate any of these activities or to terminate
its ownership or control of any subsidiary when it has reasonable cause to
believe that the bank holding company's continued ownership, activity or control
constitutes a serious risk to the financial safety, soundness, or stability of
any of its bank subsidiaries.
BANK OF TENNESSEE
Bank of Tennessee's deposits are insured by the FDIC to the maximum
extent provided by law. Bank of Tennessee is also subject to numerous state and
federal statutes and regulations that affect its business, activities and
operations, and it is supervised and examined by the FDIC and the Tennessee
Department of Financial Institutions. The FDIC and the Tennessee Department of
Financial Institutions regularly examine the operations of Bank of Tennessee and
have the authority to approve or disapprove mergers, the establishment of
branches, and similar corporate actions. Both regulatory agencies also have the
power to prevent the continuance or development of unsafe or unsound banking
practices or other violations of law.
PAYMENT OF DIVIDENDS
BancTenn Corp. is a legal entity separate and distinct from Bank of
Tennessee. The principal source of BancTenn Corp.'s cash flow, including cash
flow to pay dividends to its shareholders, is dividends that it receives from
Bank of Tennessee. Statutory and regulatory limitations apply to Bank of
Tennessee's payment of dividends to BancTenn Corp. as well as to BancTenn
Corp.'s payment of dividends to its shareholders.
If, in the opinion of the FDIC, Bank of Tennessee were engaged in or
about to engage in an unsafe or unsound practice, the FDIC could require, after
notice and a hearing, that it cease and desist from its practice. The federal
banking agencies have indicated that paying dividends that deplete a depository
institution's capital base to an inadequate level would be an unsafe and unsound
banking practice. Under the Federal Deposit Insurance Corporation Improvement
Act of 1991, a depository institution may not pay any dividend if payment would
cause it to become undercapitalized or if it already is undercapitalized.
Moreover, the federal agencies have issued policy statements that provide that
bank holding companies and insured banks should generally only pay dividends out
of current operating earnings. See "--Prompt Corrective Action" on page 73.
Tennessee law prohibits state banks such as Bank of Tennessee from
paying dividends other than from undivided profits. Under Tennessee law, the
directors of Bank of Tennessee, after making proper deduction for all
expenditures, expenses, taxes, losses, bad debts, and any write-offs or other
deductions required by the Tennessee Department of Financial Institutions, may
credit net profits to the bank's undivided profits account, and may declare a
dividend quarterly, semi-annually or annually in such amount as they deem
appropriate. In determining the amount available for declaration of a dividend,
the directors must deduct the amount of any net loss and they must transfer
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to the bank's surplus account (1) the amount, if any, required to raise the
surplus to 50% of the bank's capital stock, and (2) the amount, if any, required
to make the paid-in-surplus account equal the capital stock account. In any
event, the declaration of a dividend cannot adversely impair the bank's required
reserves against deposits.
A Tennessee bank, with the approval of the Tennessee Department of
Financial Institutions, may transfer funds from its undivided profits (retained
earnings) account or any part of its paid-in-capital account. The payment of
dividends by any bank depends upon its earnings and financial condition and, in
addition to the limitations described above, is subject to the statutory power
of state and federal regulatory agencies to act to prevent what they deem unsafe
or unsound banking practices.
In addition to the limitations under Tennessee law, federal banking
regulations require that Bank of Tennessee maintain specified levels of capital
in relation to Bank of Tennessee's total assets. These regulations have the
effect of further limiting the amount of dividends that Bank of Tennessee can
pay. See "Capital Adequacy" see below.
CAPITAL ADEQUACY
We are required to comply with the capital adequacy standards
established by the Federal Reserve in the case of BancTenn Corp. and the FDIC in
the case of Bank of Tennessee. The Federal Reserve has established two basic
measures of capital adequacy for bank holding companies -- a risk-based measure
and a leverage measure. A bank holding company must satisfy all applicable
capital standards to be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profiles among banks
and bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted
assets is 8%. At least one-half of total capital must comprise common stock,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and specified other intangible assets.
This portion of total capital is referred to as Tier 1 capital. The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves and is referred to as Tier 2 capital. At March 31, 2000, our
consolidated ratio of total capital to risk-weighted assets was 9.80% and our
consolidated ratio of Tier 1 capital to risk-weighted assets was 8.80%.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 capital to average assets, less goodwill and other specified
intangible assets, of 3% for bank holding companies that meet specified criteria
including having the highest regulatory rating. All other bank holding companies
generally are required to maintain a leverage ratio of at least 3%, plus an
additional cushion of 100 to 200 basis points. Our leverage ratio at March 31,
2000 was 7.90%. The guidelines also provide that bank holding companies
experiencing internal growth, or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels
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without significant reliance on intangible assets. Furthermore, the Federal
Reserve has indicated that it will consider a bank holding company's Tier 1
capital leverage ratio, after deducting all intangibles, and other indicators of
capital strength in evaluating proposals for expansion or new activities.
Bank of Tennessee is subject to risk-based and leverage capital
requirements adopted by the FDIC, which are substantially similar to those
adopted by the Federal Reserve for bank holding companies.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on accepting
brokered deposits, and other restrictions on its business. The FDIC can impose
substantial additional restrictions on FDIC-insured depository institutions that
fail to meet applicable capital requirements. See "Prompt Corrective Action" see
below.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, we are expected to act as a source of
financial strength for, and to commit resources to support, Bank of Tennessee as
well as Paragon Commercial Bank, located in Raleigh, North Carolina. We and our
affiliates own a total of 29.62% of Paragon Commercial Bank's outstanding common
stock. This support may be required at times when, without this Federal Reserve
policy, we might not be inclined to provide it. In addition, any capital loans
by a bank holding company to its subsidiary bank will be repaid only after the
bank's deposits and specified other indebtedness are repaid in full. In the
event of a bank holding company's bankruptcy, any commitment by the bank holding
company to a federal bank regulatory agency to maintain the capital of a banking
subsidiary will be assumed by the bankruptcy trustee and entitled to a priority
of payment.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991
established a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system, the federal banking regulators
have established five capital categories: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized. The banking regulators are required to take mandatory
supervisory actions, and are authorized to take other discretionary actions,
relating to institutions in the three undercapitalized categories. The severity
of the action depends upon the capital category in which the institution is
placed. Generally, subject to a narrow exception, the banking regulators must
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation the
relevant capital level for each category.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to limitations. The controlling
holding company's obligation to fund a capital restoration plan is limited to
the lesser of 5% of an undercapitalized subsidiary's assets or the amount
required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches, or engaging in any new
line of business, except
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under an accepted capital restoration plan or with FDIC approval. In addition,
the appropriate federal banking agency may treat an undercapitalized institution
in the same manner as it treats a significantly undercapitalized institution, if
it determines that those actions are necessary.
At March 31, 2000, Bank of Tennessee's and Paragon Commercial Bank's
capital levels placed them in the well-capitalized category.
FDIC INSURANCE ASSESSMENTS
The FDIC has adopted a risk-based assessment system for insured
depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities. The system
assigns an institution to one of three capital categories: well capitalized,
adequately capitalized and undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. The FDIC also assigns an
institution to one of three supervisory subgroups within each capital group. The
supervisory subgroup to which an institution is assigned is based on a
supervisory evaluation that the institution's primary federal regulator provides
to the FDIC and information that the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds. The FDIC determines an institution's insurance assessment rate based on
the institution's capital category and supervisory category. Under the
risk-based assessment system, there are nine combinations of capital groups and
supervisory subgroups to which different assessment rates are applied.
Assessments range from 0 to 27 cents per $100 of deposits, depending on the
institution's capital group and supervisory subgroup.
Effective January 1, 1997, the FDIC imposed assessments to help repay
the $780 million in annual interest payments on the $8 billion of Financing
Corporation bonds issued in the late 1980s as part of the government rescue of
the thrift industry. The FDIC adjusts these assessments quarterly. For the
second quarter of 2000, the assessment is 2.08 cents per $100 of deposits.
The FDIC may terminate an institution's deposit insurance if it finds
that the institution has engaged in unsafe and unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC.
PROPOSED LEGISLATION AND REGULATORY ACTION
New statutes and regulations are regularly proposed that contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. We cannot predict whether
or in what form any proposed statute or regulation will be adopted or the extent
to which our business may be affected by any new statute or regulation.
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LEGAL MATTERS
Hunter, Smith & Davis, LLP, counsel for BancTenn Corp., will pass upon
the validity of the shares of common stock offered by this prospectus. Powell,
Goldstein, Frazer & Murphy LLP, Atlanta, Georgia, has acted as special counsel
to BancTenn Corp. in connection with this offering.
EXPERTS
Hazlett, Lewis & Bieter, PLLC, independent auditors, Chattanooga,
Tennessee, have audited BancTenn Corp.'s consolidated financial statements for
the years ended December 31, 1999 and 1998 included in this prospectus. BancTenn
Corp.'s financial statements are included in this prospectus in reliance on
Hazlett, Lewis & Bieter, PLLC's report, given on their authority as experts in
accounting and auditing.
REPORTS TO SHAREHOLDERS
Upon the effective date of the Registration Statement on Form SB-2 that
registers the shares of common stock offered by this prospectus with the
Securities and Exchange Commission, we will be subject to the reporting
requirements of the Securities Exchange Act of 1934, which include requirements
to file annual reports on Form 10-KSB and quarterly reports on Form 10-QSB with
the Securities and Exchange Commission. This reporting obligation will exist for
at least one year and will continue for fiscal years thereafter, except that
these reporting obligations may be suspended for any subsequent fiscal year if
at the beginning of the year the common stock of BancTenn Corp. is held of
record by less than 300 persons.
At any time that we are not a reporting company, we will furnish our
shareholders with annual reports containing audited financial information for
each fiscal year on or before the date of the annual meeting of shareholders as
required by the FDIC. Our fiscal year ends on December 31. Additionally, we will
also furnish such other reports as we may determine to be appropriate or as
otherwise may be required by law.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission the
Registration Statement under the Securities Act with respect to the shares of
common stock offered by this prospectus. This prospectus does not contain all of
the information set forth in the Registration Statement. For further information
and our common stock, reference is made to the Registration Statement and its
exhibits about us. The Registration Statement may be examined and copied at the
public reference facilities maintained by the Securities and Exchange Commission
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the regional offices of the Securities and Exchange Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and Seven World Trade Center, 13th Floor, New York, New York 10048.
You may read and copy our registration statement, and any other materials filed
by us with the Securities and Exchange Commission, at the Securities and
Exchange Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also obtain information on the operation of the
Public Reference Room by calling 1-800-SEC-0330. The Securities and Exchange
74
<PAGE> 76
Commission also maintains a Web site (http://www.sec.gov) that contains
registration statements, reports, proxy and information statements and other
information regarding registrants, such as BancTenn Corp., that file
electronically with the Securities and Exchange Commission.
75
<PAGE> 77
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
BANCTENN CORP.
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Statements of Financial Condition as of March 31, 2000
(unaudited) and December 31, 1999 and 1998 F-3
Consolidated Statements of Income for the three months ended March 31, 2000
and March 31, 1999 (unaudited) and for the years ended December 31, 1999
and 1998 F-4
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 1999 and 1998 and for the three months ended March 31,
2000 (unaudited) F-5
Consolidated Statements of Cash Flows for the three months ended March 31,
2000 and 1999 (unaudited) and for the years ended December 31, 1999 and
1998 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 78
[HAZLETT, LEWIS & BIETER, PLLC LOGO]
Report of Independent Certified Public Accountants
To the Stockholders and
Board of Directors
BancTenn Corp.
Kingsport, Tennessee
We have audited the accompanying consolidated balance sheets of
BancTenn Corp. and subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BancTenn
Corp. and subsidiary as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Hazlett, Lewis & Bieter, PLLC
Chattanooga, Tennessee
February 4, 2000
F-2
Market Court, Suite 300 - 537 Market Street -
Chattanooga, Tennessee 37402-1239 - Telephone (423) 756-6133
FAX (423) 756-2727 - E-mail:[email protected] - Web: http://www.hlbcpa.com
<PAGE> 79
BANCTENN CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Year Ended December 31 March 31,
------------------------------------ -------------
1999 1998 2000
------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 12,860,890 $ 10,557,215 $ 17,334,320
Federal funds sold 2,094,000 -- --
Securities available for sale 32,582,480 26,397,949 37,086,093
Securities held to maturity 3,019,171 3,361,349 2,376,995
Loans, net of unearned interest and
allowance for loan losses 238,149,056 203,994,630 267,774,024
Accrued interest receivable 1,477,665 1,474,708 1,636,946
Premises and equipment 7,650,789 7,774,077 7,576,453
Other assets 1,793,125 1,130,957 2,115,988
------------- ------------ -------------
Total assets $ 299,627,176 $254,690,885 $ 335,900,819
============= ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 30,045,692 $ 34,100,270 $ 35,055,996
NOW accounts 47,452,421 44,381,119 45,278,732
Money market accounts 17,204,559 17,241,515 15,354,027
Savings accounts 13,484,771 14,412,730 20,798,039
Time deposits 155,385,267 110,758,973 166,863,886
------------- ------------ -------------
Total deposits 263,572,710 220,894,607 283,350,680
Securities sold under agreements to repurchase 9,574,336 9,087,829 12,871,999
Federal funds purchased -- 3,775,000 9,580,000
Note payable 3,000,000 -- 5,500,000
Accrued interest payable 1,089,324 807,331 1,322,564
Other liabilities 198,131 150,542 649,102
------------- ------------ -------------
Total liabilities 277,434,501 234,715,309 313,274,345
------------- ------------ -------------
Stockholders' equity:
Preferred stock, $1.00 par value; 250,000
shares authorized; no shares issued -- -- --
Common stock, $8.00 par value; 6,000,000
shares authorized; 1,468,601 shares
outstanding at March 31, 2000 and
December 31, 1999; 1,141,861 shares
outstanding at December 31, 1998 11,748,808 9,134,888 11,748,808
Additional paid-in capital 2,422,320 2,251,598 2,422,320
Retained earnings 8,348,330 8,456,482 8,857,390
Accumulated other comprehensive income (326,783) 132,608 (402,044)
------------- ------------ -------------
Total stockholders' equity 22,192,675 19,975,576 22,626,474
------------- ------------ -------------
Total liabilities and stockholders' equity $ 299,627,176 $254,690,885 $ 335,900,819
============= ============ =============
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-3
<PAGE> 80
BANCTENN CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31 Three Months Ended March 31
---------------------------------- -------------------------------
1999 1998 2000 1999
------------ ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 18,028,657 $15,208,071 $5,216,334 $ 4,217,264
Securities 1,654,635 1,871,742 543,433 384,977
Federal funds sold 33,980 187,985 37,868 3,912
------------ ----------- ---------- -----------
19,717,272 17,267,798 5,797,635 4,606,153
INTEREST EXPENSE 9,743,315 8,470,206 3,172,986 2,189,718
------------ ----------- ---------- -----------
Net interest income 9,973,957 8,797,592 2,624,649 2,416,435
Provision for loan losses 665,000 611,000 215,000 150,000
------------ ----------- ---------- -----------
Net interest income after provision
for loan losses 9,308,957 8,186,592 2,409,649 2,266,435
------------ ----------- ---------- -----------
NONINTEREST INCOME
Service charges, fees, and commissions 1,679,554 1,556,400 449,134 381,378
Service revenue 1,158,703 945,632 385,352 249,849
Other (113,823) 69,447 90,178 (12,263)
------------ ----------- ---------- -----------
2,724,434 2,571,479 924,664 618,964
------------ ----------- ---------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits 4,916,106 4,262,234 1,408,225 1,137,726
Occupancy expenses 531,784 522,096 148,756 122,164
Other operating expenses 3,132,347 2,919,581 915,131 686,226
------------ ----------- ---------- -----------
8,580,237 7,703,911 2,472,112 1,946,116
------------ ----------- ---------- -----------
Income before income taxes 3,453,154 3,054,160 862,201 939,283
Income taxes 1,218,360 1,111,613 294,397 335,269
------------ ----------- ---------- -----------
Net income $ 2,234,794 $ 1,942,547 $ 567,804 $ 604,014
============ =========== ========== ===========
EARNINGS PER SHARE
Basic $ 1.56 $ 1.37 $ 0.39 $ 0.42
Diluted 1.48 1.31 0.37 0.40
============ =========== ========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-4
<PAGE> 81
BANCTENN CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Comprehensive Stockholders' Common
Income Equity Stock
------------- ------------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1997 $ 17,785,618 $ 9,042,088
Comprehensive income:
Net income $ 1,942,547 1,942,547 --
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on securities available
for sale, net of reclassification adjustment 72,041 72,041 --
-----------
Total comprehensive income $ 2,014,588
===========
Cash dividend (56,514) --
Issuance of 11,600 common shares pursuant to employee stock purchase
and stock option plan 231,884 92,800
------------ -----------
BALANCE, December 31, 1998 19,975,576 9,134,888
Comprehensive income:
Net income $ 2,234,794 2,234,794 --
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on securities available
for sale, net of reclassification adjustment (459,391) (459,391) --
-----------
Total comprehensive income $ 1,775,403
===========
Cash dividend (57,098) --
Issuance of 285,387 common shares pursuant to a 5 for 4 stock split (2,752) 2,283,096
Issuance of 41,353 common shares pursuant to employee stock purchase
and stock option plan 501,546 330,824
------------ -----------
BALANCE, December 31, 1999 22,192,675 11,748,808
Comprehensive income:
Net income $ 567,804 567,804 --
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on securities available
for sale, net of reclassification adjustment (75,261) (75,261) --
-----------
Total comprehensive income $ 492,543
===========
Cash dividend (58,744) --
------------ -----------
BALANCE, March 31, 2000 (UNAUDITED) $ 22,626,474 $11,748,808
============ ===========
<CAPTION>
Accumulated
Additional Other
Paid-in Retained Comprehensive
Capital Earnings Income
---------- ----------- -------------
<S> <C> <C> <C>
BALANCE, December 31, 1997 $2,112,514 $ 6,570,449 $ 60,567
Comprehensive income:
Net income -- 1,942,547 --
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on securities available
for sale, net of reclassification adjustment -- -- 72,041
Total comprehensive income
Cash dividend -- (56,514) --
Issuance of 11,600 common shares pursuant to employee stock purchase
and stock option plan 139,084 -- --
---------- ----------- -----------
BALANCE, December 31, 1998 2,251,598 8,456,482 132,608
Comprehensive income:
Net income -- 2,234,794 --
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on securities available
for sale, net of reclassification adjustment -- -- (459,391)
Total comprehensive income
Cash dividend -- (57,098) --
Issuance of 285,387 common shares pursuant to a 5 for 4 stock split -- (2,285,848) --
Issuance of 41,353 common shares pursuant to employee stock purchase
and stock option plan 170,722 -- --
---------- ----------- -----------
BALANCE, December 31, 1999 2,422,320 8,348,330 (326,783)
Comprehensive income:
Net income -- 567,804 --
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on securities available
for sale, net of reclassification adjustment -- -- (75,261)
Total comprehensive income
Cash dividend -- (58,744) --
---------- ----------- -----------
BALANCE, March 31, 2000 (UNAUDITED) $2,422,320 $ 8,857,390 $ (402,044)
========== =========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-5
<PAGE> 82
<PAGE> 83
BANCTENN CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31 Three Months Ended March 31
----------------------------- -----------------------------
1999 1998 2000 1999
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,234,794 $ 1,942,547 $ 567,804 $ 604,014
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 700,402 654,291 187,996 163,440
Provision for loan losses 665,000 611,000 215,000 150,000
Deferred income taxes (183,019) (234,212) -- --
Other gains and losses, net (28,991) 24,429 22,349 1,691
Change in operating assets and liabilities:
Interest receivable (2,957) (363,060) (159,281) 192,935
Interest payable 281,993 12,454 233,240 78,831
Other assets and liabilities 120,410 (539,766) 141,188 668,006
------------ ------------ ------------ ------------
Net cash provided by operating activities 3,787,632 2,107,683 1,208,296 1,858,917
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from securities transactions:
Securities available for sale 13,420,095 10,324,252 2,444,716 6,429,544
Securities held to maturity 333,128 1,854,236 641,082 117,737
Purchase of securities available for sale (20,282,379) (10,672,223) (7,060,625) (10,078,140)
Proceeds from sale of foreclosed real estate 322,604 193,313 -- 47,913
Net increase in loans (35,424,757) (50,904,470) (29,839,968) (7,144,419)
Purchase of premises and equipment (618,298) (787,995) (191,924) (55,431)
Proceeds from sale of other assets 28,344 176,236 80,964 4,293
------------ ------------ ------------ ------------
Net cash used in investing activities (42,221,263) (49,816,651) (33,925,755) (10,678,503)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits and NOW,
money market, and savings accounts (1,948,191) 16,887,397 8,299,351 (5,158,783)
Net increase in time deposits 44,626,294 18,183,942 11,478,619 10,738,388
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase (3,288,493) 5,564,822 12,877,663 186,932
Proceeds from borrowings 3,000,000 -- 2,500,000 3,000,000
Issuance of common stock and stock split 498,794 231,884 -- --
Dividends paid (57,098) (56,514) (58,744) --
------------ ------------ ------------ ------------
Net cash provided by financing activities 42,831,306 40,811,531 35,096,889 8,766,537
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 4,397,675 (6,897,437) 2,379,430 (53,049)
CASH AND CASH EQUIVALENTS, beginning of year 10,557,215 17,454,652 14,954,890 10,557,215
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 14,954,890 $ 10,557,215 $ 17,334,320 $ 10,504,166
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the year for interest $ 9,461,322 $ 8,457,752 $ 2,939,746 $ 2,110,887
Cash paid during the year for income taxes 1,734,578 1,302,890 420,604 279,328
============ ============ ============ ============
NONCASH INVESTING ACTIVITIES
Other real estate acquired in settlement of loans $ 605,331 $ 295,956 $ -- $ 149,623
============ ============ ============ ============
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-6
<PAGE> 84
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1. Summary of Significant Accounting Policies
The accounting and reporting policies of BancTenn Corp. (Company)
conform with generally accepted accounting principles and practices
within the banking industry. The policies that materially affect
financial position and results of operations are summarized as follows:
Nature of operations:
Bank of Tennessee (Bank) provides a variety of financial services to
individual and commercial customers through its branch offices in the
Tri-Cities area of upper east Tennessee. The Bank's primary deposit
products are transaction accounts and certificates of deposit. Its
primary lending products are commercial loans, residential real estate
loans, and indirect automobile loans. The Bank also provides data
processing and other operating services to other financial
institutions. Other operating services include bookkeeping, item
processing, accounting, human resources, and loan review.
Principles of consolidation:
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Bank of Tennessee. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on
loans. Management utilizes independent appraisals in connection with
the determination of the allowance for losses on loans.
While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on
changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review
the Bank's allowance for losses on loans. Such agencies may require the
Bank to recognize additions to the allowance based on their judgment
about information available to them at the time of their examination.
Because of these factors, it is reasonably possible that the allowance
for loan losses may change materially in the near term.
F-7
<PAGE> 85
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1. Summary of Significant Accounting Policies (continued)
Cash and cash equivalents:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, and federal funds sold.
Securities available for sale:
Securities available for sale consist of debt and equity securities not
classified as securities held to maturity. Unrealized holding gains and
losses, net of tax, on securities available for sale are reported as a
separate component of stockholders' equity until realized. Amortization
of premiums and accretion of discounts on securities available for sale
are recorded using the interest method. Gains and losses on the sale of
securities available for sale are recorded when realized using the
specific-identification method.
Securities held to maturity:
Bonds, notes, and debentures for which the Bank has the positive intent
and ability to hold to maturity are reported at cost, adjusted for
premiums and discounts that are recognized in interest income using the
interest method over the period to maturity.
Loans:
Loans are stated at unpaid principal balances, less the allowance for
loan losses and unearned interest.
Unearned interest on installment loans is recognized as income over the
term of the loans using a method that approximates the interest method.
Loans are placed on nonaccrual when a loan is specifically determined
to be impaired by management. Any unpaid interest previously accrued on
those loans is reversed from income. Interest income generally is not
recognized on specific impaired loans unless the likelihood of further
loss is remote. Interest payments received on such loans are applied as
a reduction of the loan principal balance. Interest income on other
nonaccrual loans is recognized only to the extent of interest payments
received.
The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses inherent in
the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio,
including the nature of the portfolio, credit concentrations, trends in
historical loss experience, specific impaired loans, and economic
conditions. Allowances for impaired loans are generally determined
based on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan losses, which
is charged to expense and reduced by charge-offs, net of recoveries.
F-8
<PAGE> 86
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1. Summary of Significant Accounting Policies (continued)
Premises and equipment:
Premises and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed on the straight-line
depreciation method for financial statement purposes. Premises are
depreciated over 10 to 40 years, and furniture and equipment are
depreciated over 3 to 10 years.
Additions and major renewals and betterment are capitalized and
depreciated over their estimated useful lives. Repairs, maintenance,
and minor renewals are charged to operating expense as incurred. When
property is replaced or otherwise disposed of, the cost of such assets
and the related accumulated depreciation are removed from the accounts.
The gain or loss, if any, is recorded in the statement of income.
Securities sold under agreements to repurchase:
Securities sold under agreements to repurchase generally mature within
one to four days from the transaction date. Securities sold under
agreements to repurchase are secured by U.S. Government and agency
securities.
Deferred income taxes:
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Stock options:
The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise
price. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation."
F-9
<PAGE> 87
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 2. Securities
Securities have been classified in the balance sheet according to
management's intent as either securities held to maturity or securities
available for sale.
The amortized cost and market value of securities at December 31, 1999
and 1998, are as follows:
<TABLE>
<CAPTION>
1999
---------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Securities available for sale:
Securities of U.S.
Government agencies
and corporations $17,441,725 $ -- $ (312,501) $17,129,224
Obligations of states and
political subdivisions 7,581,398 1,935 (172,687) 7,410,646
Mortgage-backed and
related securities 3,167,987 6,619 (47,301) 3,127,305
Equity securities 4,114,605 -- -- 4,114,605
Restricted securities 800,700 -- -- 800,700
----------- --------- ------------ -----------
$33,106,415 $ 8,554 $ (532,489) $32,582,480
=========== ========= ============ ===========
Securities held to maturity:
Obligations of states and
political subdivisions $ 1,921,810 $ 1,836 $ (2,364) $ 1,921,282
Mortgage-backed and
related securities 1,097,361 2,409 (24,432) 1,075,338
----------- --------- ------------ -----------
$ 3,019,171 $ 4,245 $ (26,796) $ 2,996,620
=========== ========= ============ ===========
</TABLE>
F-10
<PAGE> 88
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 2. Securities (continued)
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Government
Securities $ 3,994,004 $ 36,622 $ -- $ 4,030,626
Securities of U.S.
Government agencies
and corporations 10,996,347 65,216 -- 11,061,563
Obligations of states and
political subdivisions 4,719,020 67,990 -- 4,787,010
Mortgage-backed and
related securities 4,752,644 59,005 (14,950) 4,796,699
Equity securities 1,016,851 -- -- 1,016,851
Restricted securities 705,200 -- -- 705,200
----------- --------- ------------ -----------
$26,184,066 $ 228,833 $ (14,950) $26,397,949
=========== ========= ============ ===========
Securities held to maturity:
Obligations of states and
political subdivisions $ 1,924,701 $ 18,462 $ -- $ 1,943,163
Mortgage-backed and
related securities 1,436,648 4,948 (6,037) 1,435,559
----------- --------- ------------ -----------
$ 3,361,349 $ 23,410 $ (6,037) $ 3,378,722
=========== ========= ============ ===========
</TABLE>
F-11
<PAGE> 89
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 2. Securities (continued)
The scheduled maturities of securities available for sale and
securities held to maturity at December 31, 1999, are as follows:
<TABLE>
<CAPTION>
Securities Available for Sale Securities Held to Maturity
-------------------------------- ------------------------------
Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 2,749,593 $ 2,754,899 $1,751,525 $1,745,972
Due from one year to
five years 14,707,236 14,415,554 940,600 928,774
Due from five years to
ten years 6,253,565 6,131,774 -- 187,892
Due after ten years 4,480,716 4,364,948 327,046 133,982
----------- ----------- ---------- ----------
28,191,110 27,667,175 3,019,171 2,996,620
Securities with no stated
maturity 4,915,305 4,915,305 -- --
----------- ----------- ---------- ----------
$33,106,415 $32,582,480 $3,019,171 $2,996,620
=========== =========== ========== ==========
</TABLE>
For purposes of the maturity table, mortgage-backed and related
securities, which are not due at a single maturity date, have been
allocated over maturity groupings based on the weighted-average
contractual maturities of underlying collateral. The mortgage-backed
and related securities may mature earlier than their weighted-average
contractual maturities because of principal prepayments.
Proceeds from sales of securities were $999,375 in 1998. Gross losses
realized on those sales were $1,015. There were no sales in 1999.
Securities with a book value of approximately $26,997,000 and
$20,599,000 at December 31, 1999 and 1998, respectively, were pledged
to secure various deposits.
Note 3. Loans and Allowance For Loan Losses
A summary of transactions in the allowance for loan losses for the
years ended December 31, 1999 and 1998, is as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Balance, beginning of year $ 1,898,644 $ 1,550,533
Loans charged off and recovered, net (163,152) (262,889)
Provision charged to operating expense 665,000 611,000
----------- -----------
Balance, end of year $ 2,400,492 $ 1,898,644
=========== ===========
</TABLE>
F-12
<PAGE> 90
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 3. Loans and Allowance For Loan Losses (continued)
At December 31, 1999 and 1998, the Bank's loans consist of the
following (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Real estate loans $ 159,593 $ 119,236
Commercial and industrial loans 39,241 30,764
Loans to individuals for household,
family, and other consumer expenditures 33,815 47,503
States and political subdivisions 3,355 4,533
Other 4,561 3,891
--------- ---------
Total loans 240,565 205,927
Less - Unearned interest (16) (33)
Allowance for loan losses (2,400) (1,899)
--------- ---------
Loans, net $ 238,149 $ 203,995
========= =========
</TABLE>
In the normal course of business, the Bank makes loans to directors and
executive officers of the Bank on substantially the same terms,
including interest rates and collateral, as those prevailing at the
time for comparable transactions with other borrowers. Loans to
directors and executive officers totaled $8,477,707 at December 31,
1999.
The Bank's only significant concentration of credit at December 31,
1999, occurred in real estate loans, which totaled approximately
$159,593,000. While real estate loans accounted for 67 percent of total
loans, these loans were primarily residential mortgage loans,
commercial loans secured by commercial properties, and consumer loans.
A minor portion of these loans were for construction, land acquisition,
and development. A significant portion of real estate loans are secured
by properties located in Tennessee.
At December 31, 1999 and 1998, loans that were specifically classified
as impaired were insignificant in relation to the Bank's loan
portfolio.
Note 4. Premises and Equipment
A summary of premises and equipment at December 31, 1999 and 1998, is
as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Land $ 1,525,702 $ 1,525,702
Buildings and leasehold improvements 6,271,496 6,050,469
Furniture and equipment 4,996,726 5,286,496
Automobiles 168,678 155,618
------------ ------------
12,962,602 13,018,285
Accumulated depreciation (5,311,813) (5,244,208)
------------ ------------
$ 7,650,789 $ 7,774,077
============ ============
</TABLE>
F-13
<PAGE> 91
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 5. Deposits
The aggregate amount of time deposits in denominations of $100,000 or
more at December 31, 1999 and 1998, were approximately $42,534,000 and
$24,880,000, respectively.
At December 31, 1999, the scheduled maturities of time deposits are as
follows:
<TABLE>
<S> <C>
2000 $ 38,094,191
2001 101,627,753
2002 6,563,766
2003 4,472,474
2004 4,627,083
-------------
$ 155,385,267
=============
</TABLE>
Note 6. Other Borrowed Funds
The Bank has an agreement with the Federal Home Loan Bank (FHLB) which
can provide short-term and long-term funding to the Bank in an amount
up to $16,014,000. The Bank's portfolio of one to four single-family
mortgages has been pledged as collateral for these advances based upon
an agreement to maintain a collateral to loan ratio of 150 percent.
Note 7. Stock Option and Employee Stock Purchase Plan
The Company has a stock option plan which is administered by the Board
of Directors and provides for both incentive stock options and
nonqualified stock options. In the case of incentive stock options, the
purchase price shall not be less than 100 percent of the fair market
value of the common stock on the date of grant. In the case of
nonqualified stock options, the purchase price shall not be less than
90 percent of the fair value of the common stock on the date of grant.
The maximum number of shares which can be sold or optioned under the
plan is 179,600. At December 31, 1999, the Company had granted to key
officers and employees nonqualified stock options to purchase the
maximum number of shares authorized under the plan. If not exercised,
such options will expire during 2004, 2005 and 2008.
F-14
<PAGE> 92
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 7. Stock Option and Employee Stock Purchase Plan (continued)
A summary of activity in the Company's stock option plan for the years
ended December 31, 1999 and 1998, is as follows:
<TABLE>
<CAPTION>
Weighted
Average Number
Exercise Price of Shares
-------------- ---------
<S> <C> <C>
Shares outstanding, December 31, 1997 $ 9.85 125,938
Stock options granted 24.75 40,000
-------
Shares outstanding, December 31, 1998 13.44 165,938
Exercised 9.08 (27,000)
-------
Shares outstanding, December 31, 1999 14.29 138,938
=======
</TABLE>
At December 31, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $8.25 - $26.40
and 6.35 years, respectively.
At December 31, 1999 and 1998, the number of options exercisable was
109,688 and 121,738, respectively. The weighted-average exercise price
of those options was $9.31 in 1999 and $9.78 in 1998.
The Company has not recognized any compensation cost for stock options
in the financial statements. If the Company determined compensation
cost based on the fair value at the grant date for its stock options,
the pro forma effect on net income would not be significant.
Effective January 1, 1996, the Company instituted an employee stock
purchase plan. The plan is administered by a committee designated by
the Board of Directors and provides for a maximum of 125,000 shares of
common stock to be available for purchase by eligible employees.
Substantially all full-time employees who do not own or hold options to
own five percent or more of the Company's outstanding common stock are
considered eligible. Options to purchase common stock are granted
annually to eligible employees based on compensation and are forfeited
and returned to the plan if not exercised by year-end. During 1999 and
1998, the number of shares purchased under the plan were 14,353 and
11,600 at an average per-share price of $17.87 and $19.99,
respectively.
F-15
<PAGE> 93
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 8. Income Taxes
The Company files a consolidated federal income tax return with its
subsidiary, Bank of Tennessee. Under the terms of a tax-sharing
agreement, the subsidiary's allocated portion of the consolidated tax
liability is computed as if it were reporting its income and expenses
to the Internal Revenue Service as a separate entity.
The provision for income taxes in the consolidated statements of income
for the years ended December 31, 1999 and 1998, includes the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current tax expense:
Federal $ 1,159,652 $ 1,137,157
State 241,727 208,668
----------- -----------
1,401,379 1,345,825
Deferred income taxes related to:
Provision for loan losses (199,000) (232,000)
Depreciation (4,000) (30,000)
Other 19,981 27,788
----------- -----------
Provision for income taxes $ 1,218,360 $ 1,111,613
=========== ===========
</TABLE>
The income tax provision is different than the expected tax provision
computed by multiplying income before income taxes by the statutory
federal income tax rates. The reasons for this difference are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Expected tax at statutory rates $ 1,174,000 $ 1,038,000
Increase (decrease) resulting from tax effect of:
Tax exempt interest on obligations of
states and political subdivisions (143,000) (103,000)
State income taxes, net of federal
tax benefit 160,000 138,000
Other 27,360 38,613
----------- -----------
Provision for income taxes $ 1,218,360 $ 1,111,613
=========== ===========
</TABLE>
Deferred tax assets recognized for deductible temporary differences
totaled $1,000,182 at December 31, 1999, and $602,554 at December 31,
1998. Deferred tax liabilities for taxable temporary differences
totaled $250,531 at December 31, 1999, and $318,050 at December 31,
1998.
F-16
<PAGE> 94
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 9. Profit-Sharing Plan
The Company has a salary reduction/profit-sharing plan under the
provisions of Section 401(k) of the Internal Revenue Code. All
employees may participate after having completed one full year of
service. The Plan provides for contributions by the Company in such
amounts as determined by the Board of Directors not to exceed 6 percent
of the participant's annual compensation. In addition, the Plan
provides for the Company to match employee contributions to the Plan
equal to 50 percent of the first 6 percent of the participant's annual
compensation. The Company contributed $79,316 and $65,608 to the Plan
for the years ended December 31, 1999 and 1998, respectively.
Note 10. Financial Instruments With Off-Balance-Sheet Risk
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include various commitments
to extend credit and standby letters of credit. These instruments
expose the Bank to varying degrees of credit and interest rate risk in
excess of the amount recognized in the accompanying balance sheet. To
manage this risk, the Bank uses the same management policies and
procedures for financial instruments with off-balance-sheet risk as it
does for financial instruments whose risk is reflected on the balance
sheet.
The credit risk of all financial instruments varies based on many
factors, including the value of collateral held and other security
arrangements. To mitigate credit risk, the Bank generally determines
the need for specific covenant, guarantee, and collateral requirements
on a case-by-case basis, depending on the customer's creditworthiness.
The amount and type of collateral held to reduce credit risk vary, but
may include real estate, machinery, equipment, inventory, and accounts
receivable as well as cash on deposit, stocks, bonds, and other
marketable securities that are generally held in the Bank's possession.
This collateral is valued and inspected on a regular basis to ensure
both its existence and adequacy. The Bank requests additional
collateral when appropriate.
At December 31, 1999, commitments under standby letters of credit were
$2,289,942, and undisbursed loan commitments were $54,869,006. The
Bank's credit exposure for these financial instruments is represented
by their contractual amounts.
Note 11. Fair Value of Financial Instruments
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a
particular financial instrument. Because no market exists for a
significant portion of the Company's financial instruments, fair value
estimates are based on judgments regarding future expected loss
experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
subjective in nature; involve uncertainties and matters of judgment;
and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
F-17
<PAGE> 95
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 11. Fair Value of Financial Instruments (continued)
Fair value estimates are based on existing financial instruments
without attempting to estimate the value of anticipated future business
and the value of assets and liabilities that are not considered
financial instruments. The following methods and assumptions were used
to estimate the fair value of each class of financial instruments:
Cash and cash equivalents:
For cash and cash equivalents, the carrying amount is a reasonable
estimate of fair value.
Securities:
The fair value of securities is estimated based on bid prices published
in financial newspapers or bid quotations received from securities
dealers.
Loans:
The fair value of loans is calculated by discounting scheduled cash
flows through the estimated maturity using estimated market discount
rates, adjusted for credit risk and servicing costs. The estimate of
maturity is based on historical experience with repayments for each
loan classification, modified, as required, by an estimate of the
effect of current economic and lending conditions.
Deposits:
The fair value of deposits with no stated maturity, such as demand
deposits and NOW, money market, and savings accounts, is equal to the
amount payable on demand. The fair value of time deposits is based on
the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of similar
remaining maturities.
Securities sold under agreements to repurchase and other borrowed
funds:
For securities sold under agreements to repurchase and other borrowed
funds, the carrying amount is a reasonable estimate of fair value.
Note payable:
The carrying amount of the note payable is a reasonable estimate of
fair value.
F-18
<PAGE> 96
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 11. Fair Value of Financial Instruments (continued)
The carrying amount and estimated fair value of the Company's financial
instruments at December 31, 1999 and 1998, are as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------------- ---------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 14,955 $ 14,955 $ 10,557 $ 10,557
Securities 35,602 35,579 29,759 29,777
Net loans 238,149 237,112 203,995 204,347
Liabilities:
Noninterest-bearing demand deposits 30,046 30,046 34,100 34,100
NOW accounts 47,452 47,452 44,381 44,381
Savings and money market accounts 30,689 30,689 31,654 31,654
Time deposits 155,385 156,249 110,759 111,219
Securities sold under agreements to
repurchase and federal funds purchased 9,574 9,574 12,863 12,863
Note payable 3,000 3,000 -- --
</TABLE>
Note 12. Liquidity and Capital Resources
The Company's primary source of funds with which to pay its future
obligations is the receipt of dividends from its subsidiary bank. Bank
regulations limit the amount of dividends that may be paid without
prior approval of the Bank's regulatory authorities. It is management's
intent to limit the amount of dividends paid in order to maintain
compliance with capital guidelines and to maintain a strong capital
position in the Bank.
Note 13. Related-Party Transactions
Bank of Tennessee provides data processing and other banking
operational services to Carter County Bank, whose major shareholder is
a principal shareholder and officer of the Company. Service revenue
from Carter County Bank totaled $671,990 and $640,447 in 1999 and 1998,
respectively.
Note 14. Regulatory Matters
The Bank of Tennessee is subject to various regulatory capital
requirements administered by the State of Tennessee Department of
Financial Institutions and the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory--and
possibly additional discretionary--actions by regulators that, if
undertaken, could have a direct material effect on the Bank's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices.
F-19
<PAGE> 97
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 14. Regulatory Matters (continued)
The Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1999, that the Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1999, the most recent notification from the
regulators categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. There are no
conditions or events since that notification that management believes
have changed the institution's prompt corrective action category.
The Bank's actual capital amounts and ratios are also presented in the
table. Dollar amounts are presented in thousands.
<TABLE>
<CAPTION>
For Capital
Actual Adequacy Purposes
------------------ -------------------
Amount Ratio Amount Ratio
------- ----- ------- -----
<S> <C> <C> <C> <C>
As of December 31, 1999:
Total capital
(to risk-weighted assets) $22,813 9.6% $18,925 8.0%
Tier I capital
(to risk-weighted assets) 20,412 8.6% 9,462 4.0%
Tier I capital
(to average assets) 20,412 7.1% 11,438 4.0%
As of December 31, 1998:
Total capital
(to risk-weighted assets) $19,656 9.9% $15,813 8.0%
Tier I capital
(to risk-weighted assets) 17,757 9.0% 7,906 4.0%
Tier I capital
(to average assets) 17,757 7.1% 10,017 4.0%
</TABLE>
F-20
<PAGE> 98
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 15. Other Comprehensive Income
Other comprehensive income consists of unrealized gains and losses on
securities available for sale. A summary of other comprehensive income
and the related tax effects for the years ended December 31, 1999 and
1998, is as follows:
<TABLE>
<CAPTION>
Tax
Before-Tax (Expense) Net-of-Tax
Amount Benefit Amount
---------- --------- ----------
<S> <C> <C> <C>
Year ended December 31, 1999:
Unrealized holding gains and losses
arising during the period $(740,476) $ 281,085 $(459,391)
Less reclassification adjustment for
losses realized in net income -- -- --
--------- --------- ---------
$(740,476) $ 281,085 $(459,391)
========= ========= =========
Year ended December 31, 1998:
Unrealized holding gains and losses
arising during the period $ 115,105 $ (43,694) $ 71,411
Less reclassification adjustment for
losses realized in net income (1,015) 385 (630)
--------- --------- ---------
$ 116,120 $ (44,079) $ 72,041
========= ========= =========
</TABLE>
Note 16. Note Payable
At December 31, 1999, the Company had a $5,000,000 line-of-credit with
First American National Bank, with outstanding borrowings under this
line of credit of $3,000,000. Interest is payable quarterly at the
90-day LIBOR rate plus 1% and the outstanding principal is due at
maturity on September 1, 2001.
The loan agreement requires the Bank to meet certain financial
covenants. The more significant of these covenants are as follows:
1. The Bank is to maintain an equity-to-asset ratio
equal to the greater of (i) the equity-to-asset ratio
imposed by the Bank's primary regulatory agency or
(ii) an equity-to-asset ratio greater than 6.5%.
2. The Bank is to maintain a volume of non-performing
assets, including loans and other real estate owned,
below 2.5% of total loans plus other real estate
owned.
3. The Bank is to maintain for each calendar half-year a
ratio of net income to total tangible assets for each
fiscal year of at least .75%.
At December 31, 1999, the Bank was in compliance with these covenants.
F-21
<PAGE> 99
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 17. Earnings Per Common Share
Basic earnings per share represents income available to common
stockholders divided by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share reflects
additional common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to
income that would result from the assumed issuance. Potential common
shares that may be issued by the Company relate to outstanding options
granted under the stock option and employee stock purchase plan,
determined using the treasury stock method.
Earnings per common share have been computed based on the following:
<TABLE>
<CAPTION>
Three Months
Year Ended December 31 Ended March 31
------------------------------ ------------------------------
1999 1998 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $2,234,794 $1,942,547 $ 567,804 $ 604,014
Less: Preferred stock dividends -- -- -- --
---------- ---------- ---------- ----------
Net income applicable to
common stock $2,234,794 $1,942,547 $ 567,804 $ 604,014
========== ========== ========== ==========
Average number of common
shares outstanding 1,428,889 1,416,625 1,468,601 1,427,258
Effect of dilutive options 84,236 71,919 72,274 86,778
---------- ---------- ---------- ----------
Average number of common
shares outstanding used to
calculate diluted earnings per
common share 1,513,125 1,488,544 1,540,875 1,514,036
========== ========== ========== ==========
</TABLE>
Note 18. Unaudited Interim Financial Information
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not
include all information and disclosures required by generally accepted
accounting principles for complete financial statements. The
accompanying unaudited interim consolidated financial statements do not
purport to contain all the necessary financial statement disclosures
required by generally accepted accounting principles that might
otherwise be necessary in the circumstances and should be read with the
fiscal 1999 consolidated financial statements and notes.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentation have
been included. The results of operations for the three-month periods
ended March 31, 2000 and 1999, are not necessarily indicative of the
results that may be expected for the entire fiscal year or any other
period.
F-22
<PAGE> 100
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 19. Condensed Parent Company Financial Statements
Financial information pertaining only to BancTenn Corp. is as follows:
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 497,512 $ 297,960
Securities available for sale 4,099,605 1,001,851
Other assets 561,993 804,843
Investment in subsidiary 20,087,282 17,903,777
----------- -----------
Total assets $25,246,392 $20,008,431
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 3,000,000 $ --
Other liabilities 53,717 32,855
Stockholders' equity 22,192,675 19,975,576
----------- -----------
Total liabilities and stockholders' equity $25,246,392 $20,008,431
=========== ===========
</TABLE>
INCOME STATEMENTS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Equity in subsidiary's earnings $ 2,940,035 $ 2,450,000
----------- -----------
Interest expense 145,013 --
Noninterest expense 977,901 771,964
Income tax (benefit) expense (417,673) (264,511)
----------- -----------
Total expense 705,241 507,453
----------- -----------
Net income $ 2,234,794 $ 1,942,547
=========== ===========
</TABLE>
F-23
<PAGE> 101
BANCTENN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 19. Condensed Parent Company Financial Statements (continued)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,234,794 $ 1,942,547
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in earnings of subsidiary (2,642,896) (985,964)
Change in operating assets and liabilities 263,712 (524,941)
----------- -----------
Net cash provided by (used in)
operating activities (144,390) 431,642
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale (3,097,754) (723,101)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 3,000,000 --
Issuance of common stock and stock split 498,794 231,884
Dividends paid (57,098) (56,514)
----------- -----------
Net cash provided by financing activities 3,441,696 175,370
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 199,552 (116,089)
CASH AND CASH EQUIVALENTS,
beginning of year 297,960 414,049
----------- -----------
CASH AND CASH EQUIVALENTS,
end of year $ 497,512 $ 297,960
=========== ===========
</TABLE>
F-24
<PAGE> 102
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Summary..........................................3
Risk Factors.....................................7
A Warning About Forwarding
Looking Statements.............................12
The Offering....................................13
Use of Proceeds.................................16
Market Price of and Dividends on
Common Stock...................................17
Dilution........................................18
Capitalization..................................19
Business of BancTenn Corp.......................20
Management's Discussion and
Analysis.......................................27
Principal Shareholders and Stock
Ownership of Management........................48
Directors and Executive Officers................50
Compensation....................................54
Related Party Transactions......................60
Description of Our Capital Stock................61
Important Provisions of Our Charter
and Bylaws.....................................62
Shares Eligible for Future Sale.................66
Supervision And Regulation......................67
Legal Matters...................................75
Experts.........................................75
Reports To Shareholders.........................75
Additional Information..........................75
Index to Consolidated Financial
Statements....................................F-1
</TABLE>
BANCTENN CORP.
428,571
SHARES OF
COMMON STOCK
PROSPECTUS
_________, 2000
Prospective investors may rely only on the information contained in
this prospectus. BancTenn Corp. has not authorized anyone to provide prospective
investors with different or additional information. This prospectus is not an
offer to sell nor is it seeking an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted. The information contained
in this prospectus is correct only as of the date of this prospectus, regardless
of the time of the delivery of this prospectus or any sale of these securities.
No action is being taken in any jurisdiction outside the United States
to permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe the restrictions of that jurisdiction
related to this offering and the distribution of this prospectus.
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Consistent with the applicable provisions of the laws of Tennessee, the
registrant's charter and bylaws provide that the registrant shall have the power
to indemnify its directors and officers against expenses (including attorneys'
fees) and liabilities arising from actual or threatened actions, suits or
proceedings, whether or not settled, to which they become subject by reason of
having served in such role if such director or officer acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the registrant and, with respect to a criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Advances against expenses shall be made so long as the person seeking
indemnification agrees to refund the advances if it is ultimately determined
that he or she is not entitled to indemnification. A determination of whether
indemnification of a director or officer is proper because he or she met the
applicable standard of conduct shall be made (1) by the board of directors of
the registrant, (2) in certain circumstances, by independent legal counsel in a
written opinion or, (3) by the affirmative vote of a majority of the shares
entitled to vote.
In addition, Article 16 of the registrant's charter, subject to certain
exceptions, eliminates the potential personal liability of a director for
monetary damages to the registrant and to the shareholders of the registrant for
breach of a duty as a director. There is no elimination of liability for (1) a
breach of the duty of loyalty to the registrant or its shareholders, (2) an act
or omission involving intentional misconduct or a knowing violation of law, and
(3) liability regarding unlawful distributions of corporate property. The
charter does not eliminate or limit the right of the registrant or its
shareholders to seek injunctive or other equitable relief not involving monetary
damages.
Item 25. Other Expenses of Issuance and Distribution.
Estimated expenses, other than underwriting discounts and commissions,
of the sale of the Registrant's common stock, $8.00 par value, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 3,168
Legal Fees and Expenses 35,000
Accounting Fees and Expenses 10,000
Printing and EDGAR 30,000
Miscellaneous 16,832
----------
Total $ 95,000
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
None.
II-1
<PAGE> 104
Item 27. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1 Amended and Restated Charter
3.2 Bylaws
4.1* Specimen Common Stock Certificate
4.2 See Exhibits 3.1 and 3.2 for provisions of the Charter and
Bylaws defining rights of holders of the common stock
5.1 Legal Opinion of Hunter, Smith & Davis, LLP
10.1 BancTenn Corp. 1992 Employee Stock Incentive Plan and Forms of
Qualified and Nonqualified Stock Option Agreements
10.2 Amendment No. 1 to 1992 Employee Stock Incentive Plan, dated
May 13, 1995
10.3 Amendment No. 2 to 1992 Employee Stock Incentive Plan, dated
November 6, 1995
10.4 Amendment No. 3 to 1992 Employee Stock Incentive Plan dated
May 23, 1997
10.5 Amendment No. 4 to 1992 Employee Stock Incentive Plan dated
May 15, 1998
10.6 Amendment No. 5 to 1992 Employee Stock Incentive Plan dated
June 1, 1999
10.7 Amendment No. 6 to 1992 Employee Stock Incentive Plan dated
April 24, 2000
10.8 BancTenn Corp. 1996 Employee Stock Purchase Plan
10.9 Amendment No. 1 to BancTenn Corp. Employee Stock Purchase Plan
dated May 9, 1997
10.10 Amendment No. 2 to BancTenn Corp. Employee Stock Purchase Plan
dated May 13, 1999
10.11 Amendment No. 3 to BancTenn Corp. Employee Stock Purchase Plan
dated April 24, 2000
10.12 BancTenn Corp. Change of Control Compensation Agreement, dated
April 1, 1997 (Colon A. Terrell, Jr.)
10.13 Bank of Tennessee Change of Control Compensation Agreement,
dated April 1, 1997 (Roy L. Harmon, Jr.)
10.14 BancTenn Corp. Directors Stock Option Plan, effective April 24,
2000
10.15 BancTenn Corp. Directors Fee Deferral Plan, effective January 1,
2001
10.16 Bank of Tennessee Split Dollar Insurance Plan, dated May 12,
1994
10.17 BancTenn Corp. Split Dollar Life Insurance Plan, Plan
Agreement, dated January 1, 1999 (Colon A. Terrell, Jr.)
10.18 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement,
dated January 1, 1999 (Roy L. Harmon, Jr.)
10.19 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement,
dated January 1, 1999 (Kenneth H. Maloy)
10.20 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement,
dated January 27, 2000 (Tony L. Howell)
10.21 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement,
dated February 25, 2000 (Mary Mac Wilson)
21.1 List of Subsidiaries
23.1 Consent of Hazlett, Lewis & Bieter, PLLC, dated May 12, 2000
23.2 Consent of Hunter, Smith & Davis, LLP--(contained in Exhibit 5.1)
24.1 Power of Attorney (Reference is made to page II-5)
27.1 Financial Data Schedule (for SEC use only) 12/31/98
27.2 Financial Data Schedule (for SEC use only) 12/31/99
27.3 Financial Data Schedule (for SEC use only) 03/31/00
</TABLE>
II-2
<PAGE> 105
<TABLE>
<S> <C>
99.1* Subscription Agreement (Exercise of Preemptive Rights)
99.2* Subscription Agreement (Public Offering)
</TABLE>
- -------------------
* To be filed by amendment.
II-3
<PAGE> 106
Item 28. Undertakings.
The Registrant hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes as follows:
(a) (1) To file, during any period in which it offers or
sells securities, a post-effective amendment to this Registration
Statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or
events which, individually or together, represent a
fundamental change in the information set forth in
the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement;
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities being registered that remain unsold at the end of
the offering.
II-4
<PAGE> 107
The Registrant hereby undertakes as follows:
(b) (1) For determining any liability under the Securities
Act, to treat the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant under Rule
424(b)(1), or (4) or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it
effective.
(2) For determining any liability under the Securities Act, to
treat each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities
II-5
<PAGE> 108
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-B and authorized this Registration
Statement to be signed on its behalf by the undersigned in the city of
Kingsport, State of Tennessee, on May 22, 2000.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
---------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, William B. Greene,
Jr. and Colon A. Terrell, Jr., and each of them, their respective
attorneys-in-fact, each with the power of substitution, for him or her in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments) and any registration statement
filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or their respective substitute or substitutes,
may do or cause to be done by virtue hereof.
II-6
<PAGE> 109
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ William B. Greene, Jr. Chairman of the Board May 22, 2000
- ---------------------------------
William B. Greene, Jr.
/s/ Colon A. Terrell, Jr. President and Chief Executive May 22, 2000
- --------------------------------- Officer (Principal Executive
Colon A. Terrell, Jr. Officer)
/s/ Mary Mac Wilson Executive Vice President May 22, 2000
- --------------------------------- (Principal Financial and
Mary Mac Wilson Accounting Officer)
/s/ Roy L. Harmon, Jr. Executive Vice President and May 22, 2000
- --------------------------------- Director
Roy L. Harmon, Jr.
/s/ C. B. Duke, IV Director May 22, 2000
- ---------------------------------
C. B. Duke, IV
/s/ William R. Garwood Director May 22, 2000
- ---------------------------------
William R. Garwood
/s/ John H. Poteat Director May 22, 2000
- ---------------------------------
John H. Poteat
/s/ John E. Seward, Jr. Director May 21, 2000
- ---------------------------------
John E. Seward, Jr.
</TABLE>
II-7
<PAGE> 110
INDEX TO EXHIBITS
<TABLE>
<S> <C>
3.2 Amended and Restated Charter
3.2 Bylaws
4.1* Specimen Common Stock Certificate
4.2 See Exhibits 3.1 and 3.2 for provisions of the Charter and Bylaws
defining rights of holders of the common stock
5.1 Legal Opinion of Hunter, Smith & Davis, LLP
10.1 BancTenn Corp. 1992 Employee Stock Incentive Plan and Forms of
Qualified and Nonqualified Stock Option Agreements
10.2 Amendment No. 1 to 1992 Employee Stock Incentive Plan, dated May 13,
1995
10.3 Amendment No. 2 to 1992 Employee Stock Incentive Plan, dated November
6, 1995
10.4 Amendment No. 3 to 1992 Employee Stock Incentive Plan dated May 23,
1997
10.5 Amendment No. 4 to 1992 Employee Stock Incentive Plan dated May 15,
1998
10.6 Amendment No. 5 to 1992 Employee Stock Incentive Plan dated June 1,
1999
10.7 Amendment No. 6 to 1992 Employee Stock Incentive Plan dated April 24,
2000
10.8 BancTenn Corp. 1996 Employee Stock Purchase Plan
10.9 Amendment No. 1 to BancTenn Corp. Employee Stock Purchase Plan dated
May 9, 1997
10.10 Amendment No. 2 to BancTenn Corp. Employee Stock Purchase Plan dated
May 13, 1999
10.11 Amendment No. 3 to BancTenn Corp. Employee Stock Purchase Plan dated
April 24, 2000
10.12 BancTenn Corp. Change of Control Compensation Agreement, dated April 1,
1997 (Colon A. Terrell, Jr.)
10.13 Bank of Tennessee Change of Control Compensation Agreement, dated April
1, 1997 (Roy L. Harmon, Jr.)
10.14 BancTenn Corp. Directors Stock Option Plan, effective April 24, 2000
10.15 BancTenn Corp. Directors Fee Deferral Plan, effective January 1, 2001
10.16 Bank of Tennessee Split Dollar Insurance Plan, dated May 12, 1994
10.17 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement, dated
January 1, 1999 (Colon A. Terrell, Jr.)
10.18 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement, dated
January 1, 1999 (Roy L. Harmon, Jr.)
10.19 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement, dated
January 1, 1999 (Kenneth H. Maloy)
10.20 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement, dated
_______, 2000 (Tony L. Howell)
10.21 BancTenn Corp. Split Dollar Life Insurance Plan, Plan Agreement, dated
_______, 2000 (Mary Mac Wilson)
21.1 List of Subsidiaries
23.1 Consent of Hazlett, Lewis & Bieter, PLLC, dated May 22, 2000
23.2 Consent of Hunter, Smith & Davis, LLP--(contained in Exhibit 5.1)
24.1 Power of Attorney (Reference is made to page II-5)
27.1 Financial Data Schedule (for SEC use only) 12/31/98
27.2 Financial Data Schedule (for SEC use only) 12/31/99
27.3 Financial Data Schedule (for SEC use only) 12/31/00
99.1* Subscription Agreement (Exercise of Preemptive Rights)
99.2* Subscription Agreement (Public Offering)
</TABLE>
- -------------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CHARTER
OF BANCTENN CORP.
Pursuant to the provisions of T.C.A. Sections 48-20-106 and
48-20-107, BancTenn Corp., a Tennessee corporation (the "Corporation"), adopts
the this Amended and Restated to reflect the amendments to the original Charter
as heretofore adopted by the Corporation and previously filed with the Tennessee
Secretary of State.
1.
The name of the Corporation is BancTenn Corp.
2.
The duration of the Corporation is perpetual.
3.
The address of the Corporation's registered office is 301 East
Center Street, P.O. Box 566, Kingsport, Sullivan County, Tennessee 37660. The
name of the Corporation's registered agent at that address is Colon A. Terrell,
Jr.
The address of the principal office of the Corporation is 301
East Center Street, Kingsport, Sullivan County, Tennessee 37660 but the
Corporation, acting through its Board of Directors, shall have the right to
change the principal office from time to time.
4.
The Corporation is for profit.
5.
The purposes for which the Corporation is organized are to act
as a bank holding company and to engage, directly or through subsidiaries, in
such other businesses and activities as are permitted by applicable law from
time to time and as the Board of Directors may specify from time to time by
resolution.
6.
(a) Capitalization. The total number of shares of all
classes of stock which the Corporation shall have the authority to issue is
6,250,000 shares, consisting of 250,000 shares of Preferred Stock, par value
$1.00 per share (the "Preferred Stock") and 6,000,000 shares of Common Stock,
par value $8.00 per share (the "Common Stock").
(b) Preferred Stock. Shares of Preferred Stock may be
issued from time to time in one or more series as may be determined by the Board
of Directors, each of said series to be distinctly designated. All
<PAGE> 2
shares of any series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any, thereon
shall be cumulative, if made and designated as cumulative. The voting powers and
the preferences and relative, participating, optional and other special rights
of each such series, and other qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any time
outstanding; and subject to the provisions of subparagraph (1) of this Section
(b) of this Article 6, the Board of Directors of the Corporation is hereby
expressly granted authority to fix by resolutions adopted prior to the issuance
of any shares of a particular series of Preferred Stock, the voting powers and
the designations, preferences and relative, optional and other special rights,
and the qualifications, limitations and restrictions of such series, including,
but without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the
number of shares of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of Directors;
(2) The rate and times at which, and the terms
and conditions on which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or series of
the same or other classes of stock, and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of
Preferred Stock of such series to convert the same into, or exchange the same
into, or exchange the same for, shares of any other class or classes of stock of
the Corporation and the terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such
series shall be subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed:
(5) The rights, if any, of the holders of
Preferred Stock of such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation;
(6) The terms of the sinking fund or redemption
or purchase account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any of the holders of
such series of Preferred Stock which may, without limiting the generality of the
foregoing, include the right, voting as a series or by itself or together with
other series of Preferred Stock or all series of Preferred Stock as a class, to
elect one or more directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series of Preferred stock
or under such other circumstances and on such conditions ant the Board of
Directors may determine.
Before issuing any shares of a series of Preferred Stock the Board of Directors
shall cause to be filed with the Tennessee Secretary of State such charter
amendment as shall be required from time to time pursuant to the Tennessee
Business Corporation Act or other applicable law.
(c) Common Stock. After the requirements with respect to
preferential dividends on the Preferred Stock (fixed in accordance with the
provisions of Section (b) of this Article 6), if any, shall have been met and
after the Corporation shall have complied with all of the requirements, if any,
with respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b) of
this Article 6), and subject further to any other conditions which may be fixed
in accordance with
<PAGE> 3
the provisions of this Article 6, then and not otherwise the holders of Common
Stock shall be entitled to receive such dividends as may be declared from time
to time by the Board of Directors.
(1) After distribution in full of the
preferential amount, if any (fixed in accordance with the provisions of Section
(b) of this Article 6), to be distributed to the holders of Preferred Stock in
the event of voluntary or involuntary liquidation, distribution or sale of
assets, dissolution or winding up of the Corporation, the holders of the Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation, tangible or intangible, of whatever kind available for distribution
to shareholders ratably in proportion to the number of shares of Common Stock
held by them respectively.
(2) Except as may otherwise be provided by
Article 8 of this Charter or required by law, each holder of Common Stock shall
have one vote in respect of each share of Common Stock held by him on all
matters voted upon by the shareholders of the Corporation.
(d) Other Provisions.
(1) The relative powers, preferences and rights
of each series of Preferred Stock in relation to the powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or resolutions
adopted pursuant to authority granted in Section (b) of this Article 6 and the
consent, by class or series vote or otherwise, of the holders of such of the
series of Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other series of
Preferred stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a parity
with, the powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted pursuant
to Section (b) of this Article 6 that the consent of the holders of a majority
(or such greater proportion as shall be therein fixed) of the outstanding shares
of such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(2) Subject to the provisions of subparagraph
(1) of this Section (d), shares of any series of Preferred Stock may be issued
from time to time as the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be fixed by the Board of
Directors.
(3) Shares of Common Stock may be issued from
time to time as the Board of Directors of the Corporation shall determine and on
such terms and for such consideration as shall be fixed by the Board of
Directors.
(4) The authorized amount of shares of Common
Stock and Preferred Stock may, without a class or series vote, be increased or
decreased from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
7.
The Corporation shall not commence business until
consideration of not less than One Thousand Dollars ($1,000) has been received
for the issuance of shares.
<PAGE> 4
8.
Except as otherwise provided in this Article 8, each
shareholder shall have the right to one vote for each share standing in the name
of such shareholder on the books of the Corporation. In all elections of
Directors, each shareholder shall have the right to multiply the number of
shares the shareholder may be entitled to vote by the number of Directors to be
elected, and the product shall represent the number of votes the shareholder may
cast in the election. The shareholder may cast all of the votes represented by
such product for one candidate or distribute them among two or more candidates.
9.
The Corporation shall be entitled to purchase its own shares
to the extent of its unreserved and unrestricted earned and capital surplus
available therefor, without a vote of shareholders.
10.
The Corporation shall be entitled to distribute a portion of
its assets, in cash or property, to its shareholders out of capital surplus
available therefor, without a vote shareholders.
11.
The Board of Directors shall have the right to adopt, amend
or repeal the By-laws of the Corporation by the affirmative vote of a majority
of the Directors present at a meeting at which a quorum is present, except that
any such amendment changing the number of Directors shall require the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
Directors in office.
Unless at least sixty-six and two-thirds percent (66-2/3%) of
the entire Board of Directors shall approve the proposed change, this Article 11
may be amended or rescinded only by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote thereon, at any
annual or special meeting of shareholders, and notice of the proposed change
must be contained in the notice of the meeting.
12.
Shareholders of the Corporation shall have preemptive rights
to the extent, and with the limitations, provided in the Tennessee Business
Corporation Act; provided, however, that shareholders shall also have preemptive
rights to the shares of Common Stock authorized in this Charter, as amended, and
which are issued, sold or optioned within two (2) years after January 31, 1985.
<PAGE> 5
13.
(a) Except as provided in Section (c) of this Article 13,
removal of any Director from the Board of Directors shall only be for cause and
shall require the affirmative vote of a majority of the entire Board of
Directors.
(b) For purposes of this Article 13, "cause" shall mean
final conviction of a felony, declaration of unsound mind by Court order,
adjudication of bankruptcy, nonacceptance of office, or conduct prejudicial to
the interests of the Corporation.
(c) Any or all of the Directors may be removed without
cause by the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote thereon. Such vote may be taken only
at an annual meeting of shareholders or at a special meeting of shareholders
which is called no sooner than twelve (12) months after the date of the previous
annual shareholders meeting, and notice of the proposed removal must be
contained in the notice of meeting.
(d) Unless at least sixty-six and two-thirds percent
(66-2/3%) of the entire Board of Directors shall approve the proposed change,
this Article 13 may be amended or rescinded only by the affirmative vote of the
holders of at least sixty-six and two-thirds (66-2/3%) of the shares of capital
stock of the Corporation issued and outstanding and entitled to vote thereon, at
any annual or special meeting of shareholders, and notice of the proposed change
must be contained in the notice of the meeting.
14.
(a) Except as otherwise expressly provided in this
Article 14:
(i) any merger or consolidation of the
Corporation with or into any other corporation; or
(ii) any sale, lease, exchange or other
disposition of all or substantially all of the assets
of the Corporation to or with any other corporation,
person or other entity;
shall require the affirmative vote of the holders of at least sixty-six and
two-thirds (66-2/3) of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote thereon if, as of the record date for the
determination of shareholders entitled to notice thereof and to vote thereon,
such other corporation, person or entity is the beneficial owner, directly or
indirectly, of five percent (5%) or more of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote.
<PAGE> 6
(b) The provisions of this Article 14 shall not apply to
any transaction described in Sections 14(a)(i) or 14(a)(ii) of this Article if:
(i) the Board of Directors of the Corporation by
resolution have approved a memorandum of
understanding with the other corporation,
person or entity with respect to and which
is substantially consistent with the
transaction prior to the time the other
corporation, person or entity became a
beneficial owner, directly or indirectly, of
five percent (5%) or more of the outstanding
shares of capital stock of the Corporation
entitled to vote; or
(ii) the transaction has been approved by
resolution adopted by at least sixty-six and
two-thirds (66-2/3%) of the entire Board of
Directors of the Corporation at any time
prior to the consummation thereof.
(c) For purposes of this Article 14, in addition to
shares of which it is the direct beneficial owner, a corporation, person or
other entity shall be deemed to be the beneficial owner of any shares of capital
stock of the Corporation (i) which it has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants, options or
otherwise, or (ii) which are deemed beneficially owned, directly or indirectly
(including shares deemed owned through application of Section (c)(i) of this
Article 14) by any other corporation, person or other entity (1) with which it,
or its "affiliate" or "associate" (as hereinafter defined), has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of capital stock of the Corporation, or (2) which is its "affiliate"
or "associate" as those terms were defined in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934 as in effect on
January 1, 1984. For purposes of this Article 14, the outstanding shares of
capital stock of the Corporation shall include shares deemed owned through the
application of Sections (c)(i) and (c)(ii) of this Article 14 but shall not
include any other shares which are not then issued and outstanding but which may
be issuable pursuant to any agreement, or upon exercise of conversion rights,
warrants, options or otherwise.
(d) The Board of Directors of the Corporation shall have
the power and duty to determine, on the basis of information then known to it:
(i) whether any corporation, person or other entity beneficially owns, directly
or indirectly, five percent (5%) or more of the outstanding shares of capital
stock of the Corporation entitled to vote, and (ii) whether any sale, lease,
exchange or other disposition of part of the assets of the Corporation involves
substantially all of the assets of the Corporation. Any such determination shall
be conclusive and binding for all purposes of this Article 14.
(e) Unless at least sixty-six and two-thirds percent
(66-2/3%) of the entire Board of Directors shall approve the proposed change,
this Article 14 may be amended or rescinded only by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the shares of
capital stock issued and outstanding and entitled to vote thereon, at any annual
or special meeting of shareholders, and notice of the proposed change must be
contained in the notice of meeting.
<PAGE> 7
15.
The Board of Directors, when evaluating any offer of another
party to make a tender or exchange offer for any equity security of the
Corporation, to merge or consolidate any other corporation with the Corporation,
or to purchase or otherwise acquire all or substantially all of the properties
and assets of the Corporation, shall, in determining what is in the best
interests of the Corporation and its shareholders, give due consideration to all
relevant factors, including without limitation: (a) the short-term and long-term
social and economic effects on the employees, customers, and other constituents
of the Corporation and its subsidiaries, and on the communities within which the
Corporation and its subsidiaries operate (it being understood that any
subsidiary bank of the Corporation is charged with providing support to and
being involved in the communities it serves), and (b) the consideration being
offered by another party in relation to the then current value of the
corporation in a freely negotiated transaction and in relation to the Board of
Directors' then estimate of the future value of the Corporation as an
independent entity.
Unless at least sixty-six and two-thirds percent (66-2/3%) of
the Board of Directors shall approve the proposed change, this Article 15 may
not be amended or rescinded except by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote thereon, at any
annual or special meeting of shareholders, and notice of the proposed change
must be contained in the notice of the meeting.
16.
Limitation on Director Liability. To the fullest extent from
time to time permitted by law, including without limitation the Tennessee
Business Corporation Act, as currently in effect or as it may be amended from
time to time, no director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of any fiduciary
duty as a director. Neither the amendment or repeal of this Article 16, nor the
adoption of any provision of this Charter inconsistent with this Article 16,
shall reduce or eliminate the protection afforded by this Article 16 to a
director in respect of any manner which occurred, or any cause of action or
claim which but for this Article 16 would have accrued or arisen, prior to such
amendment, repeal or adoption: provided, however, that this provision shall not
eliminate or limit the liability of any director (i) for any breach of a
director's duty of loyalty to the Corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, or (iii) liability under Section 48-18-304 of the
Tennessee Business Corporation Act regarding unlawful distributions of corporate
property. If, after approval of this provision by the shareholders of the
Corporation, the Tennessee Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of directors of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Tennessee Business
Corporation Act as so amended from time to time, without the need of any further
action by the directors or shareholders of the Corporation unless otherwise
required by applicable law. Any repeal or modification of this Article 16 shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
<PAGE> 8
17.
Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any manner (including as a
witness) in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, or whether formal or
informal or external or internal (hereinafter a "proceeding"), by reason of the
fact that he or she or a person of whom he or she is the legal representative is
or was a director, officer, or employee of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to any employee benefit plan, whether
the basis of such proceeding is alleged action in an official capacity as
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent permitted by the Tennessee Business
Corporation Act as the same exists or may hereafter be amended (but in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said Act permitted
the Corporation to provide prior to such amendment), against all expenses,
liability and loss, including attorney's fees, judgments, fines, ERISA excise
taxes or penalties, and amounts paid or to be paid in settlement, reasonably
incurred or suffered by such person in connection with such person therewith;
and such indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent, and shall inure to the benefit of his or
her heirs, executors and administrators; provided, however, that except as
provided hereinbelow with respect to proceedings seeking to enforce rights of
indemnification, the Corporation shall indemnify any such person seeking
indemnification in connection with any proceeding initiated by such person only
if such proceeding was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred herein (i) shall be a
contract between the Corporation and each director, officer and employee who
serves the Corporation in any such capacity at any time while these provisions
of the Tennessee Business Corporation Act and other applicable law, if any, are
in effect (any repeal or modification thereof not affecting any right or
obligation then existing pursuant to these provisions), and (ii) shall include
the right to be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition; provided, however, that if
the Tennessee Business Corporation Act requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or office, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a proceeding
shall be made only upon delivery to the Corporation of a written undertaking, by
or on behalf of such director or officer, to repay all amounts so advanced if it
shall ultimately determined that such director or officer is not entitled to be
indemnified under these provisions or applicable law.
If a claim for indemnification under these provisions is not
paid in full by the Corporation within 30 days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or part, the claimant shall be entitled to be paid also the
expense of prosecuting such claim. It shall be a defense to any such action that
the claimant has not met the standards of conduct which make it permissible
under the Tennessee Business Corporation Act for the Corporation to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be upon the Corporation. Neither the failure of the Corporation (including
its Board of Directors, independent legal counsel or shareholders) to have made
a determination prior to the commencement of such action that the
indemnification of the claimant is proper under the circumstances because he or
she has met the applicable standard of conduct set forth in the Tennessee
Business Corporation Act, nor an actual determination by the Corporation
(including its Board of Directors,
<PAGE> 9
independent legal counsel or shareholders) that the claimant has not met such
applicable legal standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
herein shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, any provision of the By-laws of the
Corporation or its Charter, under applicable law or any agreement, or under any
vote of the shareholders or disinterested directors or otherwise.
IN WITNESS WHEREOF, the undersigned, being the duly authorized
President and Chief Executive Officer of the Corporation, has executed this
Amended and Restated Charter, on behalf of the Corporation, to reflect the
Corporation's Charter, and all amendments heretofore approved and adopted by the
shareholders of the Corporation, this the 24th day of April, 2000.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
--------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
BANCTENN CORP
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Article I Offices................................................................................. 1
1.1 Location................................................................................ 1
1.2 Other Offices........................................................................... 1
Article II Meetings of Shareholders................................................................ 1
2.1 Place of Meeting........................................................................ 1
2.2 Annual Meetings......................................................................... 1
2.3 Notice of Meeting....................................................................... 2
2.4 Special Meetings........................................................................ 2
2.5 Corporation Action...................................................................... 2
2.6 Number of Votes of Shareholders......................................................... 3
2.7 Determination of Shareholders Entitled to Vote.......................................... 3
2.8 Shareholder List........................................................................ 3
Article III Directors............................................................................... 4
3.1 Number and Election..................................................................... 4
3.2 Place of Meeting........................................................................ 4
3.3 Removal and Vacancies................................................................... 4
3.4 Powers.................................................................................. 5
3.5 Call of Meetings........................................................................ 5
3.6 Notice.................................................................................. 5
3.7 Quorum and Vote Required................................................................ 5
3.8 Vote Without a Meeting.................................................................. 6
3.9 Committees of the Board................................................................. 6
3.10 Interested Directors and Officers....................................................... 7
3.11 Duty of Directors and Officers.......................................................... 8
Article IV Officers................................................................................ 8
4.1 Officers................................................................................ 8
4.2 Term and Removal........................................................................ 8
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
4.3 General Powers and Duties of Chairman of the Board...................................... 9
4.4 General Powers and Duties of President.................................................. 9
4.5 General Powers and Duties of Secretary.................................................. 9
4.6 General Powers and Duties of Treasurer.................................................. 10
Article V Indemnification......................................................................... 10
5.1 Insurance............................................................................... 10
5.2 Indemnification of Officers and Directors for Expenditures as Parties
to Derivative Actions................................................................... 10
5.3 Indemnification of Directors and Officers in Suite or Proceedings
Other than Derivative Actions........................................................... 11
5.4 Payment of Indemnification Other than by Court Award.................................... 12
5.5 Other Provisions Affecting Indemnification of Directors and Officers.................... 12
Article VI Stock Certificates...................................................................... 14
6.1 Stock Certificates...................................................................... 14
6.2 Transfers of Stock...................................................................... 14
6.3 Lost Certificates....................................................................... 15
Article VII General Provisions...................................................................... 15
7.1 Dividends............................................................................... 15
7.2 Books and Records....................................................................... 15
7.3 Inspection of Books and Records......................................................... 16
7.4 Seal.................................................................................... 16
7.5 Adoption and Amendments................................................................. 17
7.6 Conference Meetings..................................................................... 17
Article VIII Emergency Powers........................................................................ 18
8.1 Bylaws.................................................................................. 18
8.2 Lines of Succession..................................................................... 18
8.3 Head Office............................................................................. 18
8.4 Period of Effectiveness................................................................. 19
8.5 Notices................................................................................. 19
8.6 Officers as Directors Pro Tempore....................................................... 19
8.7 Liability of Officers, Directors and Agents............................................. 19
</TABLE>
ii
<PAGE> 3
BYLAWS
OF
BANCTENN CORP.
ARTICLE I
OFFICES
SECTION 1.1 LOCATION.
The principal office of the Corporation shall be at 301 E. Center
Street, Kingsport, Sullivan County, Tennessee, but the Corporation, acting
through its Board of Directors, shall have the right to change the principal
office from time to time.
SECTION 1.2 OTHER OFFICES.
The Corporation may have other offices at such places as the Board of
Directors may determine the business of the Corporation to require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1 PLACE OF MEETING.
Meetings of shareholders for any purpose may be held at such place,
within or without the State of Tennessee, and at such time as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
SECTION 2.2 ANNUAL MEETINGS.
A meeting of shareholders of the Corporation shall be held annually,
within six (6) months after the end of each fiscal year of the Corporation. The
annual meeting shall be held at such time and place
<PAGE> 4
and on such date as the Directors shall determine from time to time and as shall
be specified in the notice of the meeting.
SECTION 2.3 NOTICE OF MEETING.
Unless waived, written notice stating the place, day and hour of the
meeting, and in the case of a special meeting, the purpose or purposes for which
the meeting is called, and the person or persons calling the meeting, shall be
delivered either personally or by mail to each shareholder entitled to vote at
the meeting. If mailed, such notice shall be delivered not less than ten (10)
nor more than sixty (60) days before the date of the meeting and shall be deemed
to be delivered when deposited in the United States mail addressed to the
shareholder at his address as it appears on the corporate records, with postage
thereon prepaid. If delivered personally, such notice shall be delivered not
less than five (5) nor more than sixty (60) days before the date of the meeting.
When a meeting is adjourned to another time or place, it shall not be necessary
to give notice of the adjourned meeting if the time and place thereof have been
announced at the meeting at which the adjournment is taken.
SECTION 2.4 SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the President,
the Board, or by any three or more shareholders owning, in the aggregate, not
less than ten percent (10%) of the stock of the Corporation.
SECTION 2.5 CORPORATE ACTION.
Whenever any corporate action is to be taken by the shareholders,
including the election of Directors, it shall, except as otherwise required by
law or by the Charter of the Corporation, be authorized by the affirmative vote
of a majority of the shares entitled to vote thereon at a meeting at which a
quorum is represented.
2
<PAGE> 5
SECTION 2.6 NUMBER OF VOTES OF SHAREHOLDERS.
Every shareholder shall be entitled, at each meeting of shareholders,
to cast one (1) vote for each share of stock standing in his name on the books
of the Corporation on the record date for the meeting as hereinafter provided.
Every shareholder entitled to vote at such meeting or to express consent or
dissent without a meeting may authorize another person or persons to act for him
by written proxy signed by such shareholder or his attorney-in-fact.
SECTION 2.7 DETERMINATION OF SHAREHOLDERS ENTITLED TO VOTE.
(a) To determine shareholders entitled to notice of a meeting or
entitled to vote at any meeting or any adjournment thereof, or to determine
shareholders entitled to receive payment of dividends declared, or to determine
shareholders for any other purpose, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period not to exceed forty
(40) days. If the stock transfer books are to be closed to determine
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten (10) days immediately preceding such
meeting.
(b) In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not less than ten
(10) days prior to the date on which the particular action requiring such
determination of shareholders is to be taken.
SECTION 2.8 SHAREHOLDER LIST.
A list of shareholders as of the record date, certified by the
corporate officer responsible for its preparation or by the transfer agent,
shall be open for inspection at every meeting of shareholders. If the right to
vote at any meeting is challenged, the person presiding at the meeting may rely
on the list as evidence of the right of persons to vote at the meeting.
3
<PAGE> 6
ARTICLE III
DIRECTORS
SECTION 3.1 NUMBER AND ELECTION.
The initial Board of Directors shall consist of the five (5)
incorporators of the Corporation; subsequent Boards of Directors shall consist
of eighteen (18) members. Directors shall be elected by a majority of the votes
cast in an election, and the Board shall be classified as provided in the
Charter of the Corporation. Each Director shall hold office until the expiration
of the term for which he is elected and thereafter until his successor has been
elected and qualified.
SECTION 3.2 PLACE OF MEETING.
Meetings of the Board, regular or special, may be held within or
without the State of Tennessee.
SECTION 3.3 REMOVAL AND VACANCIES.
(a) Directors can be removed with or without cause only as
provided in the Charter of the Corporation.
(b) A vacancy occurring on the Board by reason of the removal of a
Director may be filled only by vote of the shareholders. Vacancies occurring on
the Board for any other reason or any new Directorship created by vote of the
Board of Directors, may be filled by the affirmative vote of a majority of the
Directors then in office, even though less than a quorum.
(c) A Director elected to fill a vacancy shall be elected to hold
office for the unexpired term of his predecessor, or, if there is no
predecessor, until the next annual meeting of shareholders.
4
<PAGE> 7
SECTION 3.4 POWERS.
The business and affairs of the Corporation shall be managed by its
Board of Directors, which may exercise all the powers of the Corporation except
those required to be exercised by the shareholders by law, by the Charter or by
these Bylaws.
SECTION 3.5 CALL OF MEETINGS.
Meetings may be called by the Chairman of the Board, the President, or
by any two (2) Directors.
SECTION 3.6 NOTICE.
Regular meetings of the Board may be held without notice if the time
therefor shall be fixed by vote of the shareholders or by the Board of Directors
at a meeting at which all the members are present, or if notice is otherwise
waived. Special meetings of the Board may be held on two (2) days' notice to
each Director given by any usual means of communication. Attendance of a
Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting was not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of any
meeting of, the Board need be specified in the notice or waiver of notice of
such meeting, except as otherwise provided in Section 7.5. Notice of an
adjourned meeting need not be given if the time and place to which the meeting
is adjourned are fixed at the meeting at which the adjournment is taken and if
the period of adjournment does not exceed thirty (30) days in any one
adjournment.
SECTION 3.7 QUORUM AND VOTE REQUIRED.
At all meetings of the Board, the presence of a majority of the
Directors then in office shall be necessary to constitute a quorum for
transaction of business and the action of a majority of the Directors present at
any such meeting shall be the act of the Board of Directors except as otherwise
5
<PAGE> 8
provided by law, the Charter or by these Bylaws. If a quorum shall not be
present at any meeting, the Directors present may adjourn the meeting from time
to time without any notice, other than announcement at the meeting, until a
quorum shall be present.
SECTION 3.8 VOTE WITHOUT A MEETING.
Whenever the vote of the Board of Directors at a meeting is required or
permitted to be taken in connection with any action of the Board, the meeting
and vote of the Directors may be dispensed with if all Directors who would have
been entitled to vote on the action if such meeting were held shall consent, in
writing, to such action being taken.
SECTION 3.9 COMMITTEES OF THE BOARD.
(a) The Board of Directors, by a resolution adopted by a majority
of the entire Board, may designate an Executive Committee consisting of two (2)
or more Directors, and other committees, consisting of two (2) or more persons,
who may but need not be Directors, and may delegate to such committee or
committees all authority of the Board that it deems advisable, except that no
such committee or committees, unless specifically so authorized by the Board,
shall have and exercise the authority of the Board to:
(i) Adopt, amend or repeal the Bylaws;
(ii) Submit to shareholders any action for which
shareholder authorization is required by law;
(iii) Fill vacancies in the Board or in any committee;
and
(iv) Declare dividends or make other corporate
distributions.
(b) The Board of Directors may designate one or more Directors as
alternate members of the Executive Committee, and one or more qualified persons
as alternate members of any other
6
<PAGE> 9
committee, who may replace any absent member or members at any meeting thereof.
All committees shall keep minutes of their meetings and shall report the same to
the Board when required.
SECTION 3.10 INTERESTED DIRECTORS AND OFFICERS.
(a) Except as otherwise provided by law, no transaction in which a
Director or officer has a personal or adverse interest shall be void or voidable
solely for such reason or solely because he is present at or participates in the
meeting or because his vote is counted, if:
(i) The material facts as to his interest and as to the
transaction are disclosed or are known to the Board or committee and the fact of
such interest is noted in the minutes, and the Board or committee authorizes,
approves or ratifies the transaction by a vote sufficient for such purpose
without counting the vote of the interested Director or Directors; or if
(ii) The material facts as to his interest and as to the
transaction are disclosed or are known to the shareholders and the transaction
is specifically approved by vote of the shareholders without counting the votes
of any shares owned or controlled by the interested Director or officer or the
vote of the interested Director or officer if he is a shareholder; or if
(iii) The transaction is fair and equitable as to the
Corporation at the time it is authorized or approved, and the party asserting
the fairness of the transaction establishes fairness.
(b) Except as otherwise provided in Section 5.4, common or
interested Directors may always be counted in determining the presence of a
quorum at a meeting of the Board or of a committee which authorizes, approves or
ratifies a transaction. Shares owned by any interested party or by a shareholder
who is an interested party may be counted in determining whether a quorum of
shares is present at a meeting of shareholders which ratifies or approves a
transaction.
7
<PAGE> 10
SECTION 3.11 DUTY OF DIRECTORS AND OFFICERS.
Directors and officers shall discharge the duties of their respective
positions in good faith and with that degree of diligence, care and skill which
prudent men would ordinarily exercise under similar circumstances in like
positions. In discharging their duties, Directors and officers, when acting in
good faith, may rely upon financial statements and other business records and
reports of the Corporation represented to them to be correct by the President or
the officers of the Corporation having charge of its books of account, or stated
in a written report by an independent public or certified public accountant or
firm of such accountants represented to them fairly to reflect the financial
condition of the Corporation.
ARTICLE IV
OFFICERS
SECTION 4.1 OFFICERS.
This Corporation shall have a Chairman of the Board, a President, a
Secretary and a Treasurer and such other officers as the Board of Directors
shall deem necessary. Any two (2) or more offices may be held by the same person
(except the office of President and Secretary), and all officers shall be
elected or appointed by the Board.
SECTION 4.2 TERM AND REMOVAL.
The officers of the Corporation shall be elected or appointed at the
meeting of the Board following the annual meeting of shareholders and shall hold
office for a term of one year and thereafter until their successors are chosen
and qualified. Any officer may be removed by the Board whenever in its judgment
the best interests of the Corporation will be served thereby, but such removal
shall be
8
<PAGE> 11
without prejudice to any written contract rights previously approved by the
Board of the person so removed. Election or appointment of an officer shall not
of itself create contract rights.
SECTION 4.3 GENERAL POWERS AND DUTIES OF CHAIRMAN OF THE BOARD.
The powers and duties of the Chairman of the Board, subject to the
supervision and control of the Board of Directors, shall be those usually
appertaining to the office of the Chairman of the Board. The Chairman of the
Board shall preside at all meetings of the Board of Directors and at all
meetings of the shareholders.
SECTION 4.4 GENERAL POWERS AND DUTIES OF PRESIDENT.
The powers and duties of the President, subject to the supervision and
control of the Board of Directors, shall be those usually appertaining to the
office of President. The President shall be the Chief Executive Officer of the
Corporation, shall be an ex-officio member of all standing committees, shall
have general and active management of the business of the Corporation, shall see
that all resolutions and orders of the Board are put into effect and shall
execute all contracts and conveyances on behalf of the Corporation except where
the power to execute the same shall be expressly delegated by the Board of
Directors, or by the President, to some other officer or agent of the
Corporation.
SECTION 4.5 GENERAL POWERS AND DUTIES OF SECRETARY.
The Secretary shall attend all meetings of the Board and of the
shareholders and shall keep the minutes thereof in a book to be kept for that
purpose, shall perform like duties for standing committees when required, shall
give notice where required of any such meetings, and shall have all such powers
and duties as are generally incident to the position of Secretary or as may be
prescribed by the Board of Directors or the President. The duties of the office
of Secretary, as defined herein, may be assigned by the Board to other officers.
9
<PAGE> 12
SECTION 4.6 GENERAL POWERS AND DUTIES OF TREASURER.
The Treasurer shall have custody of the corporate funds and securities,
shall keep full and accurate accounts of receipts and disbursements, shall
deposit all monies and other valuable effects of the Corporation to its credit
in such depositories as may be designated by the Board of Directors, shall
disburse the funds of the Corporation as may be ordered by the Board or duly
authorized officers, and shall render to the President and Directors, whenever
required, accounts of his transactions as Treasurer and statements of the
financial condition of the Corporation. The Treasurer shall have all such powers
and duties as are generally incident to the position of Treasurer or as may be
assigned to him by the President or the Board of Directors. The duties of the
office of Treasurer, as defined herein, may be assigned by the Board to other
officers.
ARTICLE V
INDEMNIFICATION
SECTION 5.1 INSURANCE.
The Corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation, against
any liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power or would be required to indemnify him against such liability under the
provisions of the laws of Tennessee.
SECTION 5.2 INDEMNIFICATION OF OFFICERS AND DIRECTORS FOR
EXPENDITURES AS PARTIES TO DERIVATIVE ACTIONS.
The Corporation may indemnify any person who is made a party to a suit
by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a Director
10
<PAGE> 13
or officer of the Corporation, against amounts paid in settlement and reasonable
expenses, including attorney fees, actually and necessarily incurred as a result
of such suit or proceeding or any appeal therein, except in relation to matters
as to which such Director or officer is adjudged to have breached his duty to
the Corporation under Section 3.11 hereof.
SECTION 5.3 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN SUITS OR
PROCEEDINGS OTHER THAN DERIVATIVE ACTIONS.
(a) The Corporation may indemnify any person made or threatened to
be made a party to a suit or proceeding other than by or in the right of the
Corporation to procure a judgment in its favor, whether civil or criminal,
including a suit by or in the right of any other corporation of any type or
kind, domestic or foreign, when any Director or officer of the other corporation
served in any capacity at the request of the Corporation, by reason of the fact
that he was a Director or officer of the Corporation or served such other
corporation in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such suit or proceeding, or any appeal
therein, if such Director or officer acted in good faith for a purpose which he
reasonably believed to be in the best interests of the Corporation and, in
criminal actions or proceedings, if such Director or officer had no reasonable
cause to believe that his conduct was unlawful.
(b) The termination of any such civil or criminal action, suit, or
proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not in itself create a presumption that any
such Director or officer did not act in good faith for a purpose which he
reasonably believed to be in the best interests of the Corporation or that he
did not have reasonable cause to believe that his conduct was unlawful.
11
<PAGE> 14
SECTION 5.4 PAYMENT OF INDEMNIFICATION OTHER THAN BY COURT AWARD.
(a) A person who has been wholly successful, on the merits or
otherwise, in the defense of a civil or criminal action or proceeding of the
character described in Sections 5.2 and 5.3 shall be entitled to indemnification
as authorized in such Sections.
(b) Any indemnification under Sections 5.2 and 5.3 to a person who
has not been wholly successful, on the merits or otherwise, in the defense of a
civil or criminal action of the character described in such Sections, unless
ordered by a court, shall be made by the Corporation only if authorized in the
specific case:
(i) By the Board acting by a quorum consisting of
Directors who are not parties to such action or proceeding upon a finding that
the Director or officer has met the standard of conduct set forth in Sections
5.2 and 5.3, as the case may be or;
(ii) If a quorum under subsection (b)(i) cannot, with due
diligence, be obtained:
(1) By the Board upon the opinion in writing of
independent legal counsel that indemnification is proper in the circumstances
because the applicable standard of conduct set forth in such Sections has been
met by such Director or officer; or
(2) By the shareholders upon a finding that the
Director or officer has met the applicable standard of conduct set forth in such
Sections.
(c) Expenses incurred in defending a civil or criminal action,
suit, or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding if authorized under Section
5.4(b) above.
SECTION 5.5 OTHER PROVISIONS AFFECTING INDEMNIFICATION OF
DIRECTORS AND OFFICERS.
(a) All expenses incurred in defending a civil or criminal action,
suit or proceeding which are advanced by the Corporation under Section 5.4(c) or
allowed by a court shall be repaid in the event
12
<PAGE> 15
the person receiving such advancement or allowance is ultimately found, under
the procedure set forth in this Article V and applicable Tennessee laws, not to
be entitled to indemnification or, where indemnification is granted, to the
extent the expenses so advanced by the Corporation or allowed by the court
exceed the indemnification to which he is entitled.
(b) No indemnification, advancement or allowance shall be made
under this Article in any circumstance where it appears:
(i) That the indemnification would be inconsistent with a
provision of the Charter, a By-law, a resolution of the Board or of the
shareholders, an agreement or other proper corporate action, in effect at the
time of the accrual of the cause of action asserted in the threatened or pending
action, suit or proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification; or
(ii) That the indemnification would be inconsistent with
any condition with respect to indemnification expressly imposed by the court in
approving a settlement.
(c) If, under this Article and applicable Tennessee law, any
expenses or other amounts are paid by way of indemnification otherwise than by
court order or action by the shareholders, the Corporation shall, not later than
the next annual meeting of shareholders, unless such meeting is held within
three (3) months after the date of such payment, and in any event, within
fifteen (15) months after the date of such payment, mail to its shareholders at
the time entitled to vote for the election of Directors a statement specifying
the person paid, the amounts paid, and the nature and status of the litigation
or threatened litigation at the time of such payment.
13
<PAGE> 16
ARTICLE VI
STOCK CERTIFICATES
SECTION 6.1 STOCK CERTIFICATES.
The shares of the Corporation shall be represented by numbered
certificates entered on the books of the Corporation as issued. Such
certificates shall include the following information upon the face thereof:
(a) That the Corporation is organized under the laws of Tennessee;
(b) The name of the Corporation;
(c) The name of the person to whom issued;
(d) The number and class of shares, and the designation of the
series, if any, which such certificates represent;
(e) The par value of each share represented by such certificate or
a statement that the shares are without par value; and
(f) Such other statements as may be permitted by law. Stock
certificates shall be signed by the President and the Secretary of the
Corporation or any other two (2) officers duly authorized, and shall be
inscribed as subject to any agreements affecting said shares in force at the
time of the issuance of certificates therefor.
SECTION 6.2 TRANSFERS OF STOCK.
Upon surrender to the Corporation of a certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, shall cancel the old certificate, and shall record the transaction on
its books. The Corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or
14
<PAGE> 17
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have notice or knowledge thereof, except as
otherwise required by the laws of Tennessee.
SECTION 6.3 LOST CERTIFICATES.
The Board of Directors may direct the issuance of a new certificate or
certificates in place of any certificate or certificates theretofore issued by
the Corporation alleged to have been lost or destroyed upon such proof of loss
or destruction as the President of the Corporation shall deem sufficient. When
authorizing such reissue, the Board of Directors may, in its discretion, require
the owner of such lost or destroyed certificate or certificates, or his legal
representative, to give the Corporation a bond (in such sum as it may direct) as
indemnity against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been lost or
destroyed.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 DIVIDENDS.
Dividends upon the capital stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting, pursuant to the laws
of Tennessee. Dividends may be paid in cash, or property, including the
Corporation's own shares, except when the Corporation is insolvent, when the
payment thereof would render the Corporation insolvent, or when the declaration
or payment thereof would be contrary to any restrictions contained in its
Charter or in the laws of Tennessee.
SECTION 7.2 BOOKS AND RECORDS.
(a) The Corporation shall:
(i) Keep correct and complete books and records of
account;
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(ii) Keep minutes of the proceedings of its shareholders,
its Board of Directors and executive committee, if any;
(iii) Keep a record of its shareholders, giving the names
and addresses of all shareholders and the number and class of the shares held by
each;
(iv) Cause a true statement of its assets and liabilities
as of the close of each fiscal year and of the results of its operations and of
changes in surplus for such fiscal year, all in reasonable detail, to be made
within four (4) months after the end of such fiscal year, and kept available for
a period of at least ten (10) years for inspection on request by any
shareholder, and shall mail or otherwise deliver a copy of the latest such
statement to any shareholder upon his written request therefor.
(b) Any shareholder may apply for a writ of mandamus to compel the
Corporation and its officers and Directors to comply with this Section.
SECTION 7.3 INSPECTION OF BOOKS AND RECORDS.
Any person who shall have been a shareholder of record for at least six
(6) months immediately preceding his demand or who shall be the holder of record
of at least five (5%) percent of the outstanding shares of the Corporation, upon
written demand stating the purpose thereof, shall have the right to examine in
person or by agent or attorney, at any reasonable time or times, for any proper
purpose, the books and records of account, and the minutes and records of
shareholders, the Board of Directors and committees of the Board of Directors,
and to make extracts therefrom.
SECTION 7.4 SEAL.
If a corporate seal is adopted by the Board of Directors, it shall have
inscribed thereon the name of the Corporation and any other information directed
by the Board. It may be used by impression,
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affixation or other reproduction; provided, however, that the use or attestation
of the use of the corporate seal shall not be essential to the validity of any
corporate action.
SECTION 7.5 ADOPTION AND AMENDMENTS.
If adopted by the incorporators at the initial organizational meeting,
these Bylaws shall be deemed to have been accepted and such action ratified by
the shareholders and Board of Directors unless at their initial meetings
affirmative action shall be taken to reject or amend the same. Except as
otherwise provided in the Charter of the Corporation, these Bylaws may be
amended or repealed, or additional Bylaws adopted, by a vote of the majority of
the members of the Board of Directors present at any regular meeting of the
Board, or at any special meeting of the Board if notice of the proposed
alteration or repeal is contained in the notice of such special meeting. These
Bylaws may be altered or repealed at any regular meeting of the shareholders or
at any special meeting of the shareholders, provided notice of the proposed
alteration or repeal is contained in the notice of such meeting.
SECTION 7.6 CONFERENCE MEETINGS.
The members of the Board of Directors or the members of any committee
of the Board may participate in a meeting of the Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section shall constitute presence in person at the
meeting. The Directors shall be promptly furnished a copy of the minutes of the
Board of Directors' meetings.
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ARTICLE VIII
EMERGENCY POWERS
SECTION 8.1 BYLAWS.
The Board of Directors may adopt emergency Bylaws, subject to repeal or
change by action of the shareholders, which shall, notwithstanding any provision
of law, the Charter or these Bylaws, be operative during any emergency in the
conduct of the business of the Corporation resulting from an attack on the
United States or on a locality in which the Corporation conducts its business or
customarily holds meeting of its Board of Directors or its shareholders, or
during any nuclear or atomic disaster, or during the existence of any
catastrophe, or other similar emergency condition, as a result of which a quorum
of the Board of Directors or a standing committee thereof cannot readily be
convened for action. The emergency Bylaws may make any provision that may be
practical and necessary for the circumstances of the emergency.
SECTION 8.2 LINES OF SUCCESSION.
The Board of Directors, either before or during any such emergency, may
provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the Corporation shall
for any reason be rendered incapable of discharging their duties.
SECTION 8.3 HEAD OFFICE.
The Board of Directors, either before or during any such emergency, may
(effective during the emergency) change the head office or designate several
alternative head offices or regional offices, or authorize the officers to do
so.
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SECTION 8.4 PERIOD OF EFFECTIVENESS.
To the extent not inconsistent with any emergency Bylaws so adopted,
these Bylaws shall remain in effect during any such emergency and upon its
termination the emergency Bylaws shall cease to be operative.
SECTION 8.5 NOTICES.
Unless otherwise provided in emergency Bylaws, notice of any meeting of
the Board of Directors during any such emergency may be given only to such of
the Directors as it may be feasible to reach at the time, and by such means as
may be feasible at the time, including publication, radio or television.
SECTION 8.6 OFFICERS AS DIRECTORS PRO TEMPORE.
To the extent required to constitute a quorum at any meeting of the
Board of Directors during any such emergency, the officers of the Corporation
who are present shall, unless otherwise provided in emergency Bylaws, be deemed,
in order of rank and within the same rank in order of seniority, Directors for
such meeting.
SECTION 8.7 LIABILITY OF OFFICERS, DIRECTORS AND AGENTS.
No officer, Director, agent or employee acting in accordance with any
emergency by-law shall be liable except for willful misconduct. No officer,
Director, agent or employee shall be liable for any action taken by him in good
faith in such an emergency in furtherance of the ordinary business affairs of
the Corporation even though not authorized by the Bylaws then in effect.
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<PAGE> 1
Exhibit 5.1
HUNTER, SMITH & DAVIS, LLP
1212 N. EASTMAN ROAD
POST OFFICE BOX 3740
KINGSPORT, TENNESSEE 37664
May 22, 2000
BancTenn Corp.
301 East Center Street
Kingsport, Tennessee 37660
Ladies and Gentlemen:
We are acting as counsel to BancTenn Corp., a Tennessee corporation
(the "Company"), located in Kingsport, Tennessee. In such capacity, we have
supervised certain proceedings taken by the Company in connection with the
registration under the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder
(collectively, the "Act"), of the offer and sale of up to 428,571 shares (the
"Shares") of common stock, $8.00 par value, of the Company.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of the documents and corporate records relating to the
authorization, issuance and sale of the Shares and have made such other
investigation as we have deemed appropriate and relevant in order to furnish the
opinion set forth below.
In our examination we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as original documents, and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies. As to questions of fact material and relevant to our
opinion, where such facts were not independently verified by us, we have relied,
to the extent we deemed such reliance proper, upon certificates or
representations of officers and representatives of the Company and appropriate
federal, state and local officials.
Based upon the foregoing, we are of the opinion that the Shares have
been duly authorized and when sold, will be validly issued, fully paid and
nonassessable.
We hereby consent to the reference to our firm under the heading "Legal
Matters" in, and to the filing of this opinion as Exhibit 5.1 to, the
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission by the Company in connection with the offer and sale of the Shares.
<PAGE> 2
BancTenn Corp.
May 22, 2000
Page 2
This letter is furnished solely to you and may not be relied upon by
any third party without our express prior written permission.
Very truly yours,
/s/ HUNTER, SMITH & DAVIS, LLP
<PAGE> 1
EXHIBIT 10.1
BANCTENN CORP.
1992 EMPLOYEE STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the BancTenn Corp. 1992 Employee Stock Incentive Plan
(the "Plan") is to enable BancTenn Corp. (the "Company") to attract, retain and
reward key employees of the Company and its Subsidiaries and Affiliates, and
strengthen the mutuality of interest between such key employees and Company's
stockholders, by offering such key employees performance-based stock incentives
and/or other equity interests or equity-based incentives in the Company, as well
as performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set
forth below:
A. "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of such entity or at least 20%
of the ownership interest in such entity.
B. "Board" means the Board of Directors of the Company.
C. "Book Value" means, as of any given date, on a per share basis
(i) the Common Stockholders' Equity in the Company as of the end of the
immediately preceding fiscal year as reflected in the Company's consolidated
balance sheet, subject to such adjustments as the Committee shall specify at or
after grant, divided by (ii) the number of then outstanding shares of Stock as
of such year-end date (as adjusted by the Committee for subsequent events).
D. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
E. "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then the functions of
the Committee specified in the Plan shall be exercised by the Board.
F. "Company" means BancTenn Corp., a corporation organized under
the laws of the State of Tennessee, or any successor corporation.
G. "Deferred Stock" means an award made pursuant to Section 7 of
the Plan conferring the right to receive Stock at the end of a specified
deferral period.
H. "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
<PAGE> 2
I. "Disinterested Person" shall have the meaning set forth in
Rule 16b-3(c)(2)(i) as promulgated by Securities and Exchange Commission under
the Securities Exchange Act of 1934, or any successor definition adopted by the
Commission.
J. "Early Retirement" means retirement, for purposes of this Plan
with the express consent of the Company or any Subsidiary or Affiliate at or
before the time of such retirement, from active employment with the Company or
any Subsidiary or Affiliate.
K. "Fair Market Value" means, as of any given date, unless
otherwise determined by the Committee in good faith, the reported closing price
of the Stock on the National Association of Securities Dealers, Inc.-National
Market System (NASDAQ) or, if no such sale of Stock is reported on the National
Market System on such date or if the Stock is not then quoted on the NASDAQ
National Market System, the fair market value of the Stock as determined by the
Committee in good faith.
L. "Incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the meaning of Section 422A
of the Code.
M. "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option.
N. "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Affiliate on or after the age of 65.
O. "Other Stock-Based Award" means an award under Section 10 of
the Plan that is valued in whole or in part by reference to, or is otherwise
based on, Stock.
P. "Plan" means this BancTenn Corp. 1992 Employee Stock Incentive
Plan, as hereinafter amended from time to time.
Q. "Restricted Stock" means an award of shares of Stock that is
subject to restrictions under Section 6 of the Plan.
R. "Retirement" means Normal or Early Retirement.
S. "Stock" means the Common Stock of the Company.
T. "Stock Option" or "Option" means any option to purchase shares
of Stock (including Restricted Stock and Deferred Stock, if the Committee so
determines) granted pursuant to Section 5 of the Plan.
U. "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
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V. "W. B. Greene, Jr. and his Related Interests" means W. B.
Greene, Jr. individually, and his daughter, Rebecca Greene, and his estate and
any executor or administrator thereof, and any trust or estate of which he is
now or hereafter a fiduciary or beneficiary, and any corporation or partnership
of which he now or hereafter owns 50% or more of the outstanding equity
interests.
In addition, the terms "Change in Control", "Potential Change in
Control" and "Change in Control Price" shall have meanings set forth,
respectively, in Sections 9(b), (c) and (d) and the term "Cause" shall have the
meaning set forth in Section 5(i).
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Committee of not less that three
Disinterested Persons, who shall be appointed by the Board of Directors of the
Company (the "Board") and who shall serve at the pleasure of the Board. The
functions of the Committee specified in the Plan may be exercised by an existing
Committee of the Board composed exclusively of Disinterested Persons, and may be
exercised by the Board, if and to the extent that no Committee exists which
otherwise has the authority to so administer the Plan.
The Committee shall have full authority to grant, pursuant to the terms
of the Plan, to officers and other key employees eligible under Section 4: (i)
Stock Options, (ii) Restricted Stock, (iii) Deferred Stock and/or (iv) Other
Stock-Based Awards. In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company
and its Subsidiaries and Affiliates to whom Stock Options, Restricted Stock,
Deferred Stock and/or Other Stock-Based Awards may from time to time be granted
hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Restricted Stock, Deferred Stock and/or
Other Stock-Based Awards, or any combination thereof, are to be granted
hereunder to one or more eligible employees;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Stock Option or
other award and/or the shares of Stock relating thereto, based in each case on
such factors as the Committee shall determine, in its sole discretion);
(v) to determine whether and under what circumstances a Stock
Option may be settled in cash, notes or other instruments, unrestricted stock or
Restricted Stock and/or Deferred Stock under Section 5(k) or (l), as applicable;
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(vi) to determine whether, to what extent and under what
circumstances Option grants and/or other awards under the Plan and/or other cash
awards made by the Company are to be made, and operate, on a tandem basis
vis-a-vis other awards under the Plan and/or cash awards made outside of the
Plan, or on an additive basis; and
(vii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the election of the
participant (including providing for an determining the amount (if any) of any
deemed earnings on any deferred amount during any deferral period).
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 36,000 shares, plus ten percent (10%) of
any increase (other than any increase due to stock awards under this Plan any
other similar plan of the Company for the benefit of key employees) in the
number of authorized and issued shares of Stock above 361,956 shares (the number
of shares of Stock issued and outstanding as of December 31, 1991), up to the
total number of authorized shares of Stock as of December 31, 1991. Shares
subject to the Plan may consist, in whole or in part, of authorized and unissued
shares.
Subject to Section 6(b)(vi) below, if any shares of Stock that have
been optioned cease to be subject to a Stock Option, or if any such shares of
Stock that are subject to any Restricted Stock or Deferred Stock award or Other
Stock-Based Award granted hereunder are forfeited or any such award otherwise
terminates without a payment being made to the participant in the form of Stock,
such shares again be available for distribution in connection with future awards
under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares reserved for issuance
under the Plan, in the number and option price of shares subject to outstanding
Options granted under the Plan in the number of shares (and, to the extent
applicable, purchase price) subject to other outstanding awards granted under
the Plan as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall always
be a whole number.
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SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company and its Subsidiaries
and Affiliates (but excluding members of the Committee and any person who serves
only as a director) who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company and/or its
Subsidiaries and Affiliates are eligible to be granted awards under the Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to or in tandem with
other awards granted under the Plan and/or cash awards made outside of the Plan.
Any Stock Option granted under the Plan shall be in such form as the Committee
may from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options. The Committee shall have the
authority to grant to any optionee Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant
but in the case of Incentive Stock Options shall be not less than 100% (or, in
the case of an employee owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or of any of its
subsidiary or parent corporations, not less than 110%) of the Fair Market Value
of the Stock at grant and in the case of Non-Qualified Stock Options not less
than 90% of the Fair Market Value of the Stock at grant. Notwithstanding the
foregoing, the option price of a Non-Qualified Stock Option may be less than 90%
of Fair Market Value at the time the option is granted if (i) prior to the date
of grant of an option the grantee of the option has entered into an irrevocable
agreement with the Company pursuant to which the grant of the option is in lieu
of future compensation which would otherwise be earned by the grantee and (ii)
the dollar amount or the value of such future compensation when added to the
exercise price of the option is at least equal to 90% of the Fair Market Value
(or such higher percentage as may be determined by the Committee) at the date of
grant of the number of shares of Stock subject to the option.
(b) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Stock Option shall be exercisable more than ten years (or,
in the case of an employee who owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the Company or any of its
subsidiary or parent corporations, more than five years) after the date the
Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee at or after grant; provided, however, that, except as provided in
Section 5(f) and (g) and Section 9, unless otherwise determined by the Committee
at or after grant, no Stock Option shall be exercisable prior to six months
after the date of the granting of the Option. If the Committee provides, in its
sole discretion, that any Stock
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Option is exercisable only in installments, the Committee may waive such
installment exercise provisions at any time at or after grant in whole or in
part, based on such factors as the Committee shall determine, in its sole
discretion.
(d) Method of Exercise. Subject to whatever installment exercise
provision apply under Section 5(c), Stock Options may be exercised in whole or
in part at any time during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument as the Committee
may accept. As determined by the Committee, in its sole discretion, at or after
grant, payment in full or in part may also be made in the form of unrestricted
Stock already owned by the optionee or, in the case of the exercise of a
Non-Qualified Stock Option, Restricted Stock or Deferred Stock subject to an
award hereunder (based, in each case, on the Fair Market Value of the Stock on
the date the option is exercised, as determined by the Committee).
If payment of the option exercise price of a Non-Qualified
Stock Option is made in whole or in part in the form of Restricted Stock of
Deferred Stock, such Restricted Stock or Deferred Stock (and any replacement
shares relating thereto) shall remain (or be) restricted or deferred, as the
case may be, in accordance with the original terms of the Restricted Stock award
or Deferred Stock award in question, and any additional Stock received upon the
exercise shall be subject to the same forfeiture restrictions or deferral
limitations, unless otherwise determined by the Committee, in its sole
discretion, at or after grant.
No shares of Stock shall be issued until full payment therefor
has been made. An optionee shall generally have the rights of dividends or other
rights of a stockholder with respect to shares subject to the Option when the
optionee has given written notice of exercise, has paid in full for such shares,
and, if requested, has given the representation described in Section 12(a).
(e) Non-Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) Termination by Death. Subject to Section 5(j), if an
optionee's employment by the Company and any Subsidiary or Affiliate terminates
by reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent such option was exercisable at the time of death or on
such accelerated basis as the Committee may determine at or after grant (or as
may be determined in accordance with procedures established by the Committee),
by the legal representative of the estate or by the legatee of the optionee
under the will of the optionee, for a period of one year (or such other period
as the Committee may specify at grant) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.
(g) Termination by Reason of Disability. Subject to Section 5(j),
if an optionee's employment by the Company and any Subsidiary or Affiliate
terminates by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was
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exercisable at the time of termination or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), for a period of one year (or such
other period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that, if the
optionee dies within such one year period (or such other period as the Committee
shall specify at grant), any unexercised Stock Option held by such optionee
shall thereafter be exercisable to the extent to which it was exercisable at the
time of death for a period of twelve months from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Disability, if
an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422A of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. Subject to Section 5(j),
if an optionee's employment by the Company and any Subsidiary or Affiliate
terminates by reason of Normal or Early Retirement, any Stock Option held by
such optionee may thereafter be exercised by the optionee, to the extent it was
exercisable at the time of such Retirement or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), for a period of one year (or such
longer or shorter period as the Committee in its discretion may specify at
grant) from the date of such termination of employment or the expiration of the
stated term of such Stock Option, whichever period is the shorter; provided,
however, that, if the optionee dies within such one year period (or such other
period as the Committee in its discretion may specify at grant), any unexercised
stock Option held by such optionee shall thereafter be exercisable, to the
extent to which it was exercisable at the time of death, for a period of twelve
months from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is shorter. In the event of termination of
employment by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422A of the Code, the option will thereafter be treated as a Non-Qualified Stock
Option.
(i) Other Termination. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at or after
grant, if an optionee's employment by the Company and any Subsidiary or
Affiliate terminates for any reason other than death, Disability or Normal or
Early Retirement, the Stock Option shall thereupon terminate, except that such
Stock Option may be exercised, to the extent otherwise then exercisable, for the
lesser of three months or the balance of such Stock Options's term if the
optionee is involuntarily terminated by the Company and any Subsidiary or
Affiliate without Cause. For purposes of this Plan, "Cause" means a felony
conviction of a participant's willful misconduct or dishonesty, any of which is
directly and materially harmful to the business or reputation of the Company or
any Subsidiary or Affiliate.
(j) Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 4422A of the Code, or, without the consent of the optionee(s) affected,
to disqualify any Incentive Stock Option under such Section 422A.
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To the extent permitted under Section 422A of the Code or the
applicable regulations thereunder or any applicable Internal Revenue Service
pronouncement:
(i) if (x) a participant's employment is terminated by
reason of death, Disability or Retirement and (y) the portion of any Incentive
Stock Option that is otherwise exercisable during the post-termination period
specified under Section 5(f), (g) or (h), applied without regard to the $100,000
limitation contained in Section 422A(b) (7) of the Code, is greater than the
portion of such option that is immediately exercisable as an "incentive stock
option" during such post-termination period under Section 422A, such excess
shall be treated as a Non-Qualified Stock Option; and
(ii) if the exercise of an Incentive Stock Option is
accelerated by reason of a Change in Control, any portion of such option that is
not exercisable as an Incentive stock Option by reason of the $100,000
limitation contained in Section 422A(b)(7) of the Code shall be treated as a
Non-Qualified Stock Option.
(k) Buyout Provisions. The Committee may at any time offer to
buyout for a payment in cash, Stock, Deferred Stock or Restricted Stock an
option previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the optionee at the time that such offer is
made.
(l) Settlement Provisions. If the option agreement so provides at
grant or is amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the shares to
be issued with respect to the spread value of an exercised Option take the form
of Deferred or Restricted Stock, which shall be valued on the date of exercise
on the basis of the Fair Market Value (as determined by the Committee) of such
Deferred or Restricted Stock determined without regard to the deferral
limitations and/or forfeiture restrictions involved.
SECTION 6. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued
either alone, in addition to or in tandem with other awards granted under the
Plan and/or cash awards made outside the Plan. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price (if any) to be
paid by the recipient of Restricted Stock (subject to Section 6(b)), the time or
times within which such awards may be subject to forfeiture, and all other terms
and conditions of the awards.
The Committee may condition the grant of Restricted Stock upon
the attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the same
with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an
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<PAGE> 9
agreement evidencing the award and has delivered a fully executed copy thereof
to the Company, and has otherwise complied with the applicable terms and
conditions of such award.
(i) The purchase price for shares of Restricted Stock
shall be established by the Committee and may be zero.
(ii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may specify at grant)
after the award date, by executing a Restricted Stock Award Agreement and paying
whatever price (if any) is required under Section 6(b)(i).
(iii) Each participant receiving a Restricted Stock award
shall be issued a stock certificate in respect of such shares of Restricted
Stock. Such certificate shall be registered in the name of such participant, and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award.
(iv) The Committee shall require that the stock
certificates evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Condition. The shares of Restricted Stock
awarded pursuant to this Section 6 shall be subject to the following
restrictions and conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the date of such
award (the "Restriction Period"), the participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee, in its sole discretion, may provide
for the lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part, based on service, performance and/or such
other factors or criteria as the Committee may determine, in its sole
discretion.
(ii) Except as provided in this paragraph (ii) and Section
6(c)(i), the participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a stockholder of the Company, including the right to
vote the shares, and the right to receive any cash dividends. The Committee, in
it sole discretion, as determined at the time of award, may permit or require
the payment of cash dividends to be deferred and, if the Committee so
determines, reinvested, subject to Section 12(e), in additional Restricted Stock
to the extent shares are available under Section 3, or otherwise reinvested.
Pursuant to Section 3 above, Stock dividends issued with respect to Restricted
Stock shall be treated as additional shares of Restricted Stock that are subject
to the same restrictions and other terms and conditions that apply to the shares
with respect to which such dividends are issued.
(iii) Subject to the applicable provisions of the award
agreement and this Section 6, upon termination of participant's employment with
the Company and any Subsidiary or Affiliate for any reason during the
Restriction Period, all shares still subject to restriction will vest, or be
forfeited, in accordance with the terms and conditions established by the
Committee at or after grant.
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<PAGE> 10
(iv) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction Period,
certificates for an appropriate number of unrestricted shares shall be delivered
to the participant promptly.
(d) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a restricted stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
SECTION 7. DEFERRED STOCK.
(a) Administration. Deferred Stock may be awarded either alone, in
addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. The Committee shall determine the eligible
persons to whom the time or times at which Deferred Stock shall be awarded, the
number of shares of Deferred Stock to be awarded to any person, the duration of
the period (the "Deferral Period") during which, and the conditions under which,
receipt of the stock will be deferred, and the other terms and conditions of the
award in addition to those set forth in Section 7(b).
The Committee may condition the grant of Deferred Stock upon
the attainment of specified performance goals or such other factors or criteria
as the Committee shall determine, in its sole discretion.
The provisions of Deferred Stock awards need not be the same
with respect to each recipient.
(b) Terms and Conditions. The shares of Deferred Stock awarded
pursuant to this Section 7 shall be subject to the following terms and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement referred to in Section 7(b)(vi) below, Deferred Stock awards may not
be sold, assigned, transferred, pledged, or otherwise encumbered during the
Deferral Period. At the expiration of the Deferral Period (or the Elective
Deferral Period referred to in Section 7(b)(v), where applicable), share
certificates shall be delivered to the participant, or his legal representative,
in a number equal to the shares covered by the Deferred Stock award.
(ii) Unless otherwise determined by the Committee at
grant, amounts equal to any dividends declared during the Deferral Period with
respect to the number of shares covered by the Deferred Stock award will be paid
to the participant currently, or deferred and deemed to be reinvested in
additional Deferred Stock, or otherwise reinvested, all as determined at or
after the time of the award by the Committee, in its sole discretion.
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<PAGE> 11
(iii) Subject to the provisions of the award agreement and
this Section 7, upon termination of a participant's employment with the Company
and any Subsidiary or Affiliate for any reason during the Deferral Period for a
given award, the Deferred Stock in question will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) Based on service, performance and/or such other
factors or criteria as the Committee may determine, the Committee may, at or
after grant, accelerate the vesting of all or any part of any Deferred Stock
award and/or waive the deferral limitations for all or any part of such award.
(v) A participant may elect to further defer receipt of
an award (or an installment of an award) for a specified period of until a
specified event (the "Elective Deferral Period"), subject to each case to the
Committee's approval and to such terms as are determined by the Committee, all
in its sole discretion. Subject to any exceptions adopted by the Committee, such
election must generally be made at least 12 months prior to completion of the
Deferral Period for such Deferred Stock award (or such installment).
(vi) Each award shall be confirmed by, and subject to the
terms of, a Deferred Stock agreement executed by the Company and the
participant.
(c) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and the service of the
participant, the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a deferred stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
SECTION 8. OTHER STOCK-BASED AWARDS.
(a) Administration. Other awards of Stock and other awards that
are valued in whole or part by reference to, or are otherwise based on, Stock
("Other Stock-Based Awards"), including, without limitation, performance shares,
Stock appreciation rights, phantom Stock, and Stock awards or options valued by
reference to Book Value, earnings per shares or subsidiary performance, may be
granted either alone or in addition to or in tandem with Stock Options,
Restricted Stock or Deferred Stock granted under the Plan and/or cash awards
made outside of the Plan.
Subject to the provisions of the Plan, the Committee shall
have authority to determine the persons to whom the time or times at which such
awards shall be made, the number of shares of Stock to be awarded pursuant to
such awards, and all other conditions of the awards. The Committee may also
provide for the grant of Stock upon the completion of a specified performance
period.
The provision of other Stock-Based Awards need not be the same
with respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant
to this Section 8 shall be subject to the following terms and conditions:
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<PAGE> 12
(i) Subject to the provisions of this Plan and the award
agreement referred to in Section 8(b)(v) below, shares and Other Stock-Based
Awards granted under this Section 8 may not be sold, assigned, transferred,
pledged or otherwise encumbered prior to the date on which the shares are issued
or the award matures or becomes vested, or, if later, the date on which any
applicable restriction, performance or deferral period lapses.
(ii) Subject to the provisions of this Plan and the award
agreement and unless otherwise determined by the Committee at grant, the
recipient of an award under this Section 8 shall be entitled to receive,
currently or on a deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by the award, as
determined at the time of the award by the Committee, in its sole discretion,
and the Committee may provide that such amounts (if any) shall be deemed to have
been reinvested in additional Stock or otherwise reinvested.
(iii) Any award under Section 8 and any Stock covered by
any such award shall vest or be forfeited to the extent so provided in the award
agreement, as determined by the Committee, in its sole discretion.
(iv) In the event of the participant's Retirement,
Disability or death, or in cases of special circumstances, the Committee may, in
its sole discretion, waive in whole or in part any or all of the remaining
limitations imposed hereunder (if any) with respect to any or all of an award
under this Section 8.
(v) Each award under this Section 8 shall be confirmed
by, and subject to the terms of, an agreement or other instrument by the Company
and by the participant.
(vi) Stock issued on a bonus basis under this Section 8
may be issued for no cash consideration. Stock purchased pursuant to a purchase
right awarded under this Section 8 shall be priced at least 50% of the Fair
Market Value of the Stock on the date of grant or such greater price as the
Committee, in its sole discretion, shall determine at the time of grant.
SECTION 9. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section 9(b) or
(2) a "Potential Change in Control" as defined in Section
9(c), but only if and to the extent so determined by the Committee or the Board
at or after grant (subject to any right of approval expressly reserved by the
Committee or the Board at the time of such determination), the following
acceleration and valuation provisions shall apply:
(i) Any Stock Option awarded under the Plan not
previously exercisable and vested shall become fully exercisable and vested.
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<PAGE> 13
(ii) The restrictions and deferral limitations
applicable to any Restricted Stock, Deferred Stock and Other Stock-Based Awards,
in each case to the extent not already vested under the Plan, shall lapse and
such shares and awards shall be deemed fully vested.
(iii) The value of all outstanding Stock Options,
Restricted Stock, Deferred Stock and Other Stock-Based Awards, in each case to
the extent vested, shall, unless otherwise determined by the Committee in its
sole discretion at or after grant but prior to any Change in Control, be cashed
out on the basis of the "Change in Control Price" as defined in Section 9(d) as
of the date such Change in Control or such Potential Change in Control is
determined to have occurred or such other date as the Committee may determine
prior to the Change in Control.
(b) Definition of "Change in Control". For purposes of Section
9(a), a "Change in Control" means the happening of any of the following:
(i) any person or entity, including "group" as defined in
Section 11(d)(3) of the Securities Exchange Act of 1934, other than (x) the
Company or a wholly-owned subsidiary thereof, or (y) any employee benefit plan
of the Company or any of its Subsidiaries or (z) W. B. Greene, Jr. and his
Related Interests, becomes the beneficial owner of the Company's securities
having 20% or more of the combined voting power of the then outstanding
securities of the Company that may be cast for the election of directors of the
Company (other than as a result of an issuance of securities initiated by the
Company in the ordinary course of business); or
(ii) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions less
than a majority of the combined voting power of the then outstanding securities
of the Company or any successor corporation or entity entitled to vote generally
in the election of the directors of the Company or such other corporation or
entity after such transaction are held in the aggregate by the holders of the
Company's securities entitled to vote generally in the election of directors of
the Company immediately prior to such transaction; or
(iii) during any period of two consecutive years,
individuals who at the beginning of any such period constitute the Board cease
for any reason to constitute at least a majority thereof, unless the election,
or the nomination for election by the Company's stockholders, of each director
of the Company first elected during such period was approved by a vote of at
least two-thirds of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period.
(iv) if W. B. Greene, Jr. and his Related Interests cease
to own at least 20% of the outstanding Stock.
(c) Definition of Potential Change in Control. For purposes of
Section 9(a), a "Potential Change in Control" means the happening of any of the
following:
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<PAGE> 14
(i) The approval by stockholders of an agreement by the
Company, the consummation of which would result in a Change in Control of the
Company as defined in Section 9(b); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company employee benefit plan (including any trustee of such
plan acting as such trustee) or W. B. Greene, Jr. and his Related Interests) of
securities of the Company representing 10% or more of the combined voting power
of the Company's outstanding securities and the adoption by the Board of
Directors of a resolution to the effect that a Potential Change of Control of
the Company has occurred for purposes of this Plan; or
(iii) The execution of a definitive binding written
agreement by W. B. Greene, Jr. and his Related Interests providing for the sale
to an independent third party, not related to or affiliated with Mr. Greene or
the Company and its Subsidiaries or a related employee benefit plan, of such
amount of Stock as will, upon closing and consummation of such agreement, cause
W. B. Greene, Jr. and his Related Interests to no longer be the Company's
largest stockholder.
(d) Change in Control Price. For purposes of this Section 9,
"Change in Control Price" means the highest price per share paid in any
transaction reported on the National Association of Securities Dealers, Inc. -
National Market System, or paid or offered in any bona fide transaction related
to a potential or actual Change in Control of the Company at any time during the
60 day period immediately preceding the occurrence of the Change in Control (or,
where applicable, the occurrence of the Potential Change in Control event)
provided, however, in no event shall the "Change in Control Price" be less than
100% of Book Value. The Committee shall determine the applicable "Change in
Control Price" except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the optionee exercises
such Stock Appreciation Rights (or Limited Stock Appreciation Rights) or, where
applicable, the date on which a cashout occurs under Section 9(a)(iii).
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<PAGE> 15
SECTION 10. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of an
optionee or participant under a Stock Option, Restricted or Deferred Stock award
of Other Stock-Based Award therefore granted, without the optionee's or
participant's consent or which, without the approval of the Company's
stockholders, would:
(a) except as expressly provided in this Plan, increase the total
number of shares reserved for the purpose of the Plan;
(b) change the pricing terms of Section 5(a);
(c) change the employees or class of employees eligible to
participate in the Plan; or
(d) extend the maximum option period under Section 5(b) of the
Plan.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one-for-one or other basis), including
previously granted Stock Options having higher option exercise prices.
Subject to the above provisions, the Board shall have broad authority
to amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.
SECTION 11. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder; provided, however, that, unless the Committee otherwise determines
with the consent of the affected participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
SECTION 12. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option or other award under the Plan to represent to and
agree with the Company in writing that the optionee or participant is acquiring
the shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
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<PAGE> 16
All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under applicable rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
Federal or state securities law, and the Committee may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of
the Company or any Subsidiary or Affiliate any right to continued employment
with the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless, otherwise determined by the
Committee, withholding obligations may be settled with Stock, including Stock
that is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company and its Subsidiaries or Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible if
sufficient shares of Stock are available under Section 3 for such reinvestment
(taking into account then outstanding Stock Options, Stock Purchase Rights and
other Plan awards).
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Tennessee.
(g) To the extent Rule 16(b)(3) (or any successor rule or
regulation) of the Securities and Exchange Commission is now or hereafter
applicable to the Plan, it is intended that the Plan shall comply in all
respects with Rule 16b-3 (as amended from time to time and including any
successor rule or regulation). In the event that any provision of the Plan is
determined by the Committee, upon advice of counsel, to not comply with Rule
16b-3, the Committee shall be authorized to nullify and void any such
provisions.
16
<PAGE> 17
SECTION 13. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of May 15, 1992, upon the approval of
the Plan by a majority of the votes cast by the holders of the Company's Common
Stock at the 1992 annual shareholders' meeting.
SECTION 14. TERM OF PLAN.
No Stock Option, Restricted Stock award, Deferred Stock award or Other
Stock-Based Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the date of stockholder approval but awards granted prior to such
tenth anniversary may extend beyond that date in accordance with the terms of
such awards and the Plan.
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<PAGE> 18
FORM OF STOCK OPTION GRANT
(QUALIFIED STOCK OPTION
UNDER SECTION 422 OF THE INTERNAL REVENUE CODE)
THIS AGREEMENT, dated as of ________________________, 200_, is made by
and between BANCTENN CORP., a Tennessee corporation with its principal offices
at 301 East Center Street, Kingsport, Tennessee (herein "Company") and
______________________ (herein "Participant"), to-wit:
RECITALS:
A. The Company's shareholders have heretofore approved the 1992
Employee Stock Incentive Plan (the "Plan") the purpose of
which is to utilize stock-based incentive compensation to
reward performance of key employees of the Company and its
wholly-owned subsidiary, Bank of Tennessee (the "Bank").
B. The Plan authorizes the Company's Board of Directors to
appoint a committee (the "Committee") to grant qualified
incentive stock options under the Plan to certain key
employees of the Company and the Bank.
C. Participant is the President and Chief Executive Officer of
the Company and Chairman of the Board of the Bank and, as
such, has significant responsibility for the management of the
Company and Bank.
D. The Committee has been duly appointed by the Company's Board
of Directors and, in the exercise of its delegated authority,
has determined to award the following qualified incentive
stock option to Participant in accordance with the terms and
conditions set forth herein and pursuant to the Plan.
NOW, THEREFORE, the Committee grants the following Stock Option to
Participant.
1. Grant. The Committee hereby grants to Participant, effective
as of the date of this instrument (the "Grant Date"), an option to purchase
______ shares of the Company's common stock (the "Stock") at a price of
$________ per share. The Committee has determined that the fair market value of
the Stock, as of the date of this Grant, is $________ per share. This Grant is
made pursuant to
<PAGE> 19
the terms and conditions of the Plan and may only be exercised in accordance
with the terms and conditions of the Plan.
2. Qualified Status. This Grant is intended to be a qualified
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and as set forth in Section 5 of the Plan. The grant of this
option conforms to the provisions of the law and regulations now in effect.
Participant acknowledges the possibility that future changes in applicable law
may require that this option be amended at a later date to conform with the
terms and conditions of any such laws and regulations as hereafter changed or
adopted.
3. Vesting of Grant and Method of Exercise. This option is
exercisable in whole or in part at Participant's discretion no later than
___________________; provided, however, Participant's right to purchase the
Stock subject to this Grant shall become vested in the following amounts and
according to the following schedule:
Date Number of Shares Becoming Vested
---- --------------------------------
_________________________ ___________
_________________________ ___________
_________________________ ___________
_________________________ ___________
To exercise this option Participant shall give written notice of exercise to the
Company specifying the number of shares of stock to be purchased. Such notice
shall be in substantially the form attached hereto as Exhibit A. The notice
shall be accompanied by payment in full of the purchase price, by check, note or
other instrument which the Committee determines is appropriate. This option may
be exercised on more than one occasion as shares of Stock become vested
hereunder, at Participant's discretion. Any vested shares not purchased by
Participant pursuant to an initial exercise of this option
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<PAGE> 20
shall continue to remain subject to this option for the stated term hereof and
subject to all stated terms and conditions.
4. Participant Rights as to Stock. Once proper notice is given
and full payment is made pursuant to Section 3, the Company shall issue one or
more certificates for such shares of Stock as may be purchased by Participant
from time to time. Upon completing the exercise of this option and tendering
payment for the shares of Stock purchased, the Participant shall generally have
all shareholder rights attendant to and arising from the shares of Stock so
purchased.
5. Holding Period Under Section 422. Pursuant to Section 422 of
the Code, Participant acknowledges and agrees that the tax treatment of this
option under Section 422 requires that (a) Participant not dispose of any shares
of Stock acquired pursuant to the exercise of this option within two (2) years
from the date of this Stock Option Grant nor within one (1) year after the
acquisition of any shares pursuant to this option, and (b) at all times during
the period beginning on the date of this Stock Option Grant and ending on the
day three (3) months prior to Participant's exercise of this option, Participant
must be an employee of the Company or Bank or a subsidiary of the Company or
Bank.
6. Adjustments in Number of Option Shares. Appropriate adjustment
in the number of shares covered by this option shall be made by the Committee to
give effect to any mergers, consolidations, acquisitions, stock splits, stock
dividends, or other relevant charges in capitalization occurring after the date
hereof, provided that no fractional shares shall be subject to this option and
each option shall be adjusted down to the nearest full share.
7. Nontransferability. This option is not transferable by the
Participant other than by will or by the laws of descent and distribution.
During the life of the Participant this option is exercisable
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<PAGE> 21
only by the Participant, or in the case of incompetency by the Participant's
duly appointed representative, and only to the extent and upon the terms set
forth in the Plan.
8. Effect of Termination of Employment. In the event
Participant's employment with the Company is terminated, the length of time this
option may be exercised may vary from the time limits otherwise specified herein
as follows:
(a) If the termination of employment is due to death,
disability, or retirement, this option is exercisable to the extent then vested,
or on such accelerated basis as the Committee may determine for a period of one
(1) year from the event or the remainder of the option period, whichever period
is shorter. If the Participant dies within the one year period following
termination of employment due to disability or retirement, any unexercised
option exercisable as of the date of death shall be exercisable for a period of
twelve months from the date of death or the remaining stated term of the grant,
whichever period is shorter.
(b) If Participant's termination of employment is
involuntary for reasons other than for "cause" (as defined in Section 5(i) of
the Plan), this option shall be exercisable to the extent then vested for a
period of three (3) months from the termination of employment or the remainder
of the option period whichever period is shorter.
(c) If Participant's termination of employment is
involuntary and is for "cause" as defined under the Plan, this option shall
terminate immediately and shall be null and void and of no effect. "Cause" is
defined in Section 5(i) of the Plan as a felony conviction or willful misconduct
or dishonesty, any of which is directly and materially harmful to the business
or reputation of the Company.
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<PAGE> 22
(d) If Participant voluntarily terminates his employment
with the Company, other than by reason of retirement, this option shall
automatically terminate upon such event and shall be null and void and of no
effect.
9. Tandem Awards. This option may be made in conjunction with, or
in tandem with, other awards under the Plan and/or cash awards outside the Plan,
including, but not limited to, awards of cash, qualified stock options,
restricted stock, deferred stock, and other stock-based cash awards; provided,
however, no tandem stock options shall be granted which create an arrangement
that provides for alternative options which would disqualify any qualified
incentive stock option portion of any such arrangement.
10. Change in Control. If there occurs a Change in Control or a
potential Change in Control as defined in Section 9 of the Plan, any portion of
this option not previously exercisable and vested shall become fully exercisable
and vested. The value of such fully-vested option shall then be paid and
redeemed by the Company in cash on the date such Change in Control occurs,
unless the Committee, in its sole discretion, determines otherwise. The value of
the Stock shall be as set forth in Section 9(d) of the Plan which provides,
generally, that such value shall be the highest price per share paid or offered
in any bona fide transaction related to the potential or actual Change in
Control in the 60-day period immediately preceding the date of Change of
Control.
11. No View Toward Distribution. This option is granted in
recognition of the Participant's contributions to the Company's growth, and is
intended to encourage acquisition of an equity interest in the Company.
Participant warrants and represents that any stock acquired pursuant to this
grant shall be purchased for investment purposes and not with a view toward
resale or distribution.
12. Amendment of Plan and Option Grant. This option is made
pursuant to the terms and conditions of the Plan, which is incorporated by
reference herein and made a part of for all purposes.
5
<PAGE> 23
In the event of a conflict between the terms and conditions the Plan and those
set forth herein, the terms of the Plan shall govern and be determinative. The
Plan may be amended from time to time or discontinued by the Board of Directors;
provided, however, that no such amendment or discontinuance shall impair the
rights of Participant hereunder without Participant's consent.
13. No Right of Continued Employment. Nothing in this Grant is
intended to create or shall be construed as conferring upon Participant or any
other employee of the Company any right of continued employment with the
Company, nor shall this Grant in any way affect the right of the Company to
terminate employment of any of its employees at any time.
14. Authority of Plan Committee. The Committee administering the
Plan shall have the authority to construe, interpret, and administer the Plan,
and to issue rules and regulations for administration of the Plan. All decisions
of the Committee shall be final, conclusive and binding upon the parties hereto.
15. No Legal Advice. Nothing in this Grant or in the Plan
documents is intended to constitute or substitute for legal or tax advice on any
matter connected herewith.
16. Integration. The headings and preamble of this document are an
integral part of this Grant.
17. Controlling Law. This Grant and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Tennessee and Internal Revenue Code of 1986, as amended.
18. Acceptance by Participant. Participant shall evidence his
acceptance of this Grant by signing a copy of this instrument and returning it
to the Chairman of the Committee. If the Participant does not execute and
deliver such acceptance to the Chairman of the Committee within 60 days from
6
<PAGE> 24
the date of the Grant for any reason other than death, this option shall become
null and void and shall not be exercisable.
IN WITNESS WHEREOF, the Committee has issued this Stock Option Grant
acting on behalf of and under the authorization of the Company's Board of
Directors.
BANCTENN CORP.
By:
-----------------------------------
Chairman of the Employee
Incentive Stock Plan Committee
The undersigned hereby accepts this Stock Option Grant in accordance
with its terms and the terms of the 1992 Employee Stock Incentive Plan (the
"Plan") and agrees that this Grant and the Plan shall control all matters
arising with respect hereto.
Date: ____________________, 200_
-----------------------------------
Participant
--------------------,
7
<PAGE> 25
NOTICE OF ELECTION TO EXERCISE OPTION
The undersigned ("Participant") hereby gives notice to BancTenn Corp.
("Company") of his election to exercise his right to purchase shares of the
Company's common stock pursuant to a Stock Option Grant heretofore awarded to
Participant under the Company's 1992 Employee Stock Incentive Plan, as amended.
Participant hereby exercises his Stock Option Grant as follows:
<TABLE>
<S> <C>
Date of Option: ______________, 200_
Total Number of Shares Covered by Option: ______________
Number of Shares Previously Purchased Pursuant to Option: ______________
Number of Shares to be Purchased Under this Note: ______________
Option Price Per Share: $_____________
Aggregate Option Exercise Price: $_____________
Date of this Notice: _____________
Date Purchase Price to be Tendered: ______________
</TABLE>
In exercising his rights under the above-described Option, Participant
acknowledges that his rights and obligations with respect thereto are controlled
by the terms of the Stock Option Grant and the Company's 1992 Employee Stock
Incentive Plan.
----------------------------
Signature of Participant
----------------------------
Name of Participant
(Printed or Typed)
8
<PAGE> 26
FORM OF STOCK OPTION GRANT
(NONQUALIFIED STOCK OPTION
UNDER SECTION 83 OF THE INTERNAL REVENUE CODE)
THIS AGREEMENT, dated as of ______________________ 200_, is made by and
between BANCTENN CORP., a Tennessee corporation with its principal offices at
301 East Center Street, Kingsport, Tennessee (herein "Company") and
______________________________ (herein "Participant"), to-wit:
RECITALS:
A. The Company's shareholders have heretofore approved the 1992
Employee Stock Incentive Plan (the "Plan") the purpose of
which is to utilize stock-based incentive compensation to
reward performance of key employees of the Company and its
wholly-owned subsidiary, Bank of Tennessee (herein
collectively the "Company").
B. The Plan authorizes the Company's Board of Directors to
appoint a committee (the "Committee") to grant nonqualified
stock options under the Plan to certain key employees of the
Company and the Bank.
C. Participant is the President and Chief Executive Officer of
the Company and Bank and, as such, has significant
responsibility for the management of the Company and Bank.
D. The Committee has been duly appointed by the Company's Board
of Directors and, in the exercise of its delegated authority,
has determined to award the following nonqualified stock
option to Participant in accordance with the terms and
conditions set forth herein and pursuant to the Plan.
NOW, THEREFORE, the Committee grants the following Stock Option to
Participant.
1. Grant. The Committee hereby grants to Participant, effective
as of the date of this instrument (the "Grant Date"), an option to purchase
______ shares of the Company's common stock (the "Stock") at a price of $_______
per share. This Grant is made pursuant to the terms and conditions of the Plan
and may only be exercised in accordance with the terms and conditions of the
Plan.
<PAGE> 27
2. Nonqualified Status. This Grant is intended to be a
nonqualified stock option as defined in Section 83 of the Internal Revenue Code
of 1986, as amended, and as set forth in Section 5 of the Plan. The grant of
this option conforms to the provisions of the law and regulations now in effect.
Participant acknowledges the possibility that future changes in applicable law
may require that this option be amended at a later date to conform with the
terms and conditions of any such laws and regulations as hereafter changed or
adopted.
3. Vesting of Grant and Method of Exercise. This option is
exercisable in whole or in part as to all shares covered hereby at Participant's
discretion no sooner than ______________, 200_ and no later than
________________, 200_. To exercise this option Participant shall give written
notice of exercise to the Company specifying the number of shares of stock to be
purchased. Such notice shall be in substantially the form attached hereto as
Exhibit A. The notice shall be accompanied by payment in full of the purchase
price, by check, note or other instrument which the Committee determines is
appropriate. This option may be exercised on more than one occasion as shares of
Stock become vested hereunder, at Participant's discretion. Any vested shares
not purchased by Participant pursuant to an initial exercise of this option
shall continue to remain subject to this option for the stated term hereof and
subject to all stated terms and conditions.
4. Participant Rights as to Stock. Once proper notice is given
and full payment is made pursuant to Section 3, the Company shall issue one or
more certificates for such shares of Stock as may be purchased by Participant
from time to time. Upon completing the exercise of this option and tendering
payment for the shares of Stock purchased, the Participant shall generally have
all shareholder rights attendant to and arising from the shares of Stock so
purchased.
5. Adjustments in Number of Option Shares. Appropriate adjustment
in the number of shares covered by this option shall be made by the Committee to
give effect to any mergers,
2
<PAGE> 28
consolidations, acquisitions, stock splits, stock dividends, or other relevant
charges in capitalization occurring after the date hereof, provided that no
fractional shares shall be subject to this option and each option shall be
adjusted down to the nearest full share.
6. Nontransferability. This option is not transferable by the
Participant other than by will or by the laws of descent and distribution.
During the life of the Participant this option is exercisable only by the
Participant, or in the case of incompetency by the Participant's duly appointed
representative, and only to the extent and upon the terms set forth in the Plan.
7. Effect of Termination of Employment. In the event
Participant's employment with the Company is terminated, the length of time this
option may be exercised may vary from the time limits otherwise specified herein
as follows:
(a) If the termination of employment is due to death,
disability, or retirement, this option is exercisable to the extent then vested,
or on such accelerated basis as the Committee may determine for a period of one
(1) year from the event or the remainder of the option period, whichever period
is shorter. If the Participant dies within the one year period following
termination of employment due to disability or retirement, any unexercised
option exercisable as of the date of death shall be exercisable for a period of
twelve months from the date of death or the remaining stated term of the grant,
whichever period is shorter.
(b) If Participant's termination of employment is
involuntary for reasons other than for "cause" (as defined in Section 5(i) of
the Plan), this option shall be exercisable to the extent then vested for a
period of three (3) months from the termination of employment or the remainder
of the option period whichever period is shorter.
3
<PAGE> 29
(c) If Participant's termination of employment is
involuntary and is for "cause" as defined under the Plan, this option shall
terminate immediately and shall be null and void and of no effect. "Cause" is
defined in Section 5(i) of the Plan as a felony conviction or willful misconduct
or dishonesty, any of which is directly and materially harmful to the business
or reputation of the Company.
(d) If Participant voluntarily terminates his employment
with the Company, other than by reason of retirement, this option shall
automatically terminate upon such event and shall be null and void and of no
effect.
8. Tandem Awards. This option may be made in conjunction with, or
in tandem with, other awards under the Plan and/or cash awards outside the Plan,
including, but not limited to, awards of cash, qualified stock options,
restricted stock, deferred stock, and other stock-based cash awards; provided,
however, no tandem stock options shall be granted which create an arrangement
that provides for alternative options which would disqualify any qualified
incentive stock option portion of any such arrangement.
9. Change in Control. If there occurs a Change in Control or a
potential Change in Control as defined in Section 9 of the Plan, any portion of
this option not previously exercisable and vested shall become fully exercisable
and vested. The value of such fully-vested option shall then be paid and
redeemed by the Company in cash on the date such Change in Control occurs,
unless the Committee, in its sole discretion, determines otherwise. The value of
the Stock shall be as set forth in Section 9(d) of the Plan which provides,
generally, that such value shall be the highest price per share paid or offered
in any bona fide transaction related to the potential or actual Change in
Control in the 60-day period immediately preceding the date of Change of
Control.
4
<PAGE> 30
10. No View Toward Distribution. This option is granted in
recognition of the Participant's contributions to the Company's growth, and is
intended to encourage acquisition of an equity interest in the Company. The
Participant warrants and represents that any stock acquired pursuant to this
grant shall be purchased for investment purposes and not with a view toward
resale or distribution.
11. Amendment of Plan and Option Grant. This option is made
pursuant to the terms and conditions of the Plan, which is incorporated by
reference herein and made a part of for all purposes. In the event of a conflict
between the terms and conditions the Plan and those set forth herein, the terms
of the Plan shall govern and be determinative. The Plan may be amended from time
to time or discontinued by the Board of Directors; provided, however, that no
such amendment or discontinuance shall impair the rights of the Participant
hereunder without the Participant's consent.
12. No Right of Continued Employment. Nothing in this Grant is
intended to create or shall be construed as conferring upon Participant or any
other employee of the Company any right of continued employment with the
Company, nor shall this Grant in any way affect the right of the Company to
terminate employment of any of its employees at any time.
13. Authority of Plan Committee. The Committee administering the
Plan shall have the authority to construe, interpret, and administer the Plan,
and to issue rules and regulations for administration of the Plan. All decisions
of the Committee shall be final, conclusive and binding upon the parties hereto.
14. No Legal Advice. Nothing in this Grant or in the Plan
documents is intended to constitute or substitute for legal or tax advice on any
matter connected herewith.
15. Integration. The headings and preamble of this document are an
integral part of this Grant.
5
<PAGE> 31
16. Controlling Law. This Grant and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Tennessee and Internal Revenue Code of 1986, as amended.
17. Acceptance by Participant. Participant shall evidence his
acceptance of this Grant by signing a copy of this instrument and returning it
to the Chairman of the Committee. If the Participant does not execute and
deliver such acceptance to the Chairman of the Committee within 60 days from the
date of the Grant for any reason other than death, this option shall become null
and void and shall not be exercisable.
IN WITNESS WHEREOF, the Committee has issued this Stock Option Grant
acting on behalf of and under the authorization of the Company's Board of
Directors.
BANCTENN CORP.
By:
---------------------------------
Chairman of the Employee
Incentive Stock Plan Committee
By:
---------------------------------
, Member
------------------
of the Employee Incentive
Stock Plan Committee
By:
---------------------------------
, Member
------------------
of the Employee Incentive
Stock Plan Committee
6
<PAGE> 32
The undersigned hereby accepts this Stock Option Grant in accordance
with its terms and the terms of the 1992 Employee Stock Incentive Plan (the
"Plan") and agrees that this Grant and the Plan shall control all matters
arising with respect hereto.
Date: ____________________, 200_.
------------------------------
------------------------------
Participant
7
<PAGE> 33
NOTICE OF ELECTION TO EXERCISE OPTION
The undersigned ("Participant") hereby gives notice to BancTenn Corp.
("Company") of his election to exercise his right to purchase shares of the
Company's common stock pursuant to a Stock Option Grant heretofore awarded to
Participant under the Company's 1992 Employee Stock Incentive Plan. Participant
hereby exercises his Stock Option Grant as follows:
<TABLE>
<S> <C>
Date of Option: ______________, 200_
Total Number of Shares Covered by Option: ______________
Number of Shares Previously Purchased Pursuant to Option: ______________
Number of Shares to be Purchased Under this Note: ______________
Option Price Per Share: $_____________
Aggregate Option Exercise Price: $_____________
Date of this Notice: ______________
Date Purchase Price to be Tendered: ______________
</TABLE>
In exercising his rights under the above-described Option, Participant
acknowledges that his rights and obligations with respect thereto are controlled
by the terms of the Stock Option Grant and the Company's 1992 Employee Stock
Incentive Plan.
--------------------------
Signature of Participant
--------------------------
Name of Participant
(Printed or Typed)
Argabrite\BancTenn\Stock Options
Stock Option Grant (Nonqualified)
8
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 1 TO
1992 EMPLOYEE STOCK INCENTIVE PLAN
THIS AMENDMENT, dated as of May 13, 1995, is made by BANCTENN CORP., a
Tennessee corporation with its principal offices at 301 East Center Street,
Kingsport, Tennessee (the "Company") as follows:
RECITALS:
A. The Company has heretofore adopted its 1992 Employee Stock
Incentive Plan (the "Plan"), which provides for an aggregate of 36,000 shares
of the Company's common stock to be subject to the Plan, with appropriate
mathematical adjustments to be made as a result of any stock dividends or stock
splits declared by the Company with regard to its common stock.
B. Pursuant to action of the Company's Board of Directors taken
on April 13, 1995, the Company has declared a 20% stock dividend on its
outstanding and optioned shares of common stock, which dividend will be paid in
the form of a 6-for-5 stock split.
C. The Company desires to amend the Plan to reflect the
resulting effect of the stock dividend on the aggregate number of shares
available under the Plan.
NOW, THEREFORE, in consideration of the foregoing premises, the Plan
is hereby amended as follows:
1. Number of Shares Subject to Plan. Section 3 of the Plan is
hereby amended to provide that the number of shares of the Company's common
stock reserved for distribution under the Plan is hereby increased from 36,000
to 43,200 shares.
2. No Other Amendments. All other terms and provisions of the
Plan as heretofore adopted remain unaltered and in full force and effect.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Company has executed this Amendment for the purposes set forth herein.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
----------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.3
AMENDMENT NO. 2 TO
1992 EMPLOYEE STOCK INCENTIVE PLAN
THIS AMENDMENT, dated as of November 6, 1995, is made by BANCTENN
CORP., a Tennessee corporation with its principal offices at 301 East Center
Street, Kingsport, Tennessee (the "Company") as follows:
RECITALS:
A. The Company has heretofore adopted its 1992 Employee Stock
Incentive Plan (the "Plan"), which provided for an aggregate of 36,000 shares
of the Company's common stock to be subject to the Plan, with appropriate
mathematical adjustments to be made as a result of any stock dividends or stock
splits declared by the Company with regard to its common stock.
B. Pursuant to action of the Company's Board of Directors taken
on April 13, 1995, the Company previously declared a 20% stock dividend on its
outstanding and optioned shares of common stock, the effect of which was to
increase the number of shares subject to the Plan from 36,000 to 43,200.
C. Pursuant to action of the Company's Board of Directors taken
on October 12, 1995, the Company has declared a 100% stock dividend on its
outstanding and optioned shares, which dividend is to be paid in the form of a
2-for-1 stock split.
D. The Company desires to amend the Plan to reflect the
resulting effect of this stock dividend on the aggregate number of shares
available under the Plan.
NOW, THEREFORE, in consideration of the foregoing premises, the Plan
is hereby amended as follows:
1. Number of Shares Subject to Plan. Section 3 of the Plan is
hereby amended to provide that the number of shares of the Company's common
stock reserved for distribution under the Plan is hereby increased from 43,200
to 86,400 shares.
2. No Other Amendments. All other terms and provisions of the
Plan as heretofore adopted remain unaltered and in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Company has executed this Amendment for the purposes set forth herein.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
----------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.4
AMENDMENT NO. 3 TO 1992 EMPLOYEE STOCK INCENTIVE PLAN
THIS AMENDMENT, dated as of May 23, 1997, is made by BANCTENN CORP., a
Tennessee corporation with its principal offices at 301 East Center Street,
Kingsport, Tennessee (the "Company") as follows:
RECITALS:
A. The Company has heretofore adopted its 1992 Employee Stock
Incentive Plan (the "Plan") which provided for an aggregate
of 36,000 shares of the Company's common stock to be subject
to the Plan, with appropriate mathematical adjustments to be
made as a result of any stock dividends or stock splits
declared by the Company with regard to its common stock.
B. Pursuant to action of the Company's Board of Directors taken
on April 13, 1995, the Company declared a 20% stock dividend
on its outstanding and optioned shares of common stock, paid
in the form of a 6-for-5 stock split, the effect of which was
to increase the number of shares subject to the Plan from
36,000 to 43,200.
C. Pursuant to action of the Company's Board of Directors taken
on October 12, 1995, the Company declared a 100% stock
dividend on its outstanding stock and option shares, paid in
the form of a 2-for-1 stock split, the effect of which was to
increase the number of shares subject to the Plan from 43,200
to 86,400.
D. Pursuant to action of the Company's Board of Directors taken
on April 24, 1997, the Company has declared and issued a 20%
stock dividend payable as of May 23, 1997, in the form of a
6-for-5 stock split to stockholders of record as of May 9,
1997.
E. The Company desires to amend the Plan to reflect the
resulting effect of the most recent 20% stock dividend on the
aggregate number of shares available under the Plan.
NOW, THEREFORE, in consideration of the foregoing premises, the Plan
is hereby amended as follows:
1. Number of Shares Subject to Plan. Section 3 of the Plan is
hereby amended to provide that the number of shares of the Company's common
stock reserved for distribution under the Plan is hereby increased from 86,400
to 103,680 shares.
2. No Other Amendments. All other terms and provisions of the
Plan as heretofore adopted remain unaltered and in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Company has executed this Amendment for the purposes set forth herein.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
----------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
<PAGE> 1
Exhibit 10.5
AMENDMENT NO. 4 TO 1992 EMPLOYEE STOCK INCENTIVE PLAN
THIS AMENDMENT, dated as of May 15, 1998, is made by BANCTENN CORP., a
Tennessee corporation (the "Company"), for the purpose of amending its 1992
Employee Stock Incentive Plan (the "Plan") according to the terms hereof.
RECITALS:
A. The shareholders of the Company have heretofore approved the
Company's 1992 Employee Stock Incentive Plan pursuant to
which the Company reserved and made available for
distribution under the Plan 36,000 shares, plus 10% of any
increase in the number of authorized and issued shares of
stock above 361,956 shares which represented the total number
of issued and outstanding shares of stock as of December 31,
1991.
B. Pursuant to Amendment No. 1 to the Plan, approved by the
Company's Board of Directors on April 13, 1995, the Company
issued a 20% stock dividend paid in the form of a 6-for-5
stock split, thereby increasing the number of shares subject
to the Plan from 36,000 to 43,200.
C. Pursuant to Amendment No. 2 to the Plan, approved by the
Company's Board of Directors on October 12, 1995, the Company
issued a 100% stock dividend paid as of November 6, 1995 in
the form of 2-for-1 stock split, thereby increasing the
number of shares subject to the Plan from 43,200 to 86,400.
D. Pursuant to Amendment No. 3 to the Plan, approved by the
Company's Board of Directors on April 24, 1997, the Company
issued a 20% stock dividend to be paid in the form of a
6-for-5 stock split, thereby further increasing the number of
shares subject to the Plan from 86,400 to 103,680.
E. The Company now desires to amend the Plan to further increase
the number of shares subject to the Plan as provided herein.
NOW, THEREFORE, in consideration of the foregoing premises, the Plan
is hereby amended as follows:
<PAGE> 2
1. Increase in Shares Subject to Plan. The number of shares
reserved for and subject to the Plan is hereby increased by 40,000, thereby
increasing the total number of shares subject to the Plan from 103,680 to
143,680. Such new 40,000 shares, and any options granted in respect thereof,
shall be administered according to the terms of the Plan and in the same manner
as the original group of shares reserved for the Plan at its inception.
2. Term of Plan. Section 14 of the Plan is hereby amended to
provide that options and grants under the Plan may be effected pursuant to the
Plan until May 14, 2008, which is the tenth anniversary date of stockholder
approval of this Amendment No. 4, unless further extended by approval of the
Company's shareholders. Any awards or grants effected prior to May 14, 2008 may
extend beyond such date in accordance with the terms of such awards and grants
and the terms of the Plan.
3. Approval by Board of Directors. The Board of Directors of the
Company approved this Amendment No. 4 by action taken at a duly called meeting
of the directors held on March 12, 1998.
4. Approval by Shareholders. The shareholders of the Company
approved this Amendment No. 4 by action taken at the 1998 Annual Shareholders
Meeting held on May 14, 1998.
IN WITNESS WHEREOF, the undersigned, being the President and Chief
Executive Officer of BancTenn Corp., has executed this Amendment No. 4 for the
purposes stated hereinabove and after having received all requisite approval
from the Board of Directors and shareholders of BancTenn Corp.
Date: May 15, 1998
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
------------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.6
AMENDMENT NO. 5 TO 1992 EMPLOYEE STOCK INCENTIVE PLAN
THIS AMENDMENT, dated as of June 1, 1999, is made by BANCTENN CORP., a
Tennessee corporation with its principal offices at 301 East Center Street,
Kingsport, Tennessee (the "Company") as follows:
RECITALS:
A. The Company has heretofore adopted its 1992 Employee Stock
Incentive Plan (the "Plan") which provided for an aggregate
of 36,000 shares of the Company's common stock to be subject
to the Plan, with appropriate mathematical adjustments to be
made as a result of any stock dividends or stock splits
declared by the Company with regard to its common stock.
B. Pursuant to action of the Company's Board of Directors taken
on April 13, 1995, the Company declared a 20% stock dividend
on its outstanding and optioned shares of common stock, paid
in the form of a 6-for-5 stock split, the effect of which was
to increase the number of shares subject to the Plan from
36,000 to 43,200.
C. Pursuant to action of the Company's Board of Directors taken
on October 12, 1995, the Company declared a 100% stock
dividend on its outstanding stock and option shares, paid in
the form of a 2-for-1 stock split, the effect of which was to
increase the number of shares subject to the Plan from 43,200
to 86,400.
D. Pursuant to action of the Company's Board of Directors taken
on April 24, 1997, the Company declared a 20% stock dividend
payable as of May 23, 1997, in the form of a 6-for-5 stock
split, the effect of which was to increase the number of
shares subject to the Plan from 86,400 to 103,680.
E. Pursuant to Amendment No. 4 to the Plan, approved by the
Company's Board of Directors on March 12, 1998 and the
Company's shareholders on May 14, 1998, the number of shares
reserved for and made subject to the Plan was increased by
40,000, thereby making the total number of shares subject to
the Plan 143,680.
F. Pursuant to action of the Company's Board of Directors taken
on May 13, 1999, the Company declared a 25% stock dividend on
its outstanding and optioned shares of common stock, paid in
the form of a 5-for-4 stock split.
G. The Company desires to amend the Plan to reflect the
resulting effect of the most recent 25% stock dividend on the
aggregate number of shares available under the Plan.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises, the Plan
is hereby amended as follows:
1. Number of Shares Subject to Plan. Section 3 of the Plan is
hereby amended to provide that the number of shares of the Company's common
stock reserved for distribution under the Plan is hereby increased from 143,680
to 179,600 shares.
2. No Other Amendments. All other terms and provisions of the
Plan as heretofore adopted remain unaltered and in full force and effect.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Company has executed this Amendment for the purposes set forth herein.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
----------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.7
AMENDMENT NO. 6 TO 1992 EMPLOYEE STOCK INCENTIVE PLAN
THIS AMENDMENT, dated as of April 24, 2000, is made by BANCTENN CORP.,
a Tennessee corporation (the "Company"), for the purpose of amending its 1992
Employee Stock Incentive Plan (the "Plan") according to the terms hereof.
RECITALS:
A. The shareholders of the Company have heretofore approved the
Company's 1992 Employee Stock Incentive Plan pursuant to
which the Company reserved and made available for
distribution under the Plan 36,000 shares, plus 10% of any
increase in the number of authorized and issued shares of
stock above 361,956 shares which represented the total number
of issued and outstanding shares of stock as of December 31,
1991.
B. Pursuant to Amendment No. 1 to the Plan, approved by the
Company's Board of Directors on April 13, 1995, the Company
issued a 20% stock dividend paid in the form of a 6-for-5
stock split, thereby increasing the number of shares subject
to the Plan from 36,000 to 43,200.
C. Pursuant to Amendment No. 2 to the Plan, approved by the
Company's Board of Directors on October 12, 1995, the Company
issued a 100% stock dividend paid as of November 6, 1995 in
the form of 2-for-1 stock split, thereby increasing the
number of shares subject to the Plan from 43,200 to 86,400.
D. Pursuant to Amendment No. 3 to the Plan, approved by the
Company's Board of Directors on April 24, 1997, the Company
issued a 20% stock dividend to be paid in the form of a
6-for-5 stock split, thereby further increasing the number of
shares subject to the Plan from 86,400 to 103,680.
E. Pursuant to Amendment No. 4 to the Plan, approved by the
Company's Board of Directors on March 12, 1998 and the
Company's shareholders on May 14, 1998, the number of shares
reserved for and made subject to the Plan was increased by
40,000, thereby making the total number of shares subject to
the Plan 143,680.
F. Pursuant to Amendment No. 5 to the Plan, approved by the
Company's Board of Directors on May 13, 1999, the Company
issued a 25% stock dividend paid in the form of a 5-for-4
stock split, thereby further increasing the number of shares
subject to the Plan from 143,680 to 179,600.
G. The Company now desires to amend the Plan to further increase
the number of shares subject to the Plan as provided herein.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises, the Plan
is hereby amended as follows:
1. Increase in Shares Subject to Plan. The number of shares
reserved for and subject to the Plan is hereby increased by 100,000, thereby
increasing the total number of shares subject to the Plan from 179,600 to
279,600. Such new 100,000 shares shall include whatever additional shares would
otherwise be automatically authorized under the terms of the Plan in the event
the Corporation completes a supplemental offering of its common stock within
one (1) year from the date the shareholders approve this amendment. Such new
100,000 shares, and any options granted in respect thereof, shall be
administered according to the terms of the Plan and in the same manner as the
original group of shares reserved for the Plan at its inception.
2. Term of Plan. Section 14 of the Plan is hereby amended to
provide that options and grants under the Plan may be effected pursuant to the
Plan until April 24, 2010, which is the tenth anniversary date of stockholder
approval of this Amendment No. 6, unless further extended by approval of the
Company's shareholders. Any awards or grants effected prior to April 24, 2010
may extend beyond such date in accordance with the terms of such awards and
grants and the terms of the Plan.
3. Approval by Board of Directors. The Board of Directors of the
Company approved this Amendment No. 6 by action taken at a duly called meeting
of the directors held on December 9, 1999.
4. Approval by Shareholders. The shareholders of the Company
approved this Amendment No. 6 by action taken at the 2000 Annual Shareholders
Meeting held on April 24, 2000.
IN WITNESS WHEREOF, the undersigned, being the President and Chief
Executive Officer of BancTenn Corp., has executed this Amendment No. 6 for the
purposes stated hereinabove and after having received all requisite approval
from the Board of Directors and shareholders of BancTenn Corp.
Date: April 24, 2000
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
------------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.8
BANCTENN CORP.
1996 EMPLOYEE STOCK PURCHASE PLAN
BancTenn Corp., a Tennessee corporation (herein the "Corporation"),
hereby adopts the following Employee Stock Purchase Plan for the benefit of its
eligible employees and eligible employees of its subsidiaries as defined herein.
The purpose of this Plan is to provide an opportunity for eligible employees to
share in the growth and prosperity of the Corporation and its subsidiaries by
acquiring a proprietary interest in the Corporation through the acquisition of
shares of the Corporation's common stock (the "Stock"). The Plan is intended to
qualify as an "employee stock purchase plan" within the meaning of Section
423(b) of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE I
DEFINITIONS
As used herein, in addition to the defined terms set forth in the
preamble above, the following words and phrases shall have the meanings
specified below, unless a different meaning is plainly required by the context:
1.1 "ANNIVERSARY DATE" shall mean January 1 of each year.
1.2 "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation.
1.3 The "COMMITTEE" shall mean those members of the Corporation's
Board of Directors who are not eligible to participate in the Plan or such other
Committee as may be designated by the Corporation's Board of Directors from time
to time.
1.4 "CONTINUOUS SERVICE" shall mean the number of full years and
completed months of continuous employment with an Employer calculated from an
Employee's last hire date to the Employee's date of severance of employment for
any reason. Continuous Service shall not be
<PAGE> 2
broken and shall be credited for absences due to vacation, temporary sickness or
injury, other paid leaves of absences authorized by an Employer, and leaves of
absence which would not cause an individual to cease to be an Employee.
1.5 "EFFECTIVE DATE" shall mean January 1, 1996.
1.6 "EMPLOYEE" shall mean each current or future employee of an
Employer as defined in Treasury Regulation Sections 1.423-2(b) and 1.421-7(h).
1.7 "EMPLOYER" and "EMPLOYER CORPORATION" shall mean the
Corporation, and its wholly-owned subsidiaries, Bank of Tennessee and Tennessee
General Corporation, and any other corporation which becomes an eighty percent
(80%) or greater subsidiary of the Corporation while this Plan is in effect.
"Employer" shall also include any successors of the Corporation and any future
parent corporation (as defined in Section 424(e) of the Code).
1.8 "EXERCISE DATE" shall mean the last business day of each
calendar month during each Plan Year.
1.9 "GRANT DATE" shall mean, for each Plan Year, the first
business day that Bank of Tennessee is open for banking business in each
calendar year.
1.10 "ISSUE PRICE" shall mean the purchase price of the
Corporation's Stock to be charged to participating Employees on the Exercise
Date.
1.11 "MARKET PRICE" shall be the amount determined by the Committee
as the fair market value of the Corporation's Stock as of each Grant Date under
this Plan. In determining the Market Price, the Committee shall take into
account all relevant factors influencing the value of the Corporation's Stock
including recent trading prices, typical banking industry price-earnings ratios,
and typical banking industry price-book value ratios. The Committee shall be
guided by the principles set forth in Treasury Regulations Sections
1.421.7(e)(2), 20.2031-2(e),
2
<PAGE> 3
and 20.2031-2(f). In no event, however, shall the "Market Price" be less than
150% of the book value per share of the Stock as of the last day of the calendar
year immediately preceding each Grant Date. The calculation of book value shall
be made based on the number of primary shares of Stock outstanding and shall not
take into account shares then under option under this Plan or any other option
plan now or hereafter in effect.
1.12 "PLAN" shall mean this BancTenn Corp. 1996 Employee Stock
Purchase Plan as set forth herein and all subsequent amendments hereto.
1.13 "PLAN YEAR" shall mean a twelve (12) month period beginning on
the first day of January and ending on the last day of December of each calendar
year; provided, however, that the first Plan Year shall mean the period
commencing on April 11, 1996 and ending on December 31, 1996.
ARTICLE II
RESERVATION OF STOCK
The Corporation hereby reserves 50,000 shares of its Stock for issuance
upon the exercise of the options granted pursuant to this Plan; provided, that
the class and aggregate number of shares which may be issued upon exercise of
options granted pursuant to this Plan shall be subject to adjustment in
accordance with the provisions of Article IX of the Plan. These shares may be
authorized and unissued shares, issued shares held in or acquired for the
treasury by the Corporation, or shares of Stock reacquired by the Corporation
upon purchase in the open market or otherwise.
ARTICLE III
ELIGIBILITY
3.1 On the Effective Date each Employee whose customary employment
is at least twenty (20) hours per week and more than five (5) months in a
calendar year and who has been
3
<PAGE> 4
employed by the Corporation for at least two (2) years shall be eligible to
participate in the Plan as of the Effective Date. Thereafter, each Employee
whose customary employment is at least twenty (20) hours per week and more than
five (5) months in a calendar year shall be eligible to participate as of any
Anniversary Date coincident with or immediately following his completion of at
least two (2) years of Continuous Service. Upon an Employee's completion of two
(2) years of Continuous Service, and assuming he is otherwise eligible to
participate, he shall be deemed an Eligible Employee as of the Anniversary Date
of the same calendar year. An Employee shall not be eligible to participate,
however, if immediately after the options are granted such Employee would own
Stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of the Corporation or any subsidiary or parent corporation
(as those terms are defined in Section 424(e) and (f) of the Code). For purposes
of this paragraph, the ownership attribution rules of Section 424(d) of the Code
shall apply in determining the stock ownership of an Employee and Stock which
the Employee may purchase under outstanding options (under this or any other
agreement) shall be treated as Stock owned by the Employee.
3.2 Each Eligible Employee (as defined in Section 3.1) shall be
bound by the terms of this Plan including any amendments adopted from time to
time. Each Eligible Employee shall be furnished a summary of the Plan and a form
for requesting participation. If the Employee elects to participate, he shall
complete such form and file it with his Employer Corporation no later than
thirty (30) days prior to the next Anniversary Date (or the date specified by
the Committee in the case of the first Plan Year). If an Eligible Employee does
not elect to participate in any Plan Year he may elect to participate as of any
future Anniversary Date if he continues to meet
4
<PAGE> 5
the eligibility requirements and files a request for participation within the
time required by the Committee.
ARTICLE IV
GRANT OF OPTIONS
4.1 Effective as of January 1 of each Plan Year (but effective as
of April 11 for the initial Plan Year), each Eligible Employee (as defined in
Article III hereof) shall be granted options to purchase shares of the
Corporation's Stock. The number of shares that each Eligible Employee shall
receive options to purchase in each Plan Year shall be determined according to
the following uniform pro-rata calculation: (a) Eligible Employee's total
compensation for the prior calendar year divided by the total amount of
compensation for all Eligible Employees as paid in the prior calendar year (b)
multiplied by the number of shares allocated by the Committee for the current
Plan Year; provided, however, the Corporation shall not issue fractional shares
of Stock in respect of options issued under this Plan. The option rights of each
Eligible Employee shall be rounded down to the nearest whole share in
calculating the number of shares of Stock an Eligible Employee holds an option
to purchase. For purposes of the initial Plan Year, 20,000 shares of the
Corporation's Stock shall be allocated for purchase by Eligible Employees. The
number of total shares to be optioned under the Plan for subsequent Plan Years
shall be set by the Committee effective as of each Anniversary Date.
4.2 Options not exercised by the Exercise Date in each Plan Year
shall automatically terminate and the shares of the Corporation's Stock
allocable to an unexercised option, and any unexercised portion of an option,
shall be returned to the general pool of shares available under the Plan for
reallocation in the next succeeding Plan Years. In no event shall the shares
subject
5
<PAGE> 6
to an unexercised option inure to the benefit of other Eligible Employees during
the Plan Year that such option was not exercised in whole or in part.
4.3 The Issue Price of the Corporation's Stock under this Plan
shall be equal to eighty-five percent (85%) of the Market Price on the Grant
Date of each Plan Year.
4.4 Notwithstanding any other provision of this Plan, no Employee
shall receive options to purchase the Corporation's Stock which permit the
rights of an Employee to purchase Stock under all "employee stock purchase
plans" of the Corporation and any parent or subsidiary corporation (as such
terms are defined in Section 424(e) and (f) of the Code) to accrue at a rate
which exceeds twenty-five percent (25%) of fair market value of such Stock
(determined at the time the option is granted) for each calendar year in which
the option is outstanding at any time. For purposes of this Section 4.4, (i) the
right to purchase Stock under an option accrues when the option (or any portion
thereof) first becomes exercisable during the calendar year, and (ii) the right
to purchase Stock under an option accrues at the rate provided in the option but
in no case shall such rate exceed Twenty-Five Thousand Dollars ($25,000)
(determined at the time the option is granted) for any one calendar year, and
(iii) a right to purchase Stock which has accrued under one option granted
pursuant to this Plan may not be carried over to any other option.
4.5 Section 16 limitations. Notwithstanding any other provision of
this Plan, and notwithstanding termination of this Plan, if an Eligible Employee
is subject to Section 16(a) of the Securities Exchange Act of 1934, as amended,
with respect to the Corporation's Stock (any such Eligible Employee being
referred to herein as a "Statutory Insider"), then any shares of the
Corporation's Stock received by a Statutory Insider under this Plan may not be
sold, assigned or otherwise transferred by such Statutory Insider for a period
of six (6) months following the date
6
<PAGE> 7
such shares of the Corporation's Stock are received by the Statutory Insider
unless the Corporation, upon advice of counsel, consents in advance.
ARTICLE V
EXERCISE OF OPTIONS
5.1 Options granted under this Plan may be exercised by Eligible
Employees as of the last business day of each calendar month up to and including
the last business day of each Plan Year (the "Exercise Date"). In no event will
any options granted under this Plan remain in effect past the last business day
of the Plan Year in which such options were granted. On or before the Exercise
Date, each Eligible Employee shall tender to the Corporation payment for the
number of shares he desires to purchase pursuant to his option. Failure to
tender such payment by the last available Exercise Date each Plan Year shall
cause such option to lapse and terminate.
5.2 Certificates for the Corporation's Stock purchased through the
exercise of options granted hereunder shall be issued as soon as practicable
after the Exercise Date. At the Corporation's option, such certificate shall
bear appropriate legend notations describing the fact that such shares have been
issued pursuant to the terms of this Plan and noting any limitations applicable
thereto.
5.3 Notwithstanding any other provision herein, the Corporation
shall not issue fractional shares of Stock in connection with the exercise of
options under this Plan.
ARTICLE VI
TERMINATION OF EMPLOYMENT
6.1 Any Employee whose employment with the Corporation is
terminated for any reason, except death or retirement, during the Plan Year
shall immediately cease to be an Eligible Employee. Any right to purchase the
Corporation's Stock pursuant to options granted
7
<PAGE> 8
under this Plan shall automatically become null and void upon the Employee's
termination of employment except where such termination is due to death or
retirement.
6.2 If an Eligible Employee retires or dies within three (3)
months prior to the Exercise Date of a Plan Year, the retired Eligible Employee
or the personal representative of the deceased Eligible Employee's estate, as
the case may be, shall be entitled to exercise any outstanding options in the
manner set forth in Article V above. Any options not so exercised shall
automatically terminate and lapse and be of no further legal effect.
ARTICLE VII
DISPOSITION OF STOCK
If an Eligible Employee or former Eligible Employee disposes of any
shares of the Corporation's Stock obtained pursuant to this Plan (i) prior to
two years after the Grant Date of such shares, or (ii) prior to one year after
the Exercise Date of such shares, such Employee or former Employee must notify
the Committee immediately of such disposition. All dispositions of the
Corporation's Stock shall be made in compliance with applicable federal and
state securities laws.
ARTICLE VIII
ADMINISTRATION
8.1 This Plan shall be administered by the Committee. No member of
the Committee shall be eligible to participate in the Plan while serving as a
member of the Committee. Meetings shall be held at such time and places as shall
be determined the Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of those members present at any meeting where a quorum is present shall decide
any question brought under the Plan. No member of the Committee shall be liable
for any
8
<PAGE> 9
act or omission of any other member of the Committee or for any act or omission
on his own part related to the Plan, including but not limited to the exercise
of any power or discretion given to him under the Plan, except in those
instances resulting from his own gross negligence or willful misconduct. All
questions of interpretation and application to the Plan or of options granted
hereunder, shall be subject to the determination of the whole Committee, which
determination shall be final and binding. The Plan shall be administered in
order to qualify the options granted hereunder as granted pursuant an "employee
stock purchase plan" described in Section 423(b) of the Code.
8.2 With respect to administration of the Plan, the Corporation
shall indemnify each present and future member of the Committee and the Board of
Directors against, and each member of the Committee and the Board of Directors
shall be entitled without further act on his or her part to indemnity from the
Corporation, for all expenses (including the amount of judgments and the amount
of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Corporation itself) reasonably
incurred by him or her in connection with or arising out of any action, suit or
proceeding in which he or she may be involved by reason of his or her being or
having been a member of the Committee and the Board of Directors, whether or not
he or she continues to be such a member of the Committee and the Board of
Directors at the time of incurring such expenses. Notwithstanding the foregoing,
such indemnity shall not include any expenses incurred by any such member of the
Committee and the Board of Directors (a) in respect of matters as to which he or
she shall be finally adjudged in any such action, suit or proceeding to have
been guilty of gross negligence or willful misconduct in the performance of his
or her duty as such a member of the Committee and the Board of Directors, or (b)
in respect of any matter in which in any settlement is effected, to an amount in
excess of the amount approved by the Corporation on the advice of its legal
counsel; and provided further, that no right of indemnification under the
provisions of this Plan shall be
9
<PAGE> 10
available to or enforceable by any such member of the Committee and the Board of
Directors unless, within sixty (60) days after institution of such action, suit
or proceeding, he or she shall have offered the Corporation, in writing, the
opportunity to handle and defend same at its own expense. The foregoing right of
indemnification shall inure to the benefit of the heirs, executors and
administrators of each such member of the Committee and the Board of Directors,
and shall be in addition to all other rights to which such member of the
Committee and the Board of Directors may be entitled as a matter of law,
contract or otherwise.
ARTICLE IX
CHANGES IN CORPORATION'S CAPITAL STRUCTURE
9.1 The existence of this Plan shall not affect in any way the
right or power of the Corporation or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations, or other changes in the
Corporation's capital structure or business, or any merger or consolidation of
the Corporation, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Corporation's Stock or rights
thereof, or the dissolution or liquidation of the Corporation, or any sale or
transfer of all or part of its assets or business, or any other corporate act or
proceeding, whether of similar character or otherwise.
9.2 In the event of a subdivision or consolidation of shares or
other capital reconstruction, the payment of a stock dividend or other increase
or reduction in the number of shares in the Corporation's Stock outstanding
without receiving compensation in money, services or property, then the class of
shares of the Corporation's Stock subject to this Plan, the number of shares
reserved under this Plan pursuant to Article II, and the number of shares
granted to eligible Employees, shall be appropriately adjusted as determined by
the Committee. The Committee's determination shall be final, binding and
conclusive, provided each option granted pursuant to this Plan shall not be
adjusted in a manner which causes the option to fail to
10
<PAGE> 11
continue to qualify as an option issued pursuant to an "employee stock purchase
plan" within the meaning of Section 423(b) of the Code.
9.3 Subject to any required action by the Corporation's
stockholders, if the Corporation shall be the surviving corporation in any
merger or consolidation, each outstanding option shall pertain to and apply to
the securities to which a holder of the number of shares of the Corporation's
Stock subject to the option would have been entitled. Unless adopted by the
surviving corporation, a dissolution or liquidation of the Corporation or a
merger or consolidation in which the Corporation is not the surviving
corporation, shall cause each outstanding option to terminate, provided that the
Committee, in its sole discretion, immediately prior to such dissolution or
liquidation, or merger or consolidation in which the Corporation is not the
surviving corporation, directs that the Plan Year end on the date immediately
prior to such event.
ARTICLE X
MISCELLANEOUS
10.1 The Board of Directors may at any time or from time to time
amend the Plan in any respect, except that the following amendments shall
require approval of the Corporation's Stockholders within twelve (12) months
prior to or after the date that the amendment is adopted by the Board of
Directors: (i) an increase in the number of shares of Stock reserved under the
Plan other than as provided in Article IX, (ii) a modification of the class of
Employees eligible to participate in the Plan, (iii) a reduction in the Issue
Price per Share as defined herein, (iv) a material increase in the benefits
accruing to Statutory Insiders under the Plan, or (v) a material modification of
the requirements as to eligibility of Statutory Insiders under the Plan.
11
<PAGE> 12
10.2 The term of the Plan shall be for a period of five (5) years
from January 1, 1996 through December 31, 2001; provided, however, the
Corporation reserves the right to terminate the Plan at any time. If the Plan is
terminated, the date of termination shall be treated as the Exercise Date for
the Plan Year in which termination occurs and Eligible Employees shall be
entitled to exercise their existing options as of such Exercise Date. The Plan
shall be deemed terminated in any event when all shares reserved for the Plan
have been purchased by Eligible Employees.
10.3 The Corporation will pay all expenses that may arise in
connection with the administration of the Plan.
10.4 Any headings or subheadings in the Plan are inserted for
convenience of reference only and are to be disregarded in the interpretation of
any provisions of the Plan.
10.5 This Plan shall be construed in accordance with the laws of
the State of Tennessee except to the extent that federal law is applicable to
the tax status and qualification of the Plan.
10.6 A misstatement in the age, length of Continuous Service, date
of employment, or any other such matter shall be corrected when it becomes known
that any such misstatement of fact has occurred.
10.7 Any option to purchase the Corporation's Stock arising by
participation under this Plan is not transferable by any Employee other than by
will or by the laws of descent and distribution, and then only to the extent
provided for herein, and is exercisable during his lifetime only by him.
10.8 This Plan shall not be deemed to constitute a contract between
any Employer Corporation and any Employee or to be in consideration of or as an
inducement for the employment of any Employee. Nothing contained in this Plan
shall be deemed to give any
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<PAGE> 13
Employee the right to be retained in the service of any Employer Corporation or
to interfere with the right of any Employer Corporation to discharge any
Employee at any time regardless of the effect which such discharge shall have
upon him as a participant under the Plan.
10.9 No liability whatsoever shall attach to or be incurred by any
past, present or future stockholders, officers, or directors, as such, of any
Employer Corporation, under or by reason of any of the terms, conditions or
agreements contained in this Plan or implied therefrom, and any and all
liabilities of and any and all rights and claims against an Employer
Corporation, or any stockholder, officer or director as such, whether arising at
common law or in equity or created by statute or constitution or otherwise,
pertaining to this Plan are hereby expressly waived and released by every
Employee as a part of the consideration for any benefits provided by the
Employer corporations under this Plan.
10.10 Notwithstanding any other provisions of this Plan, in order
for this Plan to continue as effective, it must be approved by the stockholders
holding at least a majority of the Stock of the Corporation on or before the
date which is twelve (12) months after the date it is adopted by the Board of
Directors.
10.11 The Corporation's obligation to sell and deliver Stock under
the Plan is, at all times, subject to all approvals of any governmental
authorities required in connection with the authorization, issuance, offer, sale
or delivery of such Stock and compliance with state and federal securities laws.
10.12 Whenever any notice is required or permitted hereunder, such
notice must be in writing and personally delivered or sent by United States mail
or nationally recognized overnight courier delivery. Any notice required and
permitted to be delivered hereunder shall be deemed to be delivered on the date
which it is personally delivered, or, whether actually received or not,
13
<PAGE> 14
on the third business day after it is deposited in United States Mail, certified
or registered postage prepaid, or the next business day after it is delivered to
a nationally recognized courier delivery service, properly addressed to the
person who is to receive it at the address which such person has theretofore
specified by written notice delivered in accordance herewith.
10.13 In the event the Corporation should receive notice that this
Plan fails to qualify as an "employee stock purchase plan" under Section 423 of
the Code, the Corporation shall have the option of terminating the Plan and
canceling all then outstanding options.
10.14 To the extent applicable to the Corporation's Stock, this Plan
is intended to comply with Rule 16b-3 under the Securities Exchange Act of 1934,
as amended, and to the extent necessary or appropriate shall be interpreted to
comply with such Rule 16b-3.
14
<PAGE> 1
EXHIBIT 10.9
AMENDMENT NO. 1 TO 1996 EMPLOYEE STOCK PURCHASE PLAN
THIS AMENDMENT, dated as of May 9, 1997, is made by BANCTENN CORP., a
Tennessee corporation (the "Company"), for the purpose of amending its 1996
Employee Stock Purchase Plan (the "Plan") according to the terms hereof.
RECITALS:
A. The shareholders of the Company have heretofore approved the
Company's 1996 Employee Stock Incentive Plan pursuant to which
the Company reserved and made available for distribution under
the Plan 50,000 shares.
B. Pursuant to action taken by the Company's Board of Directors
on April 24, 1997, the Company has issued a 20% stock
dividend, paid in the form of a 6-for-5 stock split.
C. The Company desires to amend the Plan to reflect the increase
in the number of shares subject to the Plan as a result of
such stock dividend.
NOW, THEREFORE, in consideration of the foregoing premises, the Plan is
hereby amended as follows:
1. Increase in Shares Subject to Plan. In accordance with the 20%
stock dividend effected in the form of a 6-for-5 stock split as described above,
the number of shares reserved for and subject to the Plan is hereby increased by
10,000, thereby increasing the total number of shares subject to the Plan from
50,000 to 60,000. Such new 10,000 shares, and any options granted in respect
thereof, shall be administered according to the terms of the Plan and in the
same manner as the original group of shares reserved for the Plan at its
inception.
2. No Other Amendments. Except as otherwise set forth herein, the Plan
remains unaltered and in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned, being the President and Chief
Executive Officer of BancTenn Corp., has executed this Amendment No. 1 for the
purposes stated hereinabove. Date: May 9, 1997.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
------------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.10
AMENDMENT NO. 2 TO 1996 EMPLOYEE STOCK PURCHASE PLAN
THIS AMENDMENT, dated as of May 13, 1999, is made by BANCTENN CORP., a
Tennessee corporation (the "Company"), for the purpose of amending its 1996
Employee Stock Purchase Plan (the "Plan") according to the terms hereof.
RECITALS:
A. The shareholders of the Company have heretofore approved the
Company's 1996 Employee Stock Incentive Plan pursuant to which
the Company reserved and made available for distribution under
the Plan 50,000 shares.
B. Pursuant to Amendment No. 1 to the Plan, dated May 9, 1997,
the Plan was amended to take in to account action a 20% stock
dividend declared on the Company's common stock, paid in the
form of a 6-for-5 stock split, thereby increasing the number
of shares subject to the Plan from 50,000 to 60,000.
C. Pursuant to action taken by the Company's Board of Directors
effective May 13, 1999, the Company has issued a 25% stock
dividend, paid in the form of a 5-for-4 stock split.
D. The Company desires to amend the Plan to reflect the increase
in the number of shares subject to the Plan as a result of
such stock dividend.
NOW, THEREFORE, in consideration of the foregoing premises, the Plan is
hereby amended as follows:
1. Increase in Shares Subject to Plan. In accordance with the 25%
stock dividend effected in the form of a 5-for-4 stock split as described above,
the number of shares reserved for and subject to the Plan is hereby increased by
15,000, thereby increasing the total number of shares subject to the Plan from
60,000 to 75,000. Such new 15,000 shares, and any options granted in respect
thereof, shall be
<PAGE> 2
administered according to the terms of the Plan and in the same manner as the
original group of shares reserved for the Plan at its inception.
2. No Other Amendments. Except as otherwise set forth herein, the
Plan remains unaltered and in full force and effect.
IN WITNESS WHEREOF, the undersigned, being the President and Chief
Executive Officer of BancTenn Corp., has executed this Amendment No. 2 for the
purposes stated hereinabove. Date: May 13, 1999.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
--------------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.11
AMENDMENT NO. 3 TO 1996 EMPLOYEE STOCK PURCHASE PLAN
THIS AMENDMENT, dated as of April 24, 2000, is made by BANCTENN CORP.,
a Tennessee corporation (the "Company"), for the purpose of amending its 1996
Employee Stock Purchase Plan (the "Plan") according to the terms hereof.
RECITALS:
A. The shareholders of the Company have heretofore approved the
Company's 1996 Employee Stock Incentive Plan pursuant to which
the Company reserved and made available for distribution under
the Plan 50,000 shares.
B. Pursuant to Amendment No. 1 to the Plan, approved by the
Company's Board of Directors on April 24, 1997, the Company
issued a 20% stock dividend, paid in the form of a 6-for-5
stock split, thereby increasing the number of shares subject
to the Plan from 50,000 to 60,000.
C. Pursuant to Amendment No. 2 to the Plan, approved by the
Company's Board of Directors on May 13, 1999, the Company
issued a 25% stock dividend, paid in the form of a 5-for-4
stock split, thereby increasing the number of shares subject
to the Plan from 60,000 to 75,000.
D. The Company now desires to amend the Plan to further increase
the number of shares subject to the Plan, to amend the
eligibility criteria, and to extend the term of the Plan, all
as provided herein.
NOW, THEREFORE, in consideration of the foregoing premises, the Plan is
hereby amended as follows:
1. Increase in Shares Subject to Plan. The number of shares
reserved for and subject to the Plan is hereby increased by 50,000, thereby
increasing the total number of shares subject to the Plan from 75,000 to
125,000. Such new 50,000 shares, and any options granted in respect thereof,
shall be administered according to the terms of the Plan and in the same manner
as the original group of shares reserved for the Plan at its inception.
2. Amendment to Eligibility Criteria. Section 3.1 of the Plan is
hereby amended and restated in its entirety as follows:
3.1 Effective as of January 1, 2000, and for each Plan
year thereafter, each Employee whose customary employment is
at least twenty (20) hours per week and more than five (5)
months in a calendar year, and who was employed by an Employer
Corporation as of December 31, 1999 or as of each succeeding
December 31 thereafter, shall be eligible to participate in
the Plan in the next Plan Year according to its terms. An
Employee shall not be eligible to
<PAGE> 2
participate, however, if immediately after the options are
granted, such Employee would own Stock possessing five percent
(5%) or more of the total combined voting power or value of
all classes of the Corporation or any subsidiary or parent
corporation (as those terms are defined in Section 424(e) and
(f) of the Code). For purposes of this paragraph, the
ownership attribution rules of Section 424(d) of the Code
shall apply in determining the stock ownership of an Employee
and Stock which the Employee may purchase under outstanding
options (under this or any other agreement) shall be treated
as Stock owned by the Employee.
3. Term of Plan. Section 10.2 of the Plan is hereby amended to
provide that the term of the Plan is extended from December 31, 2000 to December
31, 2005; provided, however, the Corporation reserves the right to terminate the
Plan at any time.
4. Approval by Board of Directors. The Board of Directors of the
Company approved this Amendment No. 3 by action taken at a duly called meeting
of the directors held on December 9, 1999.
5. Approval by Shareholders. The shareholders of the Company
approved this Amendment No. 3 by action taken at the 2000 Annual Shareholders
Meeting held on April 24, 2000.
IN WITNESS WHEREOF, the undersigned, being the President and Chief
Executive Officer of BancTenn Corp., has executed this Amendment No. 3 for the
purposes stated hereinabove and after having received all requisite approval
from the Board of Directors and shareholders of BancTenn Corp.
Date: April 24, 2000.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
-------------------------------------------
Colon A. Terrell, Jr.
President and Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.12
BANCTENN CORP.
CHANGE OF CONTROL COMPENSATION AGREEMENT
THIS AGREEMENT, dated as of April 1, 1997, is made by and between
BANCTENN CORP., a one-bank holding company chartered under the laws of the State
of Tennessee (the "Company"), BANK OF TENNESSEE, a Tennessee banking corporation
having its principal place of business at 301 East Center Street, Kingsport,
Tennessee (herein "Bank"), and COLON A. TERRELL, JR. (the "Executive").
RECITALS:
A. The Boards of Directors of the Company and the Bank have
recommended and approved that the Company and Bank enter into
agreements providing for compensation under certain
circumstances after a "Change of Control" (as defined herein)
with key executives of the Company and Bank.
B. Executive is the President and Chief Executive Officer of the
Company and the Chairman of the Board and Chief Executive
Officer of the Bank and, as such, has been designated by the
Boards of Directors as a key employee.
C. Should Company or Bank become subject to any actual or
potential Change of Control (as defined herein), the Boards of
Directors of the Company and Bank believe it is imperative
that the Company and Bank and their respective Boards of
Directors be able to rely upon Executive to continue in his
position and that the Company and Bank be able to receive and
rely upon Executive's advice as to the best interests of the
Company and Bank without concern that the Executive might be
distracted by the personal uncertainties and risks created by
a Change of Control.
D. Should the Company or Bank become subject to any such
Potential Change of Control (as defined herein), in addition
to Executive's regular duties, Executive may be called upon to
assist in the assessment of such circumstances, advise
management and the Boards of Directors as to
<PAGE> 2
whether such proposal would be in the best interests of the
Company or Bank and their respective constituents, and to take
such other actions above and beyond Executive's regular duties
as the Boards of Directors might determine to be appropriate.
NOW, THEREFORE, to assure the Company and Bank of the continued
dedication and service of Executive and the availability of his advice and
counsel notwithstanding the possibility, threat or occurrence of a Potential
Change of Control or a Change of Control of the Company or Bank, and to induce
Executive to remain in the Bank's employ and for other good and valuable
consideration, the Company, Bank and Executive hereby contract and agree as
follows:
1. Definitions. As used herein the following terms shall be
defined as follow:
"Annual Earnings" shall mean the amounts earned by Executive
for personal services rendered to Bank and its affiliates, as reportable on
Treasury Department Form W-2, including overtime, bonuses and commissions but
excluding the following: (i) moving and education expenses, (ii) income earned
under Section 79 of the Code, as amended, and (iii) income imputed to Executive
from personal use of employer-owned automobiles and employer-paid club dues, and
(iv) income attributable to grants of and dividends on shares awarded (whether
as options, restricted stock or any other form) under the Company's 1992
Employee Stock Incentive Plan, the Company's 1996 Employee Stock Purchase Plan,
and any successor to such plans.
"Average Annual Earnings" shall mean the mathematical average
of Executive's Annual Earnings for the five (5) fiscal years preceding a
Qualifying Termination.
"Board" means the Board of Directors of the Company or the
Bank as the case may be.
"Change of Control" means, with respect to the Company or the
Bank, the happening of any of the following:
(i) The death of William B. Greene, Jr.; or
<PAGE> 3
(ii) The permanent mental disability of William B. Greene,
Jr. such that it is determined by competent independent medical opinion that he
is incapable of managing his business affairs and exercising the judgment and
discretion reasonably required thereby; or
(iii) If any person or entity, including a "group" as
defined in Section 11(d)(3) of the Securities Exchange Act of 1934, (other than
(x) the Company or a wholly-owned subsidiary thereof, or (y) any employee
benefit plan of the Company or any of its subsidiaries or (z) William B. Greene,
Jr. and his Related Interests) becomes the beneficial owner of securities of the
Company or Bank having more than 50% of the combined voting power of the then
outstanding securities of the Company or Bank that may be cast for the election
of directors of the Company or Bank (other than as a result of an issuance of
securities by the Company or the Bank in the ordinary course of business); or
(iv) If, as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions, less
than a majority of the combined voting power of the then outstanding securities
of the Company or Bank (or any successor corporation or entity) entitled to vote
generally in the election of the directors of the Company or Bank after such
transaction are held in the aggregate by the holders of the Company's or Bank's
securities entitled to vote generally in the election of directors of the
Company or Bank immediately prior to such transaction; or
(v) If, during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company or the Bank cease for any reason to constitute at least
a majority thereof, unless the election of each director of the Company or the
Bank first elected during such period was approved by a vote of at least
two-thirds (2/3) of the directors of the Company or the Bank, as the case may
be, then still in office who were directors of the Company or the Bank at the
beginning of any such period; or
<PAGE> 4
(vi) If William B. Greene, Jr. and his Related Interests
cease to own at least twenty-five percent (25%) of the outstanding stock of the
Company (except as a result of the issuance of securities issued by the Company
in the ordinary course of business); provided, however, a Change of Control
shall not be deemed to have occurred so long as William B. Greene, Jr. and his
Related Interests remain, in the aggregate, the Company's largest stockholder.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and all regulations adopted pursuant thereto.
"Normal Retirement Date" shall mean the date upon which
Executive reaches sixty-five (65) years of age.
"William B. Greene, Jr. and his Related Interests" shall mean
William B. Greene, Jr., Greene Investment Corp., any trust of which William B.
Greene, Jr. is a trustee, co-trustee, or beneficiary, and any partnership,
corporation, or limited liability company of which William B. Greene, Jr. is an
officer, director, stockholder, member, or equity owner.
"Potential Change of Control" means the happening of any of
the following:
(i) The approval by the stockholders of the Company or
the Bank of an agreement the consummation of which would result in a Change of
Control of the Company or the Bank; or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
subsidiary or any Company employee benefit plan, or William B. Greene, Jr. and
his Related Interests) of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's outstanding
securities and the adoption by the Board of Directors of a resolution to the
effect that a Potential Change of Control of the Company has occurred; or
<PAGE> 5
(iii) The execution of a definitive binding written
agreement by William B. Greene, Jr. and his Related Interests providing for the
sale to an independent third party not related to or affiliated with William B.
Greene, Jr. or the Company or its subsidiaries or a related employee benefit
plan, of such amount of stock as will, upon closing and consummation of such
agreement, cause William B. Greene, Jr. and his Related Interests, in the
aggregate, to no longer be the Company's largest stockholder.
2. Assured Period of Service. In the event a third person begins
a tender or exchange offer, circulates a proxy to stockholders, or takes other
steps to pursue a transaction the effect of which would be to constitute a
Change of Control, Executive agrees that he will not voluntarily leave Bank's
employ on less than three (3) months prior written notice to the Bank's Chairman
of the Board, and will render the services expected of his position, and until
such third person has abandoned or terminated his efforts to effect a Change of
Control or until a Change of Control has occurred.
3. Termination Following Change of Control. In the event
Executive's employment is terminated at any time within three (3) years
following a Change of Control under any circumstance constituting a "Qualifying
Termination," the Company and Bank shall provide or cause to be provided to
Executive the benefits and rights described in Section 4 hereof. As used herein,
a "Qualifying Termination" shall mean a termination of Executive's employment
with the Bank under any of the following circumstances:
(a) Termination by Company or Bank. Termination of
Executive's employment by the Company or the Bank for reasons other than "cause"
as such term is defined in Section (5)(a) hereof, but not including termination
by reason of Executive's death, permanent disability, or attainment of normal
retirement age; or
<PAGE> 6
(b) Termination by Executive. Termination of employment by
Executive following the occurrence of any of the following events:
(i) The assignment of Executive to any duties or
responsibilities that are inconsistent with his position, duties,
responsibilities or status immediately preceding such Change of Control, or a
change in his reporting responsibilities or titles in effect at such time
resulting in a reduction of his responsibilities or position;
(ii) The reduction of Executive's annual salary (including
any deferred portions thereof) or any level of benefits or supplemental
compensation;
(iii) The transfer of Executive to a location requiring a
change in his residence or a material increase in the amount of travel normally
required of Executive in connection with his employment; or
(iv) The good faith determination by Executive that due to
the Change of Control he is no longer able effectively to discharge his duties
and responsibilities.
4. Rights and Benefits Upon Termination. In the event of the
termination of Executive's employment under any of the circumstances
constituting a Qualifying Termination as set forth in Section 3 hereof, the
Company and Bank and their successors shall provide or cause to be provided to
Executive the following rights and benefits:
(a) Termination Compensation. Executive shall be entitled
to receive a payment in cash in an amount equal to five (5) times Executive's
Average Annual Earnings. For purposes of this Agreement, Executive's Average
Annual Earnings shall be deemed the "Base Amount" as that term is defined in
Section 280G(b)(3)(A) of the Code, as amended. Such compensation, less any
applicable withholdings for federal income taxes and Social Security
contributions, shall be paid to Executive in a lump sum within ten (10) calendar
days after the effective date of the Qualifying Termination;
<PAGE> 7
provided, however, Executive may, at his option, elect to receive such
compensation in as many as five (5) annual installments payable, without
interest, on each anniversary date of the Qualifying Termination.
If Executive shall die after the occurrence of a Qualifying
Termination but prior to the time all payments due to Executive under this
Section 4 or otherwise under this Agreement have been made, then as soon as
practicable after such death, but in no event later than three (3) months
thereafter, Company or Bank shall pay or cause to be paid in a lump sum in cash
all sums not distributed to Executive prior to his death.
(b) Supplemental Executive Retirement Plan Benefits. Except to the
extent expressly prohibited by any applicable law or regulation, any and all
restrictions, vesting schedules and conditions or thresholds provided in any
supplemental Executive retirement plan, if any is in effect at Executive's
Qualifying Termination, shall immediately lapse and Executive shall be entitled
immediately to receive all benefits previously granted thereunder.
(c) Executive Incentive Plan Benefits. Any award under any
incentive plan for which Executive is eligible and which has not been paid to
Executive at the time of his Qualifying Termination shall be paid to him within
thirty (30) days of such termination. Such payment shall be accompanied by a
payment to Executive of an amount equal to one-twelfth (1/12th) of the award to
the Executive for the most recently ended plan year for each full month in the
current plan year prior to the month of Executive's Qualifying Termination.
(d) Insurance Benefits.
(i) Life Insurance. Upon a Qualifying Termination, the
Company and Bank shall transfer to Executive title to and ownership of such
split-dollar life insurance policies as may then be in effect insuring
Executive's life, including all cash values and other rights and benefits
thereunder.
<PAGE> 8
(ii) Medical, Accident and Disability. Upon a Qualifying
Termination, Executive shall continue to be covered, until Executive's Normal
Retirement Age, by such medical insurance and accident and disability insurance
plans or any successor plan or program as the Company or Bank may then have in
effect for Executive's benefit, subject to the terms of such plans and subject
to Executive's continuing to make any payments required for employees in the
same class or category as Executive held prior to his termination. In the event
Executive is ineligible to continue to be covered under the terms of any such
benefit plan or program, or in the event Executive is eligible but the benefits
applicable to Executive under any such plan or program after termination are not
substantially equivalent to the benefits applicable to Executive immediately
prior to termination, then until Executive's Normal Retirement Date, Bank shall
provide such substantially equivalent benefits or other such additional benefits
as may be necessary to make the benefits applicable to Executive substantially
equivalent to those in effect prior to Executive's termination; provided,
however, that if during such period Executive should enter into the employment
of another company or firm which provides substantially similar benefit
coverage, Executive's participation in the comparable benefits provided by Bank
shall cease.
For so long as Executive is eligible under this Agreement to
receive coverage under such insurance plans, Executive may purchase, at his
expense, extended coverage for his spouse and dependents according to the terms
of coverage under such plans as in effect from time to time. In the event
Executive dies after a Qualifying Termination and prior to attaining Normal
Retirement Age, Executive's spouse and dependents may continue to participate in
such plans, at their expense, until (i) the spouse reaches Normal Retirement Age
and (ii) Executive's dependents reach the age of majority or are otherwise not
eligible to participate.
<PAGE> 9
(e) Ownership of Perquisites. The ownership of any
automobile which was assigned to Executive prior to his termination shall be
transferred to him, free of charge, within thirty (30) days after his Qualifying
Termination. The ownership of any club membership which was assigned to
Executive prior to his Qualifying Termination shall be transferred to Executive
free of charge, within thirty (30) days after termination; provided, however, in
the event any such club membership is not transferrable by the Company or Bank
directly to Executive, the Company or Bank shall pay to Executive up to $25,000
or the actual cost of a replacement membership incurred by Executive, whichever
is less.
(f) No Duty to Mitigate. Executive's entitlement to
benefits under this Agreement shall not be governed by any duty to mitigate his
damages by seeking further employment nor offset by any compensation which he
may receive from future employment.
(g) Payment Obligations Absolute. Unless Section 5 is
applicable, the obligation of Company and Bank to pay or cause to be paid to
Executive the benefits and to make the arrangements provided in this Section 4
shall be absolute and unconditional upon the occurrence of a Qualifying
Termination and shall not be affected by any circumstances, including without
limitation, any setoff, counterclaim, recoupment, defense or other right which
Bank may have against Executive or anyone else. All amounts payable by or on
behalf of Bank under this Agreement shall, unless specifically stated otherwise
in this Agreement, shall be paid without notice or demand. Each and every
payment made hereunder by or on behalf of Bank shall be final and absolute, and
Bank and its subsidiaries and affiliates shall not for any reason, whatsoever,
seek to recover all or any part of such payment from Executive or from whomever
shall be entitled thereto.
(h) Tax Effect. Notwithstanding the provisions of Section
280G of the code, it is the parties' intention that the "excess parachute"
provisions of Section 280G(b), in effect as of the date
<PAGE> 10
of this Agreement, and the resulting excise tax provided for in Section 4999 of
the Code, shall be inapplicable to the payments to be made to Executive under
this Agreement for the reasons that (i) the outstanding stock of the Company is
not traded on an established securities market, and (ii) this Agreement and the
terms hereof were approved by a vote of more than seventy-five percent (75%) of
the Company's outstanding voting securities at a duly called meeting of the
Company's shareholders held on April 24, 1997, following proper notice thereof
and delivery of a complete and accurate proxy statement describing all material
terms of this Agreement.
5. Conditions to Obligations of Company and Bank. Notwithstanding
any other provision of this Agreement, neither the Company nor the Bank shall
have any obligation to provide or cause to be provided to Executive the rights
and benefits described in Section 4 hereof if either of the following events
shall occur:
(a) Termination for Cause. If Bank shall terminate
Executive's employment for "cause." For purposes of this Agreement, termination
of employment for "cause" shall mean termination solely for conviction of a
felony; or
(b) Resignation as Director or Officer. If Executive
shall fail, promptly after termination and upon receiving a written request to
do so, to resign as a director and/or officer of Bank and each subsidiary and
affiliate of Bank of which he is then serving as a director and/or officer.
6. Confidentiality; Cooperation; Consultancy.
(a) Confidentiality. Executive agrees that at all times
following termination of his employment, he will not, without the prior written
consent of Bank, disclose to any person, firm or corporation any confidential
information of the Company, Bank or their subsidiaries and affiliates which is
now known to him or which hereafter and before termination may become known to
him as a result of his employment or association with the Company and Bank, and
which could be helpful to a
<PAGE> 11
competitor; provided, however, that the foregoing shall not apply to
confidential information that becomes publicly disseminated by means other than
breach of this Agreement.
(b) Cooperation. Executive agrees that at all times following
termination of his employment, he will furnish such information and render such
assistance and cooperation as may be reasonably requested in connection with any
litigation or legal proceedings concerning Bank or any of its affiliates (other
than legal proceedings concerning Executive's employment). In connection with
such cooperation, Bank will pay or reimburse Executive for all reasonable
expenses incurred in cooperating with such request.
(c) Consultation. Executive agrees that for a period of two (2)
years following termination of his employment, he will make himself available to
the Company, Bank and their subsidiaries, affiliates and successors for
consultation with senior officers of the Company, Bank and their subsidiaries,
affiliates, and successors, as the case may be; provided, however, Executive
shall not be required to perform consulting services (i) for more than five (5)
days in any month and (ii) for more than thirty (30) hours in any month. It is
expressly agreed that Executive's consulting services will be required at such
time and at such places as will result in the least inconvenience to Executive
taking into consideration Executive's other business commitments during such
period. It is further agreed that Executive's consulting services shall be
rendered by personal consultation at Executive's principal residence or office,
wherever maintained, or by correspondence through mail, telephone, facsimile
transmission, or other similar modes of communication during regular business
hours or at such other times as are deemed by Executive to be most convenient.
In the event Executive should enter into the full-time employment with another
company or firm, Executive shall not be required to consult at times or on
matters which would conflict with his responsibilities with respect to such new
<PAGE> 12
employment. The Company and Bank shall pay Executive reasonable compensation,
together with reimbursement of all reasonable expenses, for such consulting
services.
7. Term of Agreement. This Agreement shall commence as of the
date hereof and shall terminate on March 31, 2002; provided, however,
this Agreement shall automatically renew for successive one (1) year periods
unless Company or Bank notifies Executive in writing at least 180 days prior to
the expiration date that Company and Bank does not desire to renew the Agreement
for an additional term; and provided further, however, that such notice to
terminate this Agreement shall not be given and if given shall have no effect
(i) within three (3) years after a Change of Control or (ii) during any period
of time when Company or Bank has reason to believe that any third person has
taken steps toward a Potential Change of Control.
8. Expenses. The Company and Bank shall pay or reimburse
Executive for all costs and expenses including, without limitation, court costs
and attorneys' fees, incurred by Executive as a result of any claim, action or
proceeding by Executive against Bank arising out of or challenging the validity
or enforceability of this Agreement or any provision hereof.
9. No Prejudice Toward Rights of Indemnification. Nothing
contained in this Agreement shall be construed to limit, diminish, waive or
otherwise prejudice any statutory, common law, contractual or corporate bylaw
rights of indemnification which Executive may now or hereafter hold with respect
to his position as a director and/or officer of the Bank, the Company, and their
respective subsidiaries and affiliates.
10. Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of Bank other than as
specifically stated herein. This Agreement is not an employment contract between
Bank and Executive and nothing set forth herein shall be deemed to create an
employment contract between Executive and Bank. Executive acknowledges that the
<PAGE> 13
rights of the Company and Bank to change or reduce, at any time and from time to
time, his compensation, title, responsibilities, business location, and all
other aspects of the employment relationship or to discharge him with or without
cause shall remain wholly unaffected by the provisions of this Agreement; it
being the parties' mutual intention and agreement that this Agreement is
intended to have legal effect solely at such time as there occurs a Change of
Control. No waiver by either party to this Agreement at any time of any breach
by the other party or non-compliance with any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of any
such provision or condition. This Agreement sets forth the entire agreement of
the parties with respect to the subject matter hereof and all prior agreements
or representations, express or implied, regarding such subject matter shall be
deemed merged herein.
11. Successors. The obligations and duties of the Company and the
Bank shall be binding upon their respective successors. Whenever the term
"Company" or "Bank" is used herein, it shall be deemed to include their
respective successors, whether by merger, assignment, operation of law, or
otherwise. The performance of such obligations and duties shall inure to the
benefit of Executive and Executive's heirs and assigns to the extent such
obligations and duties remain enforceable after Executive's death.
12. Amendments. This Agreement shall be amended only pursuant to
written instrument signed by each party hereto.
13. Applicable Law. This Agreement is made as a Tennessee contract
and shall be construed and applied according to the laws of the State of
Tennessee.
14. Jurisdiction. Jurisdiction with respect to any issue or
dispute arising hereunder shall be exclusively with the Chancery and Circuit
Courts for Sullivan County, Tennessee.
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first written hereinabove.
BANCTENN CORP.
By:/s/ William B. Greene, Jr.
----------------------------------
William B. Greene, Jr.
Chairman of the Board
BANK OF TENNESSEE
By:/s/ Roy L. Harmon, Jr.
----------------------------------
Roy L. Harmon, Jr.
President
/s/ Colon A. Terrell, Jr.
-------------------------------------
COLON A. TERRELL, JR.
<PAGE> 1
EXHIBIT 10.13
BANK OF TENNESSEE
CHANGE OF CONTROL COMPENSATION AGREEMENT
THIS AGREEMENT, dated as of April 1, 1997, is made by and between
BANCTENN CORP., a one-bank holding company chartered under the laws of the State
of Tennessee (the "Company"), BANK OF TENNESSEE, a Tennessee banking corporation
having its principal place of business at 301 East Center Street, Kingsport,
Tennessee (herein "Bank"), and ROY L. HARMON, JR. (the "Executive").
RECITALS:
A. The Boards of Directors of the Company and Bank have
recommended and approved that the Company and Bank enter into
agreements providing for compensation under certain
circumstances after a "Change of Control" (as defined herein)
with key executives of the Company and Bank.
B. Executive is the President and Chief Operating Officer of Bank
and Vice President of the Company, and, as such, has been
designated by the Boards of Directors as a key employee.
C. Should Company or Bank become subject to any actual or
potential Change of Control (as defined herein), the Boards of
Directors of the Company and Bank believe it is imperative
that the Company and Bank and their respective Boards of
Directors be able to rely upon Executive to continue in his
position and that the Company and Bank be able to receive and
rely upon Executive's advice as to the best interests of the
Company and Bank without concern that the Executive might be
distracted by the personal uncertainties and risks created by
a Change of Control.
D. Should the Company or Bank become subject to any such
Potential Change of Control (as defined herein), in addition
to Executive's regular duties, Executive may be called upon to
assist in the assessment of such circumstances, advise
management and the Boards of Directors as to whether such
proposal would be in the best interests of the Company or Bank
and their respective constituents, and to take such other
actions
<PAGE> 2
above and beyond Executive's regular duties as the Boards of
Directors might determine to be appropriate.
NOW, THEREFORE, to assure the Company and Bank of the continued
dedication and service of Executive and the availability of his advice and
counsel notwithstanding the possibility, threat or occurrence of a Potential
Change of Control or a Change of Control of the Company or Bank, and to induce
Executive to remain in the Bank's employ and for other good and valuable
consideration, the Company, Bank and Executive hereby contract and agree as
follows:
1. Definitions. As used herein the following terms shall be
defined as follow:
"Annual Earnings" shall mean the amounts earned by Executive
for personal services rendered to Bank and its affiliates, as reportable on
Treasury Department Form W-2, including overtime, bonuses and commissions but
excluding the following: (i) moving and education expenses, (ii) income earned
under Section 79 of the Code, as amended, and (iii) income imputed to Executive
from personal use of employer-owned automobiles and employer-paid club dues, and
(iv) income attributable to grants of and dividends on shares awarded (whether
as options, restricted stock or any other form) under the Company's 1992
Employee Stock Incentive Plan, the Company's 1996 Employee Stock Purchase Plan,
and any successor to such plans.
"Average Annual Earnings" shall mean the mathematical average
of Executive's Annual Earnings for the five (5) fiscal years preceding a
Qualifying Termination.
"Board" means the Board of Directors of the Company or the
Bank as the case may be.
"Change of Control" means, with respect to the Company or
the Bank, the happening of any of the following:
(i) The death of William B. Greene, Jr.; or
<PAGE> 3
(ii) The permanent mental disability of William B. Greene,
Jr. such that it is determined by competent independent medical opinion that he
is incapable of managing his business affairs and exercising the judgment and
discretion reasonably required thereby; or
(iii) If any person or entity, including a "group" as
defined in Section 11(d)(3) of the Securities Exchange Act of 1934, (other than
(x) the Company or a wholly-owned subsidiary thereof, or (y) any employee
benefit plan of the Company or any of its subsidiaries or (z) William B. Greene,
Jr. and his Related Interests) becomes the beneficial owner of securities of the
Company or Bank having more than 50% of the combined voting power of the then
outstanding securities of the Company or Bank that may be cast for the election
of directors of the Company or Bank (other than as a result of an issuance of
securities by the Company or the Bank in the ordinary course of business); or
(iv) If, as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions, less
than a majority of the combined voting power of the then outstanding securities
of the Company or Bank (or any successor corporation or entity) entitled to vote
generally in the election of the directors of the Company or Bank after such
transaction are held in the aggregate by the holders of the Company's or Bank's
securities entitled to vote generally in the election of directors of the
Company or Bank immediately prior to such transaction; or
(v) If, during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company or the Bank cease for any reason to constitute at least
a majority thereof, unless the election of each director of the Company or the
Bank first elected during such period was approved by a vote of at least
two-thirds (2/3) of the directors of the Company or the Bank, as the case may
be, then still in office who were directors of the Company or the Bank at the
beginning of any such period; or
<PAGE> 4
(vi) If William B. Greene, Jr. and his Related Interests
cease to own at least twenty-five percent (25%) of the outstanding stock of the
Company (except as a result of the issuance of securities issued by the Company
in the ordinary course of business); provided, however, a Change of Control
shall not be deemed to have occurred so long as William B. Greene, Jr. and his
Related Interests remain, in the aggregate, the Company's largest stockholder.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and all regulations adopted pursuant thereto.
"Normal Retirement Date" shall mean the date upon which
Executive reaches sixty-five (65) years of age.
"William B. Greene, Jr. and his Related Interests" shall mean
William B. Greene, Jr., Greene Investment Corp., any trust of which William B.
Greene, Jr. is a trustee, co-trustee, or beneficiary, and any partnership,
corporation, or limited liability company of which William B. Greene, Jr. is an
officer, director, stockholder, member, or equity owner.
"Potential Change of Control" means the happening of any of
the following:
(i) The approval by the stockholders of the Company or
the Bank of an agreement the consummation of which would result in a Change of
Control of the Company or the Bank; or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
subsidiary or any Company employee benefit plan, or William B. Greene, Jr. and
his Related Interests) of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's outstanding
securities and the adoption by the Board of Directors of a resolution to the
effect that a Potential Change of Control of the Company has occurred; or
<PAGE> 5
(iii) The execution of a definitive binding written
agreement by William B. Greene, Jr. and his Related Interests providing for the
sale to an independent third party not related to or affiliated with William B.
Greene, Jr. or the Company or its subsidiaries or a related employee benefit
plan, of such amount of stock as will, upon closing and consummation of such
agreement, cause William B. Greene, Jr. and his Related Interests, in the
aggregate, to no longer be the Company's largest stockholder.
2. Assured Period of Service. In the event a third person begins
a tender or exchange offer, circulates a proxy to stockholders, or takes other
steps to pursue a transaction the effect of which would be to constitute a
Change of Control, Executive agrees that he will not voluntarily leave Bank's
employ on less than three (3) months prior written notice to the Bank's Chairman
of the Board, and will render the services expected of his position, and until
such third person has abandoned or terminated his efforts to effect a Change of
Control or until a Change of Control has occurred.
3. Termination Following Change of Control. In the event
Executive's employment is terminated at any time within three (3) years
following a Change of Control under any circumstance constituting a "Qualifying
Termination," the Company and Bank shall provide or cause to be provided to
Executive the benefits and rights described in Section 4 hereof. As used herein,
a "Qualifying Termination" shall mean a termination of Executive's employment
with the Bank under any of the following circumstances:
(a) Termination by Company or Bank. Termination of
Executive's employment by the Company or the Bank for reasons other than "cause"
as such term is defined in Section (5)(a) hereof, but not including termination
by reason of Executive's death, permanent disability, or attainment of normal
retirement age; or
<PAGE> 6
(b) Termination by Executive. Termination of employment
by Executive following the occurrence of any of the following events:
(i) The assignment of Executive to any duties or
responsibilities that are
inconsistent with his position, duties, responsibilities or status immediately
preceding such Change of Control, or a change in his reporting responsibilities
or titles in effect at such time resulting in a reduction of his
responsibilities or position;
(ii) The reduction of Executive's annual salary
(including any deferred portions thereof) or any level of benefits or
supplemental compensation;
(iii) The transfer of Executive to a location
requiring a change in his residence or a material increase in the amount of
travel normally required of Executive in connection with his employment; or
(iv) The good faith determination by Executive
that due to the Change of Control he is no longer able effectively to discharge
his duties and responsibilities.
4. Rights and Benefits Upon Termination. In the event of the
termination of Executive's employment under any of the circumstances
constituting a Qualifying Termination as set forth in Section 3 hereof, the
Company and Bank and their successors shall provide or cause to be provided to
Executive the following rights and benefits:
(a) Termination Compensation. Executive shall be entitled
to receive a payment in cash in an amount equal to five (5) times Executive's
Average Annual Earnings. For purposes of this Agreement, Executive's Average
Annual Earnings shall be deemed the "Base Amount" as that term is defined in
Section 280G(b)(3)(A) of the Code, as amended. Such compensation, less any
applicable withholdings for federal income taxes and Social Security
contributions, shall be paid to Executive in a lump sum within ten (10) calendar
days after the effective date of the Qualifying Termination;
<PAGE> 7
provided, however, Executive may, at his option, elect to receive such
compensation in as many as five (5) annual installments payable, without
interest, on each anniversary date of the Qualifying Termination.
If Executive shall die after the occurrence of a Qualifying
Termination but prior to
the time all payments due to Executive under this Section 4 or otherwise under
this Agreement have been made, then as soon as practicable after such death, but
in no event later than three (3) months thereafter, Company or Bank shall pay or
cause to be paid in a lump sum in cash all sums not distributed to Executive
prior to his death.
(b) Supplemental Executive Retirement Plan Benefits. Except to the
extent expressly prohibited by any applicable law or regulation, any and all
restrictions, vesting schedules and conditions or thresholds provided in any
supplemental Executive retirement plan, if any is in effect at Executive's
Qualifying Termination, shall immediately lapse and Executive shall be entitled
immediately to receive all benefits previously granted thereunder.
(c) Executive Incentive Plan Benefits. Any award under any
incentive plan for which Executive is eligible and which has not been paid to
Executive at the time of his Qualifying Termination shall be paid to him within
thirty (30) days of such termination. Such payment shall be accompanied by a
payment to Executive of an amount equal to one-twelfth (1/12th) of the award to
the Executive for the most recently ended plan year for each full month in the
current plan year prior to the month of Executive's Qualifying Termination.
(d) Insurance Benefits.
(i) Life Insurance. Upon a Qualifying Termination, the
Company and Bank shall transfer to Executive title to and ownership of such
split-dollar life insurance policies as may then be in effect insuring
Executive's life, including all cash values and other rights and benefits
thereunder.
<PAGE> 8
(ii) Medical, Accident and Disability. Upon a Qualifying
Termination, Executive shall continue to be covered, until Executive's Normal
Retirement Age, by such medical insurance and accident and disability insurance
plans or any successor plan or program as the Company or Bank may then have in
effect for Executive's benefit, subject to the terms of such plans and subject
to Executive's continuing to make any payments required for employees in the
same class or category as Executive held prior to his termination. In the event
Executive is ineligible to continue to be covered under the terms of any such
benefit plan or program, or in the event Executive is eligible but the benefits
applicable to Executive under any such plan or program after termination are not
substantially equivalent to the benefits applicable to Executive immediately
prior to termination, then until Executive's Normal Retirement Date, Bank shall
provide such substantially equivalent benefits or other such additional benefits
as may be necessary to make the benefits applicable to Executive substantially
equivalent to those in effect prior to Executive's termination; provided,
however, that if during such period Executive should enter into the employment
of another company or firm which provides substantially similar benefit
coverage, Executive's participation in the comparable benefits provided by Bank
shall cease. For so long as Executive is eligible under this Agreement to
receive coverage under such insurance plans, Executive may purchase, at his
expense, extended coverage for his spouse and dependents according to the terms
of coverage under such plans as in effect from time to time. In the event
Executive dies after a Qualifying Termination and prior to attaining Normal
Retirement Age, Executive's spouse and dependents may continue to participate in
such plans, at their expense, until (i) the spouse reaches Normal Retirement Age
and (ii) Executive's dependents reach the age of majority or are otherwise not
eligible to participate.
(e) Ownership of Perquisites. The ownership of any automobile
which was assigned to Executive prior to his termination shall be transferred to
him, free of charge, within thirty
<PAGE> 9
(30) days after his Qualifying Termination. The ownership of any club membership
which was assigned to Executive prior to his Qualifying Termination shall be
transferred to Executive free of charge, within thirty (30) days after
termination; provided, however, in the event any such club membership is not
transferrable by the Company or Bank directly to Executive, the Company or Bank
shall pay to Executive up to $25,000 or the actual cost of a replacement
membership incurred by Executive, whichever is less.
(f) No Duty to Mitigate. Executive's entitlement to benefits
under this Agreement shall not be governed by any duty to mitigate his damages
by seeking further employment nor offset by any compensation which he may
receive from future employment.
(g) Payment Obligations Absolute. Unless Section 5 is
applicable, the obligation of Company and Bank to pay or cause to be paid to
Executive the benefits and to make the arrangements provided in this Section 4
shall be absolute and unconditional upon the occurrence of a Qualifying
Termination and shall not be affected by any circumstances, including without
limitation, any setoff, counterclaim, recoupment, defense or other right which
Bank may have against Executive or anyone else. All amounts payable by or on
behalf of Bank under this Agreement shall, unless specifically stated otherwise
in this Agreement, shall be paid without notice or demand. Each and every
payment made hereunder by or on behalf of Bank shall be final and absolute, and
Bank and its subsidiaries and affiliates shall not for any reason, whatsoever,
seek to recover all or any part of such payment from Executive or from whomever
shall be entitled thereto.
(h) Tax Effect. Notwithstanding the provisions of Section 280G of
the code, it is the parties' intention that the "excess parachute" provisions of
Section 280G(b), in effect as of the date of this Agreement, and the resulting
excise tax provided for in Section 4999 of the Code, shall be inapplicable to
the payments to be made to Executive under this Agreement for the reasons that
(i) the
<PAGE> 10
outstanding stock of the Company is not traded on an established securities
market, and (ii) this Agreement and the terms hereof were approved by a vote of
more than seventy-five percent (75%) of the Company's outstanding voting
securities at a duly called meeting of the Company's shareholders held on April
24, 1997, following proper notice thereof and delivery of a complete and
accurate proxy statement describing all material terms of this Agreement.
5. Conditions to Obligations of Company and Bank. Notwithstanding any
other provision of this Agreement, neither the Company nor the Bank shall have
any obligation to provide or cause to be provided to Executive the rights and
benefits described in Section 4 hereof if either of the following events shall
occur:
(a) Termination for Cause. If Bank shall terminate
Executive's employment for "cause." For purposes of this Agreement, termination
of employment for "cause" shall mean termination solely for conviction of a
felony; or
(b) Resignation as Director or Officer. If Executive
shall fail, promptly after termination and upon receiving a written request to
do so, to resign as a director and/or officer of Bank and each subsidiary and
affiliate of Bank of which he is then serving as a director and/or officer.
6. Confidentiality; Cooperation; Consultancy.
(a) Confidentiality. Executive agrees that at all times
following termination of his employment, he will not, without the prior written
consent of Bank, disclose to any person, firm or corporation any confidential
information of the Company, Bank or their subsidiaries and affiliates which is
now known to him or which hereafter and before termination may become known to
him as a result of his employment or association with the Company and Bank, and
which could be helpful to a competitor; provided, however, that the foregoing
shall not apply to confidential information that becomes publicly disseminated
by means other than breach of this Agreement.
<PAGE> 11
(b) Cooperation. Executive agrees that at all times
following termination of his employment, he will furnish such information and
render such assistance and cooperation as may be reasonably requested in
connection with any litigation or legal proceedings concerning Bank or any of
its affiliates (other than legal proceedings concerning Executive's employment).
In connection with such cooperation, Bank will pay or reimburse Executive for
all reasonable expenses incurred in cooperating with such request.
(c) Consultation. Executive agrees that for a period of
two (2) years following termination of his employment, he will make himself
available to the Company, Bank and their subsidiaries, affiliates and successors
for consultation with senior officers of the Company, Bank and their
subsidiaries, affiliates, and successors, as the case may be; provided, however,
Executive shall not be required to perform consulting services (i) for more than
five (5) days in any month and (ii) for more than thirty (30) hours in any
month. It is expressly agreed that Executive's consulting services will be
required at such time and at such places as will result in the least
inconvenience to Executive taking into consideration Executive's other business
commitments during such period. It is further agreed that Executive's consulting
services shall be rendered by personal consultation at Executive's principal
residence or office, wherever maintained, or by correspondence through mail,
telephone, facsimile transmission, or other similar modes of communication
during regular business hours or at such other times as are deemed by Executive
to be most convenient. In the event Executive should enter into the full-time
employment with another company or firm, Executive shall not be required to
consult at times or on matters which would conflict with his responsibilities
with respect to such new employment. The Company and Bank shall pay Executive
reasonable compensation, together with reimbursement of all reasonable expenses,
for such consulting services.
<PAGE> 12
7. Term of Agreement. This Agreement shall commence as of the
date hereof and shall terminate on March 31, 2002; provided, however, this
Agreement shall automatically renew for successive one (1) year periods unless
Company or Bank notifies Executive in writing at least 180 days prior to the
expiration date that Company and Bank does not desire to renew the Agreement for
an additional term; and provided further, however, that such notice to terminate
this Agreement shall not be given and if given shall have no effect (i) within
three (3) years after a Change of Control or (ii) during any period of time when
Company or Bank has reason to believe that any third person has taken steps
toward a Potential Change of Control.
8. Expenses. The Company and Bank shall pay or reimburse
Executive for all costs and expenses including, without limitation, court costs
and attorneys' fees, incurred by Executive as a result of any claim, action or
proceeding by Executive against Bank arising out of or challenging the validity
or enforceability of this Agreement or any provision hereof.
9. No Prejudice Toward Rights of Indemnification. Nothing
contained in this Agreement shall be construed to limit, diminish, waive or
otherwise prejudice any statutory, common law, contractual or corporate bylaw
rights of indemnification which Executive may now or hereafter hold with respect
to his position as a director and/or officer of the Bank, the Company, and their
respective subsidiaries and affiliates.
10. Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of Bank other than as
specifically stated herein. This Agreement is not an employment contract between
Bank and Executive and nothing set forth herein shall be deemed to create an
employment contract between Executive and Bank. Executive acknowledges that the
rights of the Company and Bank to change or reduce, at any time and from time to
time, his compensation, title, responsibilities, business location, and all
other aspects of the employment
<PAGE> 13
relationship or to discharge him with or without cause shall remain wholly
unaffected by the provisions of this Agreement; it being the parties' mutual
intention and agreement that this Agreement is intended to have legal effect
solely at such time as there occurs a Change of Control. No waiver by either
party to this Agreement at any time of any breach by the other party or
non-compliance with any condition or provision of this Agreement to be performed
by the other party shall be deemed a waiver of any such provision or condition.
This Agreement sets forth the entire agreement of the parties with respect to
the subject matter hereof and all prior agreements or representations, express
or implied, regarding such subject matter shall be deemed merged herein.
11. Successors. The obligations and duties of the Company and the
Bank shall be binding upon their respective successors. Whenever the term
"Company" or "Bank" is used herein, it shall be deemed to include their
respective successors, whether by merger, assignment, operation of law, or
otherwise. The performance of such obligations and duties shall inure to the
benefit of Executive and Executive's heirs and assigns to the extent such
obligations and duties remain enforceable after Executive's death.
12. Amendments. This Agreement shall be amended only pursuant to
written instrument signed by each party hereto.
13. Applicable Law. This Agreement is made as a Tennessee contract
and shall be construed and applied according to the laws of the State of
Tennessee.
14. Jurisdiction. Jurisdiction with respect to any issue or
dispute arising hereunder shall be exclusively with the Chancery and Circuit
Courts for Sullivan County, Tennessee.
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first written hereinabove.
BANCTENN CORP.
By: /s/ Colon A. Terrell, Jr.
-----------------------------------------
Colon A. Terrell, Jr.
President and Chief
Executive Officer
BANK OF TENNESSEE
By: /s/ Colon A. Terrell, Jr.
-----------------------------------------
Colon A. Terrell, Jr.
Chairman of the Board and
Chief Executive Officer
/s/ Roy L. Harmon, Jr.
--------------------------------------------
ROY L. HARMON, JR.
<PAGE> 1
EXHIBIT 10.14
BANCTENN CORP.
DIRECTORS STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this BancTenn Corp. Directors Stock Option Plan
(the "Plan") is to advance the interests of the Company by providing Directors
of the Company and the Bank with the opportunity to acquire Shares of the
Company. By encouraging such stock ownership, the Company seeks to attract,
retain, and motivate the best available personnel for positions of substantial
responsibility and to provide additional incentive to Directors to promote the
success of the Company's business.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company as defined in Section 424(e) and (f) of
the Code, and any entity deemed to be an "affiliate" of the Company or Bank
under applicable federal banking regulations.
(b) "Agreement" shall mean a written agreement entered
into in accordance with Paragraph 5(c).
(c) "Bank" shall mean Bank of Tennessee.
(d) "Board" shall mean the Board of Directors of the
Company.
(e) "Change in Control" shall mean, with respect to the
Corporation or Bank, the happening of any of the following: (i) if any person or
entity, including a "group" as defined in the Securities Exchange Act of 1934
(other than (x) the Corporation or a wholly-owned subsidiary thereof, or (y) any
employee benefit plan of the Corporation or any of its subsidiaries, or (z)
William B. Greene, Jr. and his Related Interests) becomes the beneficial owner
of securities of the Corporation or the Bank having 50% or more of the combined
voting power of the then outstanding securities of the Corporation or the Bank
that may be cast in the election of directors of the Corporation or the Bank
(other than as a result of an issuance of securities initiated by the
Corporation or Bank in the ordinary course of business); (ii) if, as a result of
or in connection with any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing, less than a majority of the securities of the Corporation or
the Bank, entitled to vote in the election of directors, are held by the holders
of the Corporation's or Bank's securities holding a majority of the outstanding
securities prior to such transaction; (iii) if, during any period of two (2)
consecutive years, the majority composition of the Board of Directors of the
Corporation or the Bank changes unless the election of each new director was
approved by 2/3 of the directors of the Corporation or the Bank, as the case may
be, then still in office who were directors of the Corporation or Bank at the
beginning of such period; or (iv) if William B. Greene, Jr. and his Related
Interests cease to own at least 25% of the outstanding Common Stock of the
Corporation unless William B. Greene, Jr. and his Related Interests remain the
Corporation's largest stockholder.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
<PAGE> 2
(g) "Common Stock" shall mean the common stock, par value
$8.00 per share, of the Company.
(h) "Continuous Service" shall mean the absence of any
interruption or termination of service as a Director of the Company or the Bank.
Continuous Service shall not be considered interrupted in the case of sick
leave, military leave or any other leave of absence approved by the Company's
Board of Directors or in the case of transfers between payroll locations of the
Company or Bank and an Affiliate or a successor of the Company or Bank.
(i) "Company" shall mean BancTenn Corp.
(j) "Director" shall mean any member of the Board of
Directors of the Company or Bank. Notwithstanding any other provision herein,
including the definition of "Affiliate," the only persons eligible to receive
grants of Options under this Plan are those persons who are now or hereafter
elected as members of the Board of Directors of the Company or the Board of
Directors of the Bank.
(k) "Effective Date" shall mean the date specified in
Paragraph 13 hereof.
(l) "Employee" shall mean any person employed by the
Company or the Bank.
(m) "Exercise Price" shall mean the price per Optioned
Share at which an Option may be exercised.
(n) "Market Value" shall mean the fair market value of
the Common Stock, as determined under Paragraph 7(b) hereof.
(o) "Option" means an option to purchase Common Stock
which meets the requirements set forth in the Plan. Such Options shall not
constitute "incentive stock options" within the meaning of Section 422 of the
Code.
(p) "Optioned Shares" shall mean Shares subject to an
Option granted pursuant to this Plan.
(q) "Participant" shall mean any person who receives an
Option pursuant to the Plan.
(r) "Plan" shall mean the BancTenn Corp. Directors Stock
Option Plan.
(s) "Rule 16b-3" shall mean Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended.
(t) "Share" shall mean one share of Common Stock.
(u) "William B. Greene, Jr. and his Related Interests"
shall mean William B. Greene, Jr., Greene Investment Corporation, any trust of
which Mr. Greene is a trustee, co-trustee, or beneficiary, and any partnership,
corporation or limited liability company of which Mr. Greene is an officer,
director, stockholder, member or equity owner.
2
<PAGE> 3
3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect
for a term of five (5) years from the Effective Date, unless sooner terminated
pursuant to Paragraph 14 hereof. No Option shall be granted under the Plan after
five (5) years from the Effective Date.
(b) Term of Options. The term of each Option granted
under the Plan shall be ten (10) years. The vesting formula set forth in
Paragraph 6(c) shall not have the effect of extending the ten (10) year term of
any option.
4. SHARES SUBJECT TO THE PLAN.
The aggregate number of Shares deliverable pursuant to Options
under this Plan shall not exceed 50,000 shares (subject to such adjustments as
may be made pursuant to Paragraph 10 hereof). Such Shares may either be
authorized but unissued Shares or Shares held in treasury. If Options should
expire, become unexercisable or be forfeited for any reason without having been
exercised or become vested in full, the Optioned Shares shall, unless the Plan
shall have been terminated, be available for the grant of additional Options
under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) General Rule. The Plan shall be administered by the
Board, provided that the Board may appoint a committee of Directors to make any
determinations required pursuant to the Plan.
(b) Powers. Except as limited by the express provisions
of the Plan, the Board shall have sole and complete authority and discretion (i)
to determine the form and content of Options to be issued in the form of
Agreements under the Plan, (ii) to interpret the Plan, (iii) to prescribe, amend
and rescind rules and regulations relating to the Plan, and (iv) to make other
determinations necessary or advisable for the administration of the Plan.
(c) Agreement. Each Option shall be evidenced by a
written agreement containing such provisions as may be approved by the Board.
Each such Agreement shall constitute a binding contract between the Company and
the Participant, and every Participant, upon acceptance of such Agreement, shall
be bound by the terms and restrictions of the Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the Plan. In
particular, the Board shall set forth in this Agreement (i) the Exercise Price
of an Option, (ii) the number of Shares subject to, and the expiration date of,
the Option, (iii) the manner, time, and rate (cumulative or otherwise) of
exercise or vesting of such Option, and (iv) the restrictions, if any, to be
placed upon such Option, or upon Shares which may be issued upon exercise of
such Option. The terms and restrictions of each award may vary as determined by
the Board in its sole discretion, provided, however, no award shall be
inconsistent with the terms of this Plan.
The President of the Company and such Directors as shall be
designated by the Board are hereby authorized to execute Agreements on behalf of
the Company, and to cause them to be delivered to the recipients of Options.
(d) Effect of the Board's Decisions. All decisions,
determinations, and interpretations of the Board shall be final and conclusive
on all persons affected thereby.
3
<PAGE> 4
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Board shall be indemnified
by the Company in connection with any claim, action, suit or proceeding relating
to any action taken or failure to act under or in connection with the Plan or
any Option, granted hereunder to the full extent provided for under the
Company's governing instruments with respect to the indemnification of
Directors.
(f) Certain Mandatory Abstentions. Notwithstanding
anything herein to the contrary, no Director shall have any vote with regard to
any Option previously granted to himself or herself.
6. FORMULA GRANTS OF OPTIONS.
(a) Grants on the Effective Date. On the Effective Date,
and upon approval of the Board, each Director shall receive Options to purchase
up to 1,000 Shares at an Exercise Price per Share equal to the Market Value on
the Effective Date. Any person who is a Director of both the Company and the
Bank shall be entitled to receive only one (1) Option grant pursuant to the Plan
in any given calendar year.
(b) Annual Grants Subsequent to the Effective Date. On
January 15, 2001 and on each succeeding January 15, each Director shall receive
additional Options to purchase Shares at an Exercise Price per Share equal to
the Market Value on the date of each such grant. The Board shall determine the
number of shares subject to each such Option but no individual, annual Option
shall be for more than 1,000 shares. Any person who is a Director of both the
Company and the Bank shall be entitled to receive only one (1) Option grant
pursuant to the Plan in any given calendar year.
(c) Vesting. The Board shall have the discretion
to determine the vesting schedule, if any, for each Option granted pursuant to
the Plan; provided, however, no such vesting schedule shall have the effect of
extending the term of any such Option beyond the maximum ten (10) year term
provided for in Paragraph 3(b).
7. EXERCISE PRICE FOR OPTIONS.
(a) General Rule. The Exercise Price as to any particular
Option shall be the Market Value of the Optioned Shares on the date of grant, as
determined by the Board.
(b) Standards for Determining Exercise Price. If the
Common Stock is listed on a national securities exchange (including the NASDAQ
National Market System) on the date in question, then the Market Value per Share
shall be not less than the average of the highest and lowest selling price on
such exchange on such date, or if there were no sales on such date, then the
Exercise Price shall be not less than the mean between the bid and asked price
on such date. If the Common Stock is traded otherwise than on a national
securities exchange on the date in question, then the Market Value per Share
shall be not less than the mean between the bid and asked price on such date,
or, if there is no bid and asked price on such date, then on the next prior
business day on which there was a bid and asked price. If no such bid and asked
price is available, then the Market Value per Share shall be its fair market
value as determined by the Board, in its sole and absolute discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Any Option granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and under the terms of the Option Agreement granting
Options to a Participant. An Option may not be exercised for a fractional Share.
4
<PAGE> 5
(b) Procedure for Exercise. Options may be exercised from
time to time by (i) written notice of intent to exercise the Option with respect
to all or a specified number of the Optioned Shares, and (ii) payment to the
Company (contemporaneously with the delivery of such notice), in cash, in Common
Stock, or a combination of cash and Common Stock, of the amount of the Exercise
Price for the number of the Optioned Shares with respect to which the Option is
then being exercised. Each such notice and payment shall be delivered, or mailed
by prepaid registered or certified mail, addressed to the Treasurer of the
Company at the Company's executive offices. A Director who exercises Options may
satisfy all applicable federal, state and local income and employment tax
withholding obligations, in whole or in part, by irrevocably electing to have
the Company withhold shares of Common Stock, or to deliver to the Company shares
of Common Stock that he already owns, having a value equal to the amount
required to be withheld.
(c) Exercisability. Options granted hereunder may be
exercised only while the Participant is a Director of the Company or the Bank,
or within three (3) years after termination of the Participant's Continuous
Service as a Director, but in no event later than the date on which such Options
would otherwise expire. In the event of such Director's death during the term of
his directorship, Options granted under this Paragraph may be exercised within
three (3) years from the date of his death by the personal representatives of
his estate or person or persons to whom his rights under such Option shall have
passed by will or by laws of descent and distribution, but in no event later
than the date on which such Options would otherwise expire.
(d) Forfeiture. Options granted hereunder shall be
automatically and completely forfeited in the event a Participant is removed
from the Board of the Company or the Bank for "cause". As used herein, "cause"
shall include indictment on any criminal felony, conviction of any criminal
felony, engaging in any act of moral turpitude, failure to satisfy attendance
requirements as established by the Board or the applicable regulatory
authorities from time to time, the removal of the Participant at any
shareholders meeting specifically called to consider termination or removal of
the Participant as a Director, and any other act which the Board of the Company,
in its sole discretion, determines to be materially harmful or injurious to the
reputation and standing of the Company or the Bank.
9. CHANGE IN CONTROL.
(a) General Rule. At the time of a Change in Control, all
Options shall be deemed fully exercisable and any waiting period or vesting
period shall be deemed automatically terminated. In any such instance, each
holder of an Option shall be entitled, at his discretion and choice, to (i)
receive cash from the Company in an amount equal to the excess of the Market
Value of the Common Stock subject to the Option over the Exercise Price of the
Optioned Shares, in exchange for the cancellation of such Option, or (ii)
exercise the Option in full according to its terms. Notwithstanding the
foregoing, a Participant's election to exercise his Options shall not give the
Participant any greater rights or different legal position vis-a-vis the rights
of the Company's other stockholders in regard to the event constituting the
Change of Control.
(b) Exception to General Rule. Notwithstanding subparagraph
(a) of this Paragraph, if otherwise prohibited by applicable securities law or
regulation, an Option may not be cancelled in exchange for cash within the
six-month period following the date of its grant.
10. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind
of shares reserved for issuance under the Plan, and the number and kind of
shares subject to outstanding Options (and the Exercise Price thereof) shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares,
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<PAGE> 6
or similar event in which the number or kind of shares is changed without the
receipt or payment of consideration by the Company.
(b) Transactions in Which the Company is Not the
Surviving Entity. Subject to Paragraph 9 hereof, in the event of (i) the
liquidation or dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale or disposition
of all or substantially all of the Company's assets (any of the foregoing to be
referred to herein as a "Transaction"), all outstanding Options shall be
surrendered. With respect to each Option so surrendered, the holder of the
surrendered Option may elect to receive:
(1) for each Share then subject to an
outstanding Option the number and kind of shares into which each outstanding
Share (other than Shares held by dissenting stockholders) is changed or
exchanged, together with an appropriate adjustment to the Exercise Price; or
(2) a cash payment (from the Company or the
successor corporation), in an amount equal to the Market Value of the Shares
subject to the Option on the date of the Transaction, less the Exercise Price of
the Option.
(c) Conditions and Restrictions on New, Additional, or
Different Shares or Securities. If, by reason of any adjustment made pursuant to
this Paragraph, a Participant becomes entitled to new, additional, or different
shares of stock or securities, such new, additional, or different shares of
stock or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Option before
the adjustment was made.
(d) Other Issuances. Except as expressly provided in this
Paragraph, the issuance by the Company or the Bank of shares of stock of any
class, or of securities convertible into Shares or stock of another class, for
cash or property or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with respect to, the number, class, or Exercise Price
of Shares then subject to Options or reserved for issuance under the Plan. There
shall be no preemptive rights with respect to Shares covered by unexercised
Options.
11. NON-TRANSFERABILITY OF OPTIONS.
Options may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution, or pursuant to the terms of a "qualified domestic
relations order" (within the meaning of Section 414(p) of the Code and the
regulations and rulings thereunder).
12. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the
date on which the Board makes the determination granting such Option. Notice of
the determination shall be given to each Participant to whom an Option is so
granted within a reasonable time after the date of such Grant.
13. EFFECTIVE DATE.
The Plan shall become effective April 24, 2000 (the "Effective
Date") upon approval of the Plan by the stockholders of the Company.
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<PAGE> 7
14. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan
and, with respect to any Shares at the time not subject to Options, suspend or
terminate the Plan; provided that no provision hereof may be amended more than
once every six months (other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder), and provided further that any amendment that is "material" within
the meaning of Rule 16b-3 shall be subject to stockholder approval. No
amendment, suspension or termination of the Plan shall, without the consent of
any affected holders of an Option, alter or impair any rights or obligations
under any Option theretofore granted.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common
Stock shall not be issued with respect to any Option unless the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the rules
and regulations promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company
to obtain approval from any regulatory body or authority deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder
shall relive the Company of any liability in respect of the non-issuance or sale
of such Shares. As a condition to the exercise of an Option, the Company may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal and state securities law.
16. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the requirements of the
Plan.
17. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of
Options shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations. Each
Participant may satisfy the obligation, in whole or in part, by irrevocably
electing to have the Company withhold Shares, or to deliver to the Company
Shares that he already owns, having a value equal to the amount required to be
withheld. The value of Shares to be withheld, or delivered to the Company, shall
be based on the Market Value of the Shares on the date the amount of tax to be
withheld is to be determined. As an alternative, the Company may retain, or sell
without notice, a number of such Shares sufficient to cover the amount required
to be withheld.
18. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall a Director's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Director, or any other party to continue service with the Company
or the Bank, whether as a Director or employee. Without limiting the foregoing,
neither a Director's eligibility to participate in the Plan, nor the granting of
any Options under the Plan, nor the exercise of any Options, shall be construed
to guarantee or assure any Director of continued service as a Director or
reelection
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<PAGE> 8
as a Director at any time. No Director shall have a right to be
granted an Option or, having received an Option, the right to again be granted
any further Options. However, a Director who has been granted an Option may, if
otherwise eligible and upon approval of the Board, be granted an additional
Option or Options.
19. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with
the laws of the State of Tennessee, except to the extent that federal law shall
be deemed to apply.
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<PAGE> 1
EXHIBIT 10.15
BANCTENN CORP.
DIRECTORS FEE DEFERRAL PLAN
1. PURPOSE OF THE PLAN.
The purpose of this BancTenn Corp. Directors Fee Deferral
Plan (the "Plan") is to advance the interests of the Company by providing
Directors of the Company and the Bank with the opportunity to defer receipt of
their directors fees in a manner which suits each individual director's
individual circumstances and preferences. By making this Plan available, the
Company seeks to provide each Director with a degree of flexibility in planning
his or her personal financial matters.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Bank" shall mean Bank of Tennessee.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Change in Control" shall mean, with respect to the
Corporation or Bank, the happening of any of the following: (i) if any person
or entity, including a "group" as defined in the Securities Exchange Act of
1934 (other than (x) the Corporation or a wholly-owned subsidiary thereof, or
(y) any employee benefit plan of the Corporation or any of its subsidiaries, or
(z) William B. Greene, Jr. and his Related Interests) becomes the beneficial
owner of securities of the Corporation or the Bank having 50% or more of the
combined voting power of the then outstanding securities of the Corporation or
the Bank that may be cast in the election of directors of the Corporation or
the Bank (other than as a result of an issuance of securities initiated by the
Corporation or Bank in the ordinary course of business); (ii) if, as a result
of or in connection with any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing, less than a majority of the securities of the Corporation or
the Bank, entitled to vote in the election of directors, are held by the
holders of the Corporation's or Bank's securities holding a majority of the
outstanding securities prior to such transaction; (iii) if, during any period
of two (2) consecutive years, the majority composition of the Board of
Directors of the Corporation or the Bank changes unless the election of each
new director was approved by 2/3 of the directors of the Corporation or the
Bank, as the case may be, then still in office who were directors of the
Corporation or Bank at the beginning of such period; or (iv) if William B.
Greene, Jr. and his Related Interests cease to own at least 25% of the
outstanding Common Stock of the Corporation unless William B. Greene, Jr. and
his Related Interests remain the Corporation's largest stockholder.
(d) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) "Continuous Service" shall mean the absence of any
interruption or termination of service as a Director of the Company or the
Bank. Continuous Service shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the
Company or in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor.
(f) "Company" shall mean BancTenn Corp.
(g) "Deferral Account" shall mean the account
established at the Bank to hold the deferred fees of the Directors who elect to
participate in the Plan.
(h) "Director" shall mean any member of the Board of
Directors of the Company or the Board of Directors of the Bank.
<PAGE> 2
(i) "Effective Date" shall mean the date specified in
Paragraph 8 hereof.
(j) "Employee" shall mean any person employed by the
Company or the Bank.
(k) "Interest Rate" shall mean an annual rate of
interest equal to (i) the interest rate yield on United States Treasury Bill
obligations having a maturity of one (1) year, quoted as of the first business
day of January of each calendar year, plus (ii) 250 basis points. The Interest
Rate, as so determined on the first business day of each January, shall be
fixed for the entire calendar year.
(l) "Plan" shall mean the BancTenn Corp. Directors Fee
Deferral Plan.
(m) "William B. Greene, Jr. and his Related Interests"
shall mean William B. Greene, Jr. and, Greene Investment Corporation, any trust
of which Mr. Greene is a trustee, co-trustee, or beneficiary, and any
partnership, corporation or limited liability company of which Mr. Greene is an
officer, director, stockholder, member or equity owner.
3. TERM OF THE PLAN.
The Plan shall continue in effect for a term of five
(5) years from the Effective Date, unless sooner terminated pursuant to
Paragraph 9 hereof: provided, however, the Board of Directors of the Company
shall be entitled to terminate the Plan effective at the end of each calendar
year upon a vote of not less than two-thirds of the Directors then holding
office.
4. ADMINISTRATION OF THE PLAN.
(a) Procedure for Election. Not later than December 1 of
each calendar year, each Director shall be entitled to make a Deferral Election
for the next succeeding calendar year, the effect of which is that the Director
waives his right to receive his Director fees in cash on a current basis during
such next succeeding calendar year. Such Deferral Election shall remain in
effect until revoked in writing by such Director. If a Director does not make
an affirmative Deferral Election, then he or she shall receive his or her
Director fees in cash payments according to the customary payment schedule.
(b) Interest. Funds held in the Deferral Account shall
bear interest at the Interest Rate, compounded annually, until withdrawn.
(c) General Rule. The Plan shall be administered by the
Board, provided that the Board may appoint a committee of Directors to make any
determinations required pursuant to the Plan.
(d) Powers. Except as limited by the express provisions
of the Plan, the Board shall have sole and complete authority and discretion
(i) to interpret the Plan, (ii) to prescribe, amend and rescind rules and
regulations relating to the Plan, and (iii) to make other determinations
necessary or advisable for the administration of the Plan.
(e) Effect of the Board's Decisions. All decisions,
determinations, and interpretations of the Board shall be final and conclusive
on all persons affected thereby.
(f) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Board shall be indemnified
by the Company in connection with any claim, action, suit or proceeding
relating to any action taken or failure to act under or in connection with the
Plan, granted hereunder to the full extent provided for under the Company's
governing instruments with respect to the indemnification of Directors.
5. WITHDRAWAL OF FUNDS.
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<PAGE> 3
(a) Procedure. Deferred fees, together with the
allocable interest earned thereon, may be withdrawn from time to time by the
Director's written notice of withdrawal. Each such notice shall be delivered,
or mailed by prepaid registered or certified mail, addressed to the Treasurer
of the Company at the Company's executive offices. A Director who exercises his
right of withdrawal shall provide the Company satisfactory evidence as to the
proper handling of all applicable federal, state and local income and
employment taxes withholding obligations.
(b) Heirs and Successors. Withdrawal rights created
hereunder may be exercised only while the Participant is a Director of the
Company or the Bank, or within one (1) year after termination of the
Participant's Continuous Service as a Director. In the event of such Director's
death during the term of his directorship, the withdrawal rights granted herein
may be exercised within one (1) year from the date of his death by the personal
representatives of his estate or by the person or persons to whom his rights
under such rights shall have passed by will or by laws of descent and
distribution.
(c) Forfeiture. A Director's right to withdraw Deferred
Fes shall be automatically and completely forfeited in the event a Director is
removed from the Board of the Company or the Bank for "cause". As used herein,
"cause" shall include indictment on any criminal felony, conviction of any
criminal felony, engaging in any act of moral turpitude, failure to satisfy
attendance requirements as established by the Board or the applicable
regulatory authorities from time to time, the removal of the Director at any
shareholders meeting specifically called to consider termination or removal of
the Participant as a Director, and any other act which the Board of the
Company, in its sole discretion, determines to be materially harmful or
injurious to the reputation and standing of the Company or the Bank.
6. CHANGE IN CONTROL.
Upon the occurrence of a Change of Control, the Company, and
its successors, shall have the right to terminate this Plan and require each
participant to withdraw all deferred fees, and all allocable interest thereon.
7. NON-TRANSFERABILITY.
Neither the Directors Fees deferred under this Plan, nor the
interest earned thereon, may be pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution, or pursuant to the terms of a "qualified domestic relations
order" (within the meaning of Section 414(p) of the Code and the regulations
and rulings thereunder).
8. EFFECTIVE DATE.
The Plan shall become effective as of January 1, 2001 (the
"Effective Date"); provided, however, the first election to be made by the
Directors under the Plan shall be no later than December 1, 2000.
9. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend, suspend or terminate
the Plan; provided that no provision hereof may be amended more than once every
six months (other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder),
and provided further that any amendment that is "material" within the meaning
of Rule 16b-3 of the Securities Exchange Commission shall be subject to
stockholder approval. No amendment, suspension or termination of the Plan
shall, without the consent of any affected then-participating Director, alter
or impair any deferral theretofore created.
10. WITHHOLDING TAX.
The Company's obligation to deliver Deferred Fees and the
interest earnings thereon shall be subject to the Participant's satisfaction of
all applicable federal, state and local income and employment tax withholding
obligations.
11. NO EMPLOYMENT OR OTHER RIGHTS.
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<PAGE> 4
In no event shall a Director's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Director, or any other party to continue service with the Company
or the Bank in any capacity. Without limiting the foregoing, neither a
Director's eligibility to participate in the Plan, nor the election to so
participate, shall be construed to guarantee or assure any Director of
continued service as a Director or reelection as a Director at any time.
12. GOVERNING LAW.
The Plan shall be governed by and construed in accordance
with the laws of the State of Tennessee, except to the extent that federal law
shall be deemed to apply.
Argabrite/Bank of Tennessee
4
<PAGE> 1
EXHIBIT 10.16
BANK OF TENNESSEE
SPLIT DOLLAR LIFE INSURANCE PLAN
As authorized pursuant to the Resolution of the Board of Directors of
Bank of Tennessee, (the "Bank"), dated the 12th day of May, 1994, the Centura
Banks, Inc. Split Dollar Insurance Plan as Assumed by Bank of Tennessee, is
amended and restated, and shall be renamed the Bank of Tennessee Split Dollar
Life Insurance Plan, effective as of this 12th day of May, 1994 and shall read
as follows:
ARTICLE I - PURPOSE
1.1 The purpose of the Plan is to provide split dollar life insurance
benefits to a limited group of employees and directors who contribute
materially to the continued growth, development, and future business
of Bank of Tennessee.
1.2 This Plan is intended to qualify as a life insurance employee benefit
plan as described in Revenue Ruling 64-328, as revised or amplified
and is further intended to comply with the exemption of Department of
Labor Regulation Section 2520.104-20, and shall be construed
accordingly.
ARTICLE II - DEFINITIONS
For the purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
2.1 "Bank" shall mean Bank of Tennessee.
2.2 "Beneficiary" shall mean the person(s), trust(s), or the estate of a
Participant, entitled to receive any benefits under this Plan upon the
death of a Participant.
2.3 "Committee" shall mean the Human Resources Committee of the Board of
Directors, or such other committee designated by the Board of
Directors of Bank of Tennessee to administer the Plan. The Committee
will manage and administer the Plan in accordance with the provisions
of Article X of this Plan.
2.4 "Employee" shall mean any person who is in the regular full time
employment of the Bank as determined by the personnel rules and
practices of the Bank.
2.5 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
<PAGE> 2
2.6 "Insurer" shall mean the insurance company to which both the
Participant and the Bank will apply for insurance on the Participant's
life and which issues the Insurance Policy.
2.7 "Insurance Policy" shall mean a life insurance contract issued by the
Insurer.
2.8 "Participant" shall mean an Employee or a member of the Bank's Board
of Directors who is selected and elects to participate in the Plan as
provided in Article III hereby.
2.9 "Plan" shall mean the Bank of Tennessee Split Dollar Life Insurance
Plan, which shall be evidenced by this instrument and by each Plan
Agreement.
2.10 "Plan Agreement" shall mean the form of written agreement, attached
hereto, which is entered into by and between the Bank and a
Participant, and to the extent required by the Committee, a
Participant in the Plan prior to its assumption by Bank of Tennessee
and its amendment and restatement, shall execute a new Plan Agreement.
ARTICLE III - ELIGIBILITY AND MEMBERSHIP
3.1 The Committee shall have the sole discretion to determine the
Employees that are eligible to become Participants in accordance with
the purposes of the Plan, and the top-hat exemption of ERISA.
Participants in the Plan prior to its assumption by Bank of Tennessee
and its amendment and restatement shall continue to participate in
accordance with the terms of the Plan as amended and restated.
3.2 As a condition of participation, each Participant so selected shall
complete, execute, and return to the Committee a Plan Agreement in the
form attached hereto and will comply with such further conditions as
may be established and in the sole discretion of the Committee.
ARTICLE IV - PROCUREMENT OF INSURANCE POLICY
4.1 In the form and manner determined by the Committee, the Bank and the
Participant shall apply to the Insurer for an Insurance Policy on each
Participant's life in the amount specified in his respective Plan
Agreement. The Participant shall:
(a) furnish such information as the Insurer or Committee may
require;
(b) take such physical examinations as may be requested, and
(c) do any other legal or moral act which may be requested by the
Insurer.
4.2 If a Participant does not cooperate in the securing of such insurance,
or if he is for any reason unable to obtain insurance in the specified
amount of his life, the Bank shall have no further obligation to
Participant under the Plan and such Participant's Plan Agreement shall
terminate.
4.3 As determined by the Committee, the Bank and the Participant shall be
the owners of any Insurance Policy acquired on Participant's life.
Their respective interests in the Insurance
<PAGE> 3
Policy shall be as they are set out in the Plan and Plan Agreement.
Nothing herein shall prevent the Bank from owning the entire Insurance
Policy.
4.4 The Bank shall have no obligation of any nature whatsoever to a
Participant under the Plan or Plan Agreement, if the circumstances of
the Participant's death preclude payment of death proceeds under the
Insurance Policy.
4.5 On or before the due date of each insurance policy premium, or within
the grace period provided therein, the Bank shall pay to the Insurer
the premium due.
ARTICLE V - BENEFICIARY
5.1 The Participant shall designate his Beneficiary to receive benefits
under the Plan and the Plan Agreement. If more than one Beneficiary is
named, the shares and preference of each shall be indicated.
5.2 The Bank and the Participant shall execute a Beneficiary Designation
Form used by the Insurer for such designations. It shall limit the
rights of the Participant's designated Beneficiary to the amount of
the death benefit proceeds specified in his Plan Agreement with the
balance payable to the Bank. Such Beneficiary designation shall not be
terminated, altered or amended by the Bank, without the express
written consent of the Participant. The parties hereto agree to take
all action necessary to cause such Beneficiary designation to conform
to the provision of this Plan and Plan Agreement.
5.3 Participant shall have the right to change the Beneficiary by
submitting a written direction to the Bank which will instruct the
Bank to file with the Insurer a Change of Beneficiary form. Both the
Bank and the Participant will execute that document.
5.4 No change in Beneficiary shall be effective until acknowledged in
writing by the Insurer.
5.5 Any payment made by the Insurer in accordance with an acknowledged
Beneficiary designation shall fully discharge the Insurer from all
further obligations with respect to such payment.
5.6 The Participant may elect any settlement option under the Insurance
Policy of his Beneficiary's portion of the death benefit proceeds and
the Bank agrees to execute and deliver to the Insurer the necessary
forms to elect the requested settlement options.
ARTICLE VI - RIGHTS TO BENEFITS OF POLICY
6.1 While the Participant's Agreement is in force, the Bank shall have the
unqualified right to control the portion of the cash surrender value
of the Insurance Policy equal to the amount it contributed out of its
own funds pursuant to Section 4.5 of this Plan.
6.2 The Bank shall possess the right to borrow either directly or
indirectly against each Insurance Policy or to repledge its collateral
security interest in it for an amount not exceeding its interest.
<PAGE> 4
6.3 The Participant shall control all policy values over and above those
reserved to the Bank, and all other policy rights not otherwise ceded
to the Bank. However, the Participant agrees that he will not deal
with the Insurance Policy other than in a manner expressly provided
for in the Plan or the Plan Agreement until after this Plan or the
Participant's Plan Agreement is terminated.
ARTICLE VII - NO CONTRACT OF EMPLOYMENT
7.1 This Agreement does not constitute a contract of employment between
the Bank and the Participant. Employment and compensation may be
terminated with or without cause at any time by the Bank or by the
Participant.
ARTICLE VIII - AMENDMENT AND TERMINATION
8.1 Bank of Tennessee reserves the right to totally or partially amend,
modify or supplement this Plan at any time.
8.2 Bank of Tennessee reserves the right to terminate this Plan, and each
subsidiary reserves the right to terminate its participation herein.
8.3 The Bank reserves the right to terminate the Plan Agreement or any
Participant.
8.4 The right to terminate, amend, modify or supplement the Plan or
terminate any Plan Agreement shall be exercised for the Bank by the
Committee.
8.5 No action to terminate, amend, modify or supplement the Plan or
terminate any Plan Agreement shall be taken except upon written notice
not less than thirty (30) days prior to such action to each
Participant to be affected thereby.
8.6 If a termination occurs, the obligation of the Bank to make any
premium payments shall cease and the rights of the parties shall be
controlled by Article IX.
ARTICLE IX - RELEASE OF BANK'S OWNERSHIP INTEREST
9.1 If the Participant's Plan Agreement is terminated, the Bank shall be
entitled to withdraw funds from the Insurance Policy equal to the
amount provided for in Section 6.1, reduced by all indebtedness and
interest incurred by it that is owed to the Insurer as a lien against
such Insurance Policy or in its discretion it may apply said net funds
to exercise any other option provided by the Insurance Policy, but
said application of funds shall not reduce the death benefit interest
of the Participant's Beneficiary.
9.2 After the Bank has exercised its election under Section 9.1, it will
no longer have any interest in the remaining Insurance Policy which
thereafter shall be solely owned by the Participant or his assignee.
The parties shall execute whatever documents are required by the
Insurer to cause this change to occur.
<PAGE> 5
ARTICLE X - ADMINISTRATION OF THE PLAN
10.1 The sole right of construction, interpretation and general
administration of the Plan shall be vested in the Committee. The
Committee, as Plan Administrator, shall be deemed the Named Fiduciary
of the Plan.
10.2 The Committee may act or adopt resolutions with or without a meeting.
Any action take or resolution adopted without a meeting shall require
the consent of all duly appointed and acting members. Any action taken
or resolution adopted at a meeting of the Committee shall require
approval of a majority of a quorum. A quorum shall consist of a
majority of the duly appointed and acting members.
10.3 The Committee shall establish rules, forms and procedures for the
administration of the Plan from time to time. The Committee shall have
the exclusive right to interpret the Plan and to decide any and all
matters arising thereunder or in connection with the administration of
the Plan, and is specifically authorized to exercise its discretion in
the administration of the Plan.
10.4 The following claims procedure shall apply to the Plan and shall be
interpreted consistent with the requirements of ERISA:
(a) For claims procedure purposes, the "Claims Manager" shall be
the Committee. If for any reason a claim for benefits under
this Plan is denied by the Bank, the claims Manager shall
deliver to the Claimant a written explanation setting forth
the specific reasons for the denial, pertinent references to
the Plan section on which the denial is based, such other
data as may be pertinent and information on the procedures to
be followed by the claimant in obtaining a review of its
claim, all written in a manner calculated to be understood by
the claimant. For this purpose:
(1) The claimant's claim shall be deemed filed when
presented orally or in writing to the Claims
Manager.
(2) The Claims Manager's explanation shall be in writing
delivered to the claimant within 90 days of the date
the claim is filed.
(b) The claimant shall have 60 days following its receipt of the
denial of the claim to file with the Claims Manager a written
request for review of the denial. For such review, the
claimant or its representative may submit pertinent documents
and written issues and comments.
(c) The Claims Manager shall decide the issues on review and
furnish the claimant with a copy within 60 days of receipt of
the claimant's request for review of its claim. The decision
on review shall be in writing and shall include specific
reasons for the decisions written in a manner calculated to
be understood by the claimant, as well as specific references
to the pertinent Plan provisions on which the decision is
based. If a copy of the decision is not so furnished to the
claimant within such 60 days, the claim shall be deemed
denied on review.
<PAGE> 6
10.5 No member of the Committee shall be liable for any act or omission of
any other member of the committee, nor for any act or omission on his
part excepting only willful misconduct. The Bank shall indemnify and
hold harmless each member of the Committee against any and all
expenses and liabilities arising out of his membership on the
Committee excepting only expenses and liabilities arising out of his
own willful misconduct. Expenses against which a member of the
Committee shall be so indemnified shall include, without limitation,
the amount of any settlement or judgment costs, counsel fee, and
related charges reasonably incurred in connection with a claim
asserted, or a proceeding brought or settlement thereof. The foregoing
right of indemnification shall be in addition to any other rights to
which any such member may be entitled as a matter of law or under any
other indemnification provisions now or hereafter adopted by the Bank.
10.6 The Bank shall supply full and timely information to the Committee on
all matters relating to the employment of all Participants and such
other pertinent facts as the Committee may require.
ARTICLE IX - PARTICIPANT'S ASSIGNMENT
11.1 The Participant shall have the right to make an absolute assignment of
his entire interest under this Plan and Plan Agreement and of his
interest in the Insurance Policy at any time to any person or persons.
Upon delivery of a signed copy of the assignment to the Bank, all of
the rights, obligations and duties of the Participant hereunder shall
pass to and be binding upon such assignee (including the right to make
further assignments) and the Participant shall have no further
interest in this Plan or the Insurance Policy.
ARTICLE XII - INSURER'S LIABILITY
12.1 If this Plan or Plan Agreement is still in existence at the death of a
Participant, the Insurer shall be discharged from all liability under
the appropriate policy upon payment of the proceeds in the manner
following:
(a) The amount provided for in Section 6.3 shall be paid in
accordance with both the Participant's final Beneficiary
Designation and any Optional Method of Settlement election
filed with it.
(b) The balance of the proceeds, if any, shall be paid to the
Bank.
ARTICLE XIII - MISCELLANEOUS PROVISIONS
13.1 Any notice which shall or may be given under the Plan or a Plan
Agreement shall be in writing and shall be mailed by first class mail,
postage prepaid. If notice is to be given to the Bank, such notice
shall be addressed to the Bank at its general offices:
<PAGE> 7
Bank of Tennessee
301 East Center Street
Kingsport, Tennessee 37660-4801
Attention: Human Resources Committee
Split Dollar Life Insurance Plan
If notice is to be given to a Participant, such notice shall e
addressed to the address shown on such Participant's Plan Agreement or
the Participant's last known address, if different.
13.2 Any party may change the address to which notices shall be mailed from
time to time by giving written notice of such new address.
13.3 The Plan shall be binding upon the Bank and its successors and
assigns, and upon a Participant, his Beneficiary, heirs, executors and
administrators.
13.4 This Plan shall be construed and governed in all respects under and by
the laws of the State of Tennessee, except to the extent preempted by
ERISA. If any provision of this Plan shall be held by a court of
competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereof shall continue to be fully effective.
13.5 Headings and subheadings in this Plan are inserted for convenience and
reference only and do not constitute any part of this Plan.
13.6 This Plan may be executed in an original and any number of
counterparts, each of which shall constitute an original of one and
the same instrument.
13.7 This Plan shall be construed, where required, so that the masculine
gender includes the feminine.
13.8 Notwithstanding the provisions of Article VII, upon:
(a) a dissolution, liquidation, merger, consolidation or
acquisition in which Bank of Tennessee is not the surviving
or resulting Bank;
(b) a sale of all or substantially all of the assets of Bank of
Tennessee; or
(c) any acquisition by any person or group of associated persons
of the ownership, control or voting power of twenty-five
percent (25%) or more of the voting securities of Bank of
Tennessee, other than a pro forma transaction for a purpose
such as changing the name or state of incorporation of Bank
of Tennessee, neither the Plan nor any Plan Agreement may be
terminated, amended or modified, unless Bank of Tennessee
specifically authorizes that as of the date of the Change in
Control, the Agreement may be assumed by the surviving or
resulting corporation in which case the surviving or
resulting corporation shall have all the rights and duties of
the Bank hereunder, subject to any conditions imposed by Bank
of Tennessee in authorizing the assumption of the Plan and
the Plan Agreements.
<PAGE> 8
This 12th day of May, 1994.
BANK OF TENNESSEE
/s/ Giles W. Morrill
-------------------------------------
Giles W. Morrill
Chairman - Human Resources Committee
/s/ Peggy H. Cole
- ----------------------------
Secretary
/s/ Colon A. Terrell, Jr.
-------------------------------------
Colon A. Terrell, Jr.
(Corporate Seal) President and CEO
<PAGE> 1
EXHIBIT 10.17
BANCTENN CORP.
SPLIT DOLLAR LIFE INSURANCE PLAN
PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 1ST day of January, 1999,
by and between BANCTENN CORP. (the "Company") and COLON A. TERRELL, JR., an
employee or director of the Company (the "Participant"), pursuant to the terms
of the BancTenn Corp. Split Dollar Life Insurance Plan (the "Plan"), which Plan
is attached hereto and the terms of which are incorporated herein by reference.
WHEREAS, Participant has been selected by the Committee (as defined in
the Plan) as an eligible Participant under the Plan; and
WHEREAS, the Participant desires to participate in the Plan in
accordance with the terms and conditions stated in the Plan;
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pursuant to the terms of the Plan, and its predecessor
provisions and agreements, Company and Participant have heretofore acquired
Life Insurance Policy No. 13336792 issued by The Northwestern Mutual Life
Insurance Company on May 25, 1995, with a face value of $200,000, and Life
Insurance Policy No. 14779985 issued by The Northwestern Mutual Life Insurance
Company on September 14, 1998, with a face value of $700,000 (such life
insurance policies herein referred to collectively as the "Policy").
2. The Company and the Participant shall be the owners of the
Policy and any other insurance policy acquired on Participant's life pursuant
to the Plan and this Agreement (the Policy and any other insurance policy
herein collectively referred to as the "Policy"). Their respective interests in
the Policy shall be as they are set out in the Plan and this Agreement. While
this Agreement is in force, the Company shall have the unqualified right to
control the portion of the cash surrender value of the Policy equal to the
amount it contributed out of its own funds pursuant to Section 4 hereunder and
Section 4.5 of the Plan. The Company shall possess the right to borrow either
directly or indirectly against the Policy or to repledge its collateral
security interest in it for an amount not exceeding its interest. The
Participant shall control all Policy values over and above those reserved to
the Company, and all other Policy rights not otherwise ceded to the Company.
However, the Participant agrees that he will not deal with the Policy other
than in a manner expressly provided for in the Plan or this Agreement until
after the Plan or this Agreement is terminated.
<PAGE> 2
3. On or before the due date of each insurance policy premium,
or within the grace period provided therein, the Company shall pay to the
Insurer the premium due.
4. The Participant agrees to designate his Beneficiary to
receive benefits under the Plan and this Agreement. If more than one
Beneficiary is named, the shares and preference of each shall be indicated. The
Participant shall execute a Beneficiary Designation Form used by the Insurer
for such designations.
5. The Participant shall have the right to make an absolute
assignment of his entire interest under this Agreement and of his interest in
the Policy at any time to any person or persons. Upon delivery of a signed copy
of the assignment to the Company, all of the rights, obligations and duties of
the Participant hereunder shall pass to and be binding upon such assignee
(including the right to make further assignments) and the Participant shall
have no further interest in the Plan, this Agreement or the insurance policy.
6. Any notice which shall or may be given under the Plan or this
Agreement shall be in writing and shall be mailed by first class mail, postage
prepaid. If notice is to be given to the Company, such notice shall be
addressed to the Company at its general offices:
BancTenn Corp.
301 East Center Street
Kingsport, Tennessee 37660-4801
Attention: Human Resources Committee
Split Dollar Life Insurance Plan
If notice is to be given to the Participant, such notice shall be addressed to:
Colon A. Terrell, Jr.
1000 Huntington Ct.
Kingsport, Tennessee 37660
Any party may change the address to which notices shall be mailed from time to
time by giving written notice of such new address.
7. This Agreement shall be binding upon the Company and its
successors and assigns, and upon the Participant, his Beneficiary, heirs,
executors and administrators.
8. This Agreement shall be construed and governed in all
respects under and by the laws of the State of Tennessee, except to the extent
preempted by ERISA. If any provision of this Agreement shall be held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provision hereof shall continue to be fully effective.
9. This Agreement shall be construed, where required, so that
the masculine gender includes the feminine.
2
<PAGE> 3
10. This Agreement may be terminated by the Company in accordance
with the provisions of Articles VIII and IX of the Plan.
11. This Agreement does not constitute a contract of employment
between the Company and the Participant. Employment and compensation may be
terminated with or without cause at any time by the Company or by the
Participant.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
BANCTENN CORP.
By: /s/ Roy L. Harmon, Jr.
-------------------------------
Authorized Representative
PARTICIPANT:
/s/ Colon A. Terrell, Jr.
----------------------------------
COLON A. TERRELL, JR.
3
<PAGE> 1
EXHIBIT 10.18
BANCTENN CORP.
SPLIT DOLLAR LIFE INSURANCE PLAN
PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of January, 1999,
by and between BANK OF TENNESSEE (the "Bank"), a subsidiary of BancTenn Corp.,
and ROY L. HARMON, JR., an employee or director of the Bank (the
"Participant"), pursuant to the terms of the BancTenn Corp. Split Dollar Life
Insurance Plan (the "Plan"), which Plan is attached hereto and the terms of
which are incorporated herein by reference.
WHEREAS, Participant has been selected by the Committee (as defined in
the Plan) as an eligible Participant under the Plan; and
WHEREAS, the Participant desires to participate in the Plan in
accordance with the terms and conditions stated in the Plan;
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pursuant to the terms of the Plan, and its predecessor
provisions and agreements, Bank and Participant have heretofore acquired Life
Insurance Policy No. 13312901 issued by The Northwestern Mutual Life Insurance
Company on January 9, 1995, with a face value of $500,000 (the "Policy").
2. The Bank and the Participant shall be the owners of the
Policy and any other insurance policy acquired on Participant's life pursuant
to the Plan and this Agreement (herein collectively referred to as the
"Policy"). Their respective interests in the Policy shall be as they are set
out in the Plan and this Agreement. While this Agreement is in force, the Bank
shall have the unqualified right to control the portion of the cash surrender
value of the Policy equal to the amount it contributed out of its own funds
pursuant to Section 4 hereunder and Section 4.5 of the Plan. The Bank shall
possess the right to borrow either directly or indirectly against the Policy or
to repledge its collateral security interest in it for an amount not exceeding
its interest. The Participant shall control all Policy values over and above
those reserved to the Bank, and all other Policy rights not otherwise ceded to
the Bank. However, the Participant agrees that he will not deal with the Policy
other than in a manner expressly provided for in the Plan or this Agreement
until after the Plan or this Agreement is terminated.
<PAGE> 2
3. On or before the due date of each insurance policy premium,
or within the grace period provided therein, the Bank shall pay to the Insurer
the premium due.
4. The Participant agrees to designate his Beneficiary to
receive benefits under the Plan and this Agreement. If more than one
Beneficiary is named, the shares and preference of each shall be indicated. The
Participant shall execute a Beneficiary Designation Form used by the Insurer
for such designations.
5. The Participant shall have the right to make an absolute
assignment of his entire interest under this Agreement and of his interest in
the Policy at any time to any person or persons. Upon delivery of a signed copy
of the assignment to the Bank, all of the rights, obligations and duties of the
Participant hereunder shall pass to and be binding upon such assignee
(including the right to make further assignments) and the Participant shall
have no further interest in the Plan, this Agreement or the insurance policy.
6. Any notice which shall or may be given under the Plan or this
Agreement shall be in writing and shall be mailed by first class mail, postage
prepaid. If notice is to be given to the Bank, such notice shall be addressed
to the Bank at its general offices:
Bank of Tennessee
301 East Center Street
Kingsport, Tennessee 37660-4801
Attention: Human Resources Committee
Split Dollar Life Insurance Plan
If notice is to be given to the Participant, such notice shall be addressed to:
Roy L. Harmon, Jr.
1533 Fairidge Drive
Kingsport, Tennessee 37660
Any party may change the address to which notices shall be mailed from time to
time by giving written notice of such new address.
7. This Agreement shall be binding upon the Bank and its
successors and assigns, and upon the Participant, his Beneficiary, heirs,
executors and administrators.
8. This Agreement shall be construed and governed in all
respects under and by the laws of the State of Tennessee, except to the extent
preempted by ERISA. If any provision of this Agreement shall be held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provision hereof shall continue to be fully effective.
9. This Agreement shall be construed, where required, so that
the masculine gender includes the feminine.
2
<PAGE> 3
10. This Agreement may be terminated by the Bank in accordance
with the provisions of Articles VIII and IX of the Plan.
11. This Agreement does not constitute a contract of employment
between the Bank and the Participant. Employment and compensation may be
terminated with or without cause at any time by the Bank or by the Participant.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
BANK OF TENNESSEE
By: /s/ Colon A. Terrell, Jr.
-------------------------------
Authorized Representative
PARTICIPANT:
/s/ ROY L. HARMON, JR.
----------------------------------
ROY L. HARMON, JR.
3
<PAGE> 1
EXHIBIT 10.19
BANCTENN CORP.
SPLIT DOLLAR LIFE INSURANCE PLAN
PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of January, 1999,
by and between BANK OF TENNESSEE (the "Bank"), a subsidiary of BancTenn Corp.,
and KENNETH H. MALOY, an employee or director of the Bank (the "Participant"),
pursuant to the terms of the BancTenn Corp. Split Dollar Life Insurance Plan
(the "Plan"), which Plan is attached hereto and the terms of which are
incorporated herein by reference.
WHEREAS, Participant has been selected by the Committee (as defined in
the Plan) as an eligible Participant under the Plan; and
WHEREAS, the Participant desires to participate in the Plan in
accordance with the terms and conditions stated in the Plan;
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pursuant to the terms of the Plan, Bank and Participant have
heretofore acquired Life Insurance Policy No. 14885096 issued by The
Northwestern Mutual Life Insurance Company on December 21, 1998, with a face
value of $250,000 (the "Policy").
2. The Bank and the Participant shall be the owners of the
Policy and any other insurance policy acquired on Participant's life pursuant
to the Plan and this Agreement (herein collectively referred to as the
"Policy"). Their respective interests in the Policy and any other insurance
policy shall be as they are set out in the Plan and this Agreement. While this
Agreement is in force, the Bank shall have the unqualified right to control the
portion of the cash surrender value of the Policy equal to the amount it
contributed out of its own funds pursuant to Section 4 hereunder and Section
4.5 of the Plan. The Bank shall possess the right to borrow either directly or
indirectly against the Policy or to repledge its collateral security interest
in it for an amount not exceeding its interest. The Participant shall control
all Policy values over and above those reserved to the Bank, and all other
Policy rights not otherwise ceded to the Bank. However, the Participant agrees
that he will not deal with the Policy other than in a manner expressly provided
for in the Plan or this Agreement until after the Plan or this Agreement is
terminated.
3. On or before the due date of each insurance policy premium,
or within the grace period provided therein, the Bank shall pay to the Insurer
the premium due.
<PAGE> 2
4. The Participant agrees to designate his Beneficiary to
receive benefits under the Plan and this Agreement. If more than one
Beneficiary is named, the shares and preference of each shall be indicated. The
Participant shall execute a Beneficiary Designation Form used by the Insurer
for such designations.
5. The Participant shall have the right to make an absolute
assignment of his entire interest under this Agreement and of his interest in
the Policy at any time to any person or persons. Upon delivery of a signed copy
of the assignment to the Bank, all of the rights, obligations and duties of the
Participant hereunder shall pass to and be binding upon such assignee
(including the right to make further assignments) and the Participant shall
have no further interest in the Plan, this Agreement or the insurance policy.
6. Any notice which shall or may be given under the Plan or this
Agreement shall be in writing and shall be mailed by first class mail, postage
prepaid. If notice is to be given to the Bank, such notice shall be addressed
to the Bank at its general offices:
Bank of Tennessee
301 East Center Street
Kingsport, Tennessee 37660-4801
Attention: Human Resources Committee
Split Dollar Life Insurance Plan
If notice is to be given to the Participant, such notice shall be addressed to:
Kenneth H. Maloy
708 Thornwood Place
Kingsport, Tennessee 37660
Any party may change the address to which notices shall be mailed from time to
time by giving written notice of such new address.
7. This Agreement shall be binding upon the Bank and its
successors and assigns, and upon the Participant, his Beneficiary, heirs,
executors and administrators.
8. This Agreement shall be construed and governed in all
respects under and by the laws of the State of Tennessee, except to the extent
preempted by ERISA. If any provision of this Agreement shall be held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provision hereof shall continue to be fully effective.
9. This Agreement shall be construed, where required, so that
the masculine gender includes the feminine.
10. This Agreement may be terminated by the Bank in accordance
with the provisions of Articles VIII and IX of the Plan.
2
<PAGE> 3
11. This Agreement does not constitute a contract of employment
between the Bank and the Participant. Employment and compensation may be
terminated with or without cause at any time by the Bank or by the Participant.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
BANK OF TENNESSEE
By: /s/ Roy L. Harmon, Jr.
-------------------------------
Authorized Representative
PARTICIPANT:
/s/ Kenneth H. Maloy
----------------------------------
KENNETH H. MALOY
3
<PAGE> 1
EXHIBIT 10.20
BANCTENN CORP.
SPLIT DOLLAR LIFE INSURANCE PLAN
PLAN AGREEMENT
THIS AGREEMENT, made and entered into as of January 27, 2000, by and
between BANK OF TENNESSEE (the "Bank"), a subsidiary of BancTenn Corp., and
TONY L. HOWELL, an employee of the Bank (the "Participant"), pursuant to the
terms of the BancTenn Corp. Split Dollar Life Insurance Plan (the "Plan"),
which Plan is attached hereto and the terms of which are incorporated herein by
reference.
WHEREAS, Participant has been selected by the Committee (as defined in
the Plan) as an eligible Participant under the Plan; and
WHEREAS, the Participant desires to participate in the Plan in
accordance with the terms and conditions stated in the Plan;
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pursuant to the terms of the Plan, Bank and Participant have
heretofore acquired Life Insurance Policy No. 15273156 issued by The
Northwestern Mutual Life Insurance Company on January 27, 2000 with a face value
of $250,000 (the "Policy").
2. The Bank and the Participant shall be the owners of the
Policy and any other insurance policy acquired on Participant's life pursuant
to the Plan and this Agreement (herein collectively referred to as the
"Policy"). Their respective interests in the Policy and any other insurance
policy shall be as they are set out in the Plan and this Agreement. While this
Agreement is in force, the Bank shall have the unqualified right to control the
portion of the cash surrender value of the Policy equal to the amount it
contributed out of its own funds pursuant to Section 4 hereunder and Section
4.5 of the Plan. The Bank shall possess the right to borrow either directly or
indirectly against the Policy or to repledge its collateral security interest
in it for an amount not exceeding its interest. The Participant shall control
all Policy values over and above those reserved to the Bank, and all other
Policy rights not otherwise ceded to the Bank. However, the Participant agrees
that he will not deal with the Policy other than in a manner expressly provided
for in the Plan or this Agreement until after the Plan or this Agreement is
terminated.
3. On or before the due date of each insurance policy premium,
or within the grace period provided therein, the Bank shall pay to the Insurer
the premium due.
<PAGE> 2
4. The Participant agrees to designate his Beneficiary to
receive benefits under the Plan and this Agreement. If more than one
Beneficiary is named, the shares and preference of each shall be indicated. The
Participant shall execute a Beneficiary Designation Form used by the Insurer
for such designations.
5. The Participant shall have the right to make an absolute
assignment of his entire interest under this Agreement and of his interest in
the Policy at any time to any person or persons. Upon delivery of a signed copy
of the assignment to the Bank, all of the rights, obligations and duties of the
Participant hereunder shall pass to and be binding upon such assignee
(including the right to make further assignments) and the Participant shall
have no further interest in the Plan, this Agreement or the insurance policy.
6. Any notice which shall or may be given under the Plan or this
Agreement shall be in writing and shall be mailed by first class mail, postage
prepaid. If notice is to be given to the Bank, such notice shall be addressed
to the Bank at its general offices:
Bank of Tennessee
301 East Center Street
Kingsport, Tennessee 37660-4801
Attention: Human Resources Committee
Split Dollar Life Insurance Plan
If notice is to be given to the Participant, such notice shall be addressed to:
Tony L. Howell
212 Fox Path Court
Kingsport, Tennessee 37663
Any party may change the address to which notices shall be mailed from time to
time by giving written notice of such new address.
7. This Agreement shall be binding upon the Bank and its
successors and assigns, and upon the Participant, his Beneficiary, heirs,
executors and administrators.
8. This Agreement shall be construed and governed in all
respects under and by the laws of the State of Tennessee, except to the extent
preempted by ERISA. If any provision of this Agreement shall be held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provision hereof shall continue to be fully effective.
9. This Agreement shall be construed, where required, so that
the masculine gender includes the feminine.
10. This Agreement may be terminated by the Bank in accordance
with the provisions of Articles VIII and IX of the Plan.
2
<PAGE> 3
11. This Agreement does not constitute a contract of employment
between the Bank and the Participant. Employment and compensation may be
terminated with or without cause at any time by the Bank or by the Participant.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
BANK OF TENNESSEE
By: /s/ Roy L. Harmon, Jr.
-------------------------------
Authorized Representative
PARTICIPANT:
/s/ Tony L. Howell
----------------------------------
TONY L. HOWELL
3
<PAGE> 1
EXHIBIT 10.21
BANCTENN CORP.
SPLIT DOLLAR LIFE INSURANCE PLAN
PLAN AGREEMENT
THIS AGREEMENT, made and entered into as of February 25, 2000, by
and between BANK OF TENNESSEE (the "Bank"), a subsidiary of BancTenn Corp., and
MARY MAC WILSON, an employee of the Bank (the "Participant"), pursuant to the
terms of the BancTenn Corp. Split Dollar Life Insurance Plan (the "Plan"),
which Plan is attached hereto and the terms of which are incorporated herein by
reference.
WHEREAS, Participant has been selected by the Committee (as defined in
the Plan) as an eligible Participant under the Plan; and
WHEREAS, the Participant desires to participate in the Plan in
accordance with the terms and conditions stated in the Plan;
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pursuant to the terms of the Plan, Bank and Participant have
heretofore acquired Life Insurance Policy No. 15273166 issued by The
Northwestern Mutual Life Insurance Company on February 25, 2000 with a face
value of $250,000 (the "Policy").
2. The Bank and the Participant shall be the owners of the
Policy and any other insurance policy acquired on Participant's life pursuant
to the Plan and this Agreement (herein collectively referred to as the
"Policy"). Their respective interests in the Policy and any other insurance
policy shall be as they are set out in the Plan and this Agreement. While this
Agreement is in force, the Bank shall have the unqualified right to control the
portion of the cash surrender value of the Policy equal to the amount it
contributed out of its own funds pursuant to Section 4 hereunder and Section
4.5 of the Plan. The Bank shall possess the right to borrow either directly or
indirectly against the Policy or to repledge its collateral security interest
in it for an amount not exceeding its interest. The Participant shall control
all Policy values over and above those reserved to the Bank, and all other
Policy rights not otherwise ceded to the Bank. However, the Participant agrees
that he will not deal with the Policy other than in a manner expressly provided
for in the Plan or this Agreement until after the Plan or this Agreement is
terminated.
3. On or before the due date of each insurance policy premium,
or within the grace period provided therein, the Bank shall pay to the Insurer
the premium due.
<PAGE> 2
4. The Participant agrees to designate his Beneficiary to
receive benefits under the Plan and this Agreement. If more than one
Beneficiary is named, the shares and preference of each shall be indicated. The
Participant shall execute a Beneficiary Designation Form used by the Insurer
for such designations.
5. The Participant shall have the right to make an absolute
assignment of his entire interest under this Agreement and of his interest in
the Policy at any time to any person or persons. Upon delivery of a signed copy
of the assignment to the Bank, all of the rights, obligations and duties of the
Participant hereunder shall pass to and be binding upon such assignee
(including the right to make further assignments) and the Participant shall
have no further interest in the Plan, this Agreement or the insurance policy.
6. Any notice which shall or may be given under the Plan or this
Agreement shall be in writing and shall be mailed by first class mail, postage
prepaid. If notice is to be given to the Bank, such notice shall be addressed
to the Bank at its general offices:
Bank of Tennessee
301 East Center Street
Kingsport, Tennessee 37660-4801
Attention: Human Resources Committee
Split Dollar Life Insurance Plan
If notice is to be given to the Participant, such notice shall be addressed to:
Mary Mac Wilson
1129 Watauga Street
Kingsport, Tennessee 37660
Any party may change the address to which notices shall be mailed from time to
time by giving written notice of such new address.
7. This Agreement shall be binding upon the Bank and its
successors and assigns, and upon the Participant, his Beneficiary, heirs,
executors and administrators.
8. This Agreement shall be construed and governed in all
respects under and by the laws of the State of Tennessee, except to the extent
preempted by ERISA. If any provision of this Agreement shall be held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provision hereof shall continue to be fully effective.
9. This Agreement shall be construed, where required, so that
the masculine gender includes the feminine.
10. This Agreement may be terminated by the Bank in accordance
with the provisions of Articles VIII and IX of the Plan.
2
<PAGE> 3
11. This Agreement does not constitute a contract of employment
between the Bank and the Participant. Employment and compensation may be
terminated with or without cause at any time by the Bank or by the Participant.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
BANK OF TENNESSEE
By: /s/ Roy L. Harmon, Jr.
-------------------------------
Authorized Representative
PARTICIPANT:
/s/ Mary Mac Wilson
----------------------------------
MARY MAC WILSON
3
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF BANCTENN CORP.
1. BANK OF TENNESSEE. Registrant is the sole shareholder of Bank
of Tennessee, a state bank chartered under the laws of the State of Tennessee.
2. PARAGON COMMERCIAL BANK. Registrant owns 19.11% of the
outstanding stock of Paragon Commercial Bank ("Paragon"), a banking corporation
organized under the laws of the State of North Carolina. Two of registrant's
directors are also members of the Paragon Board of Directors. Registrant's
affiliates, and their related interests, own, in the aggregate, an additional
10.51% which, for regulatory purposes, is considered to be aggregated with
Registrant's ownership position. The effect of these fact and circumstances is
that Paragon is treated as a subsidiary of registrant for regulatory financial
purposes. Accordingly, registrant takes into account, for its financial
reporting purposes, its direct proportionate share of Paragon's income and
losses.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the inclusion in the Registration Statement on
Form SB-2 of BancTenn Corp., of our report dated February 4, 2000, on the 1999
and 1998 financial statements of BancTenn Corp. We also consent to the reference
to us under the heading "Experts" in the prospectus.
/s/ Hazlett, Lewis & Bieter, PLLC
Chattanooga, Tennessee
May 22, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,557,215
<INT-BEARING-DEPOSITS> 186,794,337
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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