<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended December 31, 1996
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Commission File Number 0-28496
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Community Financial Group, Inc.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Tennessee 62-1626938
- --------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
401 Church Street Nashville, Tennessee 37219-2213
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 271-2000
-----------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $6 per share
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(Title of Class)
Warrants, exercise price $12.50 per share
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(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year.
$13,826,000.
The aggregate market value (price at which the stock sold) of Community
Financial Group, Inc., voting common stock held by non-affiliates as of February
28, 1997, was $20,353,461.
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Outstanding at
Class March 12, 1997
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Common stock $6 par value 2,203,555 shares
Documents Incorporated by Reference:
Document from which portions Part of Form 10-KSB to
are incorporated by reference which incorporated
----------------------------- ----------------------
1. Annual Report to Shareholders for year Part II - Items 5,6,
ended December 31, 1996 7 and 8
2. Proxy Statement dated March 25, 1997 Part III - Items 9,
10, 11 and 12
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ITEM 1 - DESCRIPTION OF BUSINESS
On December 13, 1995, Community Financial Group, Inc. ("CFGI"), was
incorporated, as a Tennessee Corporation. CFGI, also filed an application with
the Board of Governors of the Federal Reserve System for prior approval to
become a one bank holding company pursuant to Section 3(a)(1) of the Bank
Holding Company Act of 1956, as amended. This application was filed on January
22, 1996, and approval was received on March 29, 1996.
As of December 31, 1996, the only subsidiary of CFGI was The Bank of Nashville
(The Bank). CFGI and The Bank are collectively referred to herein as "the
Company".
The Bank was incorporated under the laws of the State of Tennessee, on July 10,
1989. The Bank was approved as a State Bank, is a member of the Federal Reserve
System, and is insured by the Federal Deposit Insurance Corporation. The initial
business day for the Bank was November 20, 1989. The Company has a total of 52
employees.
The present area and scope of the Company's activities include providing a full
range of banking and related financial services, including commercial banking,
consumer banking, trust services, investment services, and real estate finance.
The Company has a Trust Division that provides a full range of fiduciary
services, including trusteeships, custodianship, safekeeping, employee benefit
plan administration, and investment management. The Trust Division's services
are available to individuals, businesses, municipalities, and charitable
organizations. BFP Financial Partners, Inc., a subsidiary of Legg Mason Wood
Walker, Inc., operates an Investment Center in the Company's primary location
which provides bank customers convenient access to a wide array of investment
products.
The Company's capital position is adequate, in that the total risk-based capital
ratio was 20.6%; tier 1 risk-based capital ratio was 19.3% and tier 1 leverage
ratio was 13.2% at December 31, 1996. The total risk-based capital ratio of the
Bank was 20.4%; tier 1 risk-based capital ratio was 19.1% and tier 1 leverage
ratio was 13.1% at December 31, 1996. These capital ratios exceed the current
regulatory minimum requirements.
The loss of any one of the Company's deposits or loans from, or to, a single
person/business (including federal/state/local governments/agencies) would not
have a material adverse effect on the business of the Company beyond which has
been planned for in the Company's liquidity position. Due to the commercial
nature of the Company's target market, liabilities and loans are evaluated
relative to industry concentration and volatility. At December 31, 1996,
approximately 24% of total deposits were related to the construction and real
estate development industries while approximately 4% were related to the health
care industry. These areas represent the largest deposit concentrations and are
generally reflective of the local economy and the Company's asset mix. These
deposits are primarily reflected in the Company's demand deposit and interest
bearing money market account totals and are deposits of relationship
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commercial customers, which by their nature are concentrated in a fewer number
of customer relationships than would be the case in consumer deposit funding
sources. No significant portion of the Company's business can be considered
seasonal. The nature of the Company's business is principally domestic, thereby
eliminating risks attendant to foreign sources and applications of funds.
The Company is focused on serving small/mid-sized businesses and individuals in
the middle Tennessee market, with a primary service area of the Metro
Nashville-Davidson County Metropolitan Statistical Area (MSA). Nashville,
located in the north central part of the State, is the State's largest MSA.
Situated midway between the Mississippi delta to the west, and the Great Smokey
Mountains to the east, Metropolitan Nashville covers 533 square miles. Over half
of the population of the United States is located within a 600 mile radius of
the City, and the central location has contributed to the emergence of Nashville
as an important transportation, tourism, and distribution center. Diversity is a
key element of the Nashville economy with printing and publishing, healthcare,
automobile manufacturing, financial services, education, government,
entertainment, tourism, hospitality, manufacturing, warehousing, and various
service sectors, all being major contributors to the economic vitality of the
area.
The activities in which the Company engages are very competitive. Generally, the
Company competes with other banks and nonbank financial institutions located
primarily in the middle Tennessee market area. The principal methods of
competition center around such aspects as interest rates on loans and deposits,
decision making relationship management, customer services, and other service
oriented fee based products. Most of the Company's competitors are major
corporations with substantially more assets and personnel than the Company.
The Company actively competes for loans and deposits with other commercial
banks, brokerage firms, savings and loan associations and credit unions.
Consumer finance companies, department stores, mortgage brokers, and insurance
companies are also significant competitors for various types of loans. There is
also active competition for various types of fiduciary and trust business from
other banks, trust, and investment companies, and others.
The Company is headquartered in the downtown central business district of
Nashville. The Company occupies space in the lower level, the second floor, and
the third floor of the L & C Tower, located at 401 Church Street, a location
which serves as the Bank's main office. An exterior Automated Teller Machine
(ATM) and commercial depository are located on Fourth Avenue, also at the L & C
Tower. A second ATM location was established in 1994 at 201 Broadway, serving
local businesses and individuals as well as tourists on historic 2nd Avenue in
Nashville, Tennessee. In 1995, two additional ATMs were opened. One was
established in Cummins Station, a retail and office complex located at 10th
Avenue South. The other ATM combined with a commercial depository is located on
Music Valley Drive, in the Opryland area. In 1996, the Company received
regulatory approval to establish a mobile branch. The mobile branch brings
traditional
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banking services to the offices of the Company's customers. In December 1996, an
ATM was place in the Green Hills Mall. A full service branch office, located in
Green Hills, opened January 23, 1997. Management anticipates that additional
offices may be established as deemed appropriate, during future years, subject
to regulatory approval.
During 1996, the Company declared dividends of $.16 per share which resulted in
a dividend payout ratio of 13.91%. Other information relating to current banking
issues and the regulatory environment are addressed in the 1996 Annual Report to
Shareholders.
The following schedules are provided in accordance with Guide 3 "Statistical
Disclosure by Bank Holding Companies." All schedules, except those noted below,
have been omitted since the required information is either not applicable or is
incorporated by reference in the Company's 1996 Annual Report.
- Schedule III-A - Types of Loans
- Schedule III-B - Maturities and Sensitivities of Loans to Changes in
Interest Rates
- Schedule IV-B - Allocation of the Allowance for Loan Losses
III. LOAN PORTFOLIO
The following table presents a summary of loan types (net of unearned
income) by categories for the last five years.
SCHEDULE III-A
TYPES OF LOANS
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Loans (net of
unearned
income of
$256, $203,
$202, $196
and $517
respectively)
Commercial $ 35,721 $ 40,657 $ 35,108 $ 30,028 $ 37,184
Real estate -
mortgage
loans 58,763 48,648 41,800 44,743 48,363
Real estate -
construction 9,467 5,952 2,227 849 433
Consumer 3,937 3,083 1,950 1,510 2,026
-------- -------- -------- -------- --------
$107,888 $ 98,340 $ 81,085 $ 77,130 $ 88,006
======== ======== ======== ======== ========
</TABLE>
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III. LOAN PORTFOLIO - CONTINUED
Most of the Company's business activity is with customers located in the Middle
Tennessee region. Generally, loans are secured by real estate, inventory,
receivables, stocks, time certificates, or other assets. The loans are expected
to be repaid from cash flow or proceeds from the sale of selected assets of the
borrowers. The Company grants residential, consumer, and commercial loans to
customers throughout the Middle Tennessee region. Real estate mortgage and
construction loans reflected in the preceding schedule are comprised primarily
of loans to commercial borrowers.
At December 31, 1996, funded and unfunded loan commitments as classified by
standard Industry Classification codes include borrowers in the real estate
industry approximating $21.3 million and $3.9 million, respectively, and loans
to building contractors approximating $7.8 million and $7.5 million,
respectively. At December 31, 1995, funded and unfunded commitments to borrowers
in the real estate industry were approximately $18 million and $2 million,
respectively, and loans to building contractors were approximately $6.7 million
and $5.3 million, respectively.
The following table presents the maturity distribution of loan categories at
December 31, 1996 (in thousands).
SCHEDULE III-B
TYPES OF LOANS
MATURITIES AND SENSITIVITIES OF LOANS TO
CHANGES IN INTEREST RATES
<TABLE>
<CAPTION>
One After One After
Year But Within Five
Or Less Five Years Years Total
----------------------------------------------------------------
<S> <C> <C> <C> <C>
(Net of Unearned
Income)
Commercial $27,367 $ 6,662 $ 1,692 $ 35,721
Real estate -
mortgage 25,137 23,028 10,598 58,763
Real estate -
construction 8,219 995 253 9,467
Consumer 3,067 840 30 3,937
------- ------- -------- --------
$63,790 $31,525 $ 12,573 $107,888
======= ======= ======== ========
For maturities
over one year:
Fixed $33,756
Floating 10,342
</TABLE>
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Schedule IV-B presents a breakdown of the allocation of the allowance
for possible loan losses by major categories of loans at December 31,
1996 and 1995. Allocations estimated for each of the categories below
do not indicate that loan charge-offs for these amounts are anticipated
or will be required. There is no precise method of predicting specific
losses which may occur in segments of the loan portfolio. The allowance
for possible loan losses is available to absorb any and all losses and
is not limited to specific loan types. Values assigned to loan
categories in Schedule IV-B represent management's best estimates based
on an evaluation of the loan portfolio and current economic conditions.
Factors considered in establishing the level of the allowance for
possible loan losses include management's ongoing credit review of the
loan portfolio, the state of the national and regional economy, the
nature and content of the loan portfolio and the level of nonperforming
assets.
SCHEDULE IV-B
ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
Balance Applicable To: 1996 1995
- ---------------------- ---- ----
<S> <C> <C>
Commercial $ 775 $ 735
Real estate - mortgage
loans 900 730
Real estate - construction
loans 140 55
Consumer 58 80
Unallocated 1,005 1,434
-------- --------
$ 2,878 $ 3,034
======== ========
Percent of Total Allocation:
- ----------------------------
Commercial 26.9% 24.2%
Real estate - mortgage
loans 31.3 24.1
Real estate - construction loans 4.9 1.8
Consumer 2.0 2.6
Unallocated 34.9 47.3
-------- --------
100.0% 100.0%
======== ========
</TABLE>
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ITEM 2 - DESCRIPTION OF PROPERTY
The Company, located at 401 Church Street, Nashville, Tennessee, occupies a
total of 15,296 square feet on three floors of the L&C Tower, a 31-story office
building. The facility has a total of 158,907 gross square footage and is
located on .391 acres. The Company's space is leased from Metropolitan Life
Insurance Company (the "Landlord"). The lease has an initial term of ten years
with three five-year renewal options.
The Company occupies 4,670 square feet in the Glendale Shopping Center located
at 3770 Hillsboro Pike, Nashville, Tennessee. The Company's space is leased from
Coleman Partners, a Tennessee Partnership, and has an initial term of five years
with three five-year renewal options.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The following portion of the Company's 1996 Annual Report to Shareholders is
incorporated herein by reference:
Common Stock Information Page 42
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The following portions of the 1996 Annual Report are herein incorporated by
reference.
Management's Discussion and Analysis of Results of Operations and
Financial Condition on pages 6 through 21.
ITEM 7 - FINANCIAL STATEMENTS
The following portions of the 1996 Annual Report are incorporated herein by
reference.
Financial Statements and Report of Independent Auditors on pages 22
through 39 and page 40.
Quarterly Results of Operations on page 41.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors and the information regarding executive
officers called for by this item is contained in the sections entitled "Election
of Directors" and "Executive Officers" in the Company's proxy statement for its
1997 Annual Meeting of Shareholders, dated March 25 1997, and is incorporated
herein by reference.
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ITEM 10 - EXECUTIVE COMPENSATION
The information called for by this item is contained in the section entitled
"Compensation of Executive Officers" in the Company's proxy statement for its
1997 Annual Meeting of Shareholders, dated March 25, 1997, and is incorporated
herein by reference.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this item is contained in the sections entitled
"Directors and Nominees" and "Election of Directors" in the Company's proxy
statement for its 1997 Annual Meeting of Shareholders dated March 25, 1997, and
is incorporated herein by reference.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this item is contained in the section entitled
"Transactions with Directors and Executive Officers" in the Company's proxy
statement for its 1997 Annual Meeting of Shareholders dated March 25, 1997, and
is incorporated herein by reference.
ITEM 13 - EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
The following consolidated financial statements and the Report
of KPMG Peat Marwick LLP, Independent Certified Public
Accountants, are on pages 22 through 39 and page 40 of the
1996 Annual Report and are incorporated herein by reference.
- Consolidated Balance Sheets at December 31, 1996 and
1995
- Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 Consolidated
- Statements of Shareholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994
- Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994
- Notes to Consolidated Financial Statements
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(2) Exhibits
1. Not required.
2. Plan of acquisition, reorganization, arrangement,
liquidation or succession. None
3. Articles of Incorporation and By-Laws
4. Instruments defining the rights of security holders,
including debentures.
4.01 Warrant Agreement
4.02 Form of specimen Certificate of Common Stock
4.03 Form of specimen Certificate of Common Stock Purchase
Warrant
5. Not required.
6. Not required.
7. Not required.
8. Not required.
9. Voting Trust Agreement. None.
10. Material Contracts.
10.01 Employment Agreement between The Bank of Nashville
and Mack S. Linebaugh, Jr. dated September 2, 1992,
as amended.
10.02 Employment Agreement between The Bank of Nashville
and Julian C. Cornett dated October 13, 1996.
10.03 Option Agreements between The Bank of Nashville and
Mack S. Linebaugh, Jr. dated September 2, 1992 and
July 27, 1993, and Option Agreement dated July 16,
1996 between Community Financial Group, Inc., and
Mack S. Linebaugh, Jr.
10.04 Option Agreements between The Bank of Nashville and
Julian C. Cornett dated October 13, 1992 and October
13, 1993, and Option Agreement dated July 16, 1996
between Community Financial Group, Inc., and Julian
C. Cornett.
10.05 Lease Agreement dated July 19, 1989 between The Bank
of Nashville and Metropolitan Life Insurance Company.
10.06 Lease Agreement dated August 1, 1996 between The Bank
of Nashville and Coleman Partners, a Tennessee
Partnership.
10.07 The Bank of Nashville Retirement Savings Plan.
10.08 Community Financial Group, Inc.'s Associates' Stock
Purchase Plan.
11. Statement re computation of per share earnings.
12. Statement re computation of ratios. Not applicable.
13. 1996 Annual Report to Shareholders.
14. Not required.
15. Not required.
16. Letter re change in certifying accountant. Not
applicable.
17. Not required.
18. Letter re change in accounting principles. Not
applicable.
19. Not required.
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(2) Exhibits - Continued
20. Not required.
21. Subsidiaries of the registrant.
22. Published report regarding matters submitted to vote
of security holders. None.
23. Consent of experts and counsel. None.
24. Power of Attorney. None.
25. Not required.
26. Not required.
27. Financial Data Schedule.
28. Information from reports furnished to state insurance
regulatory authorities. Not applicable.
99. Additional Exhibits. None.
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(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE BANK OF NASHVILLE
By: /s/ Mack S. Linebaugh, Jr. Date: March 25, 1997
------------------------------- ------------------------------
Mack S. Linebaugh, Jr.
Chairman of the Board,
President, Chief Executive
Officer and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons or behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Mack S. Linebaugh, Jr. /s/ L. Leon Moore
- ---------------------------------- -----------------------------------
Mack S. Linebaugh, Jr. L. Leon Moore
Chairman of the Board, Director
President, Chief
Executive Officer Dated March 25, 1997
and Chief Financial --------------
Officer
Dated March 25, 1997
--------------
/s/ J. B. Baker, Jr. /s/ Perry W. Moskovitz
- ---------------------------------- -----------------------------------
J. B. Baker, Jr. Perry W. Moskovitz
Director Director
Dated March 25, 1997 Dated March 25, 1997
-------------- --------------
/s/ Jo D. Federspiel /s/ Norris Nielsen
- ---------------------------------- -----------------------------------
Jo D. Federspiel Norris Nielsen
Director Director
Dated March 25, 1997 Dated March 25, 1997
-------------- --------------
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SIGNATURES - Continued
/s/ Richard H. Fulton /s/ G. Edgar Thornton
- ---------------------------------- -----------------------------------
Richard H. Fulton G. Edgar Thornton
Director Director
Dated March 25, 1997 Dated March 25, 1997
-------------- --------------
/s/ Louis A. McRedmond
- ----------------------------------
Louis A. McRedmond
Director
Dated March 25, 1997
--------------
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Exhibit 3
BYLAWS
OF
COMMUNITY FINANCIAL GROUP, INC.
ARTICLE I
OFFICES
1.01. Registered Office. The registered office of the Corporation shall be at
401 Church Street, Nashville, Tennessee 37219.
1.02. Other Offices. The Corporation may also have offices at other places in
or out of the state of Tennessee as the Board of Directors may determine or as
the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
2.01. Place of Meeting. Meetings of shareholders shall be held at the time
and place, in or out of the State of Tennessee, stated in the notice of the
meetings or in a waiver of notice.
2.02. Annual Meetings. An annual meeting of the shareholders shall be held
each year at the registered office of the Corporation or such other place as
the Board of Directors may designate at such time as may be fixed by the Board
of Directors and pursuant to the provisions of law. If the day is a legal
holiday, then the meeting shall be on the next business day following. At the
meeting, shareholders shall elect directors and transact other business as may
properly be brought before the meeting.
2.03. Voting List. A complete list of shareholders entitled to vote at a
meeting of shareholders shall be maintained in accordance with applicable law.
2.04. Special Meetings. Special meetings of the shareholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the Charter, or by
these Bylaws, may be called by Chairman of the Board, the President, the Board
of Directors, or the holders of not less than twenty percent (20%) of all the
shares entitled to vote at the meeting pursuant to the provisions of the
charter. Business transacted at a special meeting shall be confined to the
purposes stated in the notice of the meeting.
2.05. Notice. Written or printed notice, stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) days nor
more than two (2) months before the date of the meeting, either personally or
by mail, by or at the direction of the Chairman of the Board, the President,
the Secretary, or the officer or person calling the meeting, to each
shareholder of record entitled to vote at the meeting.
2.06. Quorum. The holders of a majority of the shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
be requisite and shall constitute a quorum at meetings of the shareholders for
the transaction of business except as otherwise provided by statute, by the
Charter or by these Bylaws. If a quorum is not present or represented at a
meeting of the shareholders, the shareholders entitled to vote, present in
person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present or represented, and any business may be transacted at the
reconvened meeting which might have been transacted at the meeting as
originally notified.
2.07. Majority Vote. When a quorum is present at a meeting, the vote of the
holders of a majority of the shares having voting power, present in person or
represented by proxy, shall decide any question brought before the meeting,
unless the question is the election of directors or one on which, by express
provision of the statutes, the Charter, or these Bylaws, a higher vote is
required, in which case the express provision shall govern. There shall be no
cumulative voting by the shareholders on any matter.
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2.08. Method of Voting. Each outstanding share shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares are limited or denied by the
Charter. At any meeting of the shareholders, every shareholder having the
right to vote may vote either in person, or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after eleven months from the date of its execution, unless otherwise
provided in the proxy. Each proxy shall be revocable unless expressly provided
therein to be irrevocable and unless otherwise made irrevocable by law. Each
proxy shall be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Voting for directors shall be in accordance with Section
3.06 of these Bylaws. Any vote may be taken by voice or by show of hands
unless someone entitled to vote objects, in which case written ballots shall be
used.
2.09. Record Date; Closing Transfer Books. The Board of Directors may fix in
advance a record date for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of the shareholders, the record date to be
not more than seventy (70) days prior to the meeting; or the Board of Directors
may close the stock transfer books for such purpose for a period of not more
than seventy (70) days prior to such meeting. In the absence of any action by
the Board of Directors, the date upon which the notice of the meeting is mailed
shall be the record date.
2.10. Action Without Meeting. Any action required by statute to be taken at a
meeting of the shareholders, or any action which may be taken at a meeting of
the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote. The affirmative vote of the number of shares that would be
necessary to authorize or take such action at a meeting is the act of the
shareholders. The consent may be in more than one counterpart so long as each
shareholder signs one of the counterparts. The signed consent, or a signed
copy shall be placed in the minute book.
ARTICLE III
DIRECTORS
3.01. Management. The business and affairs of the Corporation shall be
managed by the Board of Directors who may exercise all powers of the
Corporation and do all such lawful acts and things as are not (by statute or by
the Charter or by these Bylaws) directed or required to be exercised or done by
the shareholders.
3.02. Number; Qualification; Term. The Board of Directors shall consist of at
least five (5) but no more than twenty-five (25) directors. The number of
directors serving initially shall be nine (9). At least three-fourths (3/4) of
the directors shall be citizens of the United States; at least two-thirds (2/3)
shall be residents of Tennessee or reside within 25 miles of the main office of
the Corporation, and a majority shall reside within 100 miles of the main
office of the Corporation. Each Director elected shall hold office until his
successor shall be duly elected and shall qualify.
3.03. Change in Number. The minimum or maximum number of Directors may be
increased or decreased from time to time by amendment to these Bylaws (subject
to any maximum number of Directors as provided by the Charter) but no decrease
shall have the effect of shortening the term of any incumbent Director.
3.04. Removal. The Directors may remove one (1) or more directors for cause
as provided in the Charter.
3.05. Vacancies. Any vacancy occurring in the Board of Directors, whether by
death, resignation, removal, creation of new directorship, or otherwise, may be
filled by an affirmative vote of a majority of the remaining Directors even
though the Directors remaining in office constitute fewer than a quorum of the
Board of Directors. A Director elected to fill a vacancy shall hold office
until the next annual election of Directors and until his successor is duly
elected and qualified.
3.06. Election of Directors. Except as otherwise provided in Sections 3.03
and 3.05, Directors shall be elected by a plurality vote at the annual meeting
of the shareholders. At each such election of directors, every shareholder
entitled to vote at such election shall have the right to vote, in person or by
proxy the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to vote.
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<PAGE> 3
3.07. Place of Meetings. Meetings of the Board of Directors, regular or
special, may be held in or out of the state of incorporation.
3.08. Annual Meetings. The annual meeting of a newly elected Board shall be
held without further notice immediately following the annual meeting of
shareholders, and at the same place, unless the time or place is changed by the
Chairman of the Board or the President with the consent of a majority of the
Directors then elected and serving.
3.09. Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall from time to time be
determined by the Board.
3.10. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board or the President on two (2) days' notice to
each Director, either personally or by mail or by telegram. Special meetings
shall be called by the President or Secretary in like manner and on like notice
on the written request of two (2) Directors. Except as otherwise expressly
provided by statute, the Charter or these Bylaws, neither the business to be
transacted at, nor the purpose of, any special meeting need be specified in a
notice or waiver of notice.
3.11. Quorum; Majority Vote. At meetings of the Board of Directors a majority
of the number of Directors then serving shall constitute a quorum for the
transaction of business. The act of a majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors, except as otherwise specifically provided by statute, the Charter or
these Bylaws. If a quorum is not present at a meeting of the Board of
Directors, the Directors present may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12. Compensation. By resolution of the Board of Directors, the Directors
may be paid their expenses, if any, of attendance at each meeting of the Board
of Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Director, or a combination of salary
and attendance fees. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
3.13. Procedure. The Board of Directors shall keep regular minutes of its
proceedings. The minutes shall be placed in the minute book of the
Corporation.
3.14. Action Without Meeting. Any action required or permitted to be taken at
a meeting of the Board of Directors may be taken without a meeting if a consent
in writing, setting forth the action so taken, is signed by all the members of
the Board of Directors. The affirmative vote of the number of directors that
would be necessary to authorize or take such action at a meeting is the act of
the Board of Directors. The signed consent, or a signed copy, shall be placed
in the minute book. The consent may be in more than one counterpart so long as
each Director signs one of the counterparts.
3.15. Committees of the Board. There shall be an Audit Committee consisting of
at least three (3) members of the Board of Directors appointed by the Board,
none of whom are active officers of the Corporation. The committee shall meet
once each year, or more often if required by the Chairman of the Board or
President and shall examine, or cause to be examined, such books, assets and
securities of the Corporation as it deems necessary or proper, or as it may be
directed to examine. A record shall be kept of all such examinations, which
shall be certified by the committee serving, and presented to the Board of
Directors at its next meeting. The Audit Committee shall state whether the
Corporation is in a sound and solvent condition, whether adequate internal
audit controls and procedures are being maintained, and shall recommend to the
Board such changes as shall be deemed advisable. The Audit Committee, upon its
own recommendation and with the approval of the Board of Directors, may employ
a qualified firm of certified public accountants to make the examination and
audit of the Corporation. If such a procedure is followed, the one annual
examination and audit by such firm of accountants and the presentation of its
report to the Board of Directors, shall be deemed sufficient to comply with the
requirements of the Audit Committee.
The Board of Directors may appoint, from time-to-time, other committees,
for such purposes and with such powers as the Board may determine. Unless
otherwise specified by the Board or these Bylaws, a majority of the committee
members will constitute a quorum of any Board appointed committee.
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<PAGE> 4
ARTICLE IV
NOTICE
4.01. Method. Whenever by statute, the Charter, these Bylaws, or otherwise,
notice is required to be given to a Director, Committee Member, or Shareholder,
and no provision is made as to how the notice shall be given, it shall not be
construed to mean personal notice, but any such notice may be given: (a) in
writing, by mail, postage prepaid, addressed to the Director, Committee Member,
or Shareholder at the address appearing on the books of the Corporation; or (b)
in any other method permitted by law. Any notice required or permitted to be
given by mail shall be deemed given at the time when the same is thus deposited
in the United States mails.
4.02. Waiver. Whenever, by statute or the Charter or these Bylaws, notice is
required to be given to a Shareholder, Committee Member, or Director, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance at a meeting shall constitute a waiver of
notice of such meeting, except where a person attends for the express purpose
of objecting to the transaction of any business of the ground that the meeting
is not lawfully called or convened.
ARTICLE V
OFFICERS AND AGENTS
5.01. Number, Qualification; Election; Term.
a. The Corporation shall have: (1) a Chairman of the Board, a
President and a Secretary; and (2) such other officers (including
additional Vice Presidents) and assistant officers and agents as
the Board of Directors may deem appropriate.
b. Officers of the Corporation shall not be required to be
shareholders of the Corporation. Officers need not be members of
the Board of Directors.
c. Officers named in Bylaw 5.01(a)(1) shall be elected by the Board
of Directors on the expiration of an officer's term or whenever a
vacancy exists. Officers and agents named in Bylaw 5.01(a)(2) may
be elected by the Board at any meeting, whether regular or special.
d. Unless otherwise specified by the Board at the time of his
election or appointment, or in an employment contract approved by
the Board, each officer's and agent's term shall end at the first
meeting of Directors after the next annual meeting of shareholders.
He shall serve until the end of his term or, if earlier, his
death, resignation, or removal.
e. Any two (2) or more offices, other than the offices of President
and Secretary, may be held by the same person.
5.02. Removal. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interest of the Corporation will be served thereby. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
5.03. Vacancies. Any vacancy occurring in any office of the Corporation (by
death, resignation, removal or otherwise) may be filled by the Board of
Directors.
5.04. Authority. Officers and agents shall have such authority and perform
such duties in the management of the Corporation as are provided in these
Bylaws or as may be determined by resolution of the Board of Directors not
inconsistent with these Bylaws.
5.05. Compensation. The compensation of officers and agents shall be fixed
from time to time by the Board of Directors.
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<PAGE> 5
5.06. Chairman of the Board. The Chairman of the Board shall preside at all
meetings of the shareholders and Directors, and shall be an ex-officio member
of all committees, except the audit committee. The Chairman of the Board shall
be the Chief Executive officer of the Corporation.
5.07 President. If the Chairman of the Board is absent, the President shall
preside at meetings of the shareholders and meetings of the Board of Directors.
The President shall have general and active management of the business and
affairs of the Corporation subject to the supervision of the Chief Executive
Officer; and shall see that all orders and resolutions of the Board are carried
into effect. He shall serve as an ex-officio member of the Board of all
committees, except the audit committee, and shall perform such other duties and
have such other authority and powers as the Chief Executive Officer or the
Board of Directors may from time to time prescribe.
5.08. Vice Presidents. Vice Presidents may be designated as "Executive Vice
President," "Senior Vice President" or such other designation as the Board of
Directors may from time-to-time determine. The Vice Presidents in the order of
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the Chief Executive Officer, perform the duties
and have the authority and exercise the duties and powers of the Chief
Executive Officer. They shall perform such other duties and have such other
authority and powers as the Board of Directors may from time to time prescribe
or as the Chief Executive Officer may from time to time delegate.
5.09. Secretary.
a. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all
votes, actions and the minutes of all proceedings in a book kept
for that purpose and shall perform like duties for the executive
and other committees when required.
b. She shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the Board of Directors.
c. She shall be under the supervision of the Chairman of the Board
and the President. She shall perform such other duties and have
such other authority and powers as the Board of Directors may from
time to time prescribe or as the Chairman of the Board or the
President may from time to time delegate.
5.10. Assistant Secretary. The assistant Secretaries, if any, in the order of
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the Secretary, perform the duties and have the
authority and exercise the powers of the Secretary. They shall perform such
other duties and have such other powers as the Board of Directors may from time
to time or as the President may from time to time delegate.
5.11. Vacancies. If the office of the Chairman of the Board, President, Vice
President, Secretary or Assistant Secretary becomes vacant by reason of death,
resignation or removal, the Board of Directors shall elect a successor who
shall hold office for the unexpired term, and until his successor is elected.
ARTICLE VI
CERTIFICATES AND SHAREHOLDERS
6.01. Certificates. Certificates in the form determined by the Board of
Directors shall be delivered representing all shares to which shareholders are
entitled. Certificates shall be consecutively numbered and shall be entered in
the books of the Corporation as they are issued. Each certificate shall state
on its face the holder's name, the number and class of shares, the par value of
shares or a statement that such shares are without par value, and such other
matters as may be required by law, and may be sealed with the seal of the
Corporation or a facsimile thereof.
6.02. Issuance. Shares (both treasury and authorized but unissued) may be
issued for such consideration (not less than par value) and to such persons, as
the Board of Directors may determine from time to time. Shares may not be
issued until the full amount of the consideration, fixed as provided by law,
has been paid.
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<PAGE> 6
6.03. Payment of Shares.
a. Kind. The consideration for the issuance of shares shall
consist of money paid, labor done (including services actually
performed for the corporation) or property (tangible or intangible)
actually received. Neither promissory notes nor the promise of
future services shall constitute payment for shares.
b. Valuation. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration
received shall be conclusive.
c. Effect. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be
considered fully paid and nonassessable.
6.04. Subscriptions. Unless otherwise provided in the subscription agreement,
subscriptions for shares, whether made before or after organization of the
Corporation, shall be paid in full at such time or in such installments and at
such times as shall be determined by the Board of Directors. Any call made by
the Board of Directors for payment on subscriptions shall be uniform as to all
shares of the same series. In case of default in the payment on any
installment or call when payment is due, the Corporation may proceed to collect
the amount due in the same manner as any debt due to the Corporation.
6.05. Lost, Stolen or Destroyed Certificates. The Corporation shall issue a
new certificate in place of any certificate for shares previously issued if the
registered owner of the certificate:
a. Claim. Makes proof in affidavit form that it has been lost,
destroyed or wrongfully taken; and
b. Timely Request. Requests the issuance of a new certificate
before the Corporation has notice that the certificate has been
acquired by a purchaser for value in good faith and without notice
of an adverse claim; and
c. Bond. Gives a bond in such form, and with such surety or
sureties, with fixed or open penalty, as the Corporation may
direct, to indemnify the Corporation (and its transfer agent and
registrar, if any) against any claim that may be made on account of
the alleged loss, destruction or theft of the certificate; and
d. Other Requirements. Satisfies any other reasonable requirements
imposed by the Corporation. When a certificate has been lost,
apparently destroyed or wrongfully taken, and the holder of record
fails to notify the corporation within a reasonable time after he
has notice of it, and the Corporation registers a transfer of the
shares represented by the certificate before receiving such
notification, the holder of record is precluded from making any
claim against the Corporation for the transfer or for a new
certificate.
6.06. Registration of Transfer. The Corporation shall register the transfer
of a certificate for shares presented to it for transfer if:
a. Endorsement. The certificate is properly endorsed by the
registered owner or by his duly authorized attorney; and
b. Guarantee and Effectiveness of Signature. The signature of such
person has been guaranteed by a commercial bank or by the President
of the Corporation, or by such other officer of the Corporation as
shall have been designated by the Board of Directors, and
reasonable assurance is given that such endorsements are effective.
6.07. Registered Owner. Prior to due presentment for registration of transfer
of a certificate for shares, the Corporation may treat the registered owner as
the person exclusively entitled to vote, to receive notices and otherwise to
exercise all rights and powers of a shareholder.
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<PAGE> 7
ARTICLE VII
GENERAL PROVISIONS
7.01. Dividends and Reserves.
a. Declaration and Payment. Subject to statue and the Charter,
dividends may be declared by the Board of Directors at any regular
or special meeting and may be paid in cash, in property, or in
shares of the Corporation. The declaration and payment shall be at
the discretion of the Board of Directors.
b. Record Date. The Board of Directors may fix in advance a record
date for the purpose of determining shareholders entitled to
receive payment of any dividend. In the absence of any action by
the Board of Directors, the date upon which the Board of Directors
adopts the resolution declaring the dividend shall be the record
date.
c. Reserves. By resolution the Board of Directors may create such
reserve or reserves out of available cash of the Corporation as the
Directors from time to time, in their discretion, think proper to
provide for contingencies, or to equalize dividends, or to repair
or maintain any property of the Corporation, or for any other
purpose they think beneficial to the Corporation. The Directors
may modify or abolish any such reserve in the manner in which it
was created.
7.02. Books and Records. The corporation shall keep at its registered office
or principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addresses of all
shareholders and the number and class of shares held by each.
7.03. Checks and Notes. Checks, demands for money, and notes of the
Corporation shall be signed by the officer(s) or other person(s) designated
from time to time by the Board of Directors.
7.04. Fiscal Year. The fiscal year of the Corporation shall be the calendar
year.
7.05. Resignation. A Director, officer or agent may resign by giving written
notice to the Chairman of the Board, the President or the Secretary. The
resignation shall take effect at the time specified in it, or immediately if no
time is specified. Unless it specifies otherwise, a resignation takes effect
without being accepted.
7.06. Amendment of Bylaws.
a. These Bylaws may be altered, amended, or repealed at any meeting
of the Board of Directors at which a quorum is present, by the
affirmative vote of a majority of the Directors of the Corporation,
provided notice of the proposed alteration, amendment or repeal is
contained in the notice of the meeting.
b. These Bylaws may also be altered, amended or repealed at any
meeting of the shareholders at which a quorum is present or
represented, by the affirmative vote of the holders of two-thirds
(2/3) of the shares of the Corporation entitled to vote thereon,
provided notice of the proposed alteration, amendment or repeal is
contained in the notice of the meeting.
7.07. Construction. Whenever the context so requires, the masculine shall
include the feminine and neuter, and the singular shall include the plural, and
conversely. If any portion of these Bylaws shall be invalid or inoperative,
then, so far as is reasonable and possible:
a. The remainder of these Bylaws shall be considered valid and
operative; and
b. Effect shall be given to the intent manifested by the portion
held invalid or inoperative.
7.08. Table of Contents; Heading. The table of contents and headings are for
organization, convenience and clarity. In interpreting these Bylaws, they
shall be subordinated in importance to the other written material.
7.09. Relation to Charter. These Bylaws are subject to, and are governed by
the Charter.
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<PAGE> 8
ARTICLE VIII
INDEMNITY
8.01. Liability of Officers and Directors. No person shall be liable to the
Corporation for any loss or damage suffered by it on account of any action
taken or omitted to be taken by him as a director or officer of the Corporation
in good faith, if such person exercised or used the same degree of care and
skill as a prudent man would have exercised or used in the circumstances in the
conduct of his own affairs.
8.02. Indemnification of Officers and Directors. The Corporation shall
indemnify to the fullest extent permitted by law any and all persons who may
serve or who have served at any time as directors or officers, or who at the
request of the Board of Directors of the Corporation may serve or at any time
have served as directors or officers of another corporation in which the
Corporation at such time owned or may own shares of stock or of which it was or
may be a creditor, and their respective heirs, administrators, successors, and
assigns, against any and all expenses, including amounts paid upon judgments,
counsel fees, and amounts paid in settlement (before or after suit is
commenced), actually and necessarily incurred by such persons in connection
with the defense or settlement of any claim, action, suit, or proceeding in
which they, or any of them, are made parties, or a party, or which may be
asserted against them or any of them, by reason of being or having been
directors or officers or a director or officer of the Corporation, or of such
other corporation, except in relation to matters as to which any such director
of officer or former director or officer or person shall be adjudged in any
action, suit, or proceeding to be liable for his own negligence or misconduct
in the performance of his duty. Such indemnification shall be in addition to
any other rights to which those indemnified may be entitled under any law,
bylaw, agreement, vote of shareholders, or otherwise.
ARTICLE IX
CONTRACTS, DEPOSITS AND PROXIES
9.01. Execution of Contracts, etc. Except as otherwise required by law or by
these Bylaws, all the executive officers of the Corporation shall have power to
execute and deliver any deeds, contracts, mortgages, bonds, debentures and
other documents for and in the name of the Corporation. The Board may
authorize any other officer or officers or agents to execute and deliver any
contract or other instrument in the name and on behalf of the Corporation, and
this authority may be general or confined to such specific instances as the
Board may by resolution determine.
9.02. Deposits. All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation or otherwise as
the Board or the Chief Executive Officer shall direct in such banks, trust
companies, or other depositories as the Board may select or as may be selected
by any executive officer. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, checks, drafts and other orders
for the payment of money which are payable to the order of the Corporation may
be endorsed, assigned, and delivered by any executive officer or other officer
or agent of the Corporation.
9.03. Proxies in Respect to Stock or Other Securities of Other Corporations.
Unless otherwise provided by resolution adopted by the Board, the Chief
Executive Officer, the President, or a Vice President may from time to time
appoint an attorney or attorneys or agent or agents of the Corporation to
exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other securities in
any other corporation to vote or consent in respect to such stock or other
securities; the Chief Executive Officer, the President, or a Vice President may
instruct the person or persons so appointed as to the manner of exercising such
powers and rights; and the Chief Executive Officer, the President, or a Vice
President may execute or cause to be executed in the name and on behalf of the
Corporation and under its corporate seal, or otherwise, all such written
proxies, powers of attorney or other instruments as he may deem necessary or
proper in order that the Corporation may exercise its powers and rights.
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<PAGE> 9
CERTIFICATE OF ADOPTION
The foregoing Bylaws of the Corporation have been duly adopted this 19th day of
December , 1995, by action of the Board of Directors of the Corporation
pursuant to the laws of this State.
IN TESTIMONY THEREOF, witness the hand of the undersigned as Secretary of the
Corporation on such date.
/s/ Joan B. Marshall
-------------------------------
Joan B. Marshall, Secretary
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<PAGE> 1
EXHIBIT 4.01
CERTIFIED CORPORATE RESOLUTION
I, Joan B. Marshall, do hereby certify that I am the duly elected and
qualified Secretary of The Bank of Nashville, and that the following is a true
and correct copy of certain resolutions duly adopted at a meeting of the Board
of Directors of The Bank of Nashville, convened and held in accordance with
applicable law and the bylaws of The Bank of Nashville on the 15th day of
February, 1994, and that such resolutions are now in full force and effect:
WHEREAS, warrants for the common stock of The Bank of Nashville
("Warrants") have been duly issued; and
WHEREAS, the expiration of the exercise period for the Warrants is December
31, 1995; and
WHEREAS, the discrepancy between the exercise price of the Warrants and the
current market price of the common stock of The Bank of Nashville makes the
exercise of any of the Warrants unlikely prior to the expiration of the current
exercise period; and
WHEREAS, in order to facilitate The Bank of Nashville's initial objective
of adding to its working capital the proceeds which might be received from the
exercise of the Warrants, and in order to protect the interests of those persons
who currently hold such Warrants, the Board of Directors of The Bank of
Nashville has determined the following:
NOW, THEREFORE, BE IT RESOLVED, that the expiration of the exercise period
for the Warrants shall be and is extended until December 31, 1998; and
BE IT RESOLVED FURTHER, that this extension shall be deemed by the Board
of Directors of The Bank of Nashville to be fair to The Bank of Nashville; and
BE IT RESOLVED FURTHER, that the President of The Bank of Nashville, or his
designate, be and hereby is authorized and directed to take from time to time
any and all action necessary or desirable to carry out the purposes of the
forgoing resolution.
Dated this l5th day of February, 1994.
/s/ Joan B. Marshall
-------------------------------
Joan B. Marshall, Secretary
<PAGE> 2
WARRANT AGREEMENT
This Agreement dated as of August 1, 1989, between The Bank of Nashville, a
Tennessee bank (the "Issuer"), and The Bank of Nashville, Trust Department (the
Warrant Agent").
WITNESSETH:
WHEREAS, the Issuer has authorized the issuance and sale of its Warrant
Certificates (the "Warrant Certificates") evidencing the right to purchase an
aggregate of up to 5,094,000 shares of Common Stock, par value $6.00 per share,
of the Issuer (herein called "Common Stock") at a price of $12.50 per share,
subject to adjustment as hereinafter provided (the "Purchase Price") ( each
share of Common Stock purchasable pursuant to the Warrant Certificates being
herein called a Share" and all such shares being herein collectively called the
"Shares"); and
WHEREAS, the Issuer desires the Warrant Agent to act on behalf of the
Issuer in connection with the issuance, transfer, exchange, exercise and
replacement of the Warrant Certificates, and in this Agreement wishes to set
forth, among other things, the form and provisions of the Warrant Certificates
and the terms and conditions on which they may be issued, transferred,
exchanged, exercised and replaced;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I:
ISSUANCE, EXECUTION AND DELIVERY OF WARRANT CERTIFICATES
SECTION 1.01. Subject to Sections 2.03(b), 4.02, and 5.01 hereof, upon the
execution of this Agreement, Warrant Certificates evidencing an aggregate of up
to 5,094,000 warrants to purchase Common Stock ("Warrants") shall be executed
by the Issuer and delivered to the Warrant Agent for counter-signature, and the
Warrant Agent shall, upon written order of the Issuer signed by an authorized
officer, thereupon countersign and hold and deliver said Warrant Certificates in
accordance with such written order and the provisions of this Agreement. The
Warrant Agent is hereby authorized to countersign and deliver Warrant
Certificates as required by Sections 2.03(b), 4.02, and 5.01 hereof.
<PAGE> 3
SECTION 1.02. The Warrant Certificates (and the form to be printed on the
reverse thereof [the Purchase Forms]) shall be substantially of the tenor and
purport recited in Exhibit A hereto and may have such letters, numbers or other
marks of identification, or designation and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Issuer may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or other
organized trading market on which the Warrant Certificates may be listed or
traded, or to conform to usage. The Warrant Certificates shall be dated the date
of their issue, and shall entitle the registered holders thereof to purchase
Shares at a price per Share set forth herein, subject to adjustment from time to
time pursuant to the provisions of Article III hereof.
The Warrant Certificates shall be executed on behalf of the Issuer by a
duly authorized officer of the Issuer, either manually or by facsimile signature
printed thereon. The Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Issuer who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Issuer before
countersignature by the Warrant Agent and issue and delivery thereof by the
Issuer, such Warrant Certificates, nevertheless, may be countersigned by the
Warrant Agent, and issued and delivered with the same force and effect as though
the person who signed such Warrant Certificates had not ceased to be such
officer of the Issuer. Any Warrant Certificate may be signed on behalf of the
Issuer by the person who at the actual date of the signing of such Warrant
Certificate shall have been the proper officer of the Issuer, although at the
date of issuance of such Warrant Certificate any such person may not be such
officer of the Issuer.
ARTICLE II
WARRANT PRICE, DURATION AND EXERCISE OF WARRANT CERTIFICATES
SECTION 2.01. Each Warrant Certificate shall, when countersigned by the
Warrant Agent, entitle the registered holder thereof, subject to the provisions
of this Agreement, to purchase from the Issuer one Share for each Warrant
represented thereby at the Purchase Price. The Purchase Price shall be payable
in full at the time of exercise.
SECTION 2.02. Warrant Certificates may be exercised during the period
commencing on the date hereof and terminating at 5:00 p.m. local time in the
City of Nashville, Tennessee on
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<PAGE> 4
December 31, 1995 (the "Termination Time"). Each Warrant Certificate not
exercised during said period shall become void, and all rights of the registered
holder thereunder and under this Agreement shall cease after the Termination
Time.
SECTION 2.03. (a) During the period specified in Section 2.02, a Warrant
Certificate may be exercised in whole or in part by surrendering it at the
principal office of the Warrant Agent with the Purchase Form duly executed and
by paying in full, in lawful money of the United States of America, by cash,
check or money order, the Purchase Price for each Share as to which the Warrant
Certificate is exercised. No adjustment shall be made for any dividends on any
Shares issuable on exercise of a Warrant Certificate.
(b) As soon as practicable after the exercise of any Warrant Certificate,
the Issuer shall cause to be issued or transferred and delivered to or upon the
order of the registered owner of such Warrant Certificate, certificates for the
number of Shares to which he is entitled, registered in such name or names as
may be directed by him, and, if such Warrant Certificate was not exercised in
full, a new Warrant Certificate registered in such name or names as may be
directed by him for the number of Warrants as to which such Warrant Certificate
was not exercised.
(c) The Issuer shall pay any taxes which may be payable in respect of the
issue or transfer of any Shares deliverable upon exercise of a Warrant
Certificate, except that the Issuer shall not be required to pay any tax imposed
in connection with any transfer involved in the issuance of a certificate for
Shares, or any Warrant Certificate representing unexercised Warrants, in any
name other than that of the registered holder of the Warrant Certificate
surrendered for exercise; and in such case the Issuer shall not be required to
deliver any certificate representing the securities purchased upon exercise, or
any Warrant Certificate representing unexercised Warrants, until such tax shall
have been paid or it has been established to the Issuer's satisfaction that no
tax is due.
(d) Each person in whose name any such certificate for Shares is issued
shall for all purposes be deemed to have become the owner of the Shares
represented thereby on the date on which the Warrant Certificate was surrendered
and payment of the Purchase Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate.
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<PAGE> 5
ARTICLE III
ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF
SHARES PURCHASABLE
The Purchase Price, the number of Shares purchasable and the kind of
securities or other property deliverable pursuant to the Warrant Certificates
shall be subject to adjustment from time to time as follows:
SECTION 3.01. (a) In case the Issuer shall at any time exchange as a whole,
by subdivision or combination in any manner or by the making of a stock
dividend, the number of. shares of Common Stock then outstanding into a
different number of shares, with or without par value, then thereafter the
number of Shares which the registered holder of a Warrant Certificate shall be
entitled to purchase (calculated immediately prior to such exchange), shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease in the number of shares of Common Stock of the Issuer by reason of
such exchange, and the Purchase Price of the Shares after such change shall, in
case of an increase in the number of shares of Common Stock, be proportionately
reduced, and, in case of a decrease in the number of shares of Common Stock, be
proportionately increased.
(b) In case of any reclassification or change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision,
combination or stock dividend as provided for in Section 3.01(a)), or in case of
any consolidation or merger to which the Issuer is a party or pursuant to which
the Issuer's shareholders receive shares of stock, other securities or other
property in exchange for their Common Stock, or in case of any sale of all, or
substantially all, of the property, assets, business and goodwill of the Issuer
as an entirety, the Issuer, or such successor or purchasing corporation, as the
case may be, shall provide that the registered holder of a Warrant Certificate
shall thereafter be entitled to purchase the kind and amount of shares of stock
and other securities and property-receivable upon such reclassification,
change, consolidation, merger or sale by a holder of the number of Shares which
a Warrant Certificate entitles the registered holder hereof to purchase
immediately prior to such reclassification, change, consolidation, merger or
sale. Any such successor corporation, which thereafter shall be deemed to be the
Issuer for purposes of a Warrant Certificate, shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article III.
- 4 -
<PAGE> 6
(c) No adjustment in the Purchase Price shall be required by this Article
III unless such adjustment would require an increase or decrease of at least one
cent in such price; provided, however, that any adjustments which by reason of
this sub-section (c) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Article III shall be made to the nearest one-tenth of one cent or to the nearest
one-hundredth of a Share.
SECTION 3.02. If there shall be any adjustment as provided above in Section
3.01 hereof, or if securities or property other than shares of Common Stock of
the Issuer shall become purchasable in lieu of Shares of such Common Stock upon
exercise of a Warrant Certificate, the Issuer shall forthwith cause written
notice thereof to be sent by first class U.S. mail, postage prepaid, to the
registered holders of the Warrant Certificates at the addresses of such holders
shown on the books of the Issuer, which notice shall be accompanied by a
certificate of the Issuer's chief financial officer setting forth in reasonable
detail the basis for the holders' becoming entitled to purchase such shares and
the number of shares which may be purchased and the Purchase Price thereof, or
the facts requiring any such adjustment and the Purchase Price and number of
shares purchasable after such adjustment, or the kind and amount of any such
securities or property so purchasable upon the exercise of the Warrant
Certificates, as the case may be.
SECTION 3.03. As used herein the term "Common Stock" shall mean and include
the Issuer's presently authorized Common Stock and shall also include any
capital stock of any class of the Issuer hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Issuer;
provided that the Shares purchasable pursuant to the Warrant Certificates shall
include only shares designated as Common Stock of the Issuer on the date hereof,
or in case of any reorganization, reclassification, consolidation, merger,
amalgamation or sale of assets of the character referred to in Section 3.01
hereof, the shares of stock, securities or property provided for in Section
3.01.
SECTION 3.04. No fractional Shares shall be issued upon any exercise of
Warrant Certificates. As to any fraction of a share which the same holder of one
or more Warrant Certificates which are exercised in the same transaction would
otherwise be entitled to purchase on such exercise, a cash adjustment shall be
paid by the Issuer in lieu of such fractional share, in an amount equal to the
same fraction of the market price per share of the Shares (as determined by the
Issuer, at the close of business on the business day prior to the exercise date.
- 5 -
<PAGE> 7
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF REGISTERED
HOLDERS OF WARRANT CERTIFICATES
SECTION 4.01. The Warrant Certificates shall be issued in registered form
only and no Warrant Certificate shall entitle the registered holder thereof to
any of the rights of a holder of shares of Common Stock of the Issuer,
including, without limitation, the right to vote, to receive dividends and other
distributions, to exercise any pre-emptive right, or to receive any notice of,
or to attend, meetings of holders of Common Stock or any other proceedings of
the Issuer, except that should the Issuer, during the term of this Agreement,
declare a dividend upon the Common Stock payable otherwise than in cash out of
earnings or earned surplus (computed in accordance with generally accepted
accounting principles) or otherwise than in Common Stock or securities
convertible into Common Stock or make any other distribution in respect of the
Common Stock, then, thereafter, the registered holders of Warrant Certificates,
upon exercise of a Warrant Certificate, shall receive the Shares purchasable
upon such exercise and, in addition and without further payment, the cash, stock
or other securities and/or other property which the registered holder of a
Warrant Certificate would have received by way of dividends (otherwise than in
cash out of such earnings or earned surplus or in Common Stock or securities
convertible into Common Stock) and/or any other distributions in respect of the
Common Stock as if, continuously since the date hereof, such registered holder
of a Warrant Certificate (a) had been the record holder of the number of Shares
then being purchased, and (b) had retained all such cash, stock and other
securities (other than Common Stock or securities convertible into Common Stock)
and/or other property payable in respect of such Shares or in respect of any
stock or securities paid as dividends and originating directly or indirectly
from such Shares.
SECTION 4.02. If any Warrant Certificate shall be mutilated, lost, stolen,
or destroyed, the Issuer may in its discretion direct the Warrant Agent to
countersign and deliver in exchange and substitution for and- upon cancellation
of a mutilated Warrant Certificate or in lieu of or in substitution for a lost,
stolen or destroyed Warrant Certificate a new Warrant Certificate for the number
of Warrants represented by the Warrant Certificate so mutilated, lost, stolen or
destroyed but only upon receipt of evidence satisfactory to the Issuer and the
Warrant Agent of such loss, theft or destruction of such Warrant Certificate,
evidence of the ownership thereof and, indemnity if requested, also satisfactory
to them. Applicants for such substitute Warrant Certificates shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Issuer or Warrant Agent may prescribe. Any such new Warrant
- 6 -
<PAGE> 8
Certificate shall constitute an additional contractual obligation of the Issuer,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant
Certificate shall be at any time enforceable by anyone.
SECTION 4.03. Notwithstanding any of the provisions of this Agreement, any
registered holder of any Warrant Certificate without the consent of the Warrant
Agent or the holder of any other Warrant Certificate, may, in his own behalf and
for his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Issuer shiftable to enforce, or otherwise in respect of,
his right to exercise his Warrant Certificate in the manner provided in his
warrant Certificate and in this Agreement.
SECTION 4.04. There have been reserved, and the Issuer shall at all times
keep reserved, out of its authorized and unissued shares and treasury shares, if
any, a number of Shares sufficient to permit the exercise in full of all the
outstanding Warrant Certificates and the transfer agent for the Shares (the
"Transfer Agent") and every subsequent Transfer Agent for the Shares is hereby
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued Shares as shall be requisite for such purpose. The
Issuer will keep a copy of this Agreement on file with the Transfer Agent for
the Shares and with every subsequent Transfer Agent. The Warrant Agent is hereby
irrevocably authorized to requisition from time to time from such Transfer Agent
certificates for Shares required to honor outstanding Warrant Certificates. The
Issuer will supply such Transfer Agent with duly executed share certificates for
such purpose and will itself provide or otherwise make available any cash which
may be payable as provided in Section 3.04 hereof. All Warrant Certificates
surrendered upon the exercise or redemption thereof shall be cancelled by the
warrant Agent and shall thereafter be delivered to the Issuer and such cancelled
Warrant Certificates, with the Purchase Form duly filled in and signed, shall
constitute sufficient evidence of the number of Shares which have been issued by
the exercise of such Warrant Certificates and the redemption of such Warrant
Certificates. Promptly after the expiration of the Warrant Certificates, the
Warrant Agent shall certify to the Issuer the total aggregate amount of Warrant
Certificates then outstanding and unexercised, and thereafter no Shares shall be
subject to reservation in respect of such Warrant Certificates.
- 7 -
<PAGE> 9
ARTICLE V
TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES
SECTION 5.01. The Warrant Agent shall cause to be kept at the principal
office of the Warrant Agent a register in which, subject to such reasonable
regulations as the Issuer may prescribe, provision shall be made for the
registration of transfers of Warrant Certificates as herein provided. Warrants
may be presented for transfer at such principal office.
At the option of the registered holder, Warrant Certificates may be
exchanged for other Warrant Certificates for a like aggregate number of
Warrants, upon surrender of the Warrant Certificates to be exchanged at the
principal office of the Warrant Agent. Whenever any Warrant Certificates are so
surrendered for exchange, the Issuer shall execute, and the Warrant Agent shall
authenticate and deliver, the Warrant Certificates which the registered owner
making the exchange is entitled to receive.
All Warrant Certificates issued upon any transfer or exchange of Warrant
Certificates shall be the valid obligations of the Issuer, evidencing the same
obligations and entitled to the same benefits under this Warrant Agreement, as
the Warrant Certificates surrendered for such transfer or exchange.
Every Warrant Certificate presented or surrendered for transfer or exchange
shall (if so required by the Warrant Agent) be duly endorsed by, or be
accompanied by, a written instrument of transfer, in form satisfactory to the
Warrant Agent duly executed by the registered owner thereof or his attorney duly
authorized in writing and bearing such guarantees of signature as the Warrant
Agent may require.
No service charge shall be made for any transfer or exchange of Warrant
Certificates. The Issuer will require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer of Warrant Certificates.
The Issuer and the Warrant Agent may deem and treat the registered holder
of any Warrant Certificate as the true and lawful owner thereof for all
purposes, and neither the Issuer nor the Warrant Agent shall be affected by any
notice to the contrary.
SECTION 5.02. Any Warrant Certificate surrendered for exchange or upon the
exercise thereof shall be cancelled and shall not be reissued by the Warrant
Agent on behalf of the Issuer and, except as provided in Section 4.01 in case of
an
- 8 -
<PAGE> 10
exchange or Section 2.03(b) in case of a partial exercise of a Warrant
Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof.
ARTICLE VI
CONCERNING THE WARRANT AGENT AND OTHER MATTERS
SECTION 6.01. The Issuer will from time to time promptly pay to the Warrant
Agent, or make provision satisfactory to the Warrant Agent for the payment of,
all taxes and charges that may be imposed by the United States or any State upon
the Issuer or the Warrant Agent upon the transfer or delivery of Shares upon the
exercise of Warrant Certificates, but the Issuer shall not be obligated to pay
any tax imposed in connection with any transfer involved in the delivery of a
certificate for Shares in any name other than that of the registered holder of
the Warrant Certificate surrendered in connection with the purchase thereof.
SECTION 6.02. (a) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder after giving one month's
notice in writing to the Issuer, except that such shorter notice may be given as
the Issuer shall, in writing, accept as sufficient. If the office of the Warrant
Agent becomes vacant by resignation or incapacity to act or otherwise, the
Issuer shall appoint in writing a new Warrant Agent. If the Issuer shall fail to
make such appointment within a period of thirty days after it has been notified
in writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent or by the registered holder of a Warrant Certificate, then the
registered holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new Warrant Agent. Any new Warrant Agent,
whether appointed by the Issuer or by such a court, shall be a corporation
organized and doing business under the laws of the United States or any State,
of good standing, which is authorized under such laws to exercise corporate
trust powers and is subject to supervision or examination by Federal or State
authority and which has a combined capital and surplus of not less than
$20,000,000. The combined capital and surplus of any such new Warrant Agent
shall be deemed to be the combined capital and surplus as set forth in the most
recent report of its condition published by such Warrant Agent prior to its
appointment, provided that such reports are published at least annually pursuant
to law or to the requirements of a Federal or State supervising or examining
authority. Any new Warrant Agent appointed hereunder shall execute, acknowledge
and deliver to the Issuer an instrument accepting such appointment hereunder and
thereupon such new Warrant Agent without any further act or deed
- 9 -
<PAGE> 11
shall become vested with all the rights, powers, duties and responsibilities of
the Warrant Agent hereunder with like effect as if it had been named as the
Warrant Agent; but if for any reason it becomes necessary or expedient to have
the former Warrant Agent execute and deliver any further assurance, conveyance,
act or deed, the same shall be done at the expense of the Issuer and shall be
legally and validly executed and delivered by the former Warrant Agent. Not
later than the effective date of any such appointment, the Issuer shall file
notice thereof with the former Warrant Agent. The Issuer shall promptly give
notice of any such appointment to the registered holders of the Warrants by
mail, first class, postage prepaid, at their addresses as shown on the Warrant
Certificate Register of the Issuer. Failure to file or give such notice, or any
defect therein, shall not affect the legality or validity of the appointment of
the successor Warrant Agent.
(b) Any company into which the Warrant Agent or any new Warrant Agent may
be merged or converted or with which it may be consolidated or any company
resulting from any merger, conversion or consolidation to which the Warrant
Agent or any new Warrant Agent shall be a party, shall be the successor Warrant
Agent under this Agreement without any further act, provided that such company
would be eligible for appointment as a successor Warrant Agent under the
provisions of paragraph (a) of this Section 7.02. Any such successor Warrant
Agent may adopt the prior countersignature of any predecessor Warrant Agent and
deliver Warrant Certificates countersigned and not delivered by such predecessor
Warrant Agent or may countersign Warrant Certificates either in the name of any
predecessor Warrant Agent or the name of the successor Warrant Agent.
SECTION 6.03. The Issuer agrees (i) that it will pay the Warrant Agent for
its services as Warrant Agent according to the fee schedule on Exhibit B
attached hereto and incorporated herein and will reimburse the Warrant Agent
upon demand for all expenditures that the Warrant Agent may reasonably incur in
the execution of its duties hereunder; and (ii) that it will perform, exercise,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
by the Warrant Agent of the provisions of this Agreement.
SECTION 6.04. (a) The Warrant Agent may consult with legal counsel (who may
be legal counsel for the Issuer), and the opinion of such counsel shall be full
and complete authorization and protection to the Warrant Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
-10-
<PAGE> 12
(b) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any matter be proved or
established, or that any instructions with respect to the performance of its
duties hereunder be given, by the Issuer prior to taking or suffering any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and
established, or such instructions may be given, by a certificate or instrument
signed by an officer of the Issuer and delivered to the Warrant Agent; and such
certificate or instrument shall be .~11 warrant to the Warrant Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate or instrument; but in its
discretion, the Warrant Agent may in lieu thereof accept other evidence of such
matter or may require such further or additional evidence as it may deem
reasonable.
(c) The Warrant Agent shall be liable hereunder only for its own gross
negligence or willful misconduct. The Warrant Agent shall act hereunder solely
as agent, and its duties shall be determined solely by the provisions hereof.
The Issuer agrees to indemnify the Warrant Agent and save it harmless against
any and all liabilities, including judgments, costs and counsel fees, for
anything done or omitted by the Warrant Agent in the execution of this Agreement
except as a result of the Warrant Agent's gross negligence or willful
misconduct.
(d) The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Issuer only.
(e) The Warrant Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof or in
respect of the validity or execution of any Warrant Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Issuer of any covenant or condition contained in this Agreement or in any
Warrant Certificate; nor shall it be responsible for the making of any
adjustment in the Purchase Price, or number of Shares issuable upon exercise of
the Warrant Certificates or responsible for the manner, method or amount of any
such adjustment or the facts that would require any such adjustment; nor shall
it by any act hereunder be deemed to make any representation or warranty as to
the authorization or reservation of any Shares or other securities to be issued
pursuant to this Agreement or any Warrant Certificate or as to whether any
Shares or other securities are or will be validly authorized and issued
- 11 -
<PAGE> 13
and fully-paid and non-assessable. The Warrant Agent shall have no duty with
respect to any supplemental agreement or certificate provided for in Article III
except to make available for inspection any such document filed with it to any
registered holder of Warrant Certificates during reasonable business hours.
SECTION 6.05. The Warrant Agent hereby accepts the agency established by
this Agreement and agrees to perform the same upon the terms and conditions
herein set forth.
SECTION 6.06. The Want Agent may, without the consent or concurrence of the
registered holders of the Warrant Certificates, by supplemental agreement or
otherwise,. join with the Issuer in making any changes or corrections in this
Agreement that they shall have been advised by counsel (i) are required to cure
any ambiguity or to correct any defective or inconsistent provision or clerical
omission or mistake or manifest error herein contained, or (ii) add to the
covenants and agreements of the Issuer in this Agreement such further covenants
and agreements thereafter to be observed, or surrender any right or power
reserved to or conferred upon the Issuer in this Agreement, provided that such
changes or corrections do not or will not adversely affect, alter or change the
rights, privileges or immunities of the registered holders of Warrant
Certificates including, without limitation, reducing the Purchase Price of the
shares purchasable pursuant to the Warrant Certificates or extending the
exercise period of the Warrant Certificates.
SECTION 6.07. All the covenants and provisions of this Agreement by or for
the benefit of the Issuer or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns.
SECTION 6.08. Upon any merger or consolidation of the Issuer with or into
any other corporation, or the sale or transfer of its property, assets and
business substantially as an entirety to a successor, the corporation resulting
from such merger or consolidation (if not the Issuer), or such successor, shall
expressly assume, by supplemental agreement satisfactory in form to the Warrant
Agent and executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and condition of this
Agreement to be performed and observed by the Issuer.
SECTION 6.09. Any notice or demand authorized by this Agreement to be given
or made by the warrant Agent or by the registered holder of any Warrant
Certificate to or on the Issuer shall be sufficiently given or made if sent by
mail, first class or registered, postage prepaid, addressed (until another
address
- 12 -
<PAGE> 14
is filed in writing by the Issuer with the Warrant Agent), as follows:
The Bank of Nashville
Attn: J. Richard Chambers
222 Third Avenue North
Suite 316
Nashville, Tennessee 37201
Any notice or demand authorized by this Agreement to be given or made by the
registered holder of any Warrant Certificate or by the Issuer to or on the
Warrant Agent shall be sufficiently given or made if sent by mail, first class
or registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Issuer), as follows:
The Bank of Nashville, Trust Department
Attn: Bruce L. Mitchell
222 Third Avenue North
Suite 316
Nashville, Tennessee 37201
SECTION 6.10. The validity, interpretation and performance of this
Agreement and each Warrant Certificate issued hereunder and of the respective
terms and provisions thereof shall be governed by the laws of the State of
Tennessee.
SECTION 6.11. Nothing in this Agreement expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the Issuer, the
Warrant Agent, and the registered holders of the Warrant Certificates, any
right, remedy or claim under or by reason of this Agreement or of any covenant,
condition, stipulation, promise or agreement herein; and all covenants,
conditions, stipulations, promises and agreements in this Agreement contained
shall be for the sole and exclusive benefit of the Issuer, the Warrant Agent,
their respective successors, and the registered holders of the Warrant
Certificates.
SECTION 6.12. The descriptive headings of the several Articles of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
SECTION 6.13. This Agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original; but such
counterparts shall together constitute but one and the same instrument.
- 13 -
<PAGE> 15
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of August 1, 1989, and effective as of the day and year first above
written.
THE BANK OF NASHVILLE
By: J. Richard Chambers
------------------------
J. Richard Chambers
Attest: President and CEO
/s/ Joan B. Marshall
- --------------------
(Secretary)
THE BANK OF NASHVILLE,
Trust Department
By: /s/ Bruce L. Mitchell
-------------------------
Bruce L. Mitchell
Senior Vice President, Trust
Attest:
- 14 -
<PAGE> 16
THE BANK OF NASHVILLE
INCORPORATED UNDER THE LAWS OF THE STATE OF TENNESSEE
Warrants Expire December 31, 1995.
THIS CERTIFIES THAT
IS THE REGISTERED HOLDER OF
COMMON STOCK PURCHASE WARRANTS (the "Warrants") expiring December 31, 1995, as
provided in the Warrant Agreement, dated August 1, 1989, to purchase common
stock, par value $6.00 per share, of The Bank of Nashville, a Tennessee bank
(the "Bank"). Each Warrant entitles the holder to purchase from the Bank, on or
before 5:00 p.m. local time December 31, 1995, in Nashville, Tennessee one fully
paid and nonassessable share of common stock of the Bank at the purchase price
(the "Purchase Price") at the time in effect under the Warrant Agreement ($12.50
per share at the time of the issuance of the Warrants), payable in lawful money
of the United States of America, upon surrender of this Warrant Certificate and
payment of such Purchase Price at the principal corporate trust office of the
Warrant Agent in Nashville, Tennessee, but only subject to the conditions set
forth of the in the Warrant Agreement; provided, however, that the number of
kind of shares (or in certain events other property) purchasable upon exercise
of the Warrant an payment of the purchase price may as of the date of this
Warrant Certificate have been, or may after such a date be, adjusted as a
result of the occurrence of certain events as more fully provided in the Warrant
Agreement. A copy of the Warrant Agreement is available for inspection during
normal business hours in the office of the Warrant Agent. Payment of the
Purchase Price shall be made in cash or by certified or official bank check
payable to the order of the Bank.
This Warrant Certificate shall not be valid unless countersigned by the Warrant
Agent by the manual signature of one of its authorized officers.
IN WITNESS WHEREOF, The Bank of Nashville has caused this Warrant
Certificate to be duly executed under its facsimile corporate seal and the
facsimile signatures of its authorized officers.
ATTEST:
/s/ Joan B. Marshall /s/J Richard Chambers
Secretary President
Dated:
Countersigned:
[SEAL THE BANK OF NASHVILLE]
THE BANK OF NASHVILLE
NASHVILLE TENNESSEE
SEE REVERSE FOR
CERTAIN DEFINITIONS Warrant Agent
Authorized Signature
<PAGE> 17
THE BANK OF NASHVILLE
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of supervisorship and not as tenants in
common
UNIF GIFT MIN ACT ..........Custodian..........
(Cust) (Minor)
under Uniform Gifts to Minors
Act .........................
(State)
Additional abbreviations may also be used though not in the above list.
The undersigned hereby (1) irrevocably elects to exercise ___________
Warrants, evidenced by the within Warrant Certificate and to purchase thereunder
________ full shares of the common stock issueable upon exercise of said
Warrants, (2) makes payment in full of the Purchase Price of such shares and any
applicable taxes, (3) requests that certificates for such shares be issued in
the name of and delivered to the following: (PLEASE PRINT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER, AND NAME AND ADDRESS)
SOCIAL SECURITY NUMBER OR OTHER
IDENTIFYING NUMBER
___________________________
___________________________
_______________________________________________________________________________
Name
_______________________________________________________________________________
Street Address or Post Office Box
_______________________________________________________________________________
City, State, Zip Code
and (4) if said number of Warrants shall not be all the Warrants evidenced by
the within Certificate, requests that a new Warrant Certificate evidencing the
Warrants not so exercise be issued in the name of and delivered to the
following:
_______________________________________________________________________________
Name
_______________________________________________________________________________
Street Address or Post Office Box
_______________________________________________________________________________
City, State, Zip Code
Dated_____________________, 19 ________
Signature:_____________________________________________________________________
NOTICE: The above signature must correspond with the name as written the face of
the Warrant Certificate in every particular, without alteration or enlargement
or any change whatsoever, or if signed by any other person, the Form of
Assignment hereon must be duly executed and if the certificate representing the
shares or any Warrant Certificate representing Warrants not exercised is to be
registered in a name other than that in which the Warrant Certificate is
registered, the signature of the holder hereof must be guaranteed.
SIGNATURE GUARANTEE:
FORM OF ASSIGNMENT
(To Be Executed by the Registered Holder to Assign
Warrants Evidenced by the Warrant Certificate)
FOR VALUE RECEIVED _____________________________________________________ hereby
sells, assigns and transfer unto_______________________________________________
________________________________________________________________________________
________________________________________________________________________________
Warrants, evidenced by the Warrant Certificates, and does hereby irrevocably
constitute and appoint____________ Attorney to transfer the said Warrants
evidenced by the Warrant Certificate on the books of the Bank, with full
power of substitution.
SOCIAL SECURITY NUMBER OR OTHER
IDENTIFYING NUMBER
____________________________
____________________________
Dated_____________________, 19 _______
Signature:_____________________________________________________________________
NOTICE: The above signature must correspond as written upon the face of the
Warrant Certificate in every particular, without alteration or enlargement or
any change whatsoever.
SIGNATURE GUARANTEE:
WARRANT
<PAGE> 18
EXHIBIT B
WARRANT AGENT'S FEE SCHEDULE
<PAGE> 19
[CUSIP LETTERHEAD]
DATE: 11/14/1989
TYPE: C-BA4768
INVOICE NO: 10368
SUPPLEMENT DATE: 11/10/1989
PAGE NUMBER: 1
STANDARD & POOR'S/McGRAW HILL/25 BROADWAY, NEW YORK, N.Y., 10004 /(212)208-8329
Attn: Steven J. Eisen
Baker, Worthington, Crossley, Stansberry & Woolf
1700 Nashville City Center
Nashville, TN 37219
CUSIP NO. DATED COUPON MATURITY DESCRIPTION AMOUNT
New Issue: BANK NASHVILLE TEN
063787 10 5 COM $74.00
063787 11 3 12/31/1995 WT EXP
063787 20 4 12/31/1995 UNIT 1 COM & WT EXP
OK TO PAY
/s/
01-30-90
( 1 ITEM(S) 474.00 ) TOTAL AMOUNT DUE; $ 74.00
FOR CUSTOMER SERVICE CALL: (212) 208-8339
PLEASE DETACH AND REMIT WITH YOUR PAYMENT DATE: 11/14/1989
TYPE: C-BA4768
INVOICE NO: 10368
SUPPLEMENT DATE: 11/10/1989
Attn: Steven J. Eisen
Baker, Worthington, Crossley, Stansberry & Woolf
1700 Nashville City Center
Nashville, TN 37219
TOTAL AMOUNT DUE = $ 74.00
PD 12.6.89
CK #839
CUSIP (TM)
<PAGE> 1
EXHIBIT 4.02
SHARES
COMMUNITY FINANCIAL GROUP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF TENNESSEE
SEE REVERSE FOR
CERTAIN DEFINITIONS
-------------------
CUSIP 20365M 10 8
-------------------
THIS CERTIFIES THAT
IS THE REGISTERED HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $6.00 EACH OF THE
COMMON STOCK OF COMMUNITY FINANCIAL GROUP, INC. , (hereinafter called the
"Corporation") transferable only on the books of the Corporation by the holder
hereof or by attorney, upon surrender of this Certificate properly endorsed.
This Certificate is issued by the Corporation subject to all the terms and
conditions pertaining to Common Stock of the Corporation contained in its
Charter of Incorporation and Bylaws, each as amended, copies which are on file
in the office of the Corporation, to which is hereby made.
This Certificate is not valid until countersigned by the transfer agent.
IN WITNESS WHEREOF, Community Financial Group, Inc. has caused this certificate
to be duly executed under its facsimile signature of its authorized officers.
Dated:
Countersigned:
REGISTRAR AND TRANSFER COMPANY
Warrant Agent
[SEAL COMMUNITY FINANCIAL GROUP, INC.]
/s/ Mack S. Linebaugh
/s/ Joan B. Marshall
<PAGE> 2
COMMUNITY FINANCIAL GROUP, INC.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of supervisorship and not as tenants
in common
UNIF GIFT MIN ACT ..........Custodian..........
(Cust) (Minor)
under Uniform Gifts to Minors
Act .........................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ___________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________________
_____________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________ SHARES
OF CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
____________________________________________________________________ ATTORNEY TO
TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN-NAME CORPORATION WITH FULL
POWER OF SUBSTITUTION IN THE PREMISES.
DATE:______________________
SIGNATURE: _____________________________________________________
NOTICE THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE. IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEE:
<PAGE> 1
EXHIBIT 4.03
WARRANTS
COMMUNITY FINANCIAL GROUP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF TENNESSEE
SEE REVERSE FOR
CERTAIN DEFINITIONS
-------------------
CUSIP 20365M 11 6
-------------------
THIS CERTIFIES THAT
IS THE REGISTERED HOLDER OF
COMMON STOCK PURCHASE WARRANTS (the :Warrants") expiring December 31, 1995, as
provided in the Warrant Agreement, dated August 1, 1989, (which has been
extended to December 31, 1998), to purchase common stock, par value $6.00 per
share of Community Financial Group, Inc. (the "Corporation"). Each Warrant
entitles the holder to purchase from the Corporation, on or before 5:00 pm local
time December 31, 1998, in Nashville, Tennessee one fully paid and nonassessable
share of common stock of the Corporation at the purchase price (the "Purchase
Price") at the time in effect under the Warrant Agreement ($12.50 per share at
the time of the issuance of the Warrant), payable in lawful money of the United
States of America, upon surrender of this Warrant Certificate and payment of
such Purchase Price at the principal office of the Corporation in Nashville,
Tennessee, but only subject to the conditions set forth of the in the Warrant
Agreement; provided, however, that the number of kind shares (or in certain
events other property) purchasable upon exercise of the Warrant Agreement. A
copy of the Warrant Agreement is available for inspection during normal business
hours in the office of the Corporation. Payment of the Purchase Price shall be
made in cash or by certified or official bank check payable to the order of the
Corporation.
This Warrant Certificate shall not be valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, Community Financial Group, Inc. has caused this Warrant
Certificate to be dully executed under its facsimile corporate seal and the
facsimile signature of this authorized officers.
Dated:
Countersigned:
REGISTRAR AND TRANSFER COMPANY
Warrant Agent
[SEAL COMMUNITY FINANCIAL GROUP, INC.]
/s/ Mack S. Linebaugh
/s/ Joan B. Marshall
<PAGE> 2
COMMUNITY FINANCIAL GROUP, INC.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of supervisorship and not as tenants in
common
UNIF GIFT MIN ACT ..........Custodian..........
(Cust) (Minor)
under Uniform Gifts to Minors
Act .........................
(State)
Additional abbreviations may also be used though not in the above list.
The undersigned hereby (1) irrevocably elects to exercise line Warrants
evidenced by the within Warrant Certificate and to purchase thereunder ________
full shares of the common stock issueable upon exercise of said Warrants, (2)
makes payment in full of the Purchase Price of such shares and any applicable
taxes, (3) requests that certificates for such shares be issued in the name of ,
and delivered to the following: (PLEASE PRINT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER, AND NAME AND ADDRESS)
SOCIAL SECURITY NUMBER OR OTHER
IDENTIFYING NUMBER
- ---------------------------
- ---------------------------
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Street Address or Post Office Box
- --------------------------------------------------------------------------------
City, State, Zip Code
and (4) if said number of Warrants shall not be all the Warrants evidenced by
the within Certificate, requests that a new Warrant Certificate evidencing the
Warrants not so exercise be issued in the name of and delivered to the
following:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Street Address or Post Office Box
- --------------------------------------------------------------------------------
City, State, Zip Code
Dated , 19
---------------------
Signature:
---------------------------------------------------------------------
NOTICE the above signature must correspond with the name as written the face of
the Warrant Certificate in every particular, without alteration or enlargement
or any change whatsoever, or if signed by any other person, the Form of
Assignment hereon must be dully executed and if the certificate representing the
shares or any Warrant Certificate representing Warrants not exercised is to be
registered in a name other than that in which the Warrant Certificate is
registered, the signature of the holder hereof must be guaranteed
SIGNATURE GUARANTEE:
FORM OF ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER TO ASSIGN
WARRANTS EVIDENCED BY THE WARRANT CERTIFICATE)
FOR VALUE RECEIVED _____________________________________________________ HEREBY
sells, assigns and transfer unto_______________________________________________
- --------------------------------------------------------------------------------
Warrants, evidenced by the Warrant Certificates and does hereby irrevocably
constitute and appoint____________ Attorney to transfer the said Warrants
evidenced by the Warrant Certificate on the books of the Corporation, with full
power of substitution.
SOCIAL SECURITY NUMBER OR OTHER
IDENTIFYING NUMBER
- ---------------------------
- ---------------------------
Dated , 19
--------------------- ------
Signature:
----------------------------------------------------------------------
NOTICE: The above signature must correspond as written upon the face of the
Warrant Certificate in every particular, without alteration or enlargement or
any change whatsoever.
SIGNATURE GUARANTEE:
<PAGE> 1
EXHIBIT 10.01
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (sometimes herein this
"Amendment") is made as of the 2nd day of September, 1995, by and between THE
BANK OF NASHVILLE, a corporation formed under the laws of the State of Tennessee
(the "Employer"), and MACK S. LINEBAUGH, JR. (the "Employee").
WITNESSETH:
WHEREAS, Employer and Employee are parties to that certain Employment
Agreement dated September 2, 1992, which Employment Agreement had an initial
term through September 1, 1993; and
WHEREAS, by letter dated August 2, 1993 from Employer to Employee, the
term of such Employment Agreement was renewed and extended for the period from
September 2, 1993 through September 1, 1994; and
WHEREAS, by letter dated August 25, 1994 from Employer to Employee,
the term of such Employment Agreement was renewed and extended for the period
from September 2, 1994 through September 1, 1995 (such Employment Agreement as
extended and renewed pursuant to the August 2, 1993 letter described above and
as extended and renewed pursuant to the August 25, 1994 letter described above
is hereinafter referred to as the "Employment Agreement"); and
WHEREAS, Employer and Employee desire to amend the Employment
Agreement to renew and extend the Employment Agreement for the period from
September 2, 1995 through September 1, 1996 and to provide for two (2) one-year
renewal periods thereafter.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Employer and Employee hereby agree as follows:
1. Paragraph 2 of the Employment Agreement is hereby amended by
deleting the second sentence therefrom in its entirety and inserting in lieu
thereof the follows:
Employer may renew this contract upon proper notice to Employee for up
to five (5) one-year renewal periods provided the compensation will be
maintained at least at the initial level and shall be negotiated
further as described below.
2. Employer and Employee hereby acknowledge and agree that the
Employment Agreement was properly extended and renewed for the period from
September 2, 1993 through September 1, 1994 pursuant to that certain letter
dated August 2, 1993 from Employer to Employee and that the Employment Agreement
was properly extended and renewed for the period from September 2, 1994 through
September 1, 1995 pursuant to that certain letter dated August 25, 1994 from
Employer to Employee. Employer and Employee hereby irrevocably waive any
requirement that notice of either such extension and renewal be given thirty
(30) days prior to the then expiration of the Employment Agreement.
<PAGE> 2
3. Employer and Employee hereby agree that the Employment Agreement
shall be and is hereby renewed and extended for the period from September 2,
1995 through September 1, 1996, and Employer and Employee hereby irrevocably
waive any requirement as otherwise set forth in the Employment Agreement
concerning notice of the extension and renewal for such period.
4. The provisions of this Amendment shall in no way alter any stock
options which Employer may have heretofore granted to Employee, and the
execution of this Amendment shall in no way be construed as an agreement by
Employer to grant Employee any additional stock options.
5. Except as hereby modified and amended, the Employment Agreement
shall otherwise remain in full force and effect and shall not be affected by
this Amendment.
IN WITNESS WHEREOF, Employer and Employee have executed this Amendment
on the date set forth below opposite each such party's signature, but effective
as of September 2, 1995.
EMPLOYER:
THE BANK OF NASHVILLE
Date: August 11, 1995 By:/s/ Joan B. Marshall
--------------- ---------------------------------
Joan B. Marshall, Vice President and
Corporate Secretary
EMPLOYEE:
Date: August 11, 1995 /s/ Mack S. Linebaugh, Jr.
--------------- ----------------------------------
Mack S. Linebaugh, Jr.
-2-
<PAGE> 3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement")
is dated this 2nd day of September, 1992, and is by and between THE BANK OF
NASHVILLE (hereinafter referred to as the "Employer"), a corporation formed
under the laws of the State of Tennessee, and MACK S. LINEBAUGH, JR.
(hereinafter referred to as the "Employee").
Employer and Employee hereby agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts employment, upon the terms and conditions hereinafter set
forth.
2. TERM. Subject to the provisions hereof, and the faithful
performance by Employee of his employment, as herein defined, the
term of Employee's employment hereunder shall commence on
September 2, 1992, and shall continue thereafter for a period of
one year (hereinafter referred to as the "Term" with the end of
each Term being referred to as an "Anniversary Date"). Employer
may renew this contract upon proper notice to Employee for up to
two (2), one-year renewal periods provided the compensation will
be maintained at least at the initial level and shall be
negotiated further as described below. The Employer, through the
Secretary to its Board of Directors, must notify Employee thirty
(30) days prior to the expiration hereof of its decision to renew
or its reasons for not renewing, if for cause, as defined in
Section 11.
<PAGE> 4
3. COMPENSATION.
(a) Base Salary. As compensation for the services to be rendered
by Employee during the period of his employment hereunder, and upon the
condition that Employee shall fully and faithfully keep and perform all of the
terms and conditions hereof, Employer shall pay Employee a salary of
$160,000.00, less income tax and social security withholdings and other
deductions for employee benefits applicable to other employees of Employer
("Salary"). Such Salary shall be payable in 24 equal installments paid on the
15th and last day of each month. The Salary shall be subject to periodic review
and revision by the Board of Directors of the Employer but shall not be
decreased during the term of employment hereunder.
(b) Participation in Benefits Plans. Employee shall receive all
other benefits generally offered to other employees of the Employer
("Benefits").
(c) Incentive Compensation. In addition to Salary, Employee
shall be entitled to receive such bonus or incentive compensation payments as
the Board of Directors in its sole discretion may determine from time to time.
(d) Stock Options. Employee shall receive as additional
compensation stock options to purchase 20,000 shares of common stock of the
Employer for a cash purchase price of $6.00 per share which is equal to the
market price of the common stock of the Employer on the date of the grant. The
date of the grant shall be the date of this Agreement. The right to exercise the
stock option
2
<PAGE> 5
shall vest as to 10,000 shares immediately, as to 5,000 shares on September I,
1993 and as to the remaining 5,000 shares on September 1, 1994. The vesting of
the options is conditioned upon Employee being employed by Employer or its
successor on the vesting date.
All options may be exercised in increments or in whole at any time until
August 31, 2002.
(i) Reservation of Stock. The Employer covenants that while the option is
exercisable, it will reserve from its authorized and unissued common stock a
sufficient number of shares to provide for the delivery of stock pursuant to the
exercise of this option.
(ii) Protection Against Dilution. In any of the following events, occurring
hereafter, appropriate adjustment shall be made in the number of shares
deliverable upon the exercise of this option or the price per share to be paid
so as to maintain the proportionate interest of the option holder: (a)
recapitalization of the Employer through a split-up of the outstanding shares of
the common stock or a combination of the outstanding shares into a lesser
number; (b) declaration of a dividend on the common stock of the Employer,
payable in common stock or securities convertible into common stock; (c)
issuance of common stock at less than the price per share payable upon the
exercise of this option, or issuance of securities carrying conversion
privileges or bearing stock purchase options for common stock at more favorable
terms than provided by this option.
(iii) Merger. If the Employer, or any successor, shall be consolidated or
merged with another corporation, or substantially all of its assets shall be
sold to another corporation in exchange for stock with the view to distributing
such stock to its shareholders, each share of stock purchasable by this option
shall be replaced for the purposes hereof by the securities or property issuable
or distributable in respect of one share of common stock of this Employer, or
its successors, upon such consolidation, merger, or sale, and adequate provision
to that effect shall be made at the time thereof. If all or substantially all of
Employer or any successor shall be sold for cash then all invested options shall
vest and Employee may immediately exercise such options.
(iv) Shareholder's Rights. Until the valid exercise of this option, the
holder hereof shall not be entitled to any rights of a shareholder, but
immediately upon the exercise of this option and upon payment as provided
herein, the holder hereof shall be deemed a record holder of the common stock.
3
<PAGE> 6
(e) Incentive Phantom Stock Plan. Employer shall grant employee
60,000 Phantom Stock Appreciation Rights pursuant to Employers Incentive Phantom
Stock Appreciation Rights Plan. The Date of Grant shall be January l, 1993.
(f) Continuation. This Agreement shall not be deemed abrogated or
terminated if the Board~of Directors or shareholders of Employer shall determine
to increase the compensation of Employee for any period of time.
4. DUTIES. Employee is engaged as the President and Chief Executive
Officer of Employer, to render services in such capacity which are consonant
with the position of President and Chief Executive Officer. In addition,
Employee shall perform such other duties as are reasonably required of him by
Employer in his capacity as an executive employee. The precise services of
Employee may be extended or curtailed, from time to time, at the direction of
Employer as long as Employee continues to serve as the Chief Executive Officer
with such duties as are consistent with those of a Chief Executive Officer. If
Employee is elected or appointed an officer and/or director of Employer during
the term of this Agreement, Employee shall serve in such capacity or capacities
without further compensation.
5. UNAUTHORIZED DISCLOSURE. During the period of his employment
hereunder, Employee shall not, without the prior written consent of the Board of
Directors, disclose to any person, other than a person to whom disclosure is
necessary or appropriate in connection with the performance by Employee of his
duties as an
4
<PAGE> 7
officer of the Employer, any confidential information obtained by HIM WHILE IN
the employ of the Company with respect to any of the Employer's products,
improvements, designs or styles, processes, customers, methods of marketing or
distribution, systems, procedures, plans, proposals, or policies the disclosure
of which he knows, or should have reason to know, could be damaging to the
Employer; provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Employee) or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that conducted by the Employer. Following the termination of
employment hereunder, the Employee shall not disclose any confidential
information of the type described above except as may be required in the opinion
of the Employee's counsel in connection with any judicial or administrative
proceeding or inquiry.
6. EXPENSES. Employee is authorized to incur reasonable expenses
for promoting the business of Employer. Employer shall reimburse Employee for
all such expenses upon the presentation by Employee, from time to time, of an
account of such expenditures, setting forth the purposes for which incurred, and
the amounts thereof, together with such receipts showing payments as Employee
has reasonably been able to obtain.
7. VACATIONS. Employee shall be entitled each year to a reasonable
vacation or vacations, consistent with Employer's vacation policy, during which
time his compensation shall be paid
5
<PAGE> 8
in full. Each such vacation shall be taken during a period mutually satisfactory
to both Employer and Employee hereunder.
8. EXTENT OF SERVICES. Employee agrees to perform his services
efficiently, to the best of his ability, and to Employer's reasonable
satisfaction. Employee agrees that throughout the Term of this Agreement, he
will devote Substantially all of his time, care, attention, and efforts to
Employer's business. Employee agrees that throughout the Term of this Agreement
he will not be engaged or interested in any other business activity which
competes with Employer, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage. Notwithstanding the foregoing,
Employee is permitted to engage in or become interested in the businesses and
activities enumerated in Schedule 1 annexed hereto, provided that his interest
or involvement therein does not otherwise violate any other term or provisions
of this Agreement other than the preceding sentence of this Section 8. Employee
agrees that all of his activities as an employee shall be in conformity with all
present and future policies, rules, regulations and reasonable directions of
Employer.
9. INTELLECTUAL PROPERTY. All right, title and interest of every
kind and nature whatsoever in and to any intellectual property, including any
inventions, patents, trademarks, copyrights, ideas, creations, and properties
furnished to Employer during the Term, and/or used in connection with any of
Employer's activities, or written or created by Employee, or with which Employee
is connected in the performance of his services hereunder,
6
<PAGE> 9
shall as between the parties hereto be, become, and remain the sole and
exclusive property of Employer for any and all purposes and uses whatsoever,
regardless of whether the same were invented, created, written, developed,
furnished, produced, or disclosed by Employee or any other party, and Employee
shall have no right, title or interest of any kind or Pasture therein or
thereto, or in and to any results and proceeds therefrom. Employee agrees,
during and after the Term hereof, to execute any and all documents and
agreements which Employer may deem necessary and appropriate to effectuate the
provisions of this Section 9. the provisions of this Section 9 shall survive the
expiration or termination, for any reason, of this Agreement and of Employee's
employment.
10. DEATH DURING EMPLOYMENT. If Employee dies during the Term of his
employment, Employer shall pay to the estate of Employee the compensation which
would otherwise be payable to Employee up to the end of the month in which his
death occurs.
11. TERMINATION OF AGREEMENT. Should any of the following events
occur, Employer may, at its election, terminate this Agreement by giving written
notice thereof to Employee, which such notice shall be effective immediately:
(a) Employee is physically or mentally incapacitated either for a
period of sixty (60) consecutive days, or for a total of ninety (90)
days in any twelve month period and is unable to perform the essential
functions of his job with or without reasonable accommodations.
7
<PAGE> 10
(b) Employee conducts himself in a manner substantially
detrimental to Employer, and constitutes on the part of the Employee
personal dishonesty, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated
duties of the Chief Executive Officer of the Employer, willful
violation of any law, governmental rule or regulation (other than
traffic violations of similar offenses) or final cease and desist
order, or material breach of this Agreement or for any of the reasons
set forth in 12 USC section 1818(e) and (g), determined on a
reasonable basis.
(c) Employee competes, in a manner prohibited by this Agreement,
with Employer during the Term hereof.
(d) Employee is convicted of a misdemeanor involving dishonesty
or breach of trust or is convicted of any felony.
(e) Employee engages in the illegal usage of any drug.
(f) Any state or federal regulatory agency or court of competent
jurisdiction issues an order requiring Employee's removal from any
duties or responsibilities for Employer.
Termination or any other disciplinary actions for any of the reasons stated
in this Section ll shall be deemed to be "for cause." In the event Employer
terminates or otherwise reduces the total value of Employee's Salary and
Benefits "for cause," Employer shall pay Employee the compensation and benefits
which would otherwise be payable to Employee up to the end of the month in which
the termination or disciplinary action occurs. However, should Salary and
Benefits be reduced for all employees with
8
<PAGE> 11
Employee's concurrence as a Board member, the reduction shall not invoke this
provision.
If the contract is not renewed as provided in Section 2 or Employer reduces
Employee's Salary or Benefits for reason other than cause, then the Employer
shall pay Employee within 30 days of notice from Employee to the Secretary of
the Board of Directors of the Bank a lump sum equal to six (6) months Salary
then being paid plus any Salary then due. Such payments will be conditioned, at
the Employer's option, upon the Employee's continuation of his employment for 60
days after notice with full Salary and Benefits, which shall be in addition to
the lump sum payment made thereafter. Employee will vacate the premises of the
Employer the last business day of the month in which such lump sum payment is
made.
The Employee may terminate his employment hereunder (i) at any time if his
health should become impaired to an extent that makes the continued performance
of his duties hereunder hazardous to his physical or mental health, or (ii) upon
sixty (60) days written notice for any other reason.
12. COMPETITION DURING AND AFTER TERM. Employee agrees that during his
employment hereunder, and for a period of six (6) additional months if a payment
of the lump sum amount referred to in Section 11 has been made, he will not,
either separately, jointly, or in association with others, directly or
indirectly, as an agent, employee, owner, partner, stockholder, or otherwise,
allow his name to be used by, or establish, engage in, or become interested in
any business, trade or occupation in substantial
9
<PAGE> 12
competition with the principal business being conducted by employer, in any
banking market of Employer where Employee has been principally stationed, and in
which Employer's business is presently being conducted, as long as Employer, or
any person, firm, or corporation deriving title to the goodwill of, or shares
from it, carries on a like business therein. Notwithstanding the preceding
sentence, Employee shall be allowed to engage in or be interested in the
businesses and activities enumerated in Schedule 1 annexed hereto, provided that
his interest or involvement therein does not otherwise violate any other term or
provision of this Agreement other than the preceding sentence of this Section
12. Employer and Employee acknowledge that during the Term of Employee's
employment, Employee will acquire special knowledge and/or skill that he can
effectively utilize in competition with Employer.
Employee agrees that the remedy at law for any breach by him of the
covenants contained herein will be inadequate, and that in the event of a
violation of the covenants contained herein, in addition to any and all legal
and equitable remedies which may be available, the said covenants may be
enforced by an injunction in a suit in equity, without the necessity of proving
actual damage, and that a temporary injunction may be granted immediately upon
the commencement of any such suit, and without notice. The parties hereto intend
that the covenants contained in this Section 12 shall be deemed to be a series
of separate covenants, one for each county of each state where Employer does
business and Employee has been
10
<PAGE> 13
stationed. If, in any judicial proceeding, a court shall refuse to enforce any
or all of the separate covenants deemed included in such ACTION, then such
unenforceable covenants shall be deemed eliminated from the provisions hereof
for the purposes of such proceeding to the extent necessary to permit the
remaining separate covenants to be enforced in such proceeding. Furthermore, if
in any judicial proceeding a court shall refuse to enforce any covenant by
reason of the duration or extent thereof, such covenant shall be construed to
have only the maximum duration or extent permitted by law.
13. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by registered or
certified mail, postage prepaid, addressed as follows:
If to Employer: The Bank of Nashville
401 Church Street
Nashville, Tennessee 37219
ATTN: Corporate Secretary
If to Employee: Mack S. Linebaugh, Jr.
400 Wilsonia Drive
Nashville, Tennessee 37205
The persons and addresses to which mailings may be made may be changed from time
to time by a notice mailed as aforesaid.
14. ACKNOWLEDGMENT OF PECULIAR VALUE OF SERVICES. The Employer and
Employee recognize that each party will have no adequate remedy at law for
breach by the other of any of the agreements contained herein and, in the event
of any such breach, the parties hereby agree and consent that the other shall be
11
<PAGE> 14
entitled to a decree of specific performance, mandamus or other appropriate
remedy to enforce performance of this Agreement.
15. WAIVER OF BREACH. No provisions of this Agreement may be waived or
discharged unless such waiver or discharge is agreed to in writing signed by
Employee and the Employer. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
16. ASSIGNMENT. This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided for herein. Without limiting the generality of the foregoing,
Employee's right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security interest or
otherwise, other than by a transfer by his will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer contrary
to this paragraph, the Employer shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
17. ENTIRE AGREEMENT AND MODIFICATION. This instrument contains the entire
agreement of the parties hereto, and supersedes any and all prior agreements,
arrangements or understandings between the parties hereto relating to the
subject matter hereof.
12
<PAGE> 15
This Agreement may not be modified, changed, or terminated by the parties
hereto, unless such modification, change or termination is expressly agreed in
writing by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 28th of September, 1992.
EMPLOYER:
THE BANK OF NASHVILLE
By:/s/ Joan B. Marshall
-------------------------------
Joan B. Marshall, Corporate
Secretary
EMPLOYEE:
/s/ Mack S. Linebaugh, Jr.
---------------------------------
Mack S. Linebaugh, Jr.
13
<PAGE> 16
SCHEDULE 1
Hawkins Properties
14
<PAGE> 1
EXHIBIT 10.02
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is
dated this 13th day of October, 1996, and is by and between THE BANK OF
NASHVILLE (hereinafter referred to as the "Employer"), a corporation formed
under the laws of the State of Tennessee, and JULIAN C. CORNETT (hereinafter
referred to as the "Employee").
Employer and Employee hereby agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts employment, upon the terms and conditions hereinafter set forth.
2. Term. Subject to the provisions hereof, and the faithful performance by
Employee of this employment, as herein defined, the term of Employee's
employment hereunder shall commence on October 13, 1996, and shall continue
thereafter for a period of one year.
3. Compensation.
(a) Base Salary. As compensation for the services to be rendered by
Employee during the period of his employment hereunder, and upon the condition
that Employee shall fully and faithfully keep and perform all of the terms and
conditions hereof, Employer shall pay Employee a salary of $144,700.00, less
income tax and social security withholdings and other deductions for employee
benefits applicable to other employees of Employer ("Salary"). Such Salary shall
be payable in one initial
<PAGE> 2
installment (pro rata) and 23 equal installments paid on the 15th and last day
of each month. The Salary shall be subject to periodic review and revision by
the Employer but shall not be decreased during the term of employment hereunder.
(b) Participation in Benefit Plans. Employee shall receive all other
benefits generally offered to other employees of the Employer ("Benefits").
(c) Continuation. This Agreement shall not be deemed abrogated or
terminated if the Board of Directors or shareholders of Employer shall determine
to increase the compensation of Employee for any period of time.
4. DUTIES. Employee is to be engaged as Executive Vice President and head
of Credit Administration to render services in such capacity which are consonant
with the position of Executive Vice President - Credit Administration. In
addition, Employee shall perform such other duties as are reasonably required of
him by Employer in his capacity as an executive employee. The precise services
of Employee may be extended or curtailed, from time to time, at the direction of
Employer as long as Employee continues to serve as the Executive Vice President
in Credit Administration with such duties as are consistent with that position.
If Employee is elected or appointed to serve as any other officer and/or
director of Employer during the term of this Agreement, Employee shall serve in
such capacity or capacities without further compensation.
5. UNAUTHORIZED DISCLOSURE. During the period of his employment hereunder,
Employee shall not, without the prior written consent of the Employer, disclose
to any person, other than a person to whom disclosure is necessary or
appropriate in connection with the performance by Employee of his duties as an
officer of the employer, any
2
<PAGE> 3
confidential information obtained by him while in the employ of the Company with
respect to any of the Employer's products, improvements, designs or styles,
processes, customers, methods of marketing or distribution, systems, procedures,
plans, proposals, or policies the disclosure of which he knows, or should have
reason to know, could be damaging to the Employer; provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by the Employee)
or any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Employer. Following the termination of employment hereunder, the Employee shall
not disclose any confidential information of the type described above except as
may be required in the opinion of the Employee's counsel in connection with any
judicial or administrative proceeding or inquiry.
6. EXPENSES. Employee is authorized to incur reasonable expenses for
promoting the business of Employer. Employer shall reimburse Employee for all
such expenses upon the presentation by Employee, from time to time, of an
account of such expenditures, setting forth the purposes for which incurred, and
the amounts thereof, together with such receipts showing payments as Employee
has reasonably been able to obtain.
7. VACATIONS. Employee shall be entitled each year to a reasonable vacation
or vacations, consistent with Employer's vacation policy, during which time his
compensation shall be paid in full. Each such vacation shall be taken during a
period mutually satisfactory to both Employer and Employee hereunder.
3
<PAGE> 4
8. EXTENT OF SERVICES. Employee agrees to perform his services efficiently,
to the best of his ability, and to Employer's reasonable satisfaction. Employee
agrees that throughout the Term of this Agreement he will not be engaged or
interested in any other business activity which competes with Employer, whether
or not such business activity is pursued for gain, profit or other pecuniary
advantage. Employee agrees that all of his activities as Employee shall be in
conformity with all present and future policies, rules, regulations and
reasonable directions of Employer.
9. INTELLECTUAL PROPERTY. All right, title and interest of every kind and
nature whatsoever in any to any intellectual property, including any inventions,
patents, trademarks, copyrights, ideas, creations, and properties furnished to
Employer during the Term, and/or used in connection with any of Employer's
activities, or written or created by Employee, or with which Employee is
connected in the performance of his services hereunder, shall as between the
parties hereto be, become, and remain the sole and exclusive property of
Employer for any and all purposes and uses whatsoever, regardless of whether the
same were invented, created, written, developed, furnished, produced, or
disclosed by Employee or any other party, and Employee shall have no right,
title or interest of any kind or nature therein or thereto, or in any to any
results and proceeds therefrom. Employee agrees, during and after the Term
hereof, to execute any and all documents and agreements which Employer may deem
necessary and appropriate to effectuate the provisions of this Section 9. The
provisions of this Section 9 shall survive the expiration or terminations, for
any reason, of this Agreement and of Employee's employment.
4
<PAGE> 5
10. DEATH DURING EMPLOYMENT. If Employee dies during the Term of this
employment, Employer shall pay to the estate of Employee the compensation which
would otherwise be payable to Employee up to the end of the month in which his
death occurs.
11. TERMINATION OF AGREEMENT. Should any of the following events occur,
Employer may, at its election, terminate this Agreement by giving written notice
thereof to Employee, which such notice shall be effective immediately:
(a) Employee is physically or mentally incapacitated either for a
period of sixty (60) consecutive days, or for a total of ninety (90) days
in any twelve month period and is unable to perform the essential functions
of his job with or without reasonable accommodations.
(b) Employee conducts himself in a manner substantially detrimental to
Employer, and constitutes on the part of the Employee personal dishonesty,
willful misconducts, breach of fiduciary duty involving personal profit
intentional failure to perform stated duties of the Executive Vice
President of the Employer, willful violation of any law, governmental rule
or regulation (other than traffic violations or similar offenses) or final
cease and desist order, or material breach of this Agreement or for any of
the reasons set forth in 12 USC-1818(e) and (g), determined on a
reasonable basis.
(c) Employee competes, in a manner prohibited by this Agreement, with
Employer during the Term hereof.
5
<PAGE> 6
(d) Employee is convicted of a misdemeanor involving breach of trust
or is convicted of any felony.
(e) Employee engages in the illegal usage of any drug.
(f) Any state or federal regulatory agency or court of competent
jurisdiction issues an order requiring Employee's removal from any duties
or responsibilities for Employer.
Termination or any other disciplinary actions for any of the reasons stated
in this Section 11 shall be deemed to be "for cause." In the event Employer
terminates or otherwise reduces the total value of Employee's Salary and
Benefits "for cause," Employer shall pay Employee the compensation and benefits
which would otherwise be payable to Employee up to the end of the month in which
the termination or disciplinary action occurs.
If Employer, for reasons other than cause (i) does not, at the end of the
term, renew this agreement for a period of at least one year, (ii) or otherwise
terminates this agreement, then the Employer shall pay Employee within 30 days
of notice from Employee to the President of the Bank a lump sum equal to six (6)
months Salary then being paid plus any Salary then due. Such payments will be
conditioned, at the employer's option, upon the Employee's continuation of this
employment for 60 days after notice with full Salary and Benefits, which shall
be in addition to the lump sum payment made thereafter. Employee shall vacate
the premises of the Employer the last business day of the month in which such
lump sum payment is made.
6
<PAGE> 7
The Employee may terminate his employment hereunder (i) at any time if his
health should become impaired to an extent that makes the continued performance
of his duties hereunder hazardous to his physical or mental health, or (ii) upon
sixty (60) days written notice for any other reason.
12. COMPETITION DURING AND AFTER TERM. Employee agrees that during his
employment hereunder, and for a period of six (6) additional months if a payment
of the lump sum amount referred to in Section 11 has been made, he will not,
either separately, or in association with others, directly or indirectly, as an
agent, employee, owner, partner, stockholder, or otherwise, allow his name to be
used by, or establish, engage in, or become interested in any business, trade or
occupation in substantial competition with the principal business being
conducted by Employer, in any banking market of Employer where Employee has been
principally stationed, and in which Employer's business is presently being
conducted, as long as Employer, or any person, firm, or corporation deriving
title to the goodwill of, or shares from it, carries on a like business therein.
Employer and Employee acknowledge that during the term of the Employee's
employment, Employee will acquire special knowledge and/or skill that he can
effectively utilize in competition with Employer.
Employee agrees that the remedy at law for any breach by him of the
covenants contained herein will be inadequate, and that in the event of a
violation of the covenants contained herein, in addition to any and all legal
and equitable remedies which may be available, the said covenants may be
enforced by an injunction in a suit in equity, without the necessity of proving
actual damage, and that a temporary injunction may be granted
7
<PAGE> 8
immediately upon the commencement of any such suit, and without notice. The
parties hereto intent that the covenants contained in this Section 12 shall be
deemed to be a series of separate covenants, one for each county of each state
where Employer does business and Employee has been stationed. If, in any
judicial proceeding, a court shall refuse to enforce any or all of the separate
covenants deemed included in such action, then such unenforceable covenants
shall be deemed eliminated from the provisions hereof for the purposes of such
proceeding to the extent necessary to permit the remaining separate covenants to
be enforced in such proceeding. Furthermore, if in any judicial proceeding a
court shall refuse to enforce any covenant by reason of the duration or extent
thereof, such covenant shall be construed to have only the maximum duration or
extent permitted by law.
13. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by registered or
certified mail, postage prepaid, addressed as follows:
If to Employer: The Bank of Nashville
401 Church Street
Nashville, Tennessee 37219
Attention: Corporate Secretary
If to Employee: Julian C. Cornett
9311 Chesapeake Drive
Brentwood, Tennessee 37027
8
<PAGE> 9
The persons and addresses to which mailings may be made may be changed from time
to time by a notice mailed as aforesaid.
14. ACKNOWLEDGMENT OF PECULIAR VALUE OF SERVICES. The Employer and Employee
recognize that each party will have no adequate remedy at law for breach by the
other of any of the agreements contained herein and, in the event of any such
breach, the parties hereby agree and consent that the other shall be entitled to
a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of this Agreement.
15. WAIVER OF BREACH. No provisions of this Agreement may be waived or
discharged unless such waiver or discharge is agreed to in writing signed by
Employee and the Employer. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
16. ASSIGNMENT. This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided for herein. Without limiting the generality of the foregoing,
Employee's right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security interest or
otherwise, other than by a transfer by his will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer contrary
to this
9
<PAGE> 1
EXHIBIT 10.03
Document executed with 2 originals distributed as follows:
Original A to Optionee
Original B to The Bank of Nashville ORIGINAL B
STOCK OPTION AGREEMENT
ENTERED INTO BY THE BANK OF NASHVILLE
THIS STOCK OPTION AGREEMENT ("Agreement"), effective the 2nd day of
September, 1992, by and between THE BANK OF NASHVILLE, (the "Bank"), and Mack
S. Linebaugh, Jr. (the "Optionee") pursuant to the terms of the employment
agreement between the Bank and Optionee dated September 2, 1992.
1. Grant of Option. Bank hereby grants to Optionee a stock option (the
"Option"), exercisable in whole or in part, to purchase 20,000 shares of the
Bank's common stock, $6.00 par value per share (the "Common Stock"), for a price
of $6.00 per share.
2. Vesting. The right to exercise this Stock Option vested on September 2,
1992 as to 10,000 shares, shall vest on September l, 1993 as to 5,000 shares,
on September l, 1994 as to 5,000 shares, on N/A, 19___ to N/A shares, and
shall vest on N/A, l9___ as to the remaining shares. The vesting of the option
is conditioned upon Optionee being employed by Bank or its successor on the
respective dates of vesting.
3. Expiration of Option. This Option shall expire on August 31, 2002
with respect to any then unexercised portion of this Option.
<PAGE> 2
4. Manner of Exercise. This Option shall be exercised by Optionee (or other
party entitled to exercise the Option under Section 6 of this Agreement) by
delivering written notice to the Bank stating the number of shares of Common
Stock purchased, the person or persons in whose name the shares are to be
registered, and each person's address and social security number. Such notice
shall not be effective unless accompanied by the full purchase price for all
shares so purchased. The purchase price shall be payable in cash. Payment in
currency or by check, bank draft, cashier's check or postal money order shall be
considered payment in cash.
5. Nontransferability of Option. This Option shall not be transferable by
the Optionee otherwise than by will or by the laws of descent and distribution,
and is exercisable during Optionee's lifetime only by Optionee. The terms of
this Option shall be binding on the executors, administrators, heirs and
successors of Optionee.
6. Exercise after Death. If the Optionee dies before the expiration of this
Option, this Option may be exercised until the expiration pursuant to Section 3
of this Agreement by the executors or administrators of the Optionee's estate or
by any person or persons who shall have acquired this Option directly from the
Optionee by bequest or inheritance.
7. Restrictions on Purchase and Sale of Shares. If required by applicable
securities laws, the Optionee hereby agrees that, as a further condition to the
exercise of this
2
<PAGE> 3
Option, the Optionee (or his successor under Section 6 hereof) will execute
an agreement in form satisfactory to the Bank in which the Optionee
represents that he is purchasing the shares for investment purposes, and
not with a view to resale or distribution.
8. Reservation of Stock. Bank covenants that while the Option is
exercisable, it will reserve from its authorized and unissued common stock
a sufficient number of shares to provide for the delivery of stock pursuant
to the exercise of this Option.
9. Protection Against Dilution. In any of the following events,
occurring hereafter, appropriate adjustment shall be made in the number of
shares deliverable upon the exercise of this Option or in the price per
share to be paid so as to maintain the proportionate interest of the
Optionee: (a) recapitalization of the Bank through a split-up of the
outstanding shares into a lesser number; (b) declaration of a dividend on
the Common Stock of the Bank, payable in Common Stock or securities
convertible into Common Stock; (c) issuance of Common Stock at less than
the price per share payable upon the exercise of this Option, or issuance
of securities carrying conversion privileges or bearing stock purchase
options for Common Stock at more favorable terms than provided by this
Option.
10. Merger, Sale or Change of Majority Control. If a merger, sale or
change of majority control of the Bank is announced, then any portion of
this Option that is not vested
3
<PAGE> 4
shall vest upon the closing of such event. If the Bank, or any successor,
shall be consolidated or merged with another corporation, or substantially
all of its assets shall be sold to another corporation in exchange for
stock with the view to distributing such stock to its shareholders, each
share of stock purchasable by this Option shall be replaced for the
purposes hereof by the securities or property issuable or distributable in
respect of one share of Common Stock of this Bank, or its successors, upon
such consolidation, merger, or sale, and adequate provision to that effect
shall be made at the time thereof. If all or substantially all of Bank or
any successor shall be sold for cash, the Optionee may immediately exercise
any unexercised portion of this Option.
11. Optionee's Rights. Until the valid exercise of this Option, the
Optionee hereby shall not be entitled to any rights of a shareholder, but
immediately upon the exercise of this Option and upon payment as provided
herein, the Optlonee hereof shall be deemed a record holder of the common
stock.
12. Amendment. This Option may be amended only by the written
agreement of the parties hereto.
Executed this 19th day of May, 1993.
THE BANK OF NASHVILLE
By:/s/Joan B. Marshall
------------------------------------------
Title:/s/ Vice President - Corporate Secretary
---------------------------------------
OPTIONEE
/s/ Mack S. Linebaugh
---------------------------------------------
<PAGE> 5
Document executed with 2 originals distributed as follows:
Original A to Optionee
Original B to The Bank of Nashville ORIGINAL B
STOCK OPTION AGREEMENT
ENTERED INTO BY THE BANK OF NASHVILLE
THIS STOCK OPTION AGREEMENT ("Agreement"), effective the 27th day of
July, 1993, by and between THE BANK OF NASHVILLE, (the "Bank"), and Mack S.
Linebaugh, Jr. (the "Optionee") pursuant to the terms of the employment
agreement between the Bank and Optionee dated September 2, 1992 and notice
of extension approved by Board of Directors on July 27, 1993.
1. Grant of Option. Bank hereby grants to Optionee a stock option (the
"Option"), exercisable in whole or in part, to purchase 20,000 shares of
the Bank's common stock, $6.00 par value per share (the "Common Stock"),
for a price of $7.125 per share.
2. Vesting. The right to exercise this Stock Option vested on July 27,
1993 as to 4,000 shares, shall vest on July 27, 1994 as to 4,000 shares, on
July 27, 1995 as to 4,000 shares, on July 27, 1996 to 4,000 shares, and
shall vest on July 27, 1997 as to the remaining shares. The vesting of the
option is conditioned upon Optionee being employed by Bank or its successor
on the respective dates of vesting.
3. Expiration of Option. This Option shall expire on August 31, 2003
with respect to any then unexercised portion of this Option.
<PAGE> 6
4. Manner of Exercise. This Option shall be exercised by Optionee (or
other party entitled to exercise the Option under Section 6 of this
Agreement) by delivering written notice to the Bank stating the number of
shares of Common Stock purchased, the person or persons in whose name the
shares are to be registered, and each person's address and social security
number. Such notice shall not be effective unless accompanied by the
full purchase price for all shares so purchased. The purchase price shall
be payable in cash. Payment in currency or by check, bank draft, cashier's
check or postal money order shall be considered payment in cash.
5. Nontransferability of Option. This Option shall not be transferable
by the Optionee otherwise than by will or by the laws of descent and
distribution, and is exercisable during Optionee's lifetime only by
Optionee. The terms of this Option shall be binding on the executors,
administrators, heirs and successors of Optionee.
6. Exercise after Death. If the Optionee dies before the expiration of
this Option, this Option may be exercised until the expiration pursuant to
Section 3 of this Agreement by the executors or administrators of the
Optionee's estate or by any person or persons who shall have acquired this
Option directly from the Optionee by bequest or inheritance.
7. Restrictions on Purchase and Sale of Shares. If required by
applicable securities laws, the Optionee hereby agrees that, as a further
condition to the exercise of this
2
<PAGE> 7
Option, the Optionee (or his successor under Section 6 hereof) will execute
an agreement in form satisfactory to the Bank in which the Optionee
represents that he is purchasing the shares for investment purposes, and
not with a view to resale or distribution.
8. Reservation of Stock. Bank covenants that while the Option is
exercisable, it will reserve from its authorized and unissued common stock
a sufficient number of shares to provide for the delivery of stock pursuant
to the exercise of this Option.
9. Protection Against Dilution. In any of the following events,
occurring hereafter, appropriate adjustment shall be made in the number of
shares deliverable upon the exercise of this Option or in the price per
share to be paid so as to maintain the proportionate interest of the
Optionee: (a) recapitalization of the Bank through a split-up of the
outstanding shares into a lesser number; (b) declaration of a dividend on
the Common Stock of the Bank, payable in Common Stock or securities
convertible into Common Stock; (c) issuance of Common Stock at less than
the price per share payable upon the exercise of this Option, or issuance
of securities carrying conversion privileges or bearing stock purchase
options for Common Stock at more favorable terms than provided by this
Option.
10. Merger, Sale or Change of Majority Control. If a merger, sale or
change of majority control of the Bank is announced, then any portion of
this Option that is not vested
3
<PAGE> 8
shall vest upon the closing of such event. If the Bank, or any successor, shall
be consolidated or merged with another corporation, or substantially all of its
assets shall be sold to another corporation in exchange for stock with the view
to distributing such stock to its shareholders, each share of stock purchasable
by this Option shall be replaced for the purposes hereof by the securities or
property issuable or distributable in respect of one share of Common Stock of
this Bank, or its successors, upon such consolidation, merger, or sale, and
adequate provision to that effect shall be made at the time thereof. If all or
substantially all of Bank or any successor shall be sold for cash, the Optionee
may immediately exercise any unexercised portion of this Option.
11. Optionee's Rights. Until the valid exercise of this Option, the
Optionee hereby shall not be entitled to any rights of a shareholder, but
immediately upon the exercise of this Option and upon payment as provided
herein, the Optionee hereof shall be deemed a record holder of the common stock.
12. Amendment. This Option may be amended only by the written agreement of
the parties hereto.
Executed this 4th day of August, 1993.
THE BANK OF NASHVILLE
By:/s Joan B. Marshall
---------------------------------
Title:/s/ Corporate Secretary
--------------------------------
OPTIONEE
/s/ Mack S. Linebaugh
-------------------------------------
4
<PAGE> 9
STOCK OPTION AGREEMENT
ENTERED INTO BY COMMUNITY FINANCIAL GROUP, INC.
THIS STOCK OPTION AGREEMENT ("Agreement"), effective the 16th day of July,
1996 by and between COMMUNITY FINANCIAL GROUP, INC. (CFGI), and Mack S.
Linebaugh, Jr. (the "Optionee") was approved by Board of Directors on July 16,
1996.
1. Grant of Option. Company hereby grants to Optionee a stock option (The
"Option"), exercisable in whole or in part, to purchase 10,000 shares of the
company's common stock, $6.00 par value per share (the "Common Stock"), for a
price of $ 10.125 per share.
2. Vesting. The right to exercise this Stock Option vested on July 16, 1996
as to 2,000 shares, shall vest on July 16, 1997 as to 2,000 shares, on July 16,
1998 as to 2,000 shares, on July 16, 1999 as to 2,000 shares, and shall vest on
July 16, 2000 as to the remaining shares. The vesting of the option is
conditioned upon Optionee being employed by the company or one of its
subsidiaries or its successor on the respective dates of vesting.
3. Expiration of Option. This Option shall expire on the earlier of July
16, 2006 or 90 days after employment is terminated with respect to any then
unexercised portion of this Option.
4. Manner of Exercise. This Option shall be exercised by Optionee (or other
party entitled to exercise the Option under Section 6 of this Agreement) by
delivering
1
<PAGE> 10
written notice to the Company stating the number of shares of Common Stock
purchased, the person or persons in whose name the shares are to be
registered, and each person's address and social security number. Such
notice shall not be effective unless accompanied by the full purchase price
for all shares so purchased, as well as any applicable employee tax
payments. The purchase price shall be payable in cash. Payment in currency
or by check, bank draft, cashier's check or postal money order shall be
considered payment in cash.
5. Nontransferability of Option. This Option shall not be transferable
by the Optionee otherwise than by will or by the laws of descent and
distribution, and is exercisable during Optionee's lifetime only by
Optionee. The terms of this Option shall be binding on the executors,
administrators, heirs and successors of Optionee.
6. Exercise After Death. If the Optionee dies before the expiration of
this Option, this Option may be exercised until the expiration pursuant to
Section 3 of this Agreement by the executors or administrators of the
Optionee's estate, or by any person or persons who shall have acquired this
Option directly from the Optionee by bequest or inheritance.
7. Restrictions on Purchase and Sale of Shares. If required by
applicable securities laws, the Optionee hereby agrees that, as a further
condition to the exercise of this Option, the Optionee (or his successor
under Section 6 hereof) will execute an agreement in form satisfactory to
the Company in which the Optionee represents that he is purchasing the
shares for investment purposes, and not with a view to resale or
distribution.
2
<PAGE> 11
8. Reservation of Stock. Company convenants that while the Option is
exercisable, it will reserve from its authorized and unissued common stock
a sufficient number of shares to provide for the delivery of stock pursuant
to the exercise of this Option.
9. Protection Against Dilution. In any of the following events,
occurring hereafter, appropriate adjustment shall be made in the number of
shares deliverable upon the exercise of this Option or in the price per
share to be paid so as to maintain the proportionate interest of the
Optionee: (a) recapitalization of the Company through a split-up of the
outstanding shares into a lesser number; (b) declaration of a dividend on
the Common Stock of the Company, payable in Common Stock or securities
convertible into Common Stock; (c) issuance of Common Stock at less than
the price per share payable upon the exercise of this Option, or issuance
of securities carrying conversion privileges or bearing stock purchase
options for Common Stock at more favorable terms than provided by this
Option.
10. Merger, Sale or Change of Majority Control. If a merger, sale or
change of majority control of the Company is announced, then any portion of
this Option that is not vested shall vest upon the closing of such event.
If the Company, or any successor, shall be consolidated or merged with
another corporation in exchange for stock with the view to distributing
such stock to its shareholders, each share of stock purchasable by this
Option shall be replaced for the purposes hereof by the securities or
property issuable or distributable in respect of one share of Common Stock
of this Company, or its successors, upon such consolidation, merger, or
sale, and adequate provision to that effect shall be
3
<PAGE> 12
made at the time thereof. If all or substantially all of Company or any
successor shall be sold for cash, the Optionee may immediately exercise any
unexercised portion of this Option.
11. Optionee's Rights. Until the valid exercise of this Option, the
Optionee hereby shall not be entitled to any rights of a shareholder, but
immediately upon the exercise of this Option and upon payment as provided
herein, the Optionee hereof shall be deemed a record holder of the common
stock.
12. Amendment. This Option may be amended only by the written
agreement of the parties hereto.
Executed this 1st day of August, 1996
COMMUNITY FINANCIAL GROUP, INC.
By: /s/ Joan B. Marshall
----------------------------------
Title: /s/Corporate Secretary
-------------------------------
OPTIONEE
/s/ Mack S. Linebaugh
--------------------------------------
4
<PAGE> 1
EXHIBIT 10.04
Document executed with 2 originals distributed as follows:
Original A to Optionee
Original B to The Bank of Nashville
ORIGINAL B
STOCK OPTION AGREEMENT
ENTERED INTO BY THE BANK OF NASHVILLE
THIS STOCK OPTION AGREEMENT ("Agreement"), effective the 13th day of
October , 1992, by and between THIS BANK OF NASHVILLE, (the "Bank"), and
Julian C. Cornett (the "Optionee") pursuant to the terms of the employment
agreement between the Bank and Optionee dated October 13, l992.
1. Grant of Option. Bank hereby grants to Optionee a stock option (the
"option"), exercisable in whole or in part, to purchase 10,000 shares of
the Bank's common stock, $6.00 par value per share (the "Common Stock"),
for a price of $6.00 per share.
2. Vesting. The right to exercise this Stock Option vested on October
13, 1992 as to 2,000 shares, shall vest on October 15, 1993 as to 2,000
shares, on October 15, 1994 as to 2,000 shares, on October 15, 1995 to
2,000 shares, and shall invest on October 15, l996 as to the remaining
shares. The vesting of the option is conditioned upon Optionee being
employed by Bank or its successor on the respective dates of vesting.
3. Expiration of Option. This Option shall expire on October 13, 2002
with respect to any then unexercised portion of this Option.
1
<PAGE> 2
4. Manner of Exercise. This Option shall be exercised by Optionee (or
other party entitled to exercise the Option under Section 6 of this
Agreement) by delivering written notice to the Bank stating the number of
shares of Common Stock purchased, the person or persons in whose name the
shares are to be registered, and each person's address and social security
number. Such notice shall not be effective unless accompanied by the full
purchase price for all shares so purchased. The purchase price shall be
payable in cash. Payment in currency or by check, bank draft, cashier's
check or postal money order shall be considered payment in cash.
5. Nontransferability of Option. This Option shall not be transferable
by the Optionee otherwise than by will or by the laws of descent and
distribution, and is exercisable during Optionee's lifetime only by
Optionee. The terms of this Option shall be binding on the executors,
administrators, heirs and successors of Optionee.
6. Exercise after Death. If the Optionee dies before the expiration of
this Option, this Option may be exercised until the expiration pursuant to
Section 3 of this Agreement by the executors or administrators of the
Optionee's estate or by any person or persons who shall have acquired this
Option directly from the Optionee by bequest or inheritance.
7. Restrictions on Purchase and Sale of Shares. If required by
applicable securities laws, the Optionee hereby agrees that, as a further
condition to the exercise of this
2
<PAGE> 3
Option, the Optionee (or his successor under Section 6 hereof) will
execute an agreement in form satisfactory to the Bank in which the Optionee
represents that he is purchasing the shares for investment purposes, and
not with a view to resale or distribution.
8. Reservation of Stock. Bank covenants that while the Option is
exercisable, it will reserve from its authorized and unissued common stock
a sufficient number of shares to provide for the delivery of stock pursuant
to the exercise of this Option.
9. Protection Against Dilution. In any of the following events,
occurring hereafter, appropriate adjustment shall be made in the number of
shares deliverable upon the exercise of this Option or in the price per
share to be paid so as to maintain the proportionate interest of the
Optionee: (a) recapitalization of the Bank through a split-up of the
outstanding shares into a lesser number; (b) declaration of a dividend on
the Common Stock of the Bank, payable in Common Stock or securities
convertible into Common Stock; (c) issuance of Common Stock at less than
the price per share payable upon the exercise of this Option, or issuance
of securities carrying conversion privileges or bearing stock purchase
options for Common Stock at more favorable terms than provided by this
Option.
10. Merger, Sale or Change of Majority Control. If a merger, sale or
change of majority control of the Bank is announced, then any portion of
this Option that is not vested
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<PAGE> 4
shall vest upon the closing of such event. If the Bank, or any successor,
shall be consolidated or merged with another corporation, or substantially
all of its assets shall be sold to another corporation in exchange for
stock with the view to distributing such stock to its shareholders, each
share of stock purchasable by this Option shall be replaced for the
purposes hereof by the securities or property issuable or distributable in
respect of one share of Common Stock of this Bank, or its successors, upon
such consolidation, merger, or sale, and adequate provision to that effect
shall be made at the time thereof. If all or substantially all of Bank or
any successor shall be sold for cash, the Optionee may immediately exercise
any unexercised portion of this Option.
11. Optionee's Rights. Until the valid exercise of this Option, the
Optionee hereby shall not be entitled to any rights of a shareholder, but
immediately upon the exercise of this Option and upon payment as provided
herein, the Optionee hereof shall be deemed a recordholder of the common
stock.
12. Amendment. This Option may be amended only by the written
agreement of the parties hereto.
Executed this 19 day of May, 1993.
THE BANK OF NASHVILLE
By: /s/ Joan B. Marshall
-------------------------------------------
Title: /s/ Vice President & Corporate Secretary
----------------------------------------
OPTIONEE
/s/ Julian C. Cornett
-----------------------------------------------
<PAGE> 5
Document executed with 2 originals distributed as follows:
Original A to Optionee
Original B to The Bank of Nashville ORIGINAL B
STOCK OPTION AGREEMENT
ENTERED INTO BY THE BANK OF NASHVILLE
THIS STOCK OPTION AGREEMENT ("Agreement"), effective the 13th day of
October, 1993 by and between The BANK OF NASHVILLE, (the "Bank"), and
Julian C. Cornett (the "Optionee") pursuant to the terms of the employment
agreement between the Bank and Optionee dated October 13, 1993 and approved
by Board of Directors on November 4, 1993.
1. Grant of Option. Bank hereby grants to Optionee a stock option (the
"Option"), exerciseable in whole or in part, to purchase 10,000 shares of
the Bank's common stock, $6.00 par value per share (the "Common Stock"),
for a price of $7.00 per share.
2. Vesting. The right to exercise this Stock Option vested on October
13, 1993 as to 2,000 shares, shall vest on October 13, 1994 as to 2,000
shares, on October 13, 1995 as to 2,000 shares, on October 13, 1996 to
2,000 shares, and shall vest on October 13, 1997 the remaining shares. The
vesting of the option is conditioned upon Optionee being employed by the
Bank or its successor on the respective dates of vesting.
3. Expiration of Option. This Option shall expire on October 13, 2003
with respect to any then unexercised portion of this Option.
<PAGE> 6
4. Manner of Exercise. This Option shall be exercised by Optionee (or
other party entitled to exercise the Option under Section 6 of this
Agreement) by delivering written notice to the Bank stating the number of
shares of Common Stock purchased, the person or persons in whose name
the shares are to be registered, and each person's address and social
security number. Such notice shall not be effective unless accompanied by
the full purchase price for all shares so purchased. The purchase price
shall be payable in cash. Payment in currency or by check, bank draft,
cashier's check or postal money order shall be considered payment in cash.
5. Nontransferability of Option. This Option shall not be transferable
by the Optionee otherwise than by will or by the laws of descent and
distribution, and is exercisable during Optionee's lifetime only by
Optionee. The terms of this Option shall be binding on the executors,
administrators, heirs and successors of Optionee.
6. Exercise after Death. If the Optionee dies before the expiration of
this Option, this Option may be exercised until the expiration pursuant to
Section 3 of this Agreement by the executors or administrators of the
Optionee's estate or by any person or persons who shall have acquired this
Option directly from the Optionee by bequest or inheritance.
7. Restrictions on Purchase and Sale of Shares. If required by
applicable securities laws, the Optionee hereby agrees that, as a further
condition to the exercise of this
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<PAGE> 7
Option, the Optionee (or his successor under Section 6 hereof) will execute
an agreement in form satisfactory to the Bank in which the Optionee
represents that he is purchasing the shares for investment purposes, and
not with a view to resale or distribution.
8. Reservation of Stock. Bank covenants that while the Option is
exercisable, it will reserve from its authorized and unissued common stock
a sufficient number of shares to provide for the delivery of stock pursuant
to the exercise of this Option.
9. Protection Against Dilution. In any of the following events,
occurring hereafter, appropriate adjustment shall be made in the number of
shares deliverable upon the exercise of this Option or in the price per
share to be paid so as to maintain the proportionate interest of the
Optionee: (a) recapitalization of the Bank through a split-up of the
outstanding shares into a lesser number; (b) declaration of a dividend on
the Common Stock of the Bank, payable in Common Stock or securities
convertible into Common Stock; (c) issuance of Common Stock at less than
the price per share payable upon the exercise of this Option, or issuance
of securities carrying conversion privileges or bearing stock purchase
options for Common Stock at more favorable terms than provided by this
Option.
10. Merger, Sale or Change of Majority Control. If a merger, sale or
change of majority control of the Bank is announced, then any portion of
this Option that is not vested
3
<PAGE> 8
shall vest upon the closing of such event. If the Bank, or any successor,
shall be consolidated or merged with another corporation, or substantially
all of its assets shall be sold to another corporation in exchange for
stock with the view to distributing such stock to its shareholders, each
share of stock purchasable by this Option shall be replaced for the
purposes hereof by the securities or property issuable or distributable in
respect of one share of Common Stock of this Bank, or its successors, upon
such consolidation, merger, or sale, and adequate provision to that effect
shall be made at the time thereof. If all or substantially all of Bank or
any successor shall be sold for cash, the Optionee may immediately exercise
any unexercised portion of this Option.
11. Optionee's Rights. Until the valid exercise of this Option, the
Optionee hereby shall not be entitled to any rights of a shareholder, but
immediately upon the exercise of this Option and upon payment as provided
herein, the Optionee hereof shall be deemed a record holder of the common
stock.
12. Amendment. This Option may be amended only by the written
agreement of the parties hereto.
Executed this 9th day of November, 1993
THE BANK OF NASHVILLE
By: /s/ Mack S. Linebaugh
-------------------------------
Title: /s/ President
----------------------------
OPTIONEE
/s/ Julian C. Cornett
-----------------------------------
<PAGE> 9
STOCK OPTION AGREEMENT
ENTERED INTO BY COMMUNITY FINANCIAL GROUP, INC.
THIS STOCK OPTION AGREEMENT ("Agreement"), effective the 16th day of
July, 1996 by and between COMMUNITY FINANCIAL GROUP, INC. (CFGI), and
Julian C. Cornett (the "Optionee") was approved by Board of Directors on
July 16, 1996.
1. Grant of Option. Company hereby grants to Optionee a stock option
(The "Option"), exercisable in whole or in part, to purchase 5,000 shares
of the company's common stock, $6.00 par value per share (the "Common
Stock"), for a price of $ 10.125 per share.
2. Vesting. The right to exercise this Stock Option vested on July 16,
1996 as to 1,000 shares, shall vest on July 16, 1997 as to 1,000 shares, on
July 16, 1998 as to 1,000 shares, on July 16, 1999 as to 1,000 shares, and
shall vest on July 16, 2000 as to the remaining shares. The vesting of the
option is conditioned upon Optionee being employed by the company or one of
its subsidiaries or its successor on the respective dates of vesting.
3. Expiration of Option. This Option shall expire on the earlier of
July 16, 2006 or 90 days after employment is terminated with respect to any
then unexercised portion of this Option.
4. Manner of Exercise. This Option shall be exercised by Optionee (or
other party entitled to exercise the Option under Section 6 of this
Agreement) by delivering written notice to the Company stating the number
of shares of Common Stock purchased,
1
<PAGE> 10
the person or persons in whose name the shares are to be registered, and
each person's address and social security number. Such notice shall not be
effective unless accompanied by the full purchase price for all shares so
purchased, as well as any applicable employee tax payments. The purchase
price shall be payable in cash. Payment in currency or by check, bank
draft, cashier's check or postal money order shall be considered payment in
cash.
5. Nontransferability of Option. This Option shall not be transferable
by the Optionee otherwise than by will or by the laws of descent and
distribution, and is exercisable during Optionee's lifetime only by
Optionee. The terms of this Option shall be binding on the executors,
administrators, heirs and successors of Optionee.
6. Exercise After Death. If the Optionee dies before the expiration of
this Option, this Option may be exercised until the expiration pursuant to
Section 3 of this Agreement by the executors or administrators of the
Optionee's estate, or by any person or persons who shall have acquired this
Option directly from the Optionee by bequest or inheritance.
7. Restrictions on Purchase and Sale of Shares. If required by
applicable securities laws, the Optionee hereby agrees that, as a further
condition to the exercise of this Option, the Optionee (or his successor
under Section 6 hereof) will execute an agreement in form satisfactory to
the Company in which the Optionee represents that he is purchasing the
shares for investment purposes, and not with a view to resale or
distribution.
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<PAGE> 11
8. Reservation of Stock. Company covenants that while the Option is
exercisable, it will reserve from its authorized and unissued common stock
a sufficient number of shares to provide for the delivery of stock pursuant
to the exercise of this Option.
9. Protection Against Dilution. In any of the following events,
occurring hereafter, appropriate adjustment shall be made in the number of
shares deliverable upon the exercise of this Option or in the price per
share to be paid so as to maintain the proportionate interest of the
Optionee: (a) recapitalization of the Company through a split-up of the
outstanding shares into a lesser number; (b) declaration of a dividend on
the Common Stock of the Company, payable in Common Stock or securities
convertible into Common Stock; (c) issuance of Common Stock at less than
the price per share payable upon the exercise of this Option, or issuance
of securities carrying conversion privileges or bearing stock purchase
options for Common Stock at more favorable terms than provided by this
Option.
10. Merger, Sale or Change of Majority Control. If a merger, sale or
change of majority control of the Company is announced, then any portion of
this Option that is not vested shall vest upon the closing of such event.
If the Company, or any successor, shall be consolidated or merged with
another corporation in exchange for stock with the view to distributing
such stock to its shareholders, each share of stock purchasable by this
Option shall be replaced for the purposes hereof by the securities or
property issuable or distributable in respect of one share of Common Stock
of this Company, or its successors, upon such consolidation, merger, or
sale, and adequate provision to that effect shall be
3
<PAGE> 12
made at the time thereof. If all or substantially all of company or any
successor shall be sold for cash, the Optionee may immediately exercise any
unexercised portion of this Option.
11. Optionee's Rights. Until the valid exercise of this Option, the
Optionee hereby shall not be entitled to any rights of a shareholder, but
immediately upon the exercise of this Option and upon payment as provided
herein, the Optionee hereof shall be deemed a record holder of the common
stock.
12. Amendment. This Option may be amended only by the written
agreement of the parties hereto.
Executed this 14th day of August, 1996.
COMMUNITY FINANCIAL GROUP, INC.
By:/s/ Joan B. Marshall
----------------------------------------
Title Corporate Secretary
-------------------------------------
OPTIONEE
/s/ Julian C. Cornett
-------------------------------------------
<PAGE> 1
EXHIBIT 10.05
L & C TOWER
STANDARD OFFICE BUILDING LEASE
THIS LEASE AGREEMENT (sometimes hereinafter referred to as the "Lease")
made and entered into this 19th day of July, 1989, by and between Metropolitan
Life Insurance Company c/o Centennial Incorporated (hereinafter called
"Metropolitan"; Metropolitan and any successor as landlord under this Lease
being collectively referred to as "Landlord"), whose address for purposes hereof
is 401 Church Street, Nashville, Tennessee and Bank of Nashville, a bank in
organization (hereinafter called "Tenant"), whose address for purposes hereof is
401 Church Street, Nashville, Tennessee.
WITNESSETH:
1. LEASED PREMISES. Subject to and upon the terms, provisions, covenants
and conditions hereinafter set forth, and each in consideration of the duties,
covenants and obligations of the other hereunder, Landlord does hereby lease,
demise and let to Tenant and Tenant does hereby lease, demise and let from
Landlord those certain premises (hereinafter sometimes called the "Premises" or
"Leased Premises") in the building known as L & C Tower (hereinafter called the
"Building") located at 401 Church Street, Nashville, Tennessee (such Leased
Premises being more particularly described as follows:
All space on the Lower, Second and Third levels of the Building
indicated as being part of the Leased Premises on the Drawings
attached hereto as EXHIBIT A, which shall be deemed to contain 2,794
square feet of Net Rentable Areas on the Lower Level, 7,802 square
feet on the Second Level, 4,102 square feet on the Third Level and the
space on the Lower Level designated as "Space Provided at No Cost".
The term "Net Rentable Area", as used herein, shall refer to (i) in the
case of a single tenancy floor, all space measured from the inside surface of
the outer glass of the Building to the inside surface of the opposite outer
wall, excluding only the areas ("Service Areas") within the outside walls used
for building stairs, fire towers, elevator shafts, flues, vents, pipe shafts and
vertical ducts, but including any such areas which are for the specific use of
the particular tenant such as special stairs or elevators, and (ii) in the case
of a multi-tenancy floor, all space within the inside surface of the outer glass
enclosing the tenant occupied portion of the floor and measured to the midpoint
of the walls separating areas leased by or held for lease to other tenants or
form areas devoted to corridors, elevator foyers, rest rooms and other similar
facilities for the use of all tenants on the particular floor (hereinafter
sometimes called "Common Areas"), but including a proportionate part of the
Common Areas located on such floor.
No deductions from Net Rentable Areas are made for columns necessary to the
Building. The Net Rentable Areas in the Leased Premises and in the Building have
been calculated on the basis of the foregoing definition and are hereby
stipulated above as to the Leased Premises, whether the same should be more or
less as a result of minor variations resulting from actual construction and
completion of the Leased Premises for occupancy so long as such work is done
substantially in accordance with the approved plans.
2. TERM. This Lease shall be for the term of 10 years, commencing on the
1st day of September, 1989, and ending on the 31st day of August, 1999
(hereinafter sometimes referred to as the "Leased Term" or "Term"), unless
sooner terminated or extended as provided herein.
If the Landlord is unable to give possession of the Leased Premises
the date of the commencement of the aforesaid Lease Term by reason of the
holding over of any prior tenant or tenants or for any other reasons, an
abatement or diminution of the rent to be paid hereunder shall be allowed Tenant
under such circumstances until possession is given to Tenant, but nothing herein
shall operate to extend the initial Term of the lease beyond the agreed
expiration date, and said abatement in rent shall be the full extent of
Landlord's liability to Tenant for any loss or damage to Tenant on account of
said delay in obtaining possession of the Premises. There shall be no delay in
the commencement of
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<PAGE> 2
the Term of this Lease and/or payment of rent where Tenant fails to occupy
premises when same are ready for occupancy, or when Landlord shall be delayed in
substantially completing such Leased Premises as a result of:
(a) Tenant's failure to promptly approve working drawings and plans as
required, or
(b) Tenant's failure to promptly select materials, finishes, or
installation, or
(c) Tenant's changes in plans (notwithstanding Landlord's approval of any
such changes), or
(d) Any other act of omission by Tenant or its agents, or failure to
promptly make other decisions, necessary to the preparation of the
Leased Premises for occupancy.
The commencement of the Term and the payment of rent shall not be affected,
delayed or deferred on account of any of the foregoing. For the purposes of this
paragraph, the Leased Premises shall be deemed substantially completed and ready
for occupancy by Tenant when (i) Landlord's Supervising Architect certifies that
the work required of Landlord, if any, has been substantially completed in
accordance with said approved plans and specifications and (ii) Tenant may
lawfully occupy the Leased Premises in accordance with Sections 11-1-59 et seq.
of the Metropolitan Nashville and Davidson County Code.
If Landlord does not, for any other reason, deliver possession of (i) the
Lower Level portion of the Leased Premises by August 15, 1989, or (ii) the
Second and Third Level portions of the Leased Premises by October 2, 1989, then
this Lease shall, at the option of Tenant, terminate and be of no further force
and effect, except that Tenant shall pay the costs of constructing tenant
improvements over and above the cost of building such space to "shell"
condition, as defined in APPENDIX B-2.
Taking possession of the Leased Premises by Tenant shall be conclusive
evidence as against Tenant that the Leased Premises were in good and
satisfactory condition when possession was so taken, with the exception of (i)
items reflected on a punchlist prepared by Tenant and (ii) latent defects.
If Tenant, with Landlord's consent, shall occupy the Leased Premises prior
to the beginning of the Leased Term as specified hereinabove, all provisions of
this Lease shall be in full force and effect commencing upon such occupancy, and
rent for such period shall be paid by Tenant at the same rate herein specified.
3. BASE RENT. Tenant agrees to pay Landlord a total "Base Rental" as
set forth in APPENDIX B-1 in lawful (legal tender for public or private debts)
money of the United States of America, at the Management Office of the Building
or elsewhere as designated from time to time by Landlord's written notice to
Tenant.
The Base Rental is payable in equal monthly installments as specified in
APPENDIX B-1 'on the first day of each month hereafter ensuing, the first of
which shall be due and payable on the first day of the first full month of the
term of this Lease. If the Term of this Lease commences on any day of a month
excepting the first day, Tenant shall pay Landlord rental as provided for herein
for such commencement month on a prorata basis (such proration to be based on
the actual number of days in the commencement month). Rental for any partial
month of occupancy at the end of the Term of this Lease will be prorated, such
proration to be based on the actual number of days in the partial month.
In addition to Base Rental, Tenant shall and hereby agrees to pay to
Landlord each month a sum equal to any sales tax, tax on rentals, and any other
charges, taxes and/or impositions now in existence or hereafter imposed based
upon the privilege of renting the space leased hereunder or upon the amount of
rentals collected therefor. Nothing herein shall, however, be taken to require
Tenant to pay any part of any Federal and State Taxes on income imposed upon
Landlord.
Tenant shall be required to pay Landlord interest on any rental due that
remains unpaid for five (5) days after its due date. Said interest will be
computed at the maximum legal rate from due date.
4. ADDITIONAL RENT [Intentionally Omitted].
5. COST OF LIVING INCREASE [Intentionally Omitted].
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<PAGE> 3
6. TIME OF PAYMENT. Tenant agrees: that Tenant will promptly pay said
rent at the times and place stated above; that Tenant will pay charges for work
performed on order of Tenant, and any other charges that accrue under this
Lease. If any installment of rent shall remain due and unpaid five (5) business
days following the delivery of written notice from Landlord to Tenant that such
installment is past due (provided that Landlord shall not be required to give
such five (5) business day notice more than twice in any twelve (12) consecutive
month period), then Landlord may, by delivery of written notice to Tenant,
require that Tenant pay all past due rent plus installments of rent for the next
twelve (12) succeeding months within seven (7) days of receipt of such notice.
If Tenant does pay the past due rent and the next twelve (12) installments of
rent within such seven (7) day period, no additional rent shall be due and
payable during the ensuing twelve (12) month period. If, however, Tenant does
not pay all past due rent and the next twelve (12) installments of rent within
such seven (7) day period, Landlord shall have the option (in addition to all
other rights and remedies available to it by law and in equity) of declaring the
balance of the entire rent for the entire Term of this Lease to be immediately
due and payable, and Landlord may then proceed to collect all of the unpaid rent
called for by this Lease by distress or otherwise.
7. SECURITY DEPOSIT [Intentionally Omitted].
8. USE. The Tenant will use and occupy the Lease Premises for the
following use or purpose and for no other use or purpose: A commercial banking
corporation or bank holding company and their legitimate subsidiaries. The
Second Level of the Building shall at all times be used primarily for a
commercial banking operation, but the other portions of the Leased Premises may
be used for purposes not otherwise permitted by this Section 8 if such other
portion is sublet by the Tenant in accordance with the terms and conditions of
Section 21 below.
9. QUIET ENJOYMENT. Upon payment by Tenant of the rents herein provided,
and upon the observance and performance of all terms, provisions, covenants and
conditions on Tenant's part to be observed and performed. Tenant shall, subject
to all of the terms, provisions, covenants and conditions of this Lease
Agreement, peaceably and quietly hold and enjoy the Leased Premises for the Term
hereby demised.
10. INSURANCE PREMIUMS. If the Landlord's insurance premiums exceed the
standard premium rates because the nature of Tenant's operation results in extra
hazardous exposure, then Tenant shall, upon receipt of appropriate invoices from
Landlord reimburse Landlord for such increase in premiums. It is understood and
agreed between the parties hereto that any such increase in premiums shall be
considered as rent due and shall be included in any lien for rent.
11. RULES AND REGULATIONS. Tenant agrees to comply with all rules and
regulations Landlord may adopt from time to time for operation of the Building
and parking facilities and protection and welfare of Building and Parking
facilities, its tenants, visitors and occupants. The present rules and
regulations, which Tenant hereby agrees to comply with, 'entitled "Rules and
Regulations" are attached hereto and are by this reference incorporated herein.
Any future rules and regulations shall become a part of this Lease and Tenant
hereby agrees to comply with the same upon delivery of a copy thereof to Tenant
providing the same do not materially deprive Tenant of its rights established
under this Lease or the right of Tenant to conduct its business as described in
Paragraph 8 above. Landlord covenants that it will use reasonable efforts to
enforce the Building rules and regulations against all other tenants of the
Building.
12. GOVERNMENTAL REQUIREMENTS. Tenant shall faithfully observe in the use
of the Lease Premises all municipal and county ordinances and codes and state
and federal statutes now in force or which may hereafter be in force. Nothing
contained in this Lease shall obligate the Tenant to cause the Leased Premises
to comply with such ordinances, codes and statutes if the non-compliance existed
as of the date that the Tenant assumed possession of the Leased Premises.
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<PAGE> 4
13. SERVICES. Landlord will furnish the following services to Tenant:
(A) Cleaning services, deemed by Landlord to be normal and usual in a first
class office building, on Monday through Friday, except that shampooing and
replacement of carpet as required by Tenant shall be Tenant's expense.
(B) Automatically operated elevator service,. public stairs, electrical
current for lighting, incidentals, and normal office use Including Tenant's
computer system described in APPENDIX F ("Tenant's Computer"), and water at
those points of supply provided for general use of its Tenants at all times and
on all days throughout the year.
(C) Heat and air conditioning on Monday through Friday from 7:00 A.M. to
7:00 P.M. except Memorial Day, Fourth of July, Labor Day, Thanksgiving Day,
Christmas Day and New Year's Day. Landlord shall also furnish heat and air
conditioning at such other times as are not provided for herein, provided Tenant
gives written request to Landlord before 2:00 P.M. of the business day preceding
the extra usage and if Tenant requires heat and air conditioning during such
hours, Tenant shall be billed for such service at the rate then in effect;
provided, however, that Landlord shall supply heat and air conditioning service
24 hours per day, 7 days per week, to the room housing Tenant's Computer.
No electric current shall be used except that furnished or approved by
Landlord, nor shall electric cable or wire be brought into the Leased Premises,
except upon the written consent and approval of the Landlord. Tenant shall use
only office machines and equipment that operate on the Building's standard
electric circuits, but which in on event shall overload the Building's standard
electric circuits from which the Tenant obtains electric current. Any
consumption of electric current in excess of that considered by Landlord to be
used, normal and customary for all Tenants, or which required special circuits
or equipment (the installation of which shall be at Tenant expense after
approval in writing by the Landlord), shall be paid for by the Tenant as
additional rent paid to the Landlord in an amount to be determined by Landlord,
based upon Landlord's estimated cost of such excess electric current consumption
or based upon the actual cost thereof if such excess electric current
consumption is separately metered. Notwithstanding the foregoing, Landlord shall
provide, at no additional cost, all electrical power required to operate
Tenant's Computer.
Such services shall be provided as long as the Tenant is not in default
under any of the terms, provisions, covenants and conditions of this Lease,
subject to interruption caused by repairs, renewals, improvements, changes to
service, alterations, strikes, lockouts, labor controversies, inability to
obtain fuel or power, accidents, breakdowns, catastrophies, national or local
emergencies, acts of God and conditions and caused beyond the control of
Landlord, and upon such happening, no claim for damages or abatement of rent for
failure to furnish any such services shall be made by the Tenant or allowed by
the Landlord. Nothing herein contained shall prohibit Tenant from providing or
obtaining for itself such services as are reasonably necessary to remain open
for business at the Leased Premises during normal banking hours, so long as
Tenant gives notice to Landlord of the lack or insufficiency of such services,
and affords Landlord a reasonable to provide such services to Tenant. Tenant
shall be entitled to a credit against Base Rents accruing in subsequent months
for all costs incurred in providing or obtaining such services, but no such
credit shall be allowed for such costs to the extent that the aggregate amount
of such costs for any calendar month exceed the Base Rent payable for such
month.
14. TENANT WORK. It is understood and agreed between the parties hereto
that any charges against Tenant by Landlord for services or for work done on the
Leased Premises by order of Tenant, or otherwise accruing under this Lease,
shall be considered as rent due and shall be included in any lien for rent.
15. REPAIR 0P LEASED PREMISES. Tenant will, at Tenant's own expense, keep
the Leased Premises in good repair and tenantable condition during the Lease
Term and will replace at its own expense any and all broken glass caused by
Tenant in and about said Leased Premises.
Tenant will make no alterations, additions or improvements in or to the
leased Premises without the written consent of Landlord, which shall not be
unreasonably withheld, but may be predicated upon but not limited to Tenant's
use of contractors who are acceptable to Landlord; and upon the expiration of
the Lease, Tenant shall be entitled to remove all additions, fixtures, carpet or
improvements which Tenant has installed or
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<PAGE> 5
actually paid for (including the vault, if actually paid for by Tenant), so long
as Tenant restores the Leased Premises to the same condition as existed at the
commencement of the term, normal wear and tear excepted.
Tenant shall be entitled to construct stairwells between any adjacent
floors comprising the Leased Premises, at its own expense, and in accordance
with plans approved in advance by Landlord; provided that (i) the installation
of such stairwell shall not decrease the Net Rentable Area in the Leased
Premises and (ii) the construction of the stairwell complies with all applicable
codes, ordinances and statutes. Landlord may condition its approval of the plans
for such stairwell upon Tenant's agreement to remove the stairwell at the
expiration of the term of this Lease and to restore the Leased Premises to the
same condition which existed at the commencement of the term, normal wear and
tear excepted.
It is further agreed that this Lease is made by the Landlord and accepted
by the Tenant with the distinct understanding and agreement that the Landlord
shall have the right and privilege to make and build additions to the Building
of which the Leased Premises are a part, and make such alterations and repairs
to said Building as it may deem wise and advisable so long as such work does not
materially disturb Tenant's use of the Leased Premises as contemplated by
Paragraph 8; provided, however, that noise generated by construction of
additions, alterations or repairs to the Building shall not be deemed to be a
disturbance of Tenant's use of the Leased Premises.
16. INDEMNIFICATION. Tenant further agrees that Tenant will pay all liens
of contractors, subcontractors, mechanics, laborers, materialmen, and other
items of like character, and will indemnify Landlord against all expenses,
costs, and charges, including bond premiums for release of liens and attorneys'
fees and costs reasonably incurred in and about the defense of any suit in
discharging the said Premises or any part thereof from any liens, judgments, or
encumbrances caused or suffered by Tenant. In the event any such lien shall be
made or filed, Tenant shall bond against or discharge the same within ten (10)
days after the same has been made or filed. It is understood and agreed between
the parties hereto that the expenses, costs and charges above referred to shall
be considered as rent due and shall be included in any lien for rent.
The Tenant herein shall not have any authority to create any liens for
labor or materials on the Landlord's interest in the Leased Premises and all
persons contracting with the Tenant for the destruction or removal of any
facilities or other improvements or for the erection, installation, alteration,
or repair of any facilities or other improvements on or about the Leased
Premises, and all materialmen, contractors, subcontractors, mechanics, and
laborers are hereby charged with notice that they must look only to the Tenant
and to the Tenant's interest in the Leased Premises to secure the payment of any
bill for work done or material furnished at the request or instruction of
Tenant.
17. PARKING. Pursuant to all of the teems, provisions, covenants and
conditions contained herein, for the Term of this Lease, Tenant shall have the
option to lease from Landlord 1 per 1000 rsf parking spaces in the Building
parking areas at 90% of the posted rate for parking, adjusted on January 1 of
each year of the term for said Building Parking areas. Such rate is subject to
change annually on thirty (30) days prior notice, written or oral, to Tenant and
is payable in advance on the first day of each month throughout the Term of this
Lease. Parking space rental due hereunder shall be deemed additional rent,
payable in the same manner as rent set forth in Paragraph 3 hereof, and shall be
subject to all of the teems, provisions, conditions and covenants of this Lease
pertaining to the default in the payment of rental; provided, however, that
Landlord may require that parking space rental be paid directly to the manager
of the parking garage. In the event of an increase in monthly parking rates,
Tenant shall have the right to cancel any or all of its parking spaces herein
leased upon thirty (30) days written notice to Landlord. Notwithstanding the
foregoing, the notice required pursuant to this paragraph shall be deemed given
by the posting of new rates in conspicuous places in the parking garage.
18. ESTOPPEL STATEMENT. Tenant agrees that from time to time, upon not than
ten (10) days prior request by Landlord, Tenant will deliver to Landlord a
statement in writing certifying (a) that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that the Lease as
modified is in full force and effect and stating the modifications); (b) the
dates to which the rent and other charges have been paid; and; (c) that Landlord
is not in default under any provisions of this Lease, or, if in default, the
nature thereof in detail.
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19. MORTGAGES'S RIGHT TO CURE DEFAULTS. If the Building and/or Leased
Premises are at any time subject to a mortgage and/or deed of trust, and Tenant
has received written notice from Mortgagee of same, then in any instance in
which Tenant gives notice to Landlord alleging default by Landlord hereunder,
Tenant will also simultaneously give a copy of such notice to each Landlord's
Mortgagee and each Landlord's Mortgagee shall have the right (but not the
obligation) to cure or remedy such default during the period that is permitted
to Landlord hereunder, plus an additional period of thirty (30) days, and Tenant
will accept such curative or remedial action (if any) taken by Landlord's
Mortgagee with the same effect as if such action had been taken by the Landlord.
20. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT. This Lease shall at
Landlord's option, which option may be exercised at any time during the Lease
Term, be subject and subordinate to any first mortgage now or hereafter
encumbering the Building; provided, that such first mortgagee executes and
delivers to Tenant the Subordination, Non-disturbance and Attornment Agreement
attached hereto as EXHIBIT D.
21. ASSIGNMENT. Without the written consent of Landlord first obtained in
each case, which consent shall not be unreasonably withheld or delayed, Tenant
shall not assign, transfer, mortgage, pledge, or otherwise encumber or dispose
of this Lease or underlet the Leased Premises or any part thereof or permit the
Leased Premises to be occupied by other persons. In the case of a subletting,
Landlord's consent may be predicated, among other things, upon Landlord becoming
entitled to collect and retain all rentals payable under such sublease;
provided, however, that so long as the Tenant continues to use the Second Level
of the Leased Premises primarily for a commercial banking operation, (i) Tenant
may sublease any other portion of the Leased Premises upon such terms and
conditions as Tenant may determine to be acceptable to it and shall be entitled
to collect and retain all rentals from such subtenant and (ii) the Landlord
shall not be permitted to withhold its consent to such subletting unless the
proposed use by such subtenant is not compatible with a central business
district office building. If this Lease be assigned, or if the Leased Premises
or any part thereof be underlet or occupied by anybody other than Tenant, the
Landlord may, after default by the Tenant, collect or accept rent from the
assignee, undertenant, or occupant and apply the net amount collected or
accepted to the rent herein reserved, but no such collection or acceptance shall
be deemed a waiver of this covenant or the acceptance of the assignee,
undertenant, or occupant as Tenant, nor shall it be construed as or implied to
be a release of the Tenant from the further observance and performance by the
Tenant of the terms, provisions, covenants and conditions herein contained.
22. SUCCESSORS AND ASSIGNS. All terms, provisions, covenants and
conditions to be observed and performed by Tenant shall be applicable to and
binding upon Tenant's respective heirs, administrators, executors, successors
and assigns, subject, however, to the restrictions as to assignment or
subletting by Tenant as provided herein. All expressed covenants of this Lease
shall be deemed to be covenants running with the land.
23. HOLD HARMLESS OF LANDLORD. In consideration of said Premises being
leased to Tenant for the above rental, Tenant agrees: that Tenant, at all times,
will indemnify and keep Landlord harmless from all losses, damages, liabilities
and expenses, which may arise or be claimed against Landlord and be in favor of
any persons, firms or corporations, consequent upon or arising from the use or
occupancy of said Premises by Tenant, or consequent upon or arising from any
acts, omissions, neglect or fault of Tenant, his agents, servants, employees,
licensees, visitors, customers, patrons or invitees, or consequent upon or
arising from Tenant's failure to comply with any laws, statutes, ordinances,
codes or regulations as herein provided; that Landlord shall not be liable to
Tenant for any damages, losses or injuries to the persons or property of Tenant
which may be caused by the acts, neglect, omissions or faults of any persons,
firms or corporations, except when such injury, loss or damage results from the
acts, neglect, omissions or faults of Landlord, his agents or employees, and
that Tenant will
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indemnify and keep harmless Landlord from all damages, liabilities, losses,
injuries, or expenses which may arise or be claimed against Landlord and be in
favor of any person, firm corporations, for any injuries or damages to the
person or property of any persons, firms or corporations, where said injuries or
damages arose about or upon said Premises, as a result of the negligence of
Tenant, his agents, employees, servants, licensees, visitors, customers,
patrons, and invitees. All personal property placed or moved into the Leased
Premises or Building shall be at the risk of Tenant or the owner thereof, and
Landlord shall not be liable to Tenant for any damages to said personal
property. Tenant shall maintain at all times during the Term of this Lease a
comprehensive general liability policy or policies insuring Tenant and Landlord
against all matters set forth in this Section 23, with minimum limits of
$500,000 with respect to any one person and S2,000,000 with respect to any one
accident or disaster. Such policy or policies shall be in a form acceptable to
Landlord, shall name Landlord as additional insured, shall state that the
insurance is primary over any other insurance carried by Landlord, shall state
that no act or omission of Tenant, its agents, employees or invitees shall
provide a defense to such coverage, and shall include the following coverages:
(a) Premises operations;
(b) Independent contractors;
(c) Broad form contractual in support of the indemnities provided by
this Section 23; and
(d) Personal injury liability with exclusions (a) and (c) removed.
Each policy shall include a waiver of subrogation in favor of the Landlord.
Evidence of these coverages represented by certificates of insurance issued by
the insurance carrier must be furnished to Landlord prior to Tenant moving in.
Such certficate of insurance shall state that Landlord will be notified in
writing thirty (30) days prior to the cancellation, material change or renewal
of insurance. If Tenant fails to comply with the foregoing requirements relating
to insurance, Landlord may obtain such insurance and Tenant shall pay to
Landlord immediately on demand the premium cost thereof.
In case Landlord shall be made a party to any litigation commenced against
Tenant, then Tenant shall protect and hold Landlord harmless and shall pay all
costs, expenses and reasonable attorneys' fees incurred or paid by Landlord in
connection with such litigation and any appeal thereof, unless it shall be
determined that Landlord is liable and Tenant is not liable to the plaintiff in
such litigation.
23A. HOLD HARMLESS OF TENANT. In consideration of said Premises being
leased by Tenant for the above rental, Landlord agrees: that Landlord, at all
times, will indemnify and keep Tenant harmless from all losses, damages,
liabilities and expenses, which may arise or be claimed against Tenant and be in
favor of any persons, firms or corporations, consequent upon or arising from the
use common areas of the Building (including elevators), or consequent upon or
arising from any acts, omissions, neglect or fault of Landlord, his agents,
servants, employees, licensees, visitors, customers, patrons or invitees, or
consequent upon or arising from Landlord's failure to comply with any laws,
statutes, ordinances, codes or regulations as herein provided; that Tenant shall
not be liable to Landlord for any damages, losses or injuries to the persons or
property of Landlord which may be caused by the acts, neglect, omissions or
faults of any persons, firms or corporations, except when such injury, loss or
damage results from the acts, neglect, omissions or faults of Tenant, his agents
or employees, and that Landlord will indemnify and keep harmless Tenant from all
damages, liabilities, losses, injuries, or expenses which may arise or be
claimed against Tenant and be in favor of any person, firm or corporations, for
any injuries or damages to the person or property of any persons, firms or
corporations, where said injuries or damages arose about or upon said common
areas, as a result of the negligence of Landlord, his agents, employees,
servants, licensees, visitors,
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customers, patrons, and invitees. Landlord shall maintain at all times during
the Term of this Lease a comprehensive general liability policy or policies
insuring Landlord and Tenant against all matters set forth in this Section 23A,
with minimum limits of $500,000 with respect to any one person and $2,000,000
with respect to any one accident or disaster. Such policy or policies shall be
in a form acceptable to Tenant, shall name Tenant as additional insured, shall
state that the insurance is primary over any other insurance carried by Tenant,
shall state that no act or omission of Landlord, its agents, employees or
invitees shall provide a defense to such coverage, and shall include the
following coverages:
(a) Premises operations;
(b) Independent contractors;
(c) Broad form contractual in support of the indemnities provided by this
Section 23A; and
(d) Personal injury liability with exclusions (a) and (c) removed.
Each policy shall include a waiver of subrogation in favor of the Tenant.
Evidence of these coverages represented by certificates of insurance issued by
the insurance carrier must be furnished to Tenant prior to Tenant moving in.
Such certficate of insurance shall state that Tenant will be notified in writing
thirty (30) days prior to the cancellation, material change or renewal of
insurance. If Landlord fails to comply with the foregoing requirements relating
to insurance, Tenant may obtain such insurance and shall be entitled to a credit
against Base Rent for the premium cost thereof. Notwithstanding the foregoing,
Metropolitan (but not any other Landlord) may, at its option, elect to be
self-insured against the risks specified in this Section 23A.
In case Tenant shall be made a party to any litigation commenced against
Landlord, then Landlord shall protect and hold Tenant harmless and shall pay all
costs, expenses and reasonable attorrneys' fees incurred or paid by Tenant in
connection with such litigation and any appeal thereof, unless it shall be
determined that Tenant is liable and Landlord is not liable to the plaintiff in
such litigation.
24. ATTORNEYS' FEES. If either party alleges that the other party has
defaulted in the performance of any of the terms, provisions, covenants and
conditions of this Lease and by reason thereof such party employ the services of
an attorney to enforce performance of the covenants, or to perform any service
based upon defaults, then in any of said events the prevailing party shall be
entitled to reasonable attorneys' fees and all expenses and costs incurred by
the prevailing party pertaining thereto (including costs and fees relating to
any appeal) and in enforcement of any remedy.
25. DAMAGE OR DESTRUCTION. In the event the Leased Premises shall be
destroyed or so damaged or injured by fire or other casualty, during the Term of
this Lease, whereby the same shall be rendered untenantable and the cost of
repairing and rebuilding shall not exceed 50.0% of the Base Rentals remaining to
be paid during the term of this Lease (including any renewal term for which
Tenant has exercised its option, then Landlord shall have the obligation, to
render such Leased Premises tenantable by repairs within 180 days therefrom,
unless such repairs may reasonably be expected to be completed in a shorter
period of time, in which case, Landlord shall be obligated to complete such
repairs in such shorter time period.
If the cost of repairing and rebuilding the Leased Premises equals or
exceeds 50.0% of the Base Rentals remaining to be paid during the term of this
Lease, then Landlord shall have the right, but not the obligation, to render
such Premises tenantable by repairs within 180 days therefrom (or within such
shorter period of time as is reasonable). Landlord agrees that, within 30 days
following such damage or destruction, it shall notify Tenant with respect to
whether or not Landlord intends to restore the Premises. If said Premises are
not rendered tenantable within the aforesaid 180 days (or such shorter period of
time as is reasonable) it shall be optional with either party hereto to cancel
this Lease, and in the event of such cancellation the rent shall be paid only to
the
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date of such fire of casualty. The cancellation herein mentioned shall be
evidenced in writing. During any time that the Leased Premises are untenantable
due to causes set forth in this paragraph, the rent or a just and fair
proportion thereof shall be abated. Notwithstanding the foregoing, should
damage, destruction or injury occur by reason of Tenant's negligence, Landlord
shall have the right, but not the obligation, to render the Leased Premises
tenantable within 180 days of the date of damage, destruction or injury (or
within such shorter period of time as is reasonable) and no abatement of rent
shall occur.
26. EMINENT DOMAIN. If there shall be taken during the Term of this
Lease any part of the Leased Premises, parking facility or Building, other than
a part not interfering with maintenance, operation or use of the Leased
Premises, Landlord may elect to terminate this Lease or to continue same in
effect. If Landlord elects to continue the Lease, the rental shall be reduced in
proportion to the area of the Leased Premises so taken and Landlord shall repair
any damage to the Leased Premises, parking facilities, or Building resulting
from such taking If any part of the Leased Premises is taken by condemnation or
Eminent Domain which renders the Premises unsuitable for its intended use, the
Tenant may elect to terminate this Lease, or if any part of the Leased Premises
is so taken which does not render the Premises unsuitable for its intended use,
this Lease shall continue in effect and the rental shall be reduced in
proportion to the area of the Leased Premises so taken and Landlord shall repair
any damage to the Leased Premises resulting from such taking. If all of the
Leased Premises is taken by condemnation or Eminent Domain, this Lease shall
terminate on the date of the taking. All sums awarded (or agreed upon between
Landlord and the condemning authority) for the taking of the interest of
Landlord and/or Tenant, whether as damages or as compensation, and whether for
partial or total condemnation, will be the property of Landlord, except for such
sums attributable to leasehold improvements made by Tenant at Tenant's cost,
which shall be the sole property of Tenant. If this Lease should be terminated
under any provisions of this paragraph, rental shall be payable up to the date
that possession is taken by the authority, and Landlord will refund to Tenant
any prepaid unaccrued rent less any sum or amount then owing by Tenant to
Landlord.
27. ABANDONMENT. If, during the Term of this Lease, Tenant shall
abandon, vacate or remove from the Leased Premises the major portion of the
goods, wares, equipment or furnishings usually kept on said Leased Premises, or
shall cease doing business in said Leased Premises, or shall suffer the rent to
be in arrears, Landlord may, at its option, cancel this Lease in the manner
stated in Paragraph 28 hereof, or Landlord may enter said Leased Premises as the
agent of Tenant by force or otherwise, without being liable in any way therefor
and relet the Leased Premises with or without any furniture that may be therein,
as the agent of Tenant, at such price and upon such terms and for such duration
of time as Landlord may determine, and receive the rent therefor, applying the
same to the payment of the rent due by these presents, and if the full rental
herein provided shall not be realized by Landlord over above the expenses to
Landlord of such reletting, Tenant shall pay any deficiency.
28. INSOLVENCY. It is agreed between the parties hereto that: if Tenant
shall be adjudicated a bankrupt or an insolvent or take the benefit of any
federal reorganization or composition proceeding or make a general assignment or
take the benefit of any insolvency law; or if Tenant's leasehold interest under
this Lease shall be sold under any execution or process of law; or if a trustee
in bankruptcy or a receiver be appointed or elected or had for Tenant (whether
under Federal or State laws); or if said Premises shall be abandoned or
deserted; or if Tenant shall fail to perform any of the terms, provisions,
convenants or conditions of this Lease on Tenant's part to be performed; or if
this Lease or the Term thereof be transferred or pass to or devolve upon any
persons, firms, officers or corporations other than Tenant by death of the
Tenant, operation of law or otherwise then and in any such events, at the
option of Landlord, the total remaining unpaid Base Rental for the Term of this
Lease shall become due and payable or this Lease and the Term of this Lease
shall expire and end five (5) days after Landlord has given Tenant written
notice (in the manner hereinafter provided) of such act, condition or default
and Tenant hereby agrees immediately then to pay said Base Rental or quit and
surrender said Lease Premises to Landlord; but this shall not impair or affect
Landlord's right to maintain summary proceedings for the recovery of the
possession of the Leased Premises in all cases provided for by law. If the Term
of this Lease shall be so terminated, Landlord may immediately, or at any time
thereafter, re-enter or repossess the Leased Premises and remove all persons and
property therefrom without being liable for trespass or damages.
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29. LIEN FOR PAYMENT OF RENT. [Intentionally Omitted].
30. WAIVER OF DEFAULT. Failure of Landlord to declare any default
immediately upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord shall have the right to
declare any such default at any time and take such action as might be lawful or
authorized hereunder, in law and/or in equity. No waiver by Landlord of a
default by Tenant shall be implied, and no express waiver by Landlord shall
affect any default other than the default specified in such waiver and that only
for the time and extension therein stated.
No waiver of any term, provision, condition or covenant of this Lease by
Landlord shall be deemed to imply or constitute, a further waiver by Landlord of
any other term, provision, conditions or covenants of this Lease. In addition to
any rights and remedies specifically granted Landlord herein, Landlord shall be
entitled to all rights and remedies available at law and in equity in the event
that Tenant shall fail to perform any of the terms, provisions, covenant or
conditions of this Lease on Tenant's part to be performed or fails to pay Base
Rental, Additional Rental or any other sums due Landlord hereunder when due. All
rights and remedies specifically granted to Landlord herein, by law and in
equity shall be cumulative and not mutually exclusive.
31. RIGHT OF ENTRY. Landlord, or any of his agents, shall have the right
to enter the Leased Premises during all reasonable hours to examine the same or
to make such repairs, additions or alterations as may be deemed necessary for
the safety, comfort, or preservation thereof, or to said Building, or to exhibit
said Leased Premises at any time within one hundred eighty (180) days before the
expiration of this Lease. Said right of entry shall likewise exist for the
purpose of removing placards, signs, fixtures, alterations, or additions which
do not conform to this Lease. In no event, however, shall Landlord have right of
entry to the secure areas of the Leased Premises, which shall include the lower
level space being provided to Tenant at no cost, the vault or the room in which
Tenant maintains Tenant's Computer, unless (i) Landlord, or its agents is
accompanied by Tenant, or its agents and (ii) Tenant is given at least 24 hours
advance notice of Landlord's desire to enter such secure areas.
32. NOTICE. Any notice given Landlord as provided for in this Lease shall
be sent to Landlord by registered mail addressed to Landlord at Landlord's
Management Office in the Building. Any notice to be given Tenant under the terms
of this Lease, unless otherwise stated herein, shall be in writing and shall be
sent by registered mail to the office of Tenant in the Building. Either party,
from time to time, by such notice, may specify another address to which
subsequent notice shall be sent.
33. LANDLORD CONTROLLED AREAS. All automobile parking areas, driveways,
entrances and exits thereto, Common Areas, and other facilities furnished by
Landlord, including all parking areas, truck way or ways, loading areas,
pedestrian walkways and ramps, landscaped areas, stairways, corridors, and other
areas and improvements provided by Landlord for, the general use, in common, of
tenants, their officers, agents employees, servants, invitees, licensees,
visitors, patrons and customers, shall be at all times subject to the exclusive
control and management of Landlord, and Landlord shall have the right from time
to time to establish, modify and enforce rules and regulations with respect to
all facilities and areas and improvements; to police same; from time to time to
change the area, level and location and arrangement of parking areas and other
facilities hereinabove referred to; the restrict parking by and enforce parking
changes (by operation of meters or otherwise) to tenants, their officers,
agents, invitees, employees, servants, licensees, visitors, patrons and
customers; to close all or any portion of said areas or facilities to such
extent as may in the opinion of Landlord's counsel be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any person or the
public therein; to close temporarily all or any portion of the public areas,
Common Areas or facilities; to discourage non-tenant parking; to charge a fee
for visitors and/or customer parking; and to do and perform such other acts in
and to said areas and improvements as, in the sole judgment of Landlord, the
Landlord shall determine to be advisable with a view to the improvements as, in
the sole judgment of Landlord, the Landlord shall determine to be advisable with
a view to the improvement of the convenience and use thereof by tenants, their
officers, agents, employees, servants, invitees, visitors, patrons, licensees
and customers. Landlord will operate and maintain
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the Common Areas and other facilities referred to in such reasonable manner as
Landlord shall determine from time to time. Without limiting the scope of such
discretion, Landlord shall have the full authority to make and enforce rules and
regulations regarding the use of the same or to employ all personnel and to make
and enforce all rules and regulations pertaining to and necessary for the proper
operation and maintenance of the parking areas and/or Common Areas and other
facilities. Reference in this paragraph to parking areas and/or facilities shall
in no way be construed as giving Tenant hereunder any rights and or privileges
in connection with such parking areas and/or facilities unless such rights
and/or privileges are expressly set forth in paragraph 17 hereof.
Notwithstanding the foregoing, Tenant shall have sole and exclusive control over
the loading dock area of the Building and the alleyway leading thereto from
Fourth Avenue North, but only at such times that armored cars are delivering or
picking up cash from the Tenant.
34. CONDITION OF PREMISES ON TERMINATION LEASE AND HOLDING OVER. Tenant
agrees to surrender to Landlord, at the end of the Term of this Lease and/or
upon any cancellation of this Lease, said Leased Premises in as good condition
as said Leased Premises were at the beginning of the Term of this Lease,
ordinary wear and tear, and damage by fire or other casualty not caused by
Tenant's negligence excepted. Tenant agrees that if Tenant does not surrender
said Leased Premises to Landlord at the end of the Term of this Lease then
Tenant will pay to Landlord double the amount of the current rental for each
month or portion thereof that Tenant holds over plus all damages that Landlord
may suffer on account of Tenant's failure to so surrender to Landlord possession
of said Leased Premises, and will indemnify and save Landlord harmless from and
against all claims made by any succeeding Tenant of said Leased Premises against
Landlord on account of delay of Landlord in delivering possession of said Leased
Premises to said successing Tenant so far as such delay is occasioned by failure
of Tenant to so surrender said Leased Premises in accordance herewith or
otherwise.
No receipt of money by Landlord from Tenant after termination of this Lease
or the service of any notice of commencement of any suit or final judgment for
possession shall reinstate, continue or extend the Term of this Lease or affect
any such notice, demand, suite or judgment.
No act or thing done by Landlord or its agents during the Term hereby
granted shall be deemed an acceptance of a surrender of the Leased Premises, and
no agreement to accept a surrender of the Leased Premises shall be valid unless
it be made in writing and subscribed by a duly authorized officer or agent of
Landlord.
35. OCCUPANCY TAX. Tenant shall be responsible for and shall pay before
delinquency all municipal, county or state taxes assessed during the Term of
this Lease against any occupancy interest or personal property of any kind,
owned by or placed in, upon or about the Leased Premises by the Tenant.
36. SIGNS. Landlord shall have the right to install signs on the or
exterior of the Building and Leased Premises and or change the Building's name
or street address. No sign may be installed by Landlord or other tenants of the
Building which would significantly obstruct the public's view of the Tenant's
signs which are to be mounted over the Church Street entrance to the Leased
Premises and the Fourth Avenue side of the Buidling.
37. TRIAL BY JURY. It is mutually agreed by and between Landlord and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, and Tenant's
use or matter arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and Tenant's use or occupancy of the
Premises. Tenant further agrees that it shall not interpose any counterclaim or
counterclaims in a summary proceeding or in any action based upon non-payment of
rent or any other payment required of Tenant hereunder.
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38. TEMPORARY RELOCATION OF TENANT. In the event that the Second and
Third Levels of the Leased Premises are not ready for occupancy by the Tenant on
September 5, 1989, then Landlord shall provide alternative space in the Building
which is reasonably sufficient to permit Tenant to open for business on
September 5, 1989, such space to be provided at no cost to Tenant until the
Second and Third Levels of the Leased Premises are ready for occupancy. Once
Tenant is situated in such temporary space, Landlord may not relocate Tenant,
except to move Tenant into the Leased Premises. Landlord shall not be required
to construct any leasehold improvements to such temporary space. This Section 38
shall not permit Landlord to delay Tenant's occupancy of the Second and Third
Levels of the Leased Premises beyond October 2, 1989.
39. CROSS DEFAULT. If the term of any lease, other than this Lease, made
by Tenant for any other space in the Building shall be terminated or terminable
after the making of this Lease because of any default by Tenant under such other
lease, such default shall, ipso facto constitute a default hereunder and empower
Landlord at Landlord's sole option, to terminate this Lease as herein provided
in the event of default.
40. INVALIDITY OF PROVISION. If any term, provision, covenant or condition
of this Lease or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Lease or the
application of such term, provision, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby and each term, provision, covenant or condition of
this Lease shall be valid and be enforceable to the fullest extent permitted by
law. This Lease shall be construed in accordance with the laws of the State of
Florida.
41. TIME OF ESSENCE. It is understood and agreed between the parties
hereto that time is of the essence of all the terms, provisions, covenants and
conditions of this Lease.
42. MISCELLANEOUS. The terms Landlord and Tenant as herein contained shall
include singular and/or plural, masculine, feminine and/or neuter, heirs,
successors, executors, administrators, personal representatives and/or assigns
wherever the context so requires or admits. The terms, provisions, covenants and
conditions of this Lease are expressed in the total language of this Lease
Agreement and the paragraph headings are solely for the convenience of the
reader an are not intended to be all inclusive. Any formally executed addendum
to or modification of this Lease shall be expressly deemed incorporated by
reference herein unless a contrary intention is clearly stated therein.
43.EFFECTIVE DATE. Submission of this instrument for examination does not
constitute an offer, right of first refusal, reservation of or option for the
Lease Premises or arty other space or premises in, on or about the Building.
This instrument becomes effective as a Lease upon execution and delivery by both
Landlord and Tenant.
44. ENTIRE AGREEMENT. This lease contains the entire agreement between
the parties hereto and all previous negotiations leading thereto, and it may be
modified only by an agreement in writing signed by Landlord and Tenant. No
surrender of the Leased Premises, or of the remainder of the terms of this
Lease, shall be valid unless accepted by Landlord in writing. Tenant
acknowledges and agrees that Tenant has not relied upon any statement,
representation, prior written or contemporaneous oral promises, agreements or
warranties except such as are expressed herein.
45. BROKERAGE. Tenant represents and warrants that is has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, other than Fulton,
Vaughan, Armstrong and Angle and Cushman and Wakefield and Tenant agrees to
indemnify and hold Landlord harmless from and against any claims by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction. Landlord has reached an agreement to compensate Fulton, Vaughan,
Armstrong and Angle and Cushman and Wakefield for their services rendered in
connection with this transaction. The provision of this paragraph shall survive
the termination of this Lease.
46. FORCE MAJEURE. Neither Landlord nor Tenant shall be required to
perform any term, condition, or covenant in this Lease so long as such
performance is delayed or prevented by force majeure, which shall mean acts of
God, labor disputes (whether lawful
12
<PAGE> 13
or not), material or labor shortages, restrictions by any governmental
authority, civil riots, floods, and any other cause not reasonably within the
control of Landlord or Tenant and which by the exercise of due diligence
Landlord or Tenant is unable, wholly or in part, to prevent or overcome. Lack of
money shall not be deemed force majeure. Nothing herein contained shall prohibit
Tenant from providing or obtaining for itself such services as are reasonably
necessary to remain open for business at the Leased Premises during normal
banking hours, so long as Tenant gives notice to Landlord of the lack or
insufficiency of such services, and affords Landlord a reasonable to provide
such services to Tenant. Tenant shall be entitled to a credit against Base Rents
accruing in subsequent months for all costs incurred in providing or obtaining
such services, but no such credit shall be allowed for such costs to the extent
that the aggregate amount of such costs for any calendar month exceed the Base
Rent payable for such month.
47. HAZARDOUS MATERIALS. Tenant shall not store or use or permit the
storage or use within the Premises of any hazardous or toxic waste,
contaminants, oil, radioactive or other materials the removal of which is
required or the maintenance of which is prohibited, regulated or penalized by
any local, state or federal agency, authority or governmental unit.
48. ENVIRONMENTAL HAZARDS. Landlord has delivered to Tenant a copy of an
environmental audit report prepared with respect to the Leased Premises by Soil
& Material Engineer Intech Group, Atlanta, Georgia, dated May 18, 1989. Such
report constitutes the only written document obtained by Landlord regarding
hazardous materials (including asbestos and polychlorinated biphenyls) in the
Leased Premises. Landlord will undertake such abatement procedures with respect
to hazardous materials disclosed to be present in the Leased Premises by such
audit report as Tenant deems reasonably necessary to protect the health of its
employees. Landlord makes no other warranties, express or implied, regarding
hazardous materials in the Building.
49. BANK CLOSURE. Notwithstanding any other provisions contained in this
Lease, in the event the Tenant is closed or taken over by the banking authority
of the State of Tennessee, or other bank supervisory authority, the Landlord may
terminate the Lease only with the concurrence of such banking authority or other
bank supervisory authority, and any such authority shall in any event have the
election either to continue or to terminate the Lease; provided, that in the
event this Lease is terminated, the maximum claim of Landlord for damages or
indemnity for injury resulting from the rejection or abandonment of the
unexpired term of the Lease shall in no event be in an amount exceeding the rent
reserved by the Lease, without acceleration, for the year next succeeding the
date of the surrender of the Leased Premises to the Landlord, or the date of
re-entry of the Landlord, whichever first occurs, whether before or after the
closing of the bank owned by the Tenant, plus an amount equal to the unpaid rent
accrued, without acceleration up to such date.
13
<PAGE> 14
IN WITLESS WHEREOF, the parties hereto, have signed, sealed and delivered
this Lease in quadruplicate at Davidson County, Tennessee, on the date and year
first above written.
LANDLORD:
METROPOLITAN LIFE INSURANCE
COMPANY (Executed in Atlanta, Georgia)
WITNESSES:
/s/ Helen L. Dixon By:/s/ Victor W. Turner
------------------------------- --------------------------------
VICE PRESIDENT
/s/ Patricia A. Monahan Attest:/s/ Nancy J. Hammer
------------------------------- ------------------------------
Assistant Secretary
TENANT:
BANK OF NASHVILLE, in organization
WITNESSES:
/s/ David Broadhurst By:/s/ J. Richard Chambers
------------------------------- --------------------------------
/s/ Darwin Pankey Attest:/s/ Richard L. Fulton
------------------------------- ---------------------------
14
<PAGE> 15
APPENDIX A
The Premises
Second Floor of the L & C Tower
7802 square feet
3% common area factor included
Third Floor of the L & C Tower
4184 square feet
12.5% common area factor included; to be reduced to 3.0% upon
Tenant leasing the entire third floor
Basement Level (Lower Level)
2794 rentable square feet
3.0% common area factor included
Basement Level (Lower Level)
That space designated as "Space Provided at No Cost" on the
attached floor plans
15
<PAGE> 16
APPENDIX B-l
Rate Schedule
11,986/rsf Second (2) and Third (3) floor space
Year Rate/RSF Annual Monthly
1 $ 14.00 $ 167,804.00 $ 13,983.67
2 14.28 171,160.08 14,263.34
3 14.56 174,583.28 14,548.61
4 14.86 178,111.96 14,842.66
5 15.15 181,551.94 15,129.33
6 15.46 185,303.56 15,441.96
7 15.77 189,019.22 15,751.60
8 16.08 192,734.88 16,061.24
9 16.40 196,570.40 16,380.87
10 16.73 200,521.37 16,710.11
2,794/rsf Basement level (Lower level)
Year Rate/RSF Annual Monthly
1-10 $7.00/rsf $19,558.00 $1,629.83
16
<PAGE> 17
APPENDIX B-2
RATE FOR OPTION SPACE
The rate for option space (first right of refusal space) will be computed by
compounding annually using 4% against a base of $14.00 per rentable square foot
beginning September 1, 1989. The rate will be adjusted effective September 1, of
each successive year. A 12.5% common area factor shall be included for any
partial floor and a 3.0% factor shall be included for any full floor.
The rate for lower level option (basement) space shall be $7.00 per square foot
for the entire term of the Lease (including extensions), with a 3.0% common area
factor included.
Landlord shall provide a build-out allowance of $12.00 per square foot of Net
Rentable Area, which allowance shall escalate at the rate of 4.0% per annum from
the date of this Lease through the end of the fifth (5th) year and then shall
diminish at the rate of 20% per year, beginning on the sixth (6th) anniversary
of the date of this Lease. The allowance shall not include the cost of finishing
the space to "shell" condition, which shall include (i) demolishing existing
tenant improvements, (ii) installing drop ceilings, HVAC ductwork and vents and
building standard lighting and (iii) painting exterior walls. No build-out
allowance shall be provided for the lower level option space, but the Landlord
shall deliver such space in shell condition.
17
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APPENDIX C
OPTIONS
Option to Extend
So long as Tenant shall not be in default hereunder on the date notice is given
or at the expiration of the initial term hereof if this lease shall be in full
force and effect, Tenant shall have the option to extend the term of the
original term for an additional term of five (5) years (the "first option term")
to commence on September 1, 1999 and end August 31, 2004, five years thereafter.
Provided Tenant is not in default hereunder on the date notice is given as
provided above, and further provided Tenant has exercised the first option to
extend, Tenant shall have an additional option (the "second option to extend")
to extend the term hereof on the last day of the first extension term for an
additional term of five (5) years to commence September 1, 2004 and end August
31, 2009 five (5) years thereafter. Provided Tenant is not in default hereunder
on the date notice is given as provided above, and further provided Tenant has
exercised the second option to extend, Tenant shall have an additional option
(the "third option to extend") to extend the term hereof on the last day of the
second extension term for an additional term of five (5) years to commence
September 1, 2009 and end August 31, 2014 five (5) years thereafter.
Any option to extend granted above shall be exercised by Tenant giving Landlord
notice six (6) months prior to the end of the term or any extension thereof.
In the event tenant exercises an option to extend as set forth above, all terms
and conditions shall remain in full force and effect with the exception of
Paragraph 3 Base Rent, which upon the first option to extend shall assume one
base rate for all Leased Premises, except those Leased Premises located in the
Lower Level. The new Base Rent will be the greater of the existing rent (or that
amount which would be the existing rent) for the Leased Premises on the Fourth
Level or ninety (90) percent of the current market rate (without giving
consideration to tenant concessions) agreed upon twelve months prior to the
exercising of option. Such Base Rent shall increase by 4% annually during any
year of an extension of the term. This same computation process will occur as
each option to extend is exercised.
Option to Expand
Tenant shall have the right to expand into the contiguous space remaining
on the Third Level as identified on EXHIBIT "A" attached hereto under the same
terms and conditions currently in effect for the Leased Premises on the Second
and Third Levels. All improvements to this space shall be at tenant's expense,
except that Landlord shall deliver such space in "shell' condition as defined in
APPENDIX B-2 and shall install carpet. Tenant shall be entitled to the use of
such space for occasional functions (but not as office space) prior to
exercising its option to expand into such space and shall not be obligated to
pay Base Rent for such space until such expansion occurs.
Right of First Refusal
Upon written notification from Landlord (which notification shall attach a copy
of a bona fide offer by a third party to lease such space; unless the Landlord
is Metropolitan, in which case Metropolitan may certify to Tenant that it has a
bona fide offer from a third party to lease such space), Tenant shall have the
right of first refusal on the space located on the 4th floor of the L & C
Tower. Said space shall be accepted in increments of approximately one thousand
(1,000) square feet under the same terms and conditions in effect with the
exception of Paragraph 3, Base Rent, which shall be according to the schedule
set forth in APPENDIX "B-2" attached hereto and which shall be subject to a 4%
increase compounded annually throughout the term of this lease and any
extensions thereof. Written notice to accept or reject an offer shall be given
to Landlord within ten (10) days of Tenant's receipt of notification. Failure to
remit such acceptance or rejection within said time period shall be construed as
Tenant's forfeiture or rejection of said option. Landlord shall provide a
build-out allowance for such space as provided in APPENDIX B-2.
18
<PAGE> 19
Basement Vault and Anteroom
Upon written notification (which notification shall include a copy of a bona
fide offer from a third party to lease such vault and anteroom; unless the
Landlord is Metropolitan, in which case Metropolitan may certify to Tenant that
it has a bona fide offer from a third party to lease such space) from Landlord,
Tenant shall have the right of first refusal on the vault and anteroom located
in the basement of the L & C Tower and shown on the floor plans attached to
APPENDIX A. Written notice to accept or reject this offer shall be given to
Landlord within ten (10) days of Tenant's receipt of notification. Failure to
remit such acceptance or rejection within said time period shall be construed as
Tenant's forfeiture or rejection of said option. If Tenant should exercise its
right of first refusal as to the vault and anteroom, the rent for such space
shall be $7.00 per square foot of Net Rentable Area (without escalation), and
shall include a 3.0% common area factor.
19
<PAGE> 20
APPENDIX D
CONFIDENTIALITY
Landlord and Tenant agree that all negotiations, terms, conditions, inducements
and any facts relating to this Lease shall be confidential. The only exceptions
shall be required disclosure to governing and regulatory agencies.
20
<PAGE> 21
APPENDIX E
Anytime Teller Machine and Night Depository
Tenant may place an anytime teller machine and night depository ("ATM") in the
lobby of the Building. There will be no rental cost. Construction will be at
Tenant's expense and shall not materially disturb Landlord or the other tenants
of the Building (except that noise caused by such construction shall not be
deemed to be a disturbance). The location of the ATM shall be as shown in the
drawings attached hereto as EXHIBIT A. The ATM shall remain the sole property of
the Tenant and shall be removed by Tenant at the expiration of the term of this
Lease, with the lobby being restored to its condition existing prior to the
installation of the ATM, normal wear and tear excepted. Customers of the Tenant
shall be permitted to have access to the ATM 24 hours per day, 7 days per week;
provided that Landlord's lobby attendants may, during hours that the Building is
closed to the general public, take short breaks from the security station
located in the lobby and may lock the lobby during such breaks.
21
<PAGE> 22
APPENDIX F
TENANT'S COMPUTER
IBM AS400 System with IBM 3694 proof equipment, associated printers and
access equipment.
22
<PAGE> 23
APPENDIX G
BASEMENT STORAGE
Landlord will be provide, at no cost to Tenant, space in the basement for
storing paper as required by regulation. That space is designated in EXHIBIT
"A".
23
<PAGE> 24
APPENDIX H
DAMAGES
Should the Tenant fail to gain approval to operate as a bank by both the
Tennessee Commissioner of Financial Institutions and the Board of Governors of
the Federal Reserve System and be in operation by June 1, 1990, the Landlord
will be reimbursed for all expenses incurred in construction of tenant
improvements to the Leased Premises, other than the cost of building such space
to "shell condition".
At the time of such disapproval or failure to gain approval by June 1, 1990, the
balance of this Lease will be voidable, at the option of either party; provided,
however, that Tenant shall be obligated to pay Base Rent until the termination
of the Lease pursuant to this APPENDIX H.
24
<PAGE> 25
APPENDIX I
LOADING DOCK SECURITY
Landlord agrees to construct gates or doors to enclose the loading dock as
required by the drawings attached hereto as EXHIBIT A.
25
<PAGE> 26
APPENDIX J
Landlord agrees to provide up to $10,000.00 to Tenant to assists in design of
space. Payment to be against tenant's invoice. In the event the Lease is
terminated pursuant to APPENDIX H above, all such sums shall be refunded by the
Tenant to the Landlord.
26
<PAGE> 27
APPENDIX K
POTENTIAL CONTRACTORS
[INTENTIONALLY DELETED]
27
<PAGE> 28
APPENDIX L
[Intentionally Omitted]
28
<PAGE> 29
EXHIBIT A
DRAWINGS
Floor Plans attached.
<PAGE> 30
[FLOOR PLAN]
<PAGE> 31
[FLOOR PLAN]
<PAGE> 32
[FLOOR PLAN]
<PAGE> 33
EXHIBIT B
TO LEASE DATED JULY ______, 1989
BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY (Landlord)
and
BANK OF NASHVILLE (Tenant)
To Induce Tenant to enter into the Lease (to which this EXHIBIT B is
attached) and in consideration of the mutual covenants hereinafter contained,
Landlord and Tenant agree as follows:
1. (a) Landlord shall prepare the Premises (the "Work") in accordance
with (i) the Plans (attached as EXHIBIT C to the Lease) and (ii) the Meeting
Notes - Bank of Nashville prepared by Hastings Architecture Associates, dated
May 18, 1989 and May 19, 1989, copies of which are attached to this EXHIBIT B.
Except as set forth in the Meeting Notes, and noted on EXHIBIT C, the Work shall
be at Landlord's sole cost and expense. Landlord shall prepare working drawings
and specifications adequate in detail to perform the Work. Upon completion of
said working drawings and specifications to Tenant for Tenant's approval.
Tenant's failure to approve or disapprove the drawings and specifications within
ten (10) days of submission shall be deemed an approval. Tenant shall not
unreasonably withhold its approval of the drawings and specifications or any
part thereof. Any programming or interior design services or unreasonable or
excessive revisions to the drawings and specifications required by Tenant shall
be at Tenant's sole cost and expense, subject to the allowance for design
services provided in Appendix J. Upon approval or deemed approval of the
drawings and specifications by Tenant, the drawings and specifications shall
become the "Plans" for all purposes of this Lease
(b) Except as set forth in Section (a), Landlord has on other
agreement with Tenant and has no other obligation to do any other work with
respect to the Premises.
2. If Landlord further agrees to do, at Tenant's request and upon
submission by Tenant (at Tenant's sole cost and expense) of all necessary
drawings, plans and specifications, any other work in addition to the Work
described in Section 1 hereof, such other work shall be done at Tenant's sole
cost and expense as a Tenant's extra. Prior to commencing any such other work
requested by Tenant, Landlord shall submit to Tenant written estimates of the
cost of such other work. If Tenant shall fail to approve said estimates within
fourteen(14)days from the receipt thereof, the same shall be deemed disapproved
in all respects by Tenant and Landlord promptly upon being billed therefore, at
any time and from time to time, the cost of all such other work.
3. Landlord, at Landlord's discretion, may permit Tenant and Tenant's
agents to enter the Premises prior to the Commencement Date in order that Tenant
may do such other work as may be required by Tenant to make the Premises ready
for Tenant's use and occupancy. If Landlord permits such entry prior to the
Commencement Date, such permission is conditioned upon Tenant and its agents,
contractors, employees and invitees working in harmony and not interfering with
Landlord and its agents, contractors and employees in doing Landlord's work in
the Premises or for other tenants and occupants of the Building. If at any time
such entry shall cause or threaten to cause disharmony or interference, Landlord
shall have the right to withdraw such permission upon 24 hours notice to Tenant.
Tenant agrees that any such entry into and occupation of the Premises shall be
deemed to be under all of the terms, covenants, conditions and provisions of the
Lease except as to the covenant to pay the Rent, and further agrees Landlord
shall not be liable in any way for any injury, loss or damage which may occur to
any of Tenant's work and installations made in the Premises or to properties
placed therein prior to the commencement of the Term, the same being at Tenant's
sole risk.
<PAGE> 34
4. If the substantial completion of the Premises by Landlord is
delayed due to any act or omission of Tenant or Tenant's Representatives,
including any delays by Tenant in the submission of plans, drawings,
specifications or other information or in approving any drawings or estimates or
in giving any authorization or approval, the Premises shall be deemed
substantially completed on the date when they would have been ready but for such
delay.
<PAGE> 35
This Instrument Prepared By:
KENNETH P. EZELL, JR.
BAKER, WORTHINGTON, CROSSLEY,
STANSBERRY & WOOLF
1700 Nashville City Center
511 Union Street
Post Office Box 2866
Nashville, Tennessee 37219
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE made this 5th day of September, 1989, by and
between METROPOLITAN LIFE INSURANCE COMPANY ("Landlord") and THE BANK OF
NASHVILLE ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have executed a certain "Standard Office
Building Lease" (the "Lease") dated as of July 19, 1989, relating to office
space located in the L & C Tower, 401 Church Street, Nashville, Tennessee (the
"Building"); and
WHEREAS, Landlord and Tenant wish to record a summary of certain
provisions of the Lease so as to cause all persons to be on notice thereof.
NOW, THEREFORE, Landlord and Tenant do hereby publish the following
summary of the Lease:
1. DEMISED PREMISE: All space on the Lower, Second and Third
Levels of the Building indicated as being part of the Leased
Premises on the Drawings attached hereto as EXHIBIT A,
containing 2,794 square feet of Net Rentable Area on the
Lower Level, 7,802 square feet on the Second Level, 4,102
square feet on the Third Level on the space on the Lower
Level designated as "Space Provided at No Cost."
2. TERM: The Term of the Lease extends from September 1, 1989,
through August 31, 1999.
3. RENEWALS: Tenant has the option to extend the Lease for
three (3) successive five (5) year terms, upon terms and
conditions specified in the Lease.
4. OPTION TO EXPAND. Tenant has the right to expand into the
remaining space on the Third Level of the Building upon
the terms and conditions specified in the Lease.
1
<PAGE> 36
5. RIGHT OF FIRST REFUSAL: Tenant has the right of first
refusal to lease space on the fourth (4th) floor of the
Building upon the terms and conditions specified in the
Lease.
IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease
as of the day and year first above written.
LANDLORD:
METROPOLITAN LIFE INSURANCE
COMPANY
By:/s/ Victor W. Turner
------------------------
Title: Vice President
---------------------
TENANT:
THE BANK OF NASHVILLE
By:/s/ J. Richard Chambers
------------------------
Title: President
---------------------
2
<PAGE> 37
STATE OF GEORGIA )
--------
)
COUNTY OF DEKALB )
--------
Personally appeared before me, /s/Sandra R. Nauman, a Notary Public
for the state and county aforesaid, Victor W. Turner, with whom I am personally
acquainted, and who acknowledged that he executed the within instrument for the
purposes therein contained, and who further acknowledged that he is the Vice
President of METROPOLITAN LIFE INSURANCE COMPANY, the maker, and is authorized
by the maker to execute this instrument on behalf of the maker.
WITNESS my hand and seal at office this 23rd day of October, 1989.
/s/ Sandra R. Nauman
--------------------
NOTARY PUBLIC
My Commission Expires:
STATE OF TENNESSEE )
)
COUNTY OF DAVIDSON )
Personally appeared before me, /s/ Patricia H. Rudd, a Notary Public
for the state and county aforesaid, J. Richard Chambers, with whom I am
personally acquainted, and who acknowledged that he executed the within
instrument for the purposes therein contained, and who further acknowledged that
he is the President of THE BANK OF NASHVILLE, the maker, and is authorized by
the maker to execute this instrument on behalf of the maker.
WITNESS my hand and seal at office this 5th day of September, 1989.
/s/Patricia H. Rudd
--------------------
NOTARY PUBLIC
My Commission Expires:
11-24-90
(Notary Public Seal)
3
<PAGE> 38
EXHIBIT A
[FLOOR PLAN]
<PAGE> 39
EXHIBIT A
[FLOOR PLAN]
<PAGE> 40
EXHIBIT A
[FLOOR PLAN]
<PAGE> 41
[PARTIAL PLAN - Location of ATM/Night Depository in Main Lobby]
<PAGE> 42
EXHIBIT C
CONSTRUCTION PLANS
Construction Plans Attached
<PAGE> 43
(CUSHMAN & WAKEFIELD LETTERHEAD)
CLARIFICATION TO
EXHIBIT B
CONSTRUCTION COSTS
As an interim description of the plans and specs for the construction work
to be performed for the Bank of Nashville, the following items are included for
clarification purposes until such time as the final drawings are available.
1. Meeting notes prepared by Hastings & Associates dated May 18, 1989.
2. Meeting notes prepared by Hastings & Associates dated May 19, 1989.
3. Conceptual drawings prepared by Hastings & Associates dated 3/27/89
and revised 7/17/89 covering the basement, 2nd floor and 3rd floor of
the L & C Tower.
In addition, the following items are added for clarification purposes.
1. Casework to include $10,000 budget for five teller counters and $2,500
for a check writing stand.
2. There has been $4,700 budgeted for a Receptionist desk.
3. There has been $2,880 budgeted for drawers and counter behind the
teller counters.
4. Exterior improvements to include new entry canopy, roofing and fascia
and glass entry doors with a budget of $26,700.
As a further description of the work, complete drawings and specs will be
substituted for these above items as prepared by Hastings & Associates.
No warranty or representation, express or implied, is made as to the accuracy of
the information contained herein, and same is submitted subject to errors,
omissions, change of price, rental or other conditions, withdrawal without
notice, and to any special listing conditions, imposed by our principals.
<PAGE> 44
EXHTBIT D
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made and entered into as of this _________day of _________,
198__, by and among___________________________(hereinafter referred to as
"Landlord"), and _____________________________, (hereinafter referred to as
"Tenant"), and _________________________________ (hereinafter referred to as
"Mortgagee"), which terms "Landlord," "Tenant" and "Mortgagee" shall include the
successors and assigns of the respective parties.
WITNESSETH:
WHEREAS, by lease dated ______________________, 1989, a true and complete
copy of which is attached hereto as EXHIBIT "A" and made a part hereof by this
reference (hereinafter referred to as the "Lease"), Landlord, in consideration
of the rents reserved therein, and of the terms, covenants, conditions and
agreements therein set forth, has demised and let to Tenant and Tenant has taken
and hired from Landlord, certain real property located in Nashville, Tennessee,
for an original term extending until ___________________; and
WHEREAS, Mortgagee expects to become the owner and holder of a Promissory
Note secured by a Deed of Trust (hereinafter referred to as the "Security
Instrument") constituting a first lien on and security title in and to the real
property described in EXHIBIT "B", attached hereto and made a part hereof,
including the premises leased to Tenant; and
WHEREAS, Tenant desires that Mortgage recognize Tenant's rights under the
Lease in the event of a foreclosure of the Mortgagee's lien, and Tenant is
willing to agree to attorn to the purchaser at such foreclosure if Mortgagee
will recognize Tenant's rights under said Lease.
NOW, THEREFORE, for and in consideration of the premises, any mutual
promises and covenants of the parties hereunder, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Subordination. The Lease and the lien thereon shall at all times be
subject to and subordinate in all respects to the Security Instrument and to all
renewals, modifications and extensions thereof, subject to the terms and
conditions herein after set forth in this Agreement.
2. Non-Disturbance. Subject to the condition precedent set forth below,
so long as Tenant is not in default (beyond any period given Tenant to cure such
default) in the payment of rent or additional rent, or the performance of any
other terms, covenants, or conditions of the Lease on Tenant's part to be
performed, Tenant's possession under the Lease and Tenant's rights and
privileges thereunder, or under any extensions or renewals thereof that may be
affected in accordance with any option contained in the Lease, shall not be
diminished or interfered with by Mortgagee, and Tenant's occupancy shall not be
disturbed by Mortgagee during the term of the Lease or any such extensions or
renewals thereof. As a condition precedent to Mortgagee's obligations pursuant
to this paragraph 2, Tenant shall deliver, upon request by Mortgagee, an
estoppel certificate in the form prescribed by Section 18 of the Lease.
3. Attornment. If the interest of the Landlord shall be acquired by
Mortgagee (the term "Mortgagee" as used in this paragraph 3 and in paragraph 4
shall include any purchaser at a foreclosure sale ocurring as a result of the
Security Instrument by a foreclosure of the Security Instrument or other
proceeding brought to enforce the rights of the holder thereof, and the
Mortgagee succeeds to the interest of the Landlord under the Lease, the Lease
and all the rights of the Tenant thereunder shall continued in full force and
effect and shall not be terminated or disturbed except in accordance with the
terms of the Lease, and Tenant shall be bound to Mortgagee under all of the
terms, covenants and conditions of the Lease for the balance of the term thereof
remaining, and any extensions or renewals thereof that may be affected in
accordance with any option
<PAGE> 45
contained in the Lease, with the same force and effect as if the Mortgagee were
the lessor or landlord under the Lease and the Tenant the lessee under the
Lease, the Tenant does hereby attorn to the Mortgagee as its Lessor, said
attornment to be effective and self-operative with the execution of any
instrument pertaining thereto on the part of either party hereto or immediately
upon Mortgagee's succeeding to the interest of the Landlord under the Lease and,
Tenant shall thereafter pay rent to Mortgagee from and after such time as Tenant
receives written notice from Mortgagee that it has succeeded to the interest of
Landlord under the Lease, or that Mortgagee is exercising its rights pursuant to
the assignment of Landlord's interest in leases which Landlord has given as
further security of the Security Instrument. The respective rights and
obligations of Tenant and Mortgagee upon such attornment, to the extent of the
then remaining balance of the term of the Lease and any extension or renewals,
shall be and are the same as now set forth in the Lease, it being the intention
of the parties hereto to incorporate the Lease into this Agreement by reference
with the same force and effect as if set forth fully verbatim herein.
4. Terms to Which Parties Bound. If Mortgagee shall succeed to the interest
of Landlord under the Lease, Mortgagee shall be bound to Tenant under all of
the terms, covenants and conditions of the Lease, and Tenant shall, from and
after Mortgagee's succession to the interest of the Landlord under the Lease, be
bound to Mortgagee under all of the terms, covenants and conditions of the
Lease, and the parties shall have between themselves the same remedies and
rights as Landlord and Tenant now possess with respect to the Lease; provided,
however, that Mortgagee shall not be:
(a) liable for any act or omission of any prior landlord (including
Landlord) except for any act or omission that shall continue beyond the
time Mortgagee shall succeed to the interest of Landlord; or
(b) subject to any offsets or defenses that Tenant might have against
any prior landlord (including Landlord); or
(c) bound by any rent or additional rent that Tenant might have paid
for more than the then current month to any prior landlord (including
Landlord); or
(d) bound by any material amendment, alteration, or modification of
the Lease made without Mortgagee's prior written consent, including,
without limiting the generality of the foregoing, any amendment, alteration
or modification that results in:
(i) a reduction of the term of the Lease or the amount of rent or
other charges payable by Tenant thereunder, (ii) the assignment of the
Lease or subletting of all or any portion of the Tenant's premises,
except as expressly permitted pursuant to the Lease, (iii) the
imposition of or increase in any obligation of Landlord under the
Lease, or (iv) any impairment of Mortgagee's security therein;
and Tenant and Landlord agree to provide Mortgagee with a copy of any
amendment, alternation or modification of the Lease that does not require
Mortgagee's prior written consent pursuant to this Section 4(d) promptly
upon execution thereof; or
(e) liable for any security or tenant deposits held or obtained by any
prior landlord (including Landlord).
5. Miscellaneous.
5.1 Amendments. This Agreement may not be altered, modified or amended
except in writing signed by all of the parties hereto.
5.2 Governing Law. Inasmuch as this Agreement pertains to real property
located in Nashville, Tennessee, the laws of the State of Tennessee shall be
controlling with respect to enforcement or interpretation of this Agreement.
5.3 Time of Essence. With regard to the performance to any acts, notices,
or payments of money which is required by this Agreement, or any instrument
referred to herein, time is of the essence.
<PAGE> 46
STATE OF TENNESSEE )
)
COUNTY OF DAVIDSON )
Personally appeared before me, _________________________, a Notary Public
for the state and county aforesaid, _______________________, with whom I am
personally acquainted, and who acknowledged that he executed the within
instrument for the purposes therein contained, and who further acknowledged that
he is the_________ of ________________, the maker, and is authorized by the
maker to execute this instrument on behalf of the maker.
WITNESS my hand and seal at office this ____ day of __________ , 1989.
______________________________
NOTARY PUBLIC
My Commission Expires:
_________________________
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
date first above written.
LANDLORD:
By:
-------------------------------
Title:
----------------------------
TENANT:
----------------------------------
MORTGAGEE:
By:
-------------------------------
Its:
------------------------------
Attest:
---------------------------
Its:
------------------------------
[CORPORATE SEAL]
STATE OF TENNESSEE )
)
COUNTY OF DAVIDSON )
Personally appeared before me, _______________________, a Notary Public for
the state and county aforesaid, _____________________, with whom I am personally
acquainted, and who acknowledged that he executed the within instrument for the
purposes therein contained, and who further acknowledged that he is the of
______________________, the maker, and is authorized by the maker to execute
this instrument on behalf of the maker.
WITNESS my hand and seal at office this _______ day of _____________, 1989.
<PAGE> 48
[Hastings Logo]
HASTINGS ARCHITECTURE ASSOCIATES
L & C TOWER - 31st FLOOR
401 CHURCH STREET
NASHVILLE, TENNESSEE 37219
615-242-2113
May 18, 1989
MEETING NOTES - BANK OF NASHVILLE
PARTICIPANTS: Darwin Pankey, Centennial; Lynn Crew, Bacar; Richard Coles,
Amprite Electric Company; Bill Lee, The Lee Company Mechanical Contractors and
Engineers; Jim Hastings and Alan Stephenson, Hastings Architecture Associates
(HAA)
The purpose of the meeting was to clarify items related to Build-out costs for
the Bank of Nashville space based on conceptual drawings prepared by HAA and
dated 5/11/89 (Revised Date). The following items were discussed:
BASEMENT LEVEL
The Owner is to provide "shell space" for tenant. The following items are
included and are to be priced by Bacar:
a. New painted drywall finish in Operations area, Lounge, and
Toilets.
b. Lee's "Faculty III" Carpet in Operations area, Computer Room and
Lounge with vinyl base.
c. Vinyl tile in toilets.
d. New 2 x 4 lay-in ceiling in Operations, Lounge, Toilets, and
Supplies. (Existing ceiling will be removed.)
e. Sealed concrete floor at Supplies Room.
2. The tenant is to provide the following items (Basement only):
a. New partitions and doors through new partitions such as at the
Computer Room.
b. All millwork.
c. All plumbing work except for the demolition of existing plumbing
not to be reused.
d. Halon system for Computer Room fire suppression.
e. New pass-through window.
3. Miscellaneous items related to Basement level:
a. Existing dumbwaiter equipment and walls will be removed and floor
penetrations will be sealed (all 3 levels) by Owner.
b. New air distribution will be provided by Owner.
<PAGE> 49
MEETING NOTES - BANK OF NASHVILLE
MAY 18, 1989
PAGE 2
c. Any emergency lighting upgrade required by Codes will be provided
by Owner.
d. Standard domestic power will be provided by Owner. Special power
requirements such as may be required for computer system will be
provided by tenant.
e. A new dumbwaiter will not be required and no work will be
provided at the existing service elevator or Elevator Equipment
Room.
f. The existing Telephone Equipment and Janitors' Closets in the
leased area will be cleaned but no new finishes will be provided.
g. The door to the Janitor's Closet will be relocated as shown on
the plans.
h. The Elevator Lobby and Basement corridors will be cleaned but no
new finishes will be provided.
i. The Owner will provide two doors and partitions to secure the
corridor at the entrance to the Operations Area.
j. The space designated on the plan to be provided at no cost to the
Owner will be cleared of equipment and cleaned, but no demolition
or new finishes will be provided.
MAIN BANKING FLOOR & EXECUTIVE AREAS
The following work is to be included in build-out costs provided by the
Owner:
a. 30 oz. carpet by Pacific Crest is to be installed throughout Main
Banking Space and the Executive Areas.
b. At the Entry Vestibule and in a 4' wide area along Tellers' Row,
ceramic tile by Crossville Ceramics will be provided.
c. The plan will be revised to allow a 4'-0" area between the
existing elevator shaft and Ann Cheatham's office to provide
future access to the existing freight elevator.
d. Wallcovering in the Main Banking Space will be "Tec-Wall" by
Design Tex.
<PAGE> 50
MEETING NOTES - BANK OR NASHVILLE
MAY 18, 1989
PAGE 3
e. Wallcovering in the Executive Offices and the Executive Area
Conference Rooms will be Maharam linen wall covering ($30 per
lineal yard).
f. Chair rail and wood base will be provided at Executive Offices
and Executive Conference Rooms.
g. A water line will be run to a Coffee Bar in the Executive Area.
h. Though the ceiling in the Main Banking Space has not been
designed, Bacar is to assume 50% drywall ceiling and 50% 2x2
lay-in ceiling for pricing purposes.
i. The curved wall at the Conference Room and the wall behind the
Reception Area are to be full height glass block.
j. All glass doors (Falconer or equal) are to be provided between
the existing Elevator Lobby and the Main Banking Space.
k. All other doors are to be 3'-0" x 8'-0" x 1-3/4" stain grade
solid core wood doors.
l. The entry canopy will be enlarged and the existing fascia that
wraps the second level on both 4th and Church will be replaced.
New glass entry doors will be provided.
m. All 4 Restrooms will be provided with ceramic tile floor and base
and vinyl wall covering.
n. Millwork to be provided includes Tellers' Row, Reception Desk,
Checkwriting Counter, and writing counters at booths and restroom
vanities.
THIRD LEVEL
The following work is to be included in the build-out costs provided by the
Owner:
a. New ceiling, carpet and light fixtures are to be provided in the Board
Room. Existing wood paneling and doors will be cleaned.
b. 8'-0" x 3'-0" x 1-3/4" stain grade wood doors with metal frames will
be provided where shown on plans.
<PAGE> 51
MEETING NOTES - BANK OF NASHVILLE
MAY 18, 1989
PAGE 4
c. Stair connecting Executive Area at Level 2 with Level 3 will be
opened, cleaned and painted. A rated door will be provided at Level 3.
d. Conference Rooms will be provided with drywall to deck above and sound
attenuation blankets in all walls.
e. Walls indicated on plans with double lines (Bruce Mitchell's office
and 2 other offices) are to be open office systems partitions with
doors and are not to be provided by Owner.
f. New carpet, 2 x 4 lay-in ceiling and painted finish are to be provided
by Owner throughout the third floor including the area not to be
leased.
g. Existing kitchen equipment will be removed.
h. Existing dumbwaiter walls will be removed and the floor and wall
repaired.
i. Toilets will be cleaned.
If any of the above items are incorrect, please contact us.
RespectfullY submitted,
HASTINGS ARCHITECTURE ASSOCIATES
/s/ Alan Stephenson
C. Alan Stephenson, AIA
CAS/slm
Distribution: Participants, Van Barron
<PAGE> 52
May 19, 1989
MEETING NOTES - BANK OF NASHVILLE
PARTICIPANTS: Darwin Pankey, Centennial; David Broadhurst, Cushman &
Wakefield; Richard Chambers, Richard Fulton, & Ann Cheatam,
Bank of Nashville; Ray Nathurst, Paul Biggers, & Ken
Murdock, McQuiddy's; Alan Stephenson, Hastings Architecture
Associates
The purpose of the meeting was to identify to all parties the items included in
the tenant buildout. The meeting notes prepared by HAA and dated May 18, 1989
were used as an outline for the discussion.
The following items are additions or revision to those notes.
1. The millwork behind Tellers' Row, the Coffee Bar currently shown in
the Executive Area, and the millwork shown in the Kitchen on the third
floor were not specifically mentioned in the Meeting Notes of May 18
but are to be provided by the Owner. The millwork behind Tellers' Row
is to include base cabinet with drawers for the full length of the
available wall space.
2. The lowest estimate submitted for the bank security system was $12,000
which the Owner will provide. This price includes 6 cameras with
control monitor in the basement, access control at doors, and hold-up
alarms. The price does not include conduit to serve the system which
is to be included in the electrical subcontractors work.
3. The Owner has no plan to replace the glass or window on the 3rd level
and which overlooks the alley.
4. Sound attenuation blankets will be provided by Owner and installed at
all Conference Rooms.
5. At the secured Storage Space in the Trust Department at Level 3, the
Owner will provide a smoke detector and high-temperature sprinkler
heads.
6. The paneling in the existing Conference Room and Elevator Lobby at
Level 3 will be restored to a quality appearance by the Owner either
through a wood treatment or refinishing if required.
7. At level 3, the Owner will provide Pacific Crest carpet as recommended
by McQuiddy's in the Trust Department and Board Room. In the Expansion
Area, Lee's "Faculty III" will be provided.
<PAGE> 53
Meeting Notes - Bank of Nashville
May 19, 1989
Page 2
8. The area in the 3rd floor Elevator Lobby where an existing planter has
been removed will be repaired by the Owner.
9. The Restrooms at Level 3 will be cleaned and all plumbing fixtures
restored to good working order by the Owner.
10. Ann Cheatham requested that the building Owners include the renovation
and additional opening for the service elevator in the total L&C
elevator renovation package. If the Bank chooses to proceed with the
work at that time, the portion of the total cost related to service
elevator would be paid by the Bank.
If any of the above items are incorrect, please contact us.
Respectfully submitted,
HASTINGS ARCHITECTURE ASSOCIATES
/s/Alan Stephenson
C. Alan Stephenson, AIA
CAS/slm
Distribution: Participants, Van Barron, Jim Hastings
<PAGE> 1
EXHIBIT 10.06
LEASE AGREEMENT
BY AND BETWEEN
COLEMAN PARTNERS
(LESSOR)
AND
THE BANK OF NASHVILLE
(LESSEE)
THE GLENDALE SHOPPING CENTER
3770 HILLSBORO ROAD
NASHVILLE, TENNESSEE 37215
AUGUST 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Article 1. Demised Premises, Etc..............................................1
Article 2. Base Rent and Common Area Charge...................................1
Article 3. Use and Occupancy..................................................2
Article 4. Signs..............................................................3
Article 5. Sales Tax on Rents.................................................3
Article 6. Utilities..........................................................3
Article 7. Repairs by Lessor..................................................3
Article 8. Repairs by Lessee..................................................4
Article 9. Lessee Improvements, Advertising, Decor and Signs..................4
Article 10. Compliance with Laws and Regulations.............................. 4
Article 11. Taxes..............................................................4
Article 12. Insurance..........................................................4
Article 13. Description of Lessee's Public Liability Insurance.................5
Article 14. Waiver of Subrogation..............................................5
Article 15. Damage or Destruction to the Premises..............................5
Article 16. Assignment and Subletting..........................................5
Article 17. Eminent Domain.....................................................6
Article 18. Lessor Services....................................................6
Article 19. Sidewalks, Parking Area and Common Areas...........................6
Article 20. Estoppel Certificate...............................................7
Article 21. Default. ..........................................................7
Article 22. Further Rights of Lessor Upon Default. ............................8
Article 23. Exculpation of Lessor from Personal Liability
Under Lease ...........................................8
Article 24. Surrender of Possession............................................9
Article 25. Covenant of Peaceful Possession................................... 9
Article 26. No Liens...........................................................9
Article 27. Notices. ..........................................................9
Article 28. Subordination and Attornment. .....................................9
Article 29. Memorandum of Lease. .............................................10
Article 30. Applicable Law....................................................10
Article 31. Captions..........................................................10
Article 32. Construction of Terms.............................................10
Article 33. Cross Easement....................................................10
Article 34. Miscellaneous.....................................................10
Article 35. Force Majeure.....................................................12
Article 36. Options to Renew..................................................13
SIGNATURES ...................................................................13
</TABLE>
ii
<PAGE> 3
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into this 1st day of August, 1996,
by and between Coleman Partners, a Tennessee Partnership (herein called
"Lessor"), and The Bank of Nashville, a Tennessee banking corporation (herein
called "Lessee").
WITNESSETH:
Article 1. Demised Premises, Etc.
Article 1.1 Demised Premises. In consideration of the Premises and the
mutual covenants, conditions and agreements herein contained and the rent
hereinafter agreed to be paid, Lessor does hereby lease to Lessee, and Lessee
does hereby accept from Lessor, certain Premises in Nashville, Davidson County,
Tennessee, consisting of approximately 41,600 gross square feet (computed from
measurements to the exterior of outside walls of the building and to the center
of demising walls), which space is outlined in red on Exhibit "C" (said space
herein called the "Premises"), and located in the Shopping Center more
particularly described on Exhibit "A ". For purposes of calculating percentages
as hereinafter provided, the portion of the Shopping Center which is the subject
of this Lease shall consist of 4,670 square feet. Lessor owns the Shopping
Center and/or otherwise has good right to lease the same and to bind the
owner(s) thereof. To the best of the Lessor's knowledge, and based solely on
letters and agreements with architects, engineers, and the attached letters from
the Metropolitan Government of Nashville, Davidson County, Tennessee, dated
October 28, 1994 and January 30, 1991, (A) the Shopping Center and the Premises
are in material compliance with all local, state, and federal requirements,
including the Americans With Disabilities Act, etc., (B)(1) the Premises have
been constructed, in all material respects, in accordance with applicable codes,
laws, rules, and regulations, and (2) the Premises are zoned to permit the
conduct of the permitted uses herein specified.
The following Exhibits are attached hereto and incorporated into this Lease
by reference as if fully copied herein:
Exhibit A: Legal Description of the Shopping Center (2.322 acres+)
Exhibit B: Site or Plot Plan of the Shopping Center
Exhibit C: Lessee Space Exhibit
Exhibit D. Locations of Signs and ATMs
Exhibit E: Signage Criteria Exhibit
Exhibit F: Rules and Regulations
Article 1.2 Construction of Premises.
Article 1.2.1. Lessor has erected on the Shopping Center a building
suitable for multi-lessee use.
TO HAVE AND TO HOLD the said Premises with all the rights and privileges
thereto appertaining unto the Lessee for the term hereof (subject, as herein
provided, to all existing or future mortgages, deeds of trust, ground leases,
parking agreements, utility and other rights and privileges previously granted
and/or which may be now or in the future recorded in the Register's Office for
Davidson County, Tennessee), upon the following covenants, conditions and
agreements:
Article 1.3 Initial Term. The initial term of this Lease shall be for 60
calendar months commencing August 1, 1996 and ending August 1, 2001.
Article 2. Base Rent and Common Area Charge. Lessee agrees to pay as base
rent (herein "Base Rent") and common area charge (herein "Common Area Charge")
for the Premises the following sum, due and payable in advance on the first day
of each and every month:
<TABLE>
<S> <C>
First sixty months Base Rent Per Month: $ 9,845.91
Estimated Common Area
Charge Per Month: $ 1,342.40
Total Per Month: $11,188.32
</TABLE>
Said Common Area Charge represents an estimate of Lessee's proportionate
share of the real property taxes, liability and hazard insurance premiums, a
market rate management fee to Lessor, landscaping maintenance, parking lot and
sidewalk maintenance and cleaning, signage, lighting, electricity, maintenance
fees and utility services. Therefore, said Common Area Charge ("C.A.M.") is
subject to adjustment at the end of each calendar year when the actual cost of
the above-referenced items is known. As additional minimal guaranteed rental due
hereunder, Lessee shall pay to the Lessor Lessee's pro rata share (as defined in
the later paragraphs dealing with taxes and insurance) of any of Lessor's
hazard,
<PAGE> 4
casualty or liability insurance premiums which fall due after the earlier of:
Lessee's occupancy or the completion of the improvements to be constructed upon
the Premises by Lessor for Lessee's occupancy. This shall be payable to Lessor
within thirty (30) days after Lessor sends Lessee a statement for such pro rata
share. Lessor agrees to provide reasonable documentation establishing the amount
of C.A.M. charges.
Lessor advises Lessee that Lessee's proportionate share of the Shopping
Center based on the above-stated square footage is Eleven and 41/100s percent
(11.41%).
In addition, Lessee agrees to pay the other amounts required to discharge
its obligations under the succeeding conditions and provisions of this Lease.
Automated Teller Machines ("ATMs"). The Lessor consents to the placement of
an ATM at the sites indicated on Exhibit "D" at Lessee's cost. However, the
Lessee acknowledges that such consent is specifically limited by the rights of
the existing tenant known as Pier One to restrict the placement of ATMs in the
main (upper level) parking area of the Shopping Center. The Lessor agrees to
cooperate and support the Lessee's efforts to obtain the consent of Pier One and
the Metropolitan Government of Nashville Davidson County, Tennessee for such the
establishment of the said ATMs as indicated on said Exhibit "D". The dimensions
of the ATMs acceptable to the Lessor are indicated on said Exhibit "D".
Free-Standing or Other Drive-Through Teller Windows. The Lessor will
support the Lessee's efforts to locate a free-standing or other drive-through
teller position(s) in the Shopping Center at Lessee's cost. However, the Lessee
acknowledges that such consent is specifically limited by the rights of the
existing tenant known as Pier One to restrict the placement of such
drive-throughs in the main (upper level) parking area of the Shopping Center.
The Lessor agrees to cooperate and support the Lessee's efforts to obtain the
consent of Pier One and the Metropolitan Government of Nashville Davidson
County, Tennessee for such the establishment of the said position(s) as
reasonably requested from time to time. Any such construction or positions shall
be subject to Lessor's prior approval as to location, size, design, and so
forth, all of which shall be reasonable and consistent with the general design
and appearance of the Shopping Center. Such drive-through space shall be the
basis for additional rent at a market rate and other charges (consistent with
this Agreement).
Alarms, Etc. The Lessee is hereby granted permission to install such alarm
systems as are typical in the banking industry and/or as are required by law,
rule or regulation.
Vaults, Etc. The Lessee is hereby granted permission to install such vaults
as are typical for this type of branch in the banking industry and/or as are
required by law, rule or regulation. Lessor has received a copy of the
specifications of the vaults to be used by the Lessee. Lessee is to determine
that the same may safely be used in the space.
Wiring, Etc. The Lessee is hereby granted permission to install such wiring
and plumbing as may be required to prepare and maintain the space for the
permitted uses.
Article 3. Use and Occupancy. Lessee will maintain regular business hours,
as follows: No set hours. It is a condition hereto that the Lessee be granted a
use and occupancy (and any comparable) permit without undue expense.
Lessee will use the Premises for the sole purpose of: Banking and financial
services and for no other purpose unless written consent of Lessor is first
obtained. Lessor may withhold such consent in its reasonable discretion.
Further, Lessee shall not conduct within the Premises any fire, auction or
bankruptcy sales or operate within the Premises a "wholesale" or "factory
outlet" store, a cooperative store, a "second hand" store, a "surplus" store, or
a store commonly referred to as a "discount house." Lessee shall not permit any
objectionable or unpleasant odors to emanate from the Premises, nor place or
permit any signage, radio, television, loud-speaker or amplifier on the roof or
outside the Premises or where the same can be seen or heard from outside the
building or in the Common Area, nor place an antenna, awning or other projection
on the exterior of the Premises (except a small satellite dish placed on the
roof of the Shopping Center so that it is unobtrusive); nor solicit business or
distribute leaflets or other advertising material in the Common Area; nor take
any other action which in the exclusive judgment of Lessor would constitute a
nuisance or would disturb or endanger other tenants of the Shopping Center or
unreasonably interfere with their use of their respective Premises, in or do
anything whicl1 would tend to injure the reputation of the Shopping Center.
Lessee at all times shall keep said Premises in a neat and orderly condition and
keep the entry ways and sidewalks and delivery areas adjoining the demised
Premises clean and free from rubbish and dirt. (The Lessor shall take reasonable
steps to remove snow and ice). Lessee shall take reasonable steps to keep the
Premises clean and free of rodents, bugs and vermin and at the request of Lessor
participate and cooperate in carrying out any reasonable program of
2
<PAGE> 5
extermination that Lessor may direct, and Lessee shall bear the cost thereof.
Lessee shall not use or permit the use of any portion of said Premises as
sleeping or living quarters or as lodging rooms or keep or harbor therein any
live animals, fish, or birds, or use the same for any illegal purpose. Lessee
shall not permit, allow or cause the sinks, toilets, or urinals in the Premises
to be used for any purpose except that for which they were designed and
installed. The expense of repairing any breakage, or damage or removal of any
stoppage thereof, as a result of improper use shall be paid for by Lessee.
Lessee agrees to permit no waste of the property but on the contrary take good
care of same.
Article 4. Signs. Lessee shall have the right to have signage over Lessee's
storefront at locations, sizes and designs that are reasonably approved in
writing by Lessor. Lessee shall pay for such signage. (See Exhibit "E" "Signage
Criteria"). Periodic promotionals that include sidewalk and parking lot displays
and obstructions shall require written approval in its reasonable discretion.
Lessee agrees at all times thereafter during the term hereof, to promptly repair
and at all times maintain in good condition such signs as are approved in
writing by lessor. The Lessor consents to signs on all locations (three sides
of the building and the "tombstone" sign at the entrance) designated on the
attached Exhibit "D" as well as reasonable window and door signs hung inside the
Premises. The Lessee's exterior signs shall be consistent with the current
appearance of the existing "Cook's Nook" signs and no larger than such existing
signs. In addition, it shall be the Lessee's obligation to obtain appropriate
municipal approval of the signs. The Lessor will provide reasonable assistance
and support in obtaining such approvals so long as the Lessee bears all expense
therefor.
Article 5. Sales Tax on Rents. In the event any sales, use or other
nonincome tax be levied upon the Base Rent paid by Lessee reserved in this Lease
by the State of Tennessee, the City of Nashville or Davidson County, or any
other governmental entity having jurisdiction, all such taxes attributable
thereto shall be paid by Lessee in addition to its obligations hereunder.
Article 6. Utilities. Lessee shall pay for utilities rendered or furnished
to the Premises during the term of this Lease, including gas, electricity,
telephone service and water and sewer services. All utilities, except water and
sewer services, shall be separately metered. In the case of water and sewer
services, Lessee shall pay his pro rata share of water and sewer services as a
part of C.A.M. charges in accordance with Article 2 herein. Lessor shall not be
liable for any interruption whatsoever in utility services not furnished by
Lessor, nor for interruptions in utility services furnished by Lessor which are
due to fire, accident, strike, acts of God, or other causes beyond the control
of Lessor or in order to make alterations, repairs or improvements unless such
interruption is due to the negligence or willful misconduct of Lessor, its
employees, agents or contractors. In the event that a tenant other than the
Lessee uses substantially more water on a consistent basis than the Lessee, the
charges to the Lessee shall be reasonably adjusted downward in the reasonable
discretion of the Lessor.
Article 7. Repairs by Lessor. Lessor agrees to maintain in good condition
the roof, exterior walls, gutters, sprinkler system (if any), parking areas and
hallways and sidewalks which make up the "common areas" outlined in blue in
Exhibit "B". The term "exterior walls" shall not include glass windows, entrance
doors, service doors or other glass inserts or panels (or window and door
frames, openers and closers). In the event said glass windows, entrance doors,
service doors or other glass inserts or panels (or window and door frames,
openers and closers) are broken, destroyed or must be replaced for any reason
except for the negligence or the willful misconduct of the Lessor, its
employees, agents or contractors in which case the expense shall be borne by
Lessor. The same shall be done at Lessee's expense and in like kind (or as
nearly like kind as can reasonably be obtained by either Lessor or Lessee) as
existed before. Lessor gives to Lessee exclusive control of the Premises and
shall be under no obligation to inspect the Premises. Lessee shall at once
report in writing to Lessor any defective condition actually known to Lessee
which Lessor is required to repair, and failure to so report such defect shall
make Lessee responsible to Lessor for any liability incurred by Lessor by reason
of such defect to the extent that Lessee's delay caused such liability. Lessee
agrees to give Lessor immediate written notice if known to Lessee of any fire or
other casualty in the Premises, or the building of part. Notwithstanding the
foregoing, Lessor shall not be liable for any damage caused by the sprinkler
system or any water leakage, including, but not limited to, damage to Lessee's
merchandise, unless due to the negligence or willful misconduct of Lessee, its
employees, agents or contractors or if such damage occurs after written notice
to Lessor raising specific concerns about such sprinkler(s), water pipe(s),
and/or any other such matters. Any funds spent by Lessor on maintenance will be
charged back on a pro rata basis to Lessee on its common area maintenance.
Lessor shall not be liable for any latent defect in the demised Premises or in
the building of which they form a part except for a period of one (1) year from
the date Lessee takes possession of the demised Premises. All property of Lessee
kept or stored on the demised Premises shall be so kept or stored at the risk of
Lessee only and Lessee shall hold Lessor harmless from any and all claims
arising out of damage to same, including subrogation claims by Lessee's
insurance carriers unless due to the negligence or willful misconduct of Lessee,
its employees, agents, or contractors.
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Article 8. Repairs bY Lessee. Lessee shall make all repairs and carry out
all maintenance, other than that set forth in Article 7 above, upon the Premises
during the term of this Lease, at Lessee's expense, but subject only to Lessor's
prior written approval. This obligation shall include maintenance, repair and/or
replacement of all glass windows, entrance doors, service doors and other glass
paneling or inserts in the walls of said building; maintenance, which approval
shall not be unreasonably withheld. Lessee is responsible for repair and
replacement of heating and cooling systems, plumbing, wiring and their
components. Lessor agrees to transfer to Lessee on the date of the commencement
of this Lease any manufacturer's warranties which Lessor may have relating to
Premises.
Article 9. Lessee Improvements, Advertising, Decor and Signs. Lessee may
make such alterations and improvements to the interior of the Premises, as may
be proper and necessary for the conduct of Lessee's business and for the full
beneficial use of the Premises; provided, however, Lessee shall obtain Lessor's
prior written consent and approval, and provided Lessee shall pay all costs and
expenses thereof and make such alterations, changes and Improvements in a good
and workmanlike manner. Without limiting the foregoing, Lessor's right of
approval shall specifically include the right to approve Lessee's decor, window
dressing(s) and signs, either permanent or temporary, for which Lessee hereby
completely and fully indemnifies Lessor against any mechanic's lien or other
lien or claims in connection with the making of any alterations, changes and
improvements. Lessor does not consent to any such lien.
Lessee shall indemnify and hold Lessor harmless for all loss or damages
growing out, or as a result, of any Lessee improvements, including installation
of fixtures and the vault.
Except as otherwise provided, all signs, furnishings, trade fixtures and
other removable equipment installed in the Premises by Lessee and paid for by
Lessee, shall remain the property of Lessee and shall be removed by Lessee upon
termination of this Lease, provided that (a) any of such as are affixed to the
Premises and require severance may be removed only if Lessee shall repair any
damage caused by such removal, and (b) Lessee shall have fully performed all of
the covenants and agreements required to be performed by Lessee under the
provisions of this Lease in all material respects. Lessor's cost of removal,
and/or storage plus 10 percent, shall be immediately payable by Lessee.
Article 1O. Compliance with Laws and Regulations. Lessee shall comply with
all existing and future laws and regulations affecting the Lessee's use of the
Premises which have been or which may be adopted, passed or issued by any
government or governmental authority, such compliance to be at Lessee's expense.
However, Lessee shall have the right, at its expense to contest the validity or
applicability of any such order or regulation. Lessee shall provide Lessor with
a cash or other bond reasonably satisfactory to Lessor during the period of such
contest, and for a reasonable period thereafter. Further, if such changed or new
laws, rules and regulations materially impair the ability of the Lessee to use
the space without, in Lessee's good faith judgment, undue expense or cost, then
the Lessee may terminate this Lease on six months' prior written notice and upon
the payment of rent, C.A.M. and other applicable charges for six months
accompanied by the prompt evacuation of the space by Lessee.
Article 11. Taxes. Lessee shall pay any taxes or charges assessed against
the Leased Premises and its contents and/or Lessee's proportionate share
("Lessee's Share") of all taxes, assessments or levies of every kind or
character, general or special, whicl1 may be assessed or imposed upon the
Shopping Center by any taxing authority or governmental authority with power to
tax. Lessee's share shall be the percentage created by the leased square footage
of the Premises as shown on page one hereof to the total leasable square footage
of the Shopping Center. Said amount is included in the Common Area Charge and is
payable in accordance with the provisions of, and subject to adjustment as
provided in, Article 2 hereof. All income taxes payable primarily by Lessor,
direct and indirect, are excluded from this provision and shall be the sole
obligation of the Lessor or other responsible taxpayer.
Article 12. Insurance. Lessor shall keep the replacement cost of buildings
and other improvements located upon Lessor's portion of the Shopping Center
insured against loss or damage by fire and extended coverage. Lessee shall pay
Lessee's share of any and all premiums or other charges made for such insurance.
Lessee's share shall be the percentage created by the leased square footage of
the Premises as shown on page one hereof to the total leasable square footage of
the Shopping Center. Said amount is included in the Common Area Charge and is
payable in accordance with the provisions of, and subject to adjustment as
provided in, Article 2 hereof. Lessee shall not keep anything within the
Premises for any purpose which increases the insurance premium cost or
invalidates any insuring Center or the Premises. Lessee shall pay, in addition
to its other obligations hereunder, upon demand of Lessor, any such increased
premium cost due to Lessee's use or occupation of the Premises. Lessor agrees
that
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Lessee's stated use of the Premises as set forth on page 1 hereof will not, in
and of itself, be the basis for any such increased premium costs. Lessee agrees
to maintain insurance upon all of Lessee's improvements including fixtures and
furnishings as well as Lessee's inventory and merchandise in an amount to be
determined by Lessee.
Article 13. Description of Lessee's Public LiabilitY Insurance. Lessee
shall indemnify Lessor and save it harmless from and against any and all claims,
actions, damages, liability and expense (including court cost and attorneys
fees) in connection with loss of life, personal injury and/or damage to property
arising from or out of any occurrence inside the demised Premises, or the
occupancy or use by Lessee of the demised or any part thereof, or occasioned
wholly or in part by any act or omission of Lessee, its agents, contractors,
employees, servants, Lessees or concessionaires. In the case Lessor shall be
made a party to any litigation commenced by or against Lessee, then Lessee shall
protect and hold Lessor harmless and shall pay all costs, expenses and
reasonable attorneys' fees incurred or paid by Lessor in connection with such
litigation. Lessee shall also pay all costs, expenses and reasonable attorneys'
fees that may be incurred or paid by Lessor in enforcing the covenants and
agreements in this Lease against Lessee if Lessor is the party in any such
action. For these purposes, Lessee shall, at its expense, procure liability
insurance issued by a company or companies reasonably acceptable to Lessor,
giving comprehensive coverage of the Premises for all hazards as are normally
insurable for which the Lessor might be held liable, such insurance to have a
limit of ONE MILLION ($1,000,000.00) DOLLARS for each occurrence for public
liability and at least TWENTY-FIVE THOUSAND ($25,000.00) DOLLARS for property
damage for each occurrence. The policy or policies shall be written so as to
indemnify and protect both the Lessor and the Lessee, as their respective
interests may appear, and shall provide that they may not be canceled except
upon not less than ten (10) days' prior written notice to Lessor and Lessee.
Lessee will furnish Lessor, at all times, with an exact copy of all policies
purchased in compliance with this Article. The amounts of insurance specified
herein shall be adjusted upward, if required at the date hereof by the terms of
the existing deed of trust in favor of the existing mortgagee of record in the
Register's Office of Davidson County, Tennessee ("RODC"), at Book 9990, page 29
(the "Deed of Trust").
Article 14. Waiver of Subrogation. Lessor and Lessee agree, provided such
agreement does not invalidate or prejudice any policy of insurance, or
materially increase the cost thereof, that, in the event the Premises or the
fixtures or merchandise therein are damaged or destroyed by fire or other
casualty that is covered by insurance of Lessor or Lessee, the rights, if any,
of any party against the other, or against the employees, agents or licensees of
any party, with respect to any loss resulting therefrom, including public
liability and property liability damage and/or the interruption of the business
of any of the parties, are hereby waived of the extent of the coverage of such
insurance. Lessor and Lessee agree, further, that all policies of fire, extended
coverage, business interruption and other insurance covering the Premises or the
contents, fixtures and improvements therein, shall, if obtainable, contain a
clause or endorsement providing in substance that the insurance shall not be
prejudiced if the assureds have waived right of recovery from any person or
persons prior to the date and time of loss or damage, if any.
Article 15. Damage or Destruction to the Premises. In the event that the
Premises are totally destroyed or so damaged by fire or other casualty that the
same cannot be repaired or restored, in the opinion of Lessor, within three (3)
months from the date of such occurrence, this Lease shall absolutely cease and
terminate, and all rent and other charges shall abate as of the date of such
damage or destruction for the balance of the term.
If the damage caused as above be only partial and/or such that the Premises
can be restored, in Lessor's opinion, to its then condition within three (3)
months, then the Lessor shall restore the Premises with reasonable promptness,
having the right to enter upon the premises for that purpose whenever necessary,
even though the effect of such entry may be to render the Premises untenantable.
During the period after any destruction or damage, rent shall be apportioned, if
Lessee, in its option is able to operate its business, or suspended during the
time which Lessee in its option is unable to operate its business at all at this
Premises. Notwithstanding anything contained in this Article, Lessor shall not
be required to restore the Premises if the cost of such restoration exceeds the
extent of insurance proceeds available, and in this event, Lessor may at its
option, terminate this Lease, upon thirty (30) days' notice to Lessee. Pursuant
to this Article, Lessor shall have (30) days after any destruction or damage in
which to notify Lessee of its intent.
Article 16. Assignment and Subletting. Lessee shall have no right to assign
this Lease nor to sublet the Premises, without the prior consent in writing of
Lessor, nor shall this Lease nor the Leasehold interest described herein ever be
assignable or transferable by operation of any applicable state or federal law,
or by reason of assignment or subletting of all or part of the Leased Premises
shall automatically result in a termination of the Lessee's interest in this
Lease as of the day immediately preceding such assignment or subletting, at the
option of Lessor. However, the Lessee is hereby authorized to sublet or
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license space to a "Bean Central" or "Joe's Coffee" venture led by Joe Dougherty
and to one or more financial services providers such as securities brokers and
others deemed closely related to banking by banking regulators. A corporate
merger or reorganization shall not constitute an assignment or subletting.
In the event of the transfer and assignment by Lessor of its interest in
this Lease and in the building containing the Premises to a person expressly
assuming Lessor's obligations under this Lease, and provided that such a
conveyance does not operate as a fraudulent conveyance as to the Lessee (and
Lessee being granted standing to contest the same as a fraudulent conveyance in
accordance with law), Lessor shall thereby be released from any further
obligations hereunder, and Lessee agrees to look solely to such successor in
interest of the Lessor for performance of such obligations.
Article 17. Eminent Domain. In the event of the taking of at least twenty
(20%) percent of the total land area of the Shopping Center or any portion of
the Premises by eminent domain or as the result of any law, order, regulation or
ordinance or any government or governmental agency, neither party shall be
liable to the other in any respect on account thereof, and such taking shall not
constitute an eviction. In the event of any such taking, with rent abatement as
of this date of such taking, Lessor may terminate this Lease, at its option, by
notice in writing duly given within thirty (30) days following the effective
date of the taking. If Lessor elects to so terminate this Lease, Lessor shall be
entitled to receive and retain the entire proceeds paid in the taking, including
any amounts paid for the land and Premises taken, as well as any amounts paid on
account of the diminution in value of the leasehold estate. Lessee shall be
entitled to receive and retain only such amounts as may be paid on account of
its moving expenses of its movable fixtures to a location within fifteen (15)
miles of the Shopping Center. If, on the other hand, Lessor does not elect to
terminate this Lease on account of such taking, then Lessor shall apply so much
of the condemnation award as may be necessary in order to restore the Shopping
Center to a condition comparable to its condition immediately prior to taking
and the Premises to a condition as originally delivered to Lessee. Further, in
the event Lessor does not elect to terminate this Lease, the rent and all other
charges shall be reduced in proportion to the reduction in the square footage of
the Premises and all common areas. If by reason of any taking, Lessee in its
opinion is unable to reasonably conduct its business, this Lease shall
terminate.
Article 18. Lessor Services. Lessor agrees to provide, as Lessor deems
necessary, (a) reasonable sweeping and janitor service for the common areas, (b)
trash and garbage service (c) proper lighting for the parking and mall area of
the Shopping Center, (d) maintenance of the landscaping, and (e) the keeping of
sidewalks and parking area reasonably clear of ice and snow. All charges for the
foregoing services (including a reasonable supervisory and/or management fee to
Lessor or to a management company) will be prorated between the various tenants,
including Lessee, of the Shopping Center and paid in accordance with and subject
to adjustment as provided in Article 2 hereof. If Lessor should determine, in
its reasonable discretion that Lessee, or any of Lessee's contractors, agents,
employees or invitees, is responsible for more than Lessee's share of the said
cost, then Lessor may charge Lessee an reasonable extra charge for the
additional cost allocable to Lessee's responsibility.
Article 19. Sidewalks, Parking Area and Common Areas. Lessee shall neither
encumber nor obstruct the sidewalks, parking area or other common areas
adjoining the Premises, nor allow the same to be obstructed or encumbered in any
manner by its employees, agents or contractors, Lessee shall not place, or cause
to be placed, any merchandise, vending machine or anything on the sidewalk,
parking area or ether common areas.
The parking area shall be reserved for the exclusive use of the customers
of Lessee and the customers of other tenants of the Shopping Center. Lessee
shall direct its employees to park in the parking garage during the hours prior
to sunset. At all other times when the Shopping Center is open, Lessee's
employees shall park in the middle of the parking areas shown on Exhibit A in
hours after sunset. Anything herein to the contrary notwithstanding, Lessee
shall be permitted to park up to two (2) delivery vehicles on a temporary,
short-term basis in front of the Premises during business hours. After business
hours, such delivery vehicles may be parked in front of the Premises.
"Temporary" shall mean temporary parking of up to no more than thirty (30)
minutes per delivery or loading. The Lessor at his sole cost and expense shall
grade and pave the parking area, together with the sidewalks, driveways and
service area, and shall provide and maintain proper and adequate water drainage
and provide and maintain an adequate and suitable lighting system for said
parking lot.
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Parking, Etc. The parking area shall not be disturbed without Lessee's
consent. Lessor agrees not to use or permit the use of the common area for any
purpose other than parking and passage of vehicles and the movement of
pedestrian traffic, lighting, landscaping, directional and traffic control
signals. The Lessor will not construct, locate or allow construction or location
of any fence, barricade, structure, buildings or other construction which would
interfere with the visibility and/or with the intended uses thereof.
The Lessee agrees to pay, within thirty (30) days of receipt of notice from
the Lessor, Lessee's share (as defined above) of costs incurred by the Lessor in
maintenance, and repair and replacement of the parking and other common areas of
the Shopping Center. Said fees shall encompass, without limitation, all costs of
maintaining lighting, cleaning, snow removal, landscaping, the repair of
sidewalks, pavement and curbs, and providing adequate drainage, as may be
necessary to maintain the Premises in adequate condition and good repair.
Patching and repaving the parking lot, repairing the curbing, and restriping the
parking lot in the ordinary course of maintaining the Shopping Center shall be
considered a part of the C.A.M. Lessee is not and shall not become responsible
for Lessor's remodeling, construction, reconstruction or other comparable
building in the Shopping Center unless Lessee requests or approves the same in
writing.
Article 20. Estoppel Certificate. Lessee, upon Lessor's reasonable request,
shall certify in writing that Lessor is not in default under the terms of this
Lease, and that the same is unmodified and in full force and effect (or if there
have been modifications, that the same is in full force and effect as so
modified) or if there has been a default by Lessor, specifying the default. The
exact date of commencement, current rent, current term and other lease
particulars shall also be certified by Lessee.
Article 21. Default. Upon the happening of any one or more of the events of
default set out below in paragraphs (a) through (c) inclusive, Lessor shall have
the right, at Lessor's option, to terminate this Lease, provided that Lessor
shall give to the Lessee fifteen (15) days' written notice in the case of
default as set out in paragraph (d) below (no notice being required in case of
default as set out in paragraphs (a), (b), (c) below), such notice to be sent,
in either event, by certified mail, return receipt requested, to the Lessee (it
being stipulated that the failure of Lessor to give notice after default shall
not constitute a waiver of Lessor's right upon any subsequent default); and at
any time after the expiration of such notice period, or immediately upon the
occurrence of a default as set out in paragraphs (a), (b), and (c) below, to
reenter and relet the Premises or parts or parcels thereof, and such reentry
and/or reletting shall not discharge Lessee from any liability or obligation
hereunder, except that net rents collected from others as a result of such
reletting shall be a credit on the Lessee's liability for rents payable under
the terms of this Lease as provided hereinabove and Lessor shall be required to
mitigate its damages.
(a) If Lessee should fail to pay any installment within fifteen (15) days
of the due date thereof;
(b) If Lessee or any guarantor is adjudged a bankrupt or a Receiver or
Trustee be appointed for the Lessee's or any guarantor's property, or any other
execution or legal process is levied upon all or substantially all of the
property and effects of the Lessee or any other guarantor located upon the
Premises, which adjudication, appointment or execution be not set aside or
discharged of record, as the case may be, within forty-five (45) days; subject
only to the rights of the Federal Deposit Insurance Corporation (its successors
and assigns) to affirm and to reject leases in accordance with federal law);
(c) In the event the Lessee or any guarantor makes a general assignment for
the benefit of its creditors or files a petition for a reorganization, or an
arrangement, under the appropriate provisions of the National Bankruptcy Act, or
any other act substantially similar thereto;
(d) In the event the Lessor delivers possession of the premises to the
Lessee to open for business and/or fixturing, and if Lessee fails to open for
business on a regular basis within sixty (60) days from the date Lessor delivers
the unencumbered possession of the Premises to Lessee; or
(e) If Lessee would assign or sublet its interest herein without Lessor's
written consent, as prohibited in Article 16, hereof; or if Lessee should cease
doing business (as specifically authorized hereunder) upon the Premises for a
period in excess of thirty (30) continuous days; or
(f) In the event Lessee violates any of the terms, covenants and conditions
of this Lease other than those mentioned in (a) through (c) above, in any
material respect and such default is not cured by the Lessee within fifteen (15)
days after the giving of written notice thereof to the Lessee by certified mail,
return receipt requested, at the Leased Premises, or if the Lessee fails to
proceed promptly, after such notice, to procure the curing of such default with
all due diligence (it being agreed that, in connection with
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a default not reasonably susceptible of being cured within fifteen (15) days,
the time of the Lessee within which to cure the same shall be extended for such
additional period as may be reasonably necessary to complete the same); then, in
any of such cases, the Lessor may give to the Lessee notice of election to end
the term hereof, which notice shall likewise be given by certified mail, return
receipt requested, at the Leased Premises, and the term of this Lease shall
expire upon the mailing of such notice.
Nothing herein, however, shall be construed to require the Lessor to
reenter and relet in any such event or events, nor shall anything herein be
construed to postpone the right of Lessor to sue for rent, whether past due or
whether matured by acceleration or otherwise; provided, however, that the Lessee
shall have the right, within the period of any notice above provided, to cure
any default or defaults, and if such default is cured by Lessee within such
period, dating from the mailing of said certified letter, the Lessor shall not
have the right to proceed with forfeiture or reentry.
Failure to give any of the notices above provided shall not constitute a
waiver of any right as to any different or subsequent breach. Time is of the
essence of Lessee's obligations hereunder. All of the above Events of Default
are bargained for and go to the consideration given for the granting of this
Lease by the Lessor. While some or all of such material Events of Default may
result in a forfeiture or a so-called unconscionable loss to the Lessee as a
result of any such default, the parties expressly agree that such material
Events of Default may result in a forfeiture and/or unconscionable loss to the
Lessee thereunder.
If Lessee should not pay its rent or any additional rents or other charges
due the Lessor hereunder, when the same are due, and if such non-payment should
continue for ten (10) days thereafter, then Lessee shall pay Lessor, as
additional rent, a sum equal to 5% of the unpaid rent (or additional rents or
the charges), computed from the due date thereof, regardless of whether Lessee
is entitled to written notice of any defaults hereunder. Further, if this Lease
grants Lessee any option to extend the term hereof, such option may be extended
only and is expressly conditioned upon Lessee not being in payment or other
material default hereunder and/or Lessee not paying any rent, additional rent or
other charges later than within the time allowed for payment thereof.
Article 22. Further Rights of Lessor Upon Default. If this Lease shall be
for any reason terminated for a violation of its terms by Lessee, as above
provided, then the Lessor shall have the right forthwith to reenter the
Premises, by legal process or otherwise (without any liability for trespass or
damage to the Premises), and to remove all their effects not previously removed
by them, to alter all locks and other security devices at the Premises, and to
hold said Premises as if this Lease had not been made, in addition to the other
rights secured by this Lease to Lessor, or secured to Lessor by the law
applicable hereto. Lessee hereby expressly waives any service of notice to
proceed hereunder, except as expressly provided in Article 21, and waives notice
of the proposed institution of legal proceedings to secure the rights of Lessor
hereunder. In the event of termination of this Lease by reason of violation of
its terms by the Lessee, in addition to any other remedies Lessor may have,
Lessor shall be entitled to prove, claim for and obtain judgment against Lessee
for the balance of the rent agreed to be paid for the term herein provided, plus
all expenses of Lessor in regaining possession of the Premises (including
removal of all improvements and trade fixtures and, under appropriate
supervision for removal thereof, inventory) and the reletting, remodeling, and
improving for a new lessee, including reasonable attorneys' fees and court
costs, crediting against such claim, however, any amount obtained by reason of
any such reletting, remodeling, and improving for a new lessee. Anything
contained in this Lease to the contrary notwithstanding, Lessor may, at its
option, exhaust any one or more of the rights and remedies granted hereunder in
addition to all rights and remedies that Lessor may have at law or equity,
either concurrently or independently, and in such order as it may determine, and
no act of Lessor shall be construed as an election to proceed under any one
provision contained herein to the exclusion of any others or as an election of
remedies to the bar of any other remedy allowed at law or in equity. Lessee's
banking and financial services records that are covered by the Tennessee Bank
Privacy Act may be removed by the Lessee at any time, however, even after
default, termination, or other such condition. No term of this Lease is intended
or designed as an authorization to violate any of the Lessee's software
licenses. Further, Lessee may remove at any time any collateral pledged by
customer of the Bank, the contents of any safe deposit boxes, and any property
beneficially held for one or more of the Bank's customers.
Article 23. Exculpation of Lessor from Personal Liability Under Lease.
Lessee shall look solely to the then interest of Lessor in the premises, or
of any successor in interest to Lessor, as owner of said premises, for the
satisfaction of any remedy of Lessee for failure to perform any of Lessor's
obligations under this Lease, express or implied, or under any law or for any
condition of the Premises or the Shopping Center. Neither Lessor nor any
disclosed or undisclosed principal of Lessor (or officer, director, stockholder,
partner or agent of Lessor or of any such principal),
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nor any successor of any of them, shall have any personal liability for any such
failure under this Lease or otherwise. The provisions of this article shall not
apply to any sum which shall be paid or payable to or on behalf of Lessor or any
party claiming through Lessor if such payment shall be based on an event (which
had previously occurred) whicl1 shall give rise to a duty on Lessor's part to
repair, restore or replace any part of the demised premises, including any
structures thereon. The provisions of this article shall apply only to Lessor
and the parties above-described. They shall not be for the benefit of any
insurance company nor any third party.
Article 24. Surrender of Possession. Lessee agrees to surrender peaceable
and quiet possession of the Premises to the Lessor upon the expiration or
termination of this Lease for any reason, and at any time, in good order and
condition, ordinary wear and tear excepted. If Lessee holds over, Lessee shall
be a Lessee at will of Lessor, and such holdover shall not create a new term.
Article 25. Covenant of Peaceful Possession. Lessor agrees, under the
terms of this Lease, to keep Lessee in quiet and peaceable, uninterrupted
possession of the Premises, subject and subordinate to Lessee's material
compliance with all of the terms, covenants and conditions of this Lease.
Article 26. No Liens. In its use of the Premises and in the performance of
its duties to maintain and finish the same, if applicable, Lessee will not,
under any circumstances, suffer or permit any lien to attach to the Premises, or
any portion thereof. Anything herein to the contrary notwithstanding, Lessor
does not consent to any work or materials for improvements to be performed on
the Premises without Lessor's prior written consent and approval. If a lien
attributable to the Lessee is filed, the Lessee shall have five days to post a
bond to remove the same.
Article 27. Notices. Unless otherwise provided elsewhere in this Lease, any
notice required or permitted to be made by either party under the terms of this
Lease shall be given in writing and shall be forwarded by certified mail,
first-class postage prepaid or by FedEx (shipping charges prepaid). Notices to
the Lessor shall, unless the Lessor otherwise advises the Lessee in writing
strictly under the Notice provision hereof, be addressed to Lessor at the
address shown on the signature page. Initially, the Lessee requests that notices
be sent to the Lessee at 401 Church Street, Nashville, Tennessee 37219,
attention: President.
Notices to the Lessee shall, unless the Lessee otherwise advises the Lessor
in writing strictly under the Notice provision hereof, be addressed to Lessee at
the Leased Premises.
In the event this Lease contains an option to extend, it must be exercised
in writing at least 120 days prior to the termination of the then-existing term.
Notices shall be deemed to have been given when said certified mail is
deposited in any United States Post Office which accepts certified mail
first-class postage prepaid.
Article 28. Subordination and Attornment. This Article is subject to
paragraph 15 of the Deed of Trust. At such time as Lessor and any first
mortgagee or proposed first mortgagee of the Premises in writing request the
same, the Lessee agrees to subject and subordinate its interest herein to the
lien of any deed of trust (which term shall include all security instruments) of
the demised Premises made by the Lessor, or the Shopping Center made by Lessor,
subject to the following: so long as Lessee shall faithfully discharge the
obligations on its part to be kept, this Lease shall not be affected by any
default under such deed of trust, and in the event of foreclosure or enforcement
by any such deed of trust, the rights to mortgagee, Lessee shall attorn to such
mortgagee, its successors and assigns, and this Lease shall in all respects
continue in full force and effect, provided, however, that Lessee fully performs
all of its obligations hereunder, and provided further that Lessee shall not
have prepaid any rent, except as the same become due under the terms of this
Lease. Lessor will use its best efforts to cause its first mortgagee and any
other mortgagee whose interest is superior to that of this Lease to enter into
appropriate subordination and attornment agreements with the Lessee to protect
this Lease in the event of a default by the Lessor under such mortgagee(s).
Except as otherwise provided herein, Lessee agrees that except in an
emergency it will not exercise any right herein arising out of Lessor's breach
of any agreement herein contained or institute any judicial or other proceedings
as a consequence thereof, except after giving notice to any first mortgagee of
the demised Premises the name and address of which has been furnished in writing
to Lessee and affording such mortgagee reasonable opportunity to cure such
breach. Lessee agrees that Lessee will not terminate the Lease, or make any
expenditures hereunder as a result of Lessor's failure to perform obligations
imposed upon him by the Lease until Lessee has given Lessor's mortgagee, or the
assigns or successors in interest of such mortgagee: (1) notice of Lessor's
failure to perform; and (2) a reasonable
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time, without allowance for events beyond mortgagee's control, to undertake
performance of such obligations by mortgagee. Provided that, however, all such
obligations that can be performed within sixty (60) days, shall be performed
within sixty (60) days after notice is given to said mortgagee or mortgagee's
assigns or successors in interest, and after such sixty (60) day period if such
obligations have not been performed, then Lessee may avail itself of remedies
provided for elsewhere in this Lease.
Article 29. Memorandum of Lease. A Memorandum of Lease describing the
Premises, giving the term of this Lease and referring to this Lease, may be
prepared and recorded upon request of either party.
Article 30. Applicable Law. The laws of the State of Tennessee shall govern
the validity, performance and enforcement of this Lease and any provision of
this Lease which is contrary to a law which the parties cannot legally waive or
contract against, is and shall be void and not binding on any party hereby;
provided, however, that the invalidity or unenforceability of any provision of
this Lease shall not affect or impair any other provisions.
Article 31. Captions. The headings of the Articles contained herein are for
the convenience only of the parties and do not define, limit or construe the
contents of such Articles.
Article 32. Construction of Terms. The words "Lessor" and "Lessee" as used
herein shall include the Lessor and the Lessee and their respective heirs,
executors, administrators, legal representatives, and successors, together with
any permitted assigns of the parties hereto, and all those holding under either
of them. The pronouns used herein shall include, when appropriate, either gender
and both singular and plural.
Unless the context clearly denotes to the contrary, the word "rent" or
"rental" as used in this Lease not only includes cash rental, but also all other
payments and obligations to pay assumed by Lessee, whether such obligations to
pay run to the Lessor or other parties.
Article 33. Cross Easement. Lessee agrees that it will abide by and not
violate any existing Cross Easement Agreements and Maintenance Agreements
reflected on Exhibit "B" (including that recorded at Book 9990, page 5, RODC
(the "Recorded Cross Easement"), as to which Lessee is hereby granted the right
to enforce the Lessor's rights in the same if the Lessor declines to enforce the
same within a reasonable time after written notice) and agrees to abide by and
not violate the same. Lessor agrees that all such amendments shall be reasonable
and not adversely and materially affect the rights of the Lessee hereunder. In
accordance with paragraph 8 of the Recorded Cross Easement, the Lessor (as owner
of the Shopping Center) grants to the Lessee (as a tenant) and its subtenants
the privileges and benefits of the easements, rights and privileges of the
Recorded Cross Easement for the duration of the Lessee's tenancy (including
renewals covered by this Lease). The Lessor will not consent to any cross
easements or other encumbrances, or to any changes in existing cross-easements,
that do, or are likely, to adversely and materially affect the Lessee.
Article 34. Miscellaneous.
(1) Any amendment to this Lease must be in writing and signed by Lessor and
Lessee.
(2) Time is of the essence of this Agreement.
(3) No act or thing done by Lessor or his agent during the term hereby
granted shall be deemed an acceptance of a surrender of the demised Premises,
and no agreement to accept a surrender of said demised Premises shall be valid
unless the same be made in writing and subscribed by Lessor. The provisions in
this Lease of any particular remedy shall not preclude Lessor from any other
remedy Lessor might have, either in law or in equity, nor shall the waiver of or
redress for any violation of any covenant or condition in this Lease contained
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of any original violation. In case it
should be necessary or proper for Lessor to bring any action under this Lease or
to place said Lease, for any amount payable by Lessee thereunder, with an
attorney concerning or for the enforcement of any of Lessor's rights hereunder,
then Lessee agrees in each and any such case to pay to Lessor a reasonable
attorney's fee. All past due rent shall bear interest at the rate of ten percent
(10%) per annum from the eleventh day after the due date until paid. The receipt
by Lessor of rent with knowledge of the default of any covenant in this Lease
contained, shall not be deemed a waiver of such default as to future defaults.
The failure of the Lessor to enforce any of the rules and regulations set forth
herein, against the Lessee and/or any other Lessee in the building shall not be
deemed a waiver of such rules and regulations as to future breaches. The
receipt by Lessor of rent from any assignee, underlessee or occupant of said
Premises shall not be
10
<PAGE> 13
deemed a waiver of the covenants in this Lease contained, against assignment,
and sub-letting or an acceptance of the assignee, sub-lessee or occupant as
Lessee or a release of Lessee from the further observance or performance by
Lessee of the covenants in this Lease contained, on the part of the Lessee to be
observed and performed. No provision of this Lease shall be deemed to have been
waived by Lessor or Lessee unless such waiver is in writing signed by the
parties hereto.
(4) Inspection of and Access to Premises. Lessee agrees to permit the
Lessor, his agents and employees, at all reasonable times to enter the demised
Premises or any part thereof for the purpose of inspection, repairs, maintenance
or repairs to Lessor's adjoining property, and, during the last four (4) months
of this Lease or any renewals thereof, to allow Lessor to post upon the exterior
of the Premises the usual notices advertising the Premises "for Lease." However,
Lessor acknowledges that there may be reasonable limitations placed upon any
inspection or repair due to security concerns related to the fact that the
Lessee is a commercial bank which, among other items, has a stock of cash and
other instruments that must be safeguarded at all times.
Lessor may post upon the exterior of the Premises and/or in the common
areas usual notices advertising the Premises "For Sale" at any time so long as
such signs do not adversely affect the Premises or the Lessee's business. Such
signs shall not be overly obtrusive or impact the Lessee in any materially
adverse fashion.
Lessee further agrees to permit Lessor to install and maintain in the
demised Premises all pipes for water, drainage, gas heating, fixtures and
electric wiring and all other appliances and mechanical equipment and systems
necessary for the operation of the demised Premises, and Lessor shall have
access to the Premises at any time in case of any emergency for the purpose of
examining same and for making such repairs or changes in the equipment and
systems referred to above as Lessor may deem necessary. However, Lessor
acknowledges that there may be reasonable limitations placed upon any inspection
or repair due to security concerns related to the fact that the Lessee is a
commercial bank that, among other items, has a stock of cash and other
instruments that must be safeguarded at all times.
Severability. Invalidation of any one of the covenants or restrictions by
judgment or court order shall in no way affect any other provisions whicl1 shall
remain in full force and effect.
If any provision of the Lease, or any section, sentence, clause, phrase,
work, or the application thereof in any circumstance, is held invalid, the
validity of the remainder of this Lease and of the application of any other
circumstances shall not be affected thereby and the remainder of this Lease
shall be construed as if such invalid part was never included therein.
Past-Due Rent, Etc. The past due rent in the amount of $20,657.69 of the
Cook's Nook, Inc. must be paid at the execution hereof and acceptance of such
rent shall constitute the Lessor's agreement (and consideration for such
agreement) to terminate such lease. However, such existing tenant must consent
to this Lease by agreeing in a written instrument that it consents hereto and to
the termination of the current lease. In addition, such existing tenant will be
authorized to erect at his expense on the exterior wall of his area of the
Shopping Center (facing the main parking lot adjacent to Hillsboro Road) a
reasonable sign with the name of such business.
Lessee must receive regulatory approval before this Lease is binding on the
Lessee. Lessee agrees to use its reasonable best efforts to obtain this consent
and represents that it has filed its branch application and given public notice
in order to obtain such approval. The Lessor may terminate this Lease if such
approval is not obtained by the Lessee prior to September 30, 1996.
It is a condition to the Lessee's obligations hereunder that the Premises
are properly zoned for Lessee's intended use as a full-service commercial
banking branch office.
11
<PAGE> 14
Exclusion of Certain CAM Charges - Tenant's proportionate share of CAM
charges shall not include:
- - Separate outparcels;
- - Office buildings;
- - Undeveloped land or future phases; and/or
- - Additional parking or land arising out of destruction of The Glendale
Shopping Center buildings or condemnation of same.
Future Expansion. The Lessee shall have the right of first refusal to
expand or to move into additional contiguous space within the Shopping Center as
space becomes available, whicl1 right of first refusal shall be a continuing
one.
Exclusive. Lessor agrees not to lease any space in The Glendale Shopping
Center to any other tenant which is engaged in the sale or provision of
financial services, or permit any of their electronic banking or other remote
facilities (including, without limitation, ATMs other than those of The Bank of
Nashville). As used in this paragraph, "financial services" means, whether done
directly or indirectly, any lending or loan origination business, any trust
business, any check cashing or pawn broking business, and/or any business
engaged as a primary part of its business in making loans and/or taking deposits
including, without limitation, any bank, savings bank, savings association,
thrift, and/or credit union. In addition to the foregoing, the Lessor agrees not
to lease any space in the Shopping Center to any insurance agency or insurance
brokerage business or to any business that provides investment services or
investment advice without the prior written consent of the Lessee, which consent
the Lessee shall not withhold unreasonably.
The Lessee will he given the name of reasonable repair and maintenance
services to contact for repairs and maintenance, particularly for use after
hours and in emergencies. In the event that an item for which the Lessor is
responsible must be repaired repeatedly in such a fashion that it must
reasonably be concluded that it should be replaced or subjected to a major
overhaul, then the Lessor will upon written request by Lessee replace the same
or perform such major overhaul.
Lessee Signage. The Lessor agrees to allow a reasonable "The Bank of
Nashville Coming Soon" sign on this site. Lessee acknowledges that it must
obtain appropriate local governmental approvals for all signage as a condition
to placing such signage into use.
Any permissions herein which relate to signage or the like are subject to
conditions in the cross easement of Pier One and municipal approvals, and any
limitations included expressly in the Recorded Cross Easement.
Article 35. Force Majeure. Lessor shall not be held responsible for and is
expressly relieved from all liability by reason of any injury, loss or damage to
any person or property in or about the demised Premises or the Shopping Center,
however caused, whether the loss, injury or damage be to the personal property
of the Lessee or any other person, except damage caused by the failure of the
Lessor to perform hereunder within a reasonable time after written notice of
default received from Lessee. This provision shall apply especially (but not
exclusively) to damage caused by water, snow, frost, steam, sewage, illuminating
glass, sewer gas, or odors, or by the bursting or leaking of pipes of plumbing
or neglect or willful misconduct of other Lessees, occupants or janitors of
Lessor, or of any other person, or by act of God, casualty, or earthquake, or
earth settlement and/or subsidence, or foundation collapse, or whether such
damage be caused or occasioned by anything above-mentioned or referred to, or by
any other thing or circumstances, whether of a like nature, or of a wholly
different nature. If any such damage shall be caused by the acts of neglect or
willful misconduct of the Lessee, Lessor may, at his option, repair such damage,
whether caused to the surrounding structures or the Lessee thereof, of such
damage both to the building and to the Lessees thereof, of such damage both to
the building and to the tenants thereof, the Lessee further agrees that all
personal property upon the demised premises shall be a the risk of the Lessee
only and that the Lessor shall not be liable for any damage thereto or theft
thereof. Nor shall the Lessor be liable for delays in delivery of or
interruptions of possession, or for the stoppage or interruption of water,
light, heat, air conditioning, janitor service, caused by riot, strike,
accident, the making of repairs, the failure to make repairs, or any cause over
which the Lessor has no control. Any failure, delay or default shall not be
construed or considered as an actual or constructive eviction or the Lessee nor
shall it in any way operate to release the Lessee from the performance of each
and all of the other covenants herein contained by the Lessee to be performed.
Notwithstanding anything else to the contrary, Lessor shall be liable for the
negligence or willful misconduct of Lessor and its employees, agents and
contractors.
12
<PAGE> 15
However, interruption of any material service that the Lessor agrees herein to
provide in any material respect for a period of thirty (30) consecutive days
after written notice from the Lessee, and where Lessor has not commenced
corrective action, shall entitle the Lessee either to obtain (at Lessor's
expense) such service elsewhere or (2) to terminate this Lease upon ten (10)
days notice.
Article 36. Options to Renew. Upon giving 120 days notice to Lessor as to
each option period, the Lessee retains three (3) options to renew for three (3)
additional periods of sixty (60) months with all terms and conditions of this
lease remaining the same with the exception of rent. The new base rent for the
first option period will be $10,830.50 per month plus CAM pass-throughs as
outlined in this lease. The second option period base rent will be $11,913.55
per month plus CAM pass-througl1s as outlined in this lease. The base rent for
the third option period will be a market rate for the Premises as reasonably
determined by the parties through negotiation plus CAM pass-throughs as
outlined in this lease. A 120 day notice will be required for the each of the
second and third renewal periods.
SIGNATURES
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS LEASE AGREEMENT ON
AUGUST 15, 1996, TO BE EFFECTIVE AUGUST 1, 1996.
LESSOR:
COLEMAN PARTNERS
By: /s/ Stephen H. Horrell
-----------------------------------------
Stephen H. Horrell, for the Joint Venture
By:
-----------------------------------------
LESSEE:
THE BANK OF NASHVILLE
By: /s/Mack S. Linebaugh, Jr.
-----------------------------------------
Mack S. Linebaugh, Jr., President and CEO
NOTARIES
STATE OF TENNESSEE )
COUNTY OF DAVIDSON )
Before me, the undersigned, a Notary Public in and for said County and
State, personally appeared STEPHEN H. HORRELL, with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence) and who, upon
oath, acknowledged himself to be a JOINT VENTURER IN THE JOINT VENTURE KNOWN AS
COLEMAN PARTNERS, the within named bargainor, a Tennessee joint venture, and
that he as such Joint Venturer, being authorized
13
<PAGE> 16
to do so, executed the foregoing instrument for the purpose therein contained,
by signing the name of the Joint Venture by himself as such Joint Venturer.
Witness my hand and seal, at office in Nashville, Tennessee, this 14th day
of August, 1996.
/s/Carolyn P. Curry
------------------------------
Notary Public
My Commission Expires: June 23, 1998.
STATE OF TENNESSEE )
COUNTY OF DAVIDSON )
Before me, Mary J. Karnes of the state and county aforesaid, personally
appeared MACK S. LINEBAUGH, JR., with who I am personally acquainted, or proved
to me on the basis of satisfactory evidence and who, upon oath, acknowledged
himself to be President (or other officer authorized to execute the instrument)
of THE BANK OF NASHVILLE, the within name bargainor, a Tennessee Banking
Corporation and that he as such PRESIDENT executed the foregoing instrument for
the purpose therein contained, by signing the name of the corporation by himself
as PRESIDENT.
Witness my hand and seal, at office in Nashville, Tennessee, this 15th day
of August, 1996.
/s/ Mary J. Karnes
------------------------------
Notary Public
My Commision Expires: My Commission Expires May 24, 1997
----------------------------------
14
<PAGE> 17
CASHIERS CHECK
20265
REMITTER The Bank of Nashville Aug. 15, 1996 87-388/640
___________________________ _____________
PAY TO THE Coleman Partners** $ 11,188.32**
ORDER OF________________________________________________________________________
-THE BANK-
OF NASHVILLE 11,188dol's 32 cts
________________________________________________________________________DOLLARS
[THE BANK OF NASHVILLE LOGO]
401 Church Street
Nashville, Tennesee 37219 /s/ Anne J. Cheatham
615-271-2000 ________________________________
00020265 :064003881: 0000019
CASHIERS CHECK
20266
REMITTER The Bank of Nashville Aug. 15, 1996 87-388/640
___________________________ ____________
PAY TO THE Coleman Partners** $20,657.69**
ORDER OF________________________________________________________________________
-THE BANK-
OF NASHVILLE 20,657 dol'S 69 cts
________________________________________________________________________DOLLARS
[THE BANK OF NASHVILLE LOGO]
401 Church Street
Nashville, Tennessee 37219
615-271-2000 /s/ Anne J. Cheatham
________________________________
00020266 :064003881: 0000019
<PAGE> 18
SUBLEASE OF COMMERCIAL SPACE
BY AND BETWEEN
THE BANK OF NASHVILLE
(AS SUBLESSOR)
AND
JOE'S COFFEE, LLC
(AS SUBLESSEE)
EFFECTIVE AUGUST 1, 1996 THROUGH JULY 31, 2001
THE GLENDALE SHOPPING CENTER
3770 HILLSBORO ROAD
NASHVILLE, TENNESSEE 37215
<PAGE> 19
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Article 1 The Lease............................................................. 1
Article 2 Demised Premises, Etc. ............................................... 1
Article 2.1 Demised Premises............................................ 1
Article 2.2 Initial Term ............................................... 1
Article 2.3 Options to Renew............................................ 1
Article 2.4 Relocations. ............................................... 2
Article 2.5 Termination ................................................ 2
Article 3 Base Rent, Secured Indebtedness, and Security Interest, Etc........... 2
Article 4 Other Primary Lease Obligations; Indemnity to Sublessor............... 2
Article 5 Primacy of Primary Lease ............................................. 3
Article 6 Attempted Holdovers, Etc ............................................. 3
Article 7 Services and Utilities, Etc .......................................... 3
Article 8 Prior Lease, Termination Payment, Etc................................. 3
Article 9 Permitted Use, Prohibited Use, Etc.................................... 3
Article 10 Certain Regulations, Etc ............................................ 3
Article 11 ..................................................................... 4
Article 12 Buildout Expenses.................................................... 4
Article 13 Background of this Sublease, Etc .................................... 4
Article 14 No Waste, Nuisance, or Illegal Use, Etc.............................. 4
Article 15 Alterations, Additions, and Improvements, Etc........................ 4
Article 16 Liens, Etc .......................................................... 4
Article 17 Signs, Etc .......................................................... 5
Article 18 Access for Inspection and Repairs; Security, Etc .................... 5
Article 19 Sublessee Repairs and Maintenance ................................... 5
Article 20 Public Liability Insurance. ......................................... 5
Article 21 Damage or Destruction, Etc. ......................................... 5
Article 22 Eminent Domain Proceedings (Condemnation)............................ 5
Article 23 Waiver of One Breach Not Waiver of Others. .......................... 6
Article 24 Default by Sublessee................................................. 6
Article 24.2 Time to Cure . ............................................ 8
Article 24.3 Remedies .................................................. 8
</TABLE>
ii
<PAGE> 20
<TABLE>
<CAPTION>
TABLE OF CONTENTS (Cont'd)
<S> <C>
Article 24.4 Responsibility of the Sublessor for Property
or Collateral in Possession ............................... 8
Article 24.5 Application of Proceeds from Sale of Collateral............ 9
Article 24.6 Power of Attorney ......................................... 9
Article 25 Default by Lessor or Sublessor. ..................................... 9
Article 26 Termination and Reentry, Etc......................................... 9
Article 27 "For Rent," "For Lease," or "For Sale" Signs. ....................... 9
Article 28 Surrender of Premises and Keys at Termination........................ 10
Article 29 Disposition of Assets, Etc. ......................................... 10
Article 30 Notices.............................................................. 10
Article 31 Binding Effect, Conditions Precedent, Etc............................ 10
Article 32 No Assignment or other Sublease...................................... 10
Article 33 General Terms and Provisions......................................... 10
Article 33.1 Notices .......................... ........................ 10
Article 33.2 Deviation from Agreements or Covenants;
Amendments; Course of Dealing; Waivers .................... 11
Article 33.3 Survival of Agreements, Invalidity, Etc ................... 11
Article 33.5 Renewal, Extension, or Rearrangement ...................... 11
Article 33.6 Cumulative Rights and Remedies . . ........................ 11
Article 33.7 Construction .............................................. 11
Article 33.8 Time of Essence ........................................... 11
Article 33.9 Nature of Commitment . .................................... 11
Article 33.10 Disclosures .............................................. 12
Article 33.11 Indemnification .......................................... 12
Article 33.12 Titles of Articles, Sections and Subsections.............. 12
Article 33.13 Counterparts ............................................. 12
Article 33.14 Exhibits and Appendices .................................. 12
Article 33.15 Computations ............................................. 12
Article 33.16 Sublessor's Discretion or Judgment........................ 12
Article 33.17 Jurisdiction and Venue.................................... 13
Article 33.18 No Third Party Beneficiary................................ 13
Article 33.19 Mutual Release............................................ 13
Article 33.20 Costs, Expenses and Taxes................................. 13
Article 33.21 Representations and Warranties of Sublease................ 13
Article 33.22 Access, Gates Etc......................................... 13
</TABLE>
iii
<PAGE> 21
This Instrument Prepared By:
Daniel W. Small
Attorney at Law
Suite 250, 3100 West End Avenue
Nashville, Tennessee 37203
SUBLEASE OF COMMERCIAL SPACE
THIS SUBLEASE OF COMMERCIAL SPACE ("Sublease") is entered into by and
between THE BANK OF NASHVILLE, a Tennessee banking corporation, whose business
address is 401 Church Street, City of Nashville, State of Tennessee (the
"Sublessor"), and JOE'S COFFEE, LLC, a Tennessee limited liability company whose
business address is 2817 West End Avenue, Suite 109, City of Nashville, State of
Tennessee 37203 (the "Sublessee").
WITNESSETH:
Article 1 The Lease. Sublessor represents that it entered into a lease with
Coleman Partners (the "Lessor") dated August 15, 1996, providing for an initial
term of sixty (60) calendar months commencing August 1, 1996 and ending August
1, 2001 (as amended or otherwise changed, supplemented and/or replaced, the
"Primary Lease"), a copy of certain portions of which is attached hereto as
EXHIBIT "A" and incorporated herein by reference. As used herein, the
"Commencement Date" is five (5) days after the date that the Sublessee obtains
possession of the space (the "Leased Space") pursuant to the Primary Lease.
The Leased Space is located in the Glendale Shopping Center, 3770 Hillsboro
Road, Nashville, Tennessee (the "Shopping Center") where The Cook's Nook, Inc.
is currently located (the "Cook's Nook Space"). As evidenced by its signature
below, the Cook's Nook, Inc. consents to the Primary Lease and to this Sublease.
Article 2 Demised Premises, Etc.
Article 2.1 Demised Premises. Sublessor leases to Sublessee and Sublessee
leases from Sublessor, for the purpose of operating a coffee shop, approximately
seven hundred fifty (750) square feet of space, which space is outlined in red
on EXHIBIT "B" (said space hereinafter referred to as the "Premises"), located
in the Shopping Center more particularly described on EXHIBIT "C". Common areas
shall be available to Sublessee during the Sublessee's regular business hours as
established from time to time.
Article 2.2 Initial Term. The initial term of this Sublease shall be for
the period commencing August 1, 1996 and ending July 31, 2001. However, the
Sublease shall terminate immediately upon the termination, expiration, or
surrender of the Primary Lease. The Sublessee shall be entitled to take
possession of the Premises only after the Sublessor has taken possession of its
space in the Shopping Center (as defined herein).
Article 2.3 Options to Renew. Subject to the other provisions hereof, the
Sublessee shall have three (3) options to renew. Each option shall be for five
(5) years and subject to the terms and provisions of the Primary Lease, as
amended from time to time, and of this Sublease, as amended from time to time.
The Sublessee may not exercise any option to renew unless:
(a) There is no default under this Sublease;
(b) The Sublessee gives at least 90 days prior written notice to the
Sublessor prior to the end of the then current term stating that the
Sublessee intends to exercise its option to renew the Sublease. No
such notice shall be effective if given more than 180 days prior to
the end of such then current term;
(c) There is mutual agreement on rentals and other payments. It is
expressly agreed that neither party shall be required to agree to any
rental, C.A.M., or other charge that is not satisfactory to it; and
(d) The Sublessor determines to exercise its option to renew, and actually
does renew and extend, the Primary Lease.
<PAGE> 22
Article 2.4 Relocations. The Sublessor may relocate and/or expand within
the Shopping Center or be relocated within the Shopping Center on one or more
occasions. In such event(s), the Sublessee hereby agrees to have its Premises
relocated by the Sublessor. Such new area shall then become the "Premises." The
Sublessor shall pay the reasonable costs of such relocation and for the buildout
of the new "Premises." The Sublessor shall not be liable for loss of business
related to such relocation. The Sublessee shall continue to be responsible for
the costs of the Initial Buildout covered elsewhere in this Sublease.
Article 2.5 Termination. At the option of the Sublessor, the initial term
shall expire, among other reasons, if there is a foreclosure of the real
property on which the Premises are located or for any other termination of the
Primary Lease by the Lessor.
Article 3 Base Rent, Secured Indebtedness, and Security Interest, Etc. The
Sublessee shall pay a rental (herein "Base Rent") of Ninety-Three Thousand Seven
Hundred Fifty Dollars ($93,750.00) in sixty (60) equal monthly installments.
This equals approximately Twenty-Five Dollars ($25.00) per square foot per year
for the space. Each installment of the Base Rent for the Premises shall be paid
on or before the first calendar day of each month during the term hereof (pro
rated for any partial months based on the actual number of days in such month).
The rentals and all other amounts due hereunder are sometimes referred to herein
as the "Secured Indebtedness". All amount due hereunder, if not sooner paid,
shall be due and payable at the same time as the last monthly rental payment.
This includes the costs of the Initial Buildout, utilities, and all other
charges in addition to rentals.
The Sublessee grants to the Sublessor a first lien on and a first priority
security interest in all of the Collateral to secure the payment of the rentals
and all other Secured Indebtedness. As used herein, the "Collateral" is all of
Sublessee's inventory, equipment, accounts, accounts receivable, chattel paper,
leasehold interests, fixtures, leases (including this Sublease), contracts,
contract rights, copyrights and trademarks (and all other intellectual
property), general intangibles and all other intangibles related to the
operation of Sublessee at the Premises. Such collateral shall not be removed
unless sold, replaced, or discarded in the ordinary course of business and shall
not be permitted to be transferred to another location to avoid this security
interest.
Joe Dougherty ("Guarantor") shall guaranty the payment and performance of
the Sublessee hereunder, including all rentals, buildouts, and all other costs.
However, his liability for rentals is subject to reduction as follows: For each
month during the term hereof that the Sublessee timely and fully pays and
performs its monthly rental installment and all other amounts and duties due
under this Sublease, the Guarantor's liability for rental installments shall
decrease by that month plus one additional month. Accordingly, by way of example
only, if the Sublessee timely and fully pays the first ten months of rental
installments, then the Guarantor's liability for rental installments shall be
deemed to have decreased by twenty rental installments (out of the 60
installments scheduled hereunder). Again, by way of example only, if the
Sublessee timely and fully pays the first thirty months of rental installments,
then the Guarantor's liability for rental installments shall be deemed to have
decreased by sixty rental installments (out of the 60 installments scheduled
hereunder) and, as to that term, the Guarantor shall have no further liability
for rental installments as a result of this guaranty. (On the other hand, there
shall be no reduction related to any month(s) when amounts and duties owed
hereunder are not fully and timely paid and performed.) This process shall be
reinstated as to any option terms. The Guarantor shall be fully liable for all
rentals related to any holdover periods.
Article 4 Other Primary Lease Obligations; Indemnity to Sublessor.
Sublessee agrees to perform and observe the covenants, conditions, and terms of
the Primary Lease on the part of the Sublessor (and any other lessee thereunder)
to be performed and observed, except the covenant for the payment of rent (and
all other charges including, without limitation, C.A.M. charges) reserved in the
Primary Lease, and to indemnify Sublessor on demand from and against all claims,
damages, and expenses arising out of nonperformance or nonobservance of such
covenants, conditions, and terms. Such compliance is enforceable by both the
Sublessor and the Primary Lessor (Coleman Partners, its successor and permitted
assigns).
2
<PAGE> 23
Article 5 Primacy of Primary Lease. Sublessee agrees that the terms of the
Primary Lease govern over and supersede any conflicting terms, and supplement
any other terms, of this Sublease (other than as to rentals). The Sublessee
agrees that it shall neither have nor claim any rights superior to those of the
Sublessor contained in the Primary Lease and that this Sublease is subject and
subordinate to the Primary Lease in all respects.
Article 6 Attempted Holdovers, Etc. Sublessee shall NOT holdover in the
Premises after the termination or expiration of this Sublease or after the
expiration, termination, or surrender of the Primary Lease. Any holdover at the
expiration or termination of this Sublease with Sublessor's prior written
consent shall be on a week-to-week basis, which tenancy may then be terminated
as provided by the laws of the State of Tennessee. During any such expressly
permitted holdover tenancy, Sublessee agrees to pay monthly to Sublessor an
amount equal to 150% of the last monthly installment of the Base Rent (and all
other charges) as in effect at the time of such termination or expiration and
agrees to be bound by the terms of this Sublease insofar as they are applicable.
Article 7 Services and Utilitie, Etc. At no additional expense to Sublessee
other than amounts actually charged to or paid by the Sublessor that are
specifically attributable to the Sublessee's coffee shop business, the Sublessee
shall receive as a part of the rental consideration the water, electrical, and
gas services and utilities as set forth in the Primary Lease, with the exception
of the following utility services which Sublessee shall provide at its own
expense: telephone, maintenance, janitorial, pest control, and related types of
services, and insurance. Sublessee shall keep the bathrooms spotless clean and
shall assure the attractiveness and cleanliness of the other common areas as
they are affected by Sublessee's business. (Said another way, Sublessee shall
keep the bathrooms spotless and clean up its own messes.) Sublessee shall pay
twenty-five percent (25%) of the cost of pest control.
Article 8 Prior Lease, Termination Payment, Etc. The Sublessee hereby
agrees that effective August 1, 1996, the Sublessor shall be entitled to lease
from the Lessor the space in the Shopping Center currently known as the Cook's
Nook's Space. The execution of this instrument shall be deemed to be the
termination of the Sublessee's interest in the Cook's Nook Space. The Cook's
Nook, Inc. executes this Sublease to reflect its consent to such termination and
to evidence a reaffirmation of its agreement to pay all amounts due and payable
under its lease with Coleman Partners and to pay all amounts owed to The Bank of
Nashville. The Cook's Nook is not insolvent and will not be rendered insolvent
by virtue of the termination of its lease in the shopping center or the other
transactions provided for herein.
Article 9 Permitted Use, Prohibited Use, Etc. The subleased Premises are to
be used solely for the "Permitted Use" described herein, and for no other use,
and for no other purpose without first obtaining the written consent of the
Sublessor (which consent can be withheld by the Sublessor in its sole and
exclusive discretion). As used herein, the term "Permitted Use" shall mean the
operation at retail of a coffee shop combined with a cyber cafe. In no event
shall the Sublessee do, permit, or suffer as a part of its business or
operations anything that casts or portrays the Sublessor in a negative manner,
that knowingly advances the operations of a competitor financial institution (or
corporate affiliate thereof), or that brings scandal or condemnation on the
Sublessee, the Sublessor, the Lessor, the Premises, or any affiliated person.
Article 10 Certain Regulations, Etc. The following apply to the Sublessee's
operations in the Premises:
The following apply to the Sublessee's operations in the Premises:
Sublessee shall immediately clean up the Premises and assure that it
remains at all times clean and attractive for the use of its customers and the
customers of the Sublessor. The Sublessee shall direct its employees to promptly
remedy any problems specified by the Sublessor's employees or agents. The
Sublessee shall operate within rules and regulations reasonably promulgated by
the Sublessor including, without limitation, those attached hereto.
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Throughout the term of the Sublease, Sublessee shall continuously conduct
in the Premises, with a full stock of inventory and full staff of personnel, the
Permitted Use during reasonable business hours.
Article 11 Right to Construct Wall; Termination by Sublessee. Sublessor
reserves the right to erect at any time during the term hereof a wall or other
barrier between the spaces occupied by the Sublessee and Sublessor, including
the common areas other than the bathroom(s). Sublessee waives any rights it may
have for loss of business or other damages resulting from such construction.
However, on or before 180 days after the date that construction of any such wall
is completed the Sublessee may give notice of termination of this Sublease and
may cease making payments for any unpaid amounts of the rentals and buildouts on
the 61st day after sending such notice. Sublessor shall not be responsible for
any damages or costs incurred by Sublessee as a result of such construction by
Sublessor or termination by Sublessee. If the Sublessee terminates the Sublease
because of such wall, the Sublessor shall retain all fixtures, equipment and
inventory in the Premises for its own uses.
Article 12 Buildout Expenses. The Sublessor will initially fund all
mutually agreed buildout cost(s) in connection with this Sublease of the
Premises (the "Initial Buildout"). The Sublessor will control and perform the
Initial Buildout. The Initial Buildout will be constructed as reasonably
requested by Sublessee, but the costs for the Initial Buildouts to be funded by
the Sublessor shall not exceed $25,000 in the aggregate. The Sublessee will be
responsible for reimbursing the Sublessor for the cost(s) of the Initial
Buildout funded by the Sublessor, by paying in equal monthly installments, in
addition to the rent, an amount sufficient to repay the buildout cost(s) over
the five (5) year term of this Sublease.
Article 13 Background of this Sublease, Etc. The subleased Premises are
presently used by The Cook's Nook, Inc., which has negotiated with the Sublessor
to have the Sublessor take over its space and, thus, free The Cook's Nook, Inc.
from its obligations under the said lease. The Sublessor has paid The Cook's
Nook, Inc. a substantial sum for the right to lease such space and for its
termination. By their signatures below, Joe Dougherty and Joe's Coffee, LLC
acknowledge and agree that they are not being required by The Bank of Nashville
to sublet any portion of the space but have negotiated at arm's length with The
Bank of Nashville and The Cook's Nook, Inc. to obtain such rights.
Article 14 No Waste, Nuisance, or Illegal Use, Etc. Sublessee shall not
commit waste on the Premises demised, nor maintain, commit, or permit the
maintenance or commission of a nuisance on the Premises, or use such Premises
for an unlawful purpose. Sublessee shall conform to all applicable laws and
ordinances respecting the use and occupancy of the space sublet here relating to
matters not covered elsewhere in this instrument, provided that it shall not be
required to make alterations, additions, or improvements to such Premises in
order to conform with such laws and ordinances.
Article 15 Alterations, Additions, and Improvements, Etc. Sublessee shall
not make alterations, additions, or improvements on the Premises without first
obtaining the written consent of Sublessor. All alterations, additions, and
improvements that shall be made shall be at Sublessee's expense, shall become
Sublessor's property, and shall remain on and be surrendered with the Premises
as a part of the Premises at the termination of this Sublease without
disturbance, molestation, or injury. Nothing contained in this paragraph shall
prevent Sublessee from removing all office machines and equipment and trade
fixtures customarily used in its business. The Sublessor shall have the right to
conduct, oversee, and direct all alterations, improvements, fixturing, and
changes to the Premises at all times.
Article 16 Liens, Etc. Sublessee shall keep the leased Premises free and
clear of liens arising out of any work performed, materials furnished, or
obligations incurred by Sublessee, including mechanics' liens.
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Article 17 Signs. Etc. Sublessor agrees to use its diligent best efforts to
reasonably accommodate the signage needs of the Sublessee on the exterior area
of the Premises facing the parking lot but without impairing or limiting the
Sublessor's signage design and plans in such area. Sublessor shall not be
required to bring suit against any other tenant or against the Lessor to
accommodate the the Sublessee nor shall Sublessor be required to downsize its
own sign plans in this regard. Any expense in accommodating the Sublessee's
requests shall be at Sublessee's cost and subject to the guarantee by Joe
Dougherty.
The Sublessor hereby consents to a sign comparable to, and of substantially
the same size and shape as, the "Total Image Salon" sign currently in the
Shopping Center on the face of the building. Said sign shall commence on the
corner adjacent to and to the left of the existing "Cooks Nook" sign, shall be
at a level below the "Cooks Nook" sign but above the level of the arch, shall be
subject to Codes, and shall be at the end of the wall.
Sublessee covenants and agrees that no signs or symbols shall be placed in
the windows or doors of the Premises, or on any exterior part of the building
without the Sublessor's prior written approval, which approval may be withheld
by the Sublessor in the exercise of its discretion and/or if so directed or
requested by the Lessor. Any sign or symbol placed on the exterior of the
building or in the windows or doors of the building so as to be visible from the
street that is not satisfactory to Sublessor, shall be removed promptly upon
request by an employee of the Sublessor.
Article 18 Access for Inspection and Repairs; Security, Etc. Sublessee
shall allow Lessor and Sublessor, and their agents, free access at all
reasonable times to the Premises sublet for the purpose of inspecting or of
making repairs, additions, or alterations to the Premises or any property owned
by or under the control of Lessor or Sublessor. Sublessee acknowledges and
agrees that because the Sublessor is a commercial bank, the issue of security is
paramount. Consequently, the Sublessee shall permit the Sublessor to take all
steps deemed necessary, convenient and/or appropriate to protect its space
and/or the Premises and the Sublessee shall comply with such rules and
regulations as the Lessor and the Sublessor shall establish from time to time.
Certain rules and regulations are attached hereto as EXHIBIT "D" and shall be
complied with by the Sublessee at all times in all material respects.
Article 19 Sublessee Repairs and Maintenance. Subject to the Lessor's
obligations under the Primary Lease, Sublessee shall maintain the subleased
Premises in good repair and tenantable condition during the continuance of this
Sublease, except in case of damage arising from the wilful misconduct of
Sublessor or its agents.
Article 20 Public Liability Insurance. Sublessee agrees to carry liability
insurance insuring Sublessee, Sublessor, and Lessor against all claims for
personal injury or property damage caused by conditions or activities on the
subleased Premises in amounts to be approved by Sublessor, but not less than One
Million Dollars ($1,000,000.00) or such greater amount as may be required by the
Primary Lease and/or as may reasonably be required by the Sublessor and/or
requested by the Lessor.
Article 21 Damage or Destruction, Etc. In the event that the Premises are
rendered untenantable in whole or in substantial part as result of destruction
or damage by fire, acts of war, or acts of God this Lease shall cease, provided,
nevertheless, that the Sublessee shall have the option of rebuilding or
repairing the Premises if Sublessee elects so to do and gives written notice of
such election to rebuild or repair to the Sublessor within sixty (60) days after
such damage or destruction. If Sublessee elects to rebuild or repair the
Premises and does so without unnecessary delay, Sublessor shall be bound by the
terms of this Sublease, except that during the period of repair or rebuilding,
the rent under this Sublease shall be abated in the same proportion as the
portion of the Premises rendered unfit for occupancy by Sublessee shall bear to
the whole of the subleased Premises. Sublessor shall have the right to declare
this Sublease terminated when more than ninety (90) days after the destruction
or damaging of the Premises as shall have elapsed without the Sublessee having
elected to repair or rebuild. Further, if Sublessor gives notice that it
intends to repair or rebuild after such destruction or damage, then this
Sublease shall, at the option of the Sublessor, continue in full force and
effect subject only to the rent abatement specified in this Article. If the
damage or destruction is not caused by the Sublessee (or any of
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its employees, agents, owners, or representatives), and if the damage or
destruction materially and adversely affect the Sublessee's business for a
period of not less than sixty (60) days, then the Sublessee may terminate the
Sublease without obligation for future rentals or for any unpaid costs of
buildout. Such termination releases the Sublessor from the Sublease and
Sublessor shall not be responsible to Sublessee for loss of business or the
costs of relocation.
Article 22 Eminent Domain Proceedings (Condemnation). If the Premises or
any part are condemned for public or semi-public use by eminent domain
proceedings, or if by reason of law, ordinance, regulation or court judgment,
Sublessee's use of the subleased Premises for any of the specific purposes
referred to in this instrument shall be prohibited, Sublessee shall have the
right to terminate this Lease on written notice to Sublessor, and rental shall
be paid only to the time when Sublessee surrenders possession of the Premises.
In the event of condemnation of only part of the subleased Premises, Sublessee
may elect to continue in possession of that part of the Premises not so
appropriated or condemned under the same terms and conditions of this Sublease,
except that in such cases Sublessee shall be entitled to an equitable reduction
of the rental payment. Any rental paid in advance beyond such time shall be
returned by Sublessor to Sublessee on demand. Sublessee does not waive any right
it may have to recover from the condemnation authority for such damage as it may
suffer by reason of such condemnation. If the condemnation materially and
adversely affects the Sublessee's business for a period of not less than sixty
(60) days, then the Sublessee may terminate the Sublease without obligation for
future rentals or for any unpaid costs of buildout. Such termination releases
the Sublessor from the Sublease and Sublessor shall not be responsible to
Sublessee for loss of business or the costs of relocation. Sublessor is not
responsible for damages related to any exercise or the powers of eminent domain
or other condemnation of all or any part of the Premises or the Shopping Center.
Article 23 Waiver of One Breach Not Waiver of Others. Waiver of one breach
of a term, condition, or covenant of this Sublease by either party to this
Sublease shall be limited to the particular instance and shall not be construed
as a waiver of past or future breaches of the same or other terms, conditions,
or covenants. Waivers must be in writing and signed by both the Sublessee and
the Sublessor to be binding on either party.
Article 24 Default by Sublessee.
Article 24.1 Defaults. The following are defaults ("Defaults) under this
Sublease:
Nonpayment. Failure to pay each and every rental installment when due; or
Other Payments. The Sublessee fails for any reason to make payment within
five (5) calendar days of the due date of any installment or bill for any other
amounts due hereunder; or
Representations and Warranties. Any representation or warranty made by the
Sublessee in this Sublease and/or in any financial statement presented to the
Sublessor by the Sublessee, Joe Dougherty, and/or The Cook's Nook, Inc., proves
to have been incorrect in any material respect as of the date thereof; or any
representation, statement (including any financial statements), certificate or
data furnished or made by any of such persons (or any accountant, agent or
attorney thereof) in connection herewith proves to have been untrue in any
material respect, as of the date as of which the facts therein set forth were
stated or certified; or
Covenants; Agreements. Unless subject to another Default provision, the
Sublessee fails to comply with any of the covenants or agreements contained in
this Sublease and such failure or violation continues unremedied or is not
waived for a period of twenty (20) days after the earlier of (i) notice thereof
has been given by the Sublessor to the Sublessee, or (ii) such failure or
violation otherwise has become known to any Person who is a Sublessee; or
Dissolution; Merger. The Sublessee is liquidated or dissolved, or otherwise
terminated, or merges with or into any person or entity; or
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Unauthorized Transfer, Etc. The Sublessee transfers, or seeks or attempts
to transfer, or suffers a transfer, voluntarily or otherwise, any of the
Sublessee's interest in the Premises, this Sublease, or any of its material
assets; or
Unauthorized Lien, Etc. Any lien or encumbrance on all or any part of the
Premises or any of the other Collateral, which lien or encumbrance is not
removed or fully bonded within twenty (20) days after attachment, except for
taxes due but not in default, or for taxes which are being contested in good
faith and for which the Sublessee provides sufficient assurance to the Sublessor
on demand and from time to time that such reserves are adequate; or
Loss of Privilege, Etc. The Sublessee forfeits or in any manner loses any
right to do business in any locality or jurisdiction that has or could have any
impact on the Premises, the construction of the buildout, the construction,
opening, operating, or maintaining the Sublessor's intended coffee shop
business, or any other Materially Adverse Effect; or
Bankruptcy or Receivership Proceedings. A receiver, custodian, liquidator
or trustee of the Sublessee or of any Property of the Sublessee is appointed by
the order or decree of any court or agency or supervisory authority having
jurisdiction, and such decree or order remains in effect for more than sixty
(60) days; or the Sublessee files, threatens to file, or authorizes the filing
of a petition in bankruptcy or for purposes of reorganization or insolvency; or
the Sublessee is adjudicated bankrupt or insolvent; or any of the Property of
the Sublessee is sequestered by court order and such order remains in effect for
more than sixty (60) days; or a petition is filed against the Sublessee under
any state or federal (or other applicable) bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, liquidation or
receivership law of any jurisdiction, whether now or hereafter in effect, and is
not dismissed within sixty (60) days after such filing; or
Assignments for Benefit of Creditors, Etc. The Sublessee makes an
assignment for the benefit of such Sublessee's creditors, or admits in writing
Sublessee's inability to pay Sublessee's debts generally as they become due, or
consents to the appointment of a receiver, trustee, or liquidator of the
Sublessee of all or any part of the Premises; or
Discontinuance of Business, Etc. The Sublessee discontinues such
Sublessee's coffee shop business or fails to operate the said business
continuously during reasonable business hours during each week during the term
hereof; or fails to operate the business in a clean and reasonable manner under
the circumstances; but the requirement that said business be conducted
continuously shall NOT be satisfied by being "open" on the internet or some
other "virtual" location but must be physically open and staffed in the
Premises; or
Default on Other Debt or Security. Sublessee fails to make any payment due
on any indebtedness or any event shall occur or any condition shall exist in
respect of any indebtedness of the Sublessee or under any agreement securing or
relating to such indebtedness, the effect of which is to cause or to permit any
holder of such indebtedness or other security or a trustee to cause (whether or
not such holder or trustee elects to cause) such indebtedness, or a portion
thereof, to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment and the default exceeds, when aggregated with all
other such defaults, Twenty-Five Thousand Dollars ($25,000.00); or
Undischarged Judgments; Criminal Prosecutions, Etc. If any one or more
judgments (in the aggregate at any one time outstanding) for the payment of
money in excess of Twenty-Five Thousand Dollars ($25,000.00) are rendered by any
court or other governmental body against the Sublessee which is not fully
covered by valid collectible insurance and the Sublessee does not discharge the
same or provide for its discharge in accordance with its terms, or procure a
stay of execution thereof within the applicable appeal period and within said
appeal period following the date of entry thereof or such longer period during
which execution of such judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal while providing such
reserves therefor as may be required under GAAP; or the Sublessee (or any
Directors or executive officer thereof), is indicted for or convicted of any
felony or imprisoned for any reason for more than five (5) days; or
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Materially Adverse Effect. The occurrence of any amendment, termination,
default under, violation of, of any other impairment of any one or more
contracts, materially and adversely affecting the Premises or the Sublessee's
right or ability to engage in its business or owning and operating the coffee
shop as intended at the date hereof; or
Substantial Change in Equity Ownership. Any material adverse change (ten
percent (10%) or more) in the equity ownership accounts of the Sublessee as of
the date hereof; or
Change in Control. The occurrence of a change in the Members, or in the
control of the Sublessee, or in the Sublessor's executive management from the
identity of the ownership and management as in existence at the time of closing;
provided, that this provision shall not be violated or triggered so long as Joe
Dougherty (and, so long as he is married to his present spouse), his wife, own
and control not less than 51% of the voting equity interests in the Sublessee
and control the governing body thereof, subject to no limitation or derogation
(such as, for example, by charter, bylaw, management contract, or operating
agreement) of his (or, with such spouse, their) authority to run the Sublessee
and to make operative and binding decisions for the Sublessee; or
Article 24.2 Time to Cure. Upon the happening of any Default specified in
this Sublease, and except for payment Defaults, and except where a specific time
frame is specified above, the Sublessee shall have thirty (30) days to cure a
default under this Sublease from the date that Sublessor sends notice thereof to
Sublessee.
Article 24.3 Remedies. Upon the happening of any Default specified in this
Sublease, (i) the Sublessor may declare the entire principal amount (or any
part(s) or installment(s) thereof) of all Secured Indebtedness then outstanding
including interest accrued thereon to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor or other notice of
default of any kind, all of which are hereby expressly waived by the Sublessee,
and/or (ii) terminate this Sublease or (in its discretion, without terminating
this Sublease, change the locks, lock the Sublessee out of the Premises, and on
behalf of the Sublessee for the sole purpose of reletting the Premises, enter
into and secure the Premises, show and relet the same upon terms and conditions
deemed appropriate to the Sublessor without consulting with or obtaining the
permission of the Sublessee. The Sublessee agrees that the occurrence of any
Default shall permit the Sublessor, without any notice to the Sublessee or to
any other Person, to accelerate the due date(s) of installments of rental and
all other parts of the Secured Indebtedness. The Sublessee agrees that no action
or failure to act, and no pursuit of any particular remedy or remedies, shall
constitute a waiver, novation or election of remedies by the Sublessor.
Article 24.4 Responsibility of the Sublessor for Property or Collateral in
Possession. Should all or any part of the Premises and/or the Collateral come
into the possession of the Sublessor, whether before or after a Default, the
Sublessor may use or operate such Premises and other Collateral for the purpose
of preserving it or its value, or pursuant to the order of a court of
appropriate jurisdiction, or in accordance with any other rights held by the
Sublessor in respect of the same. The risk of accidental loss or damage (or of
malicious or other loss or damage not caused intentionally and wilfully by the
Sublessor) to the Premises and/or Collateral is and shall be on the Sublessee
and the Sublessor shall have no liability whatever for failure to obtain or
maintain insurance, nor to determine whether any insurance ever in force is
adequate as to amounts, coverage or as to the risks insured, nor to take any
active steps to protect or to maintain the Collateral, the Premises, or any
other property claimed by the Sublessee or any one else.
Article 24.5 Application of Proceeds from Sale of Collateral. The Sublessor
shall be entitled to apply the proceeds of any sale of all or any part of the
Collateral in the following order: first, to the payment of all of Sublessor's
expenses, including (without limitation) attorneys, receivers, trustees and
other fees and other legal expenses incurred in retaking, holding and preparing
all or any part of the Collateral for sale, in arranging for such sale, and in
actually selling the same; second, toward payment of the balance of the rentals
and/or any other portion of the Secured Indebtedness in such order and manner as
the Sublessor, in its sole discretion, may deem advisable and beneficial to the
Sublessor for the repayment and performance of the Obligations. If the proceeds
from any sale, applied in the manner set forth in this Article, are
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insufficient to pay the Secured Indebtedness in full, the Sublessee shall be
liable for any deficiency and shall pay such deficiency to the Sublessor as soon
as the Sublessor notifies the Sublessee of the amount of such deficiency.
Article 24.6 Power of Attorney. The Sublessee hereby irrevocably appoints
the Sublessor, and its designees, to do and to perform all acts that the
Sublessee itself could do and/or perform, to sign all things that the Sublessee
could have signed or caused to be signed, and to have power and dominion over,
all of the property of the Sublessee in order to do and to discharge all of the
Sublessee's Secured Indebtedness obligations and all other Obligations to the
Sublessor set forth in this Sublease. This appointment is intended to be, and
shall be understood to be, a power coupled with an interest. However, the
Sublessor shall not be required to use this power for any reason and the
Sublessor may at any time in writing reject this power. This power of attorney
shall terminate automatically when the Secured Indebtedness have been fully and
finally paid and performed by the Sublessee. The Sublessor is specifically
authorized to execute on Sublessee's behalf (as "Debtor"), at Sublessee's cost,
one or more financing statements in each State or jurisdiction in which the
Sublessee has an office or address and to charge Sublessee's accounts with the
Sublessor to pay amounts due in connection with any Obligations (including the
Secured Indebtedness).
Article 25 Default by Lessor or Sublessor. If Lessor fails and neglects to
perform the Lease for a period of thirty (30) consecutive days, or if Sublessor
fails to perform the Lease or this Sublease for such a period, Sublessee may, on
reasonable notice in writing of not less than ninety (90) days or such longer
time as may be permitted in the Primary Lease, terminate this Sublease unless
either the Lessor or the Sublessor has commenced curing the problem(s). The
Sublessor is not responsible for defaults caused entirely or in material part by
the Lessor.
Article 26 Termination and Reentry, Etc. If Sublessee abandons or vacates
the Premises or is dispossessed for cause by Sublessor before the termination of
this Sublease, or any renewal of this Sublease, Sublessor may, on giving five
(5) days' written notice to Sublessee, declare this Sublease forfeited and may
then make reasonable efforts to relet the Premises. Sublessee shall be liable to
Sublessor for all damages suffered by reason of such forfeiture. Such damages
shall include, but shall not be limited to, the following: (1) all actual
damages suffered by Sublessor until the property is relet, including reasonable
expenses incurred in attempting to relet; (2) the difference between the rent
received when the property is relet and the rent reserved under this Sublease;
and (3) all other costs, damages, injuries, and related matters that flow or
result from the Sublessee's Default and/or the Sublessor's exercise of any one
or more of its remedies.
Until the Premises have been relet, Sublessee agrees to pay to Sublessor,
on the same days as the rental payments are due under this Sublease, the actual
damages suffered by Sublessor since the last payment, either rent or damages,
was made. After the Premises have been relet, Sublessee agrees to pay to
Sublessor, on the last day of each rental period, the difference between the
rent received for the period from reletting and the rent reserved under or
applicable to this Sublease for that period.
Article 27 "For Rent," "For Lease," or "For Sale" Signs. If Sublessee has
not obtained the consent of the Sublessor to renew the Sublease or to holdover
in the space, Sublessor shall have the right to place and maintain on the
subleased Premises "For Rent," "For Lease," or "For Sale" signs during the last
six (6) months of the term of this Sublease.
Article 28 Surrender of Premises and Keys at Termination. Sublessee agrees
that at the expiration of this Sublease, Sublessee will quit and surrender the
subleased Premises without notice, and will deliver to Sublessor all keys
belonging to the Premises.
Article 29 Disposition of Assets. Etc. All alterations, additions, and
improvements made by Sublessee and/or affixed to the Premises, shall become
Sublessor's property as provided in that Article, and shall be surrendered with
the Premises as a part of the Premises as provided in that Article. Sublessee
may remove all personal property, trade fixtures, and office equipment, whether
attached to the Premises or not, provided that such may be removed without
serious damage to the building or Premises. All holes or damage to the building
or Premises caused by
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removal of such items shall be repaired and restored by Sublessee promptly after
removal of the property. The Sublessee shall be entitled to remove any
electrical service connections installed by it which were designed specifically
for the operation of electronic computing equipment.
Article 30 Notices. Except where otherwise required by statute, all notices
given pursuant to the provisions of this Sublease shall be in writing, addressed
to the party to whom the notice is given, and sent by registered or certified
mail to the last known mailing address of the party. However, notices to
Sublessee may be sent to the address of the subleased Premises.
Article 31 Binding Effect, Conditions Precedent, Etc. The terms,
conditions, and covenants of this Sublease shall inure to and be binding on the
heirs, successors, administrators, executors, and assigns of the parties to this
Sublease, except as otherwise provided. However, this Sublease shall not be
effective for any purpose (except termination of The Cook's Nook, Inc. lease)
unless and until all conditions for the effectiveness of the Primary Lease are
fulfilled and the Sublessor actually becomes the Lessee under the Primary Lease.
Final approval of the Sublessor's branch application for the space in the
Shopping Center, as well as approval of the Primary Lease and this Sublease by
the Tennessee Department of Financial Institutions is expressly made a condition
precedent to the effectiveness of this Sublease but not of the termination of
The Cook's Nook, Inc. lease of space in the Shopping Center.
Article 32 No Assignment or other Sublease. Sublessee shall not sell or
assign this Sublease or any part of this Sublease, or re-sublet the subleased
Premises in whole or in part without first obtaining the written consent of
Sublessor. This Sublease shall not be assigned by operation of law. If Sublessor
and Lessor once give consent to assignment of this Sublease or of any interest,
they shall not be barred from afterwards refusing to consent to any further
assignment. Any attempt to sell, assign, or re-Sublease without written consent
of Sublessor and Lessor shall be deemed sufficient grounds for dispossession and
shall entitle Sublessor to proceed pursuant to the terms of this Sublease if
Sublessor so elects as in the case of a Default.
Article 33 General Terms and Provisions.
Article 33.1 Notices. All communications under or in connection with this
Sublease, the rentals, and any other part of the Secured Indebtedness, shall be
in writing and shall be mailed by first class mail, postage prepaid, or
otherwise sent by telex, telegram, telecopy or other similar form of rapid
transmission confirmed by mailing (in the manner stated above) written
confirmation at substantially the same time as such rapid transmission, or
personally delivered to the receiving party or to a representative thereof. All
such communications shall be mailed, sent or delivered to the parties at their
respective addresses set forth on the signature page(s) hereof. Notices to the
Sublessee will be sent to the attention of the Sublessee at such address; and
notices to the Sublessor shall be sent to the Sublessor's President. Any party
may send notice in accordance with this Article of a new address to be used to
contact such Person.
Any communication so addressed and mailed by registered or certified mail
shall be deemed to be given three (3) Business Days after being so mailed.
Article 33.2 Deviation from Agreements or Covenants; Amendments; Course of
Dealing; Waivers. In order to amend or deviate from the terms of any of this
Sublease, the Sublessee must first obtain the prior written consent of the
Sublessor, which consent may be withheld or granted in the Sublessor's sole
discretion. No amendment(s), modification(s), deviations from agreements or
covenants, or waiver(s) of any provision of this Sublease shall in any event be
effective unless the same shall be in writing and signed by appropriate officers
of the Sublessor and by the Sublessee. No action or course of dealing on the
part of the Sublessor, its officers, employees, consultants or agents, nor any
failure or delay by the Sublessor with respect to exercising any right, power or
privilege of the Sublessor under this Sublease or any other operative document
or instrument shall operate as a waiver thereof, except as expressly provided in
writing in accordance with this Article.
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<PAGE> 31
Article 33.3 Survival of Agreements, Invalidity, Etc. All representations
and warranties of the Sublessee herein, and all covenants and agreements herein
not fully performed before the Closing Date of this Sublease, shall survive such
date. In the event that any one or more of the provisions contained in the Note,
this Sublease shall, for any reason, be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Sublease.
Article 33.4 Successors and Assigns, Etc. All covenants and agreements
contained by or on behalf of the Sublessee in this Sublease and any other
operative document or instrument shall bind such Sublessee's successors and
assigns and shall inure to the benefit of the Sublessor and its successors and
assigns. The Sublessee shall not assign or seek to assign, or delegate or seek
to delegate, any of the Sublessee's rights or obligations under this Sublease.
Any assignment not approved by the Sublessor in advance in writing shall be of
no force or effect, and the fact that the Sublessor may receive (knowingly or
otherwise) any payments from any Person other than the Sublessee shall not
constitute a novation, a waiver of this provision, or be treated as the
Sublessor's consent to any attempted assignment.
Article 33.5 Renewal, Extension, or Rearrangement. All provisions of this
Sublease relating to the terms hereof and to the Secured Indebtedness shall
apply with equal force and effect to each and every succeeding sublease and/or
obligation of the Sublessee to the Sublessor, and any matter that may represent
a renewal, extension for any period, increase or rearrangement of any part of
the Secured Indebtedness originally created by this Sublease or of any part of
such Secured Indebtedness. No renewal Sublease or act of renewal shall in any
event release or constitute a novation in respect of this Sublease unless the
Sublessor executes a document specifically stating that the Sublessor intends
there to be a novation and in fact uses the word "novation." The parties
expressly agree that they do not intend, now or in the future, to cause or
permit any implicit or non-express novation or release.
Article 33.6 Cumulative Rights and Remedies. Rights and remedies of the
Sublessor under this Sublease shall be cumulative, and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of that or
any other right or remedy. All remedies provided for in this Sublease for the
Sublessor shall be in addition to all other remedies available to the Sublessor
under the principles of law and equity, and pursuant to any other body of law,
statutory or otherwise.
Article 33.7 Construction. This Sublease constitutes a contract made under
and shall be construed in accordance with and governed by the laws of the State
of Tennessee.
Article 33.8 Time of Essence. Time is of the essence with regard to each
and every provision of this Sublease.
Article 33.9 Nature of Commitment. With respect to the Sublease and the
amounts owed by the Sublessee to the Sublessor, the Sublessor's obligations
under the Sublease shall be deemed to be pursuant to a contract to make a loan
or extend debt financing or financial accommodations to or for the benefit of
the Sublessee within the meaning of the Bankruptcy Act of the United States, 11
U.S.C. section 101 et seq.
Article 33.10 Disclosures. Every reference in this Sublease to disclosures
of the Sublessee to the Sublessor in writing (except the Financial Statements),
to the extent that such references refer or are intended to refer to disclosures
at or prior to the execution of this Sublease, shall be deemed strictly to refer
only to written disclosures delivered to the Sublessor concurrently with the
execution hereof. It is the intention of the parties that such disclosures are
to be limited to those presented in an orderly manner at the time of entering
into this Sublease and are not to be deemed to include expressly or impliedly
any disclosures which may previously have been delivered from time to time to
the Sublessor, except to the extent that such previous disclosures are again
presented to the Sublessor in writing concurrently with the execution hereof.
11
<PAGE> 32
Article 33.11 Indemnification. In consideration of the execution and
delivery of this Sublease by the Sublessor, the Sublessee hereby indemnifies,
exonerates the Sublessor and each of the Sublessor's respective officers,
directors, employees, attorneys, and agents (collectively the "Sublessor
Parties" and, individually, a "Sublessor Party") free and harmless from and
against any and all actions, causes of action, suits, losses, costs,
liabilities, damages, and expenses actually incurred in connection therewith
(irrespective of whether such Sublessor Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys fees and
disbursements (the "Indemnified Liabilities"), incurred by the Sublessor Parties
or any of them as a result of, or arising out of, or relating to, or as a direct
or indirect result of any violation of this Sublease and/or any damage related
to the Premises related to the Sublessee's use and/or occupancy thereof, except
for any such Indemnified Liabilities arising for the account of a particular
Sublessor Party solely by reason of such Sublessor Party's willful misconduct or
breach by such Sublessor Party of its obligations under this Sublease, and if
and to the extent that the foregoing undertaking may be unenforceable for any
reason, Sublessee hereby agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
Article 33.12 Titles of Articles, Sections and Subsections. All titles or
headings to articles, sections, subsections or other divisions of this Sublease,
any appendix or appendices, or any exhibit(s) hereto are only for the
convenience of the parties and shall not be construed to have any effect or
meaning with respect to the other content of such articles, sections,
subsections or other divisions, such other content being controlling as to the
agreement between the parties hereto.
Article 33.13 Counterparts. This Sublease may be executed in two or more
counterparts, and it shall not be necessary that the signatures of all parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Article 33.14 Exhibits and Appendices. All Exhibits referred to in this
Sublease shall be timely, accurately, and completely furnished to the Sublessor
as provided in the appropriate Article or, if not so provided, within ten (10)
calendar days of its creation, filing, or dissemination. The exhibits and
appendices attached to this Sublease are incorporated herein and shall be
considered a part of this Sublease.
Article 33.15 Computations. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Sublease, such determination or calculation shall, to the extent
applicable and except as otherwise specified in this Sublease, be made in
accordance with generally accepted accounting principles applied on a
consolidated basis consistent with those at the time in effect as at the date of
this Sublease.
Article 33.16 Sublessor's Discretion or Judgment. Where this Sublease
requires or permits the Sublessor to exercise its discretion or judgment, the
parties agree that the Sublessor is authorized, permitted and expected to
exercise such discretion or judgment with a view toward protecting its rights in
the Premises, in the Collateral, in this Sublease, and in the Lease, as well as
in obtaining full and timely repayment and performance of all Secured
Indebtedness.
Article 33.17 Jurisdiction and Venue. This Sublease was executed by the
Sublessor in Nashville, Davidson County, Tennessee, and all payments are due at
the Sublessor's address. Any dispute arising hereunder shall be litigated in a
forum located in such County and State.
Article 33.18 No Third Party Beneficiary. This Sublease is for the sole
benefit of the Sublessor and the Sublessee and it is not for the benefit of any
other Person or third party except as provided herein for enforcement of certain
provisions by the Lessor.
Article 33.19 Mutual Release. With the exception of the indemnity provision
contained in this Sublease, upon full and final payment and satisfaction of the
rentals and other parts of the Secured Indebtedness, the parties shall thereupon
automatically each be fully, finally and forever released and discharged from
any further claim, liability or obligation in connection with this
12
<PAGE> 33
Sublease, except that the Sublessee shall remain fully and completely liable for
any amounts that must be returned, surrendered, or otherwise disgorged (as a
preference or otherwise) pursuant to any bankruptcy or insolvency provision.
Article 33.20 Costs, Expenses and Taxes. The Sublessee agrees to pay on
demand all out-of-pocket costs and expenses of the Sublessor (including the
reasonable fees and out-of-pocket expenses of counsel for the Sublessor in
connection with the monitoring, administration, enforcement, and/or protection
of this Sublease, all Collateral, the Premises, and/or the Leased Space). All
obligations provided for in this Article shall survive any termination of this
Sublease.
Article 33.21 Representations and Warranties of Sublessee. The Sublessee
represents and warrants to the Sublessor, as an inducement to the Sublessor to
enter into this Sublease, that the Sublessee is a duly formed Tennessee limited
liability company, that Joe Dougherty has been authorized to sign the same, and
that the Sublessor is not insolvent and will not be rendered insolvent by the
execution or performance hereof.
Article 33.22 Access, Gates Etc. The Sublessee acknowledges and agrees that
the Sublessor is authorized to install and enforce such space restrictions,
doors, gates and access restrictions as it deems reasonable and prudent to
safeguard its commercial banking operations, customers, employees, and others.
BY THEIR SIGNATURES BELOW, ALL OF THE PARTIES HERETO, AFTER
CONSULTATION WITH COUNSEL, HEREBY KNOWINGLY WAIVE THEIR
RIGHTS TO A TRIAL BY JURY AND CONSENT TO A TRIAL TO THE COURT
SITTING WITHOUT A JURY, SUCH MUTUAL WAIVER HAVING BEEN
BARGAINED FOR BY THE PARTIES AND A MUTUAL INDUCEMENT TO THE
PARTIES TO ENTER INTO THIS SUBLEASE.
DATED TO BE EFFECTIVE, UPON SATISFACTION OF ALL TERMS AND CONDITIONS, THE
1ST DAY OF AUGUST, 1996.
JOE'S COFFEE, LLC, SUBLESSEE
/s/ Joe Dougherty
-------------------------------------
Joe Dougherty, as President of Joe's
Coffee, LLC, AND Individually
THE BANK OF NASHVILLE, SUBLESSOR
/s/ Mack S. Linebaugh, Jr.
-------------------------------------
Mack S. Linebaugh, Jr.
Chairman and CEO
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CONSENT AND AGREEMENT OF THE COOK'S NOOK, INC. AND JOE DOUGHERTY
The Cook's Nook, Inc. and Joe Dougherty hereby agree and consent to the
termination of the Cook's Nook, Inc.'s lease at the Glendale Shopping Center and
agree to pay all amounts due under the said Lease and/or owed to The Bank of
Nashville. The Bank of Nashville agrees to pay, upon execution hereof, the
amounts specified in the letter of intent dated August 1, 1996 between The Bank
of Nashville and Joe's Coffee, LLC and The Cook's Nook, Inc. The Cook's Nook,
Inc. and Joe Dougherty hereby agree that The Bank of Nashville may lease the
space subject to the current Cook's Nook, Inc. lease being terminated hereby and
consent thereto.
This 5th day of September, 1996.
/s/ Joe Dougherty
-----------------------------
Joe Dougherty, President, for
The Cook's Nook, Inc., AND
For Himself Personally
AGREEMENT OF JOE DOUGHERTY
Joe Dougherty, as owner of The Cook's Nook, Inc. and of Joe's Coffee, LLC,
consents hereto and, further, hereby unconditionally and irrevocably guarantees
payment and performance of the Secured Indebtedness and all other obligations
set forth in the Sublease.
/s/ Joe Dougherty
-----------------------------
Joe Dougherty, Individually
[NOTARIES FOLLOW ON SUCCEEDING PAGE(S)]
ACKNOWLEDGMENTS
STATE OF TENNESSEE )
COUNTY OF DAVIDSON )
Before me, the undersigned Notary Public of the state and county aforesaid,
personally appeared JOE DOUGHERTY, with whom I am personally acquainted, or
proved to me on the basis of satisfactory evidence and who, upon oath,
acknowledged himself to be Chief Manager (or other officer authorized to execute
the instrument) of JOE'S COFFEE, LLC, the within name bargainer, a Tennessee
limited liability company, and that he as such Chief Manager executed the
foregoing instrument for the purpose therein contained, by signing the name of
the corporation by himself as Chief Manager.
Witness my hand and seal, at office in Nashville, this the 5th day of
September, 1996.
/s/ Daniel W. Small
-----------------------------
Notary Public
My Commission Expires: 1-20-99
STATE OF TENNESSEE )
COUNTY OF DAVIDSON )
Before me, the undersigned Notary Public of the state and county aforesaid,
personally appeared JOE DOUGHERTY with whom I am personally acquainted, or
proved to me on the basis of satisfactory evidence and who, upon oath,
acknowledged himself to be President (or other
14
<PAGE> 35
officer authorized to execute the instrument) of THE COOK'S NOOK, INC., the
within name bargainer, a Tennessee business corporation, and that he as such
President executed the foregoing instrument for the purpose therein contained,
by signing the name of the corporation by himself as President.
Witness my hand and seal, at office in Nashville, Tennessee, this the 5th
day of September, 1996.
/s/ Daniel W. Small
-----------------------------
Notary Public
My Commission Expires: 1-20-99
STATE OF TENNESSEE )
COUNTY OF DAVIDSON )
Before me, the undersigned Notary Public of the state and county aforesaid,
personally appeared MACK S. LINEBAUGH, JR., with whom I am personally
acquainted, or proved to me on the basis of satisfactory evidence and who, upon
oath, acknowledged himself to be Chairman (or other officer authorized to
execute the instrument) of THE BANK OF NASHVILLE, the within name bargainor, a
Tennessee Banking Corporation, and that he as such Chairman executed the
foregoing instrument for the purpose therein contained, by signing the name of
the corporation by himself as Chairman.
Witness my hand and seal, at office in Nashville, Tennessee, this the 5th
day of September, 1996.
/s/ Daniel W. Small
-----------------------------
Notary Public
My Commission Expires: 1-20-99
STATE OF TENNESSEE )
COUNTY OF DAVIDSON )
Before me, the undersigned Notary Public of the state and county aforesaid,
personally appeared JOE DOUGHERTY, with whom I am personally acquainted, or
proved to me on the basis of satisfactory evidence and who acknowledged that he
executed the within instrument for the purposes herein contained.
Witness my hand and seal, at office in Nashville, Tennessee, this the 5th
day of September, 1996.
/s/ Daniel W. Small
-----------------------------
Notary Public
My Commission Expires: 1-20-99
15
<PAGE> 36
EXHIBIT "D"
RULES AND REGULATIONS
The following Rules and Regulations apply to the Sublease of Commercial
Space between The Bank of Nashville and Joe's Coffee, LLC, in respect of the
Glendale Shopping Center, 3770 Hillsboro Road, Nashville, Tennessee. Terms used
in such Sublease shall be understood to apply herein and, unless other defined
herein, capitalized terms shall be understood to have the same meanings as are
ascribed to them in the Sublease.
RULE 1. No sign, picture, advertisement, or notice shall be displayed,
inscribed, painted, or affixed, on any part of the outside or inside of the
building in which the Premises are located ("Building"), or on or about the
Premises, except as expressly permitted in the Sublease between The Bank of
Nashville, as Sublessor, and JOE'S COFFEE, LLC, as Sublessee, and then only of
such color, size, style and materials as shall be first specified by the Lessor
or the Sublessor in a writing attached or appended to this Sublease. No "For
Rent" signs shall be displayed by Sublessee and no showcases, or obstructions,
signs, flags, barber poles, statuary, or any advertising device of any kind
whatever shall be placed in front of Building or in the passageways, halls,
lobbies, or corridors thereof by Sublessee; and Sublessor reserves the right to
remove all such showcases, obstructions, signs, flags, barber poles, statuary or
advertising devices and all signs other than those provided for, without notice
to Sublessee and at its expense.
RULE 2. Sublessee shall not without Sublessor's written consent put up or
operate any steam engine, boiler, machinery, stove or other devise upon the
Premises, or carry on any mechanical business thereof, or do any cooking
thereon, or use or allow to be used upon the Premises oil, burning fluids,
camphene, kerosene for heating, warming or lighting, or anything (except gas or
incandescent electric lights, and those only of such company or companies as may
be supplying the Building) for illuminating the Premises. No article deemed
unreasonably hazardous by the Sublessor or the Lessor (including, without
limitation, explosives and triggering devices) shall be brought into or near the
Premises. The Sublessor will not withhold unreasonably its consent to appliances
for the proposed coffee shop.
RULE 3. No additional locks shall be placed upon any doors of the Premises.
Upon the termination of the Lease, the Sublessee shall surrender to Sublessor
all keys to the Premises.
RULE 4. The Sublessor's executive officers, engineers, maintenance and
planning personnel, attorneys, auditors and examiners shall have access to, and
they are authorized to enter upon and to inspect, the Premises at all times.
RULE 5. Safes, furniture, boxes or other bulky articles shall be carried up
into the Premises only with written consent of Sublessor first obtained, and
then only by means of the elevators, by the stairways or through the windows of
Building as Sublessor may in writing direct, and at such times and in such
manner and by such persons as Sublessor may direct. Safes and other heavy
articles shall be placed by Sublessee in such places only as may be first
specified in writing by Sublessor, and any damage done to Building or to
Sublessee or to other persons taking a safe or other heavy article in or out of
the Premises, from overloading a floor, or in any other manner, shall be paid
for by Sublessee causing such damage.
RULE 6. Sublessor will furnish janitor service in the Premises only to the
extent generally furnished by Sublessor in the Building in which the Premises
are located. Any person employed by Sublessee to do janitor work, shall, while
in said Building and outside of said Premises, be subject to and under the
control and direction of the space director of the Sublessor as designated from
time to time (but not as agent or servant of said Sublessor or of the Lessor).
Both the Lessor and Sublessor may retain a pass key to the Premises and be
allowed admittance thereto at all times to enable its representatives to examine
the Premises from time to time.
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<PAGE> 37
RULE 7. Sublessor reserves all vending rights not directly associated with
the Sublessee's coffee shop business. There shall be no vending machines of any
nature attached to or placed on or near the Premises by the Sublessee.
RULE 8. Sublessee shall have the nonexclusive right, along with other
Sublessees of the Building, to use the parking area located on the land upon
which the Building is located, except for portions of the parking area necessary
for entrances, exits, driveways, walkways, loading, and unloading areas.
Reference is here made to the rules and limitations contained in the Primary
Lease and Sublessee agrees to comply with such limitations and rules in all
respects and at all times. Sublessor shall have the authority at any time to
designate portions of the parking area for exclusive use by certain tenants in
the Building, or to regulate the use of the parking areas in general.
RULE 9. If Sublessee desires telegraphic, telephonic, or other
telecommunication connections, or the installation of any other electrical
wiring, Sublessor will, upon receiving and consenting to Sublessee's written
request, direct the electricians as to where and how the wires are to be
introduced and run, and without such directions, no boring, cutting, or
installations of wires will be permitted. Such work shall be at the Sublessee's
sole cost and expense.
RULE 10. Sublessee shall not allow anything to be placed against or near
the glass in the partitions between the Premises and the halls or corridors of
Building, which shall diminish the light in, or prove unsightly from the halls
or corridors or from outside. The Sublessee shall at all times maintain all of
the Premises and shared common areas clean, safe and attractive and shall not
permit any of its customers (or their families or guests) to interfere with the
Sublessor's business, employees, customers, visitors or guests.
RULE 11. No electric current, intended for light or power purposes, shall
be used by Sublessee, excepting that furnished or approved by Sublessor; nor
shall electric or other wires be brought into the Premises, except upon the
written consent and approval of Sublessor.
RULE 12. Sublessee, when closing his office for business, at any time,
shall see that all awnings are pulled up and the windows closed, thus avoiding
possible damage from fire, storm, rain, freezing, or other hazards or damages
attributable to the elements.
RULE 13. Sublessee shall not allow anything to be placed on the outside
window ledges of the Premises, nor shall anything be thrown by Sublessee, or its
employees, out of the windows of Building; nor shall Sublessee or its employees
undertake to regulate the thermostats. if any, which control the heat or air
conditioning.
RULE 14. No Sublessee shall have, allow, or authorize admittance into the
Building at any times other than operating hours, without the prior written
approval of the Building manager.
RULE 15. Key holders (including all types of "keying" devices such as
"security key cards" must obtain written approval from the Sublessor before
allowing any other persons to use their keys or similar devices. If any key or
other type of security card key holder violates this rule, the Sublessor may
immediately repossess that person's key or similar device, and may also void it
from the system and/or change the locks at the Sublessee's expense.
RULE 16 Food Preparation and Service. Sublessee shall be permitted to serve
a menu limited to baked and prepared foods and beverages excluding alcoholic
beverages.
RULE 17 Employee Dress and Conduct. Sublessee's employees shall at all
times be required to present a clean and well groomed appearance.
RULE 18 Complaints. All complaints against the Sublessee received by the
Sublessor shall be immediately and properly adjusted in a business like manner.
17
<PAGE> 38
RULE 19 Permits. Licenses and Approvals. Sublessee shall, and its sole
expense, obtain and conspicuously display any and all permits, licenses, or
approvals required by any applicable governmental authority for the operation of
its business.
RULE 20 Serviceware. Sublessee shall not use serviceware (cups, plates,
trays, paper goods and similar items) which are offensive, or which in any
manner detract from or compete with the Sublessor. Upon request, and for
reasonably limited periods of time, Sublessee agrees to use serviceware provided
by Sublessor bearing the name of, or advertising for, the Sublessor's business,
so long as it reasonably follows the design of Sublessee's business.
RULE 21 Trash. Sublessee shall store its garbage, trash, and other refuse
in rat-proof, insect-proof, and odorless containers inside the Premises, and
remove the same frequently and regularly and, if directed by the Sublessor, by
such means and methods and at such times and intervals as are designated by
Sublessor, at all Sublessee's sole cost and expense.
RULE 22 Hours of Operation. Throughout the term of the Sublease, Sublessee
shall continuously conduct in the Premises, with appropriate inventory and
staff~ the Permitted Use during Sublessee's posted business hours which shall in
any case include the hours of operation of Sublessee's Business.
[These rules and regulations supplement the rules of the Lessor in effect on the
date hereof. All of the Sublessor's and Lessor's rules and regulations are
subject to change from time to time in the discretion of each such person.]
18
<PAGE> 1
EXHIBIT 10.07
RESOLUTION OF BOARD OF DIRECTORS
OF
THE BANK OF NASHVILLE
I hereby certify that the following is a true copy of resolutions duly adopted
by the Board of Directors of the Employer at a meeting held on August 17, 1993
at which a quorum was present and acting throughout.
WHEREAS, The Employer has previously adopted The Bank of Nashville Retirement
Plan (hereinafter called the "Former Plan and Trust") originally effective as
of October 1, 1990, and amended March 15, 1993;
WHEREAS, The Employer desires to amend and restate the Former Plan and Trust in
total for the purposes of complying with final TRA'86 regulations and new
federal legislation;
WHEREAS, The proper officers or representatives of the Employer have previously
executed an Adoption Agreement setting forth the terms and conditions of the
Employer's amended and restated Plan.
NOW THEREFORE, Be it resolved, that the Employer hereby amends and restates the
former plan under the terms of The Bank of Nashville Prototype Plan and Trust,
effective as of the date defined in the Prototype Plan and Trust;
RESOLVED, That the Employer is hereby authorized and directed to pay to the
Trustee(s) or Custodian under the Employer's Plan, such sum or sums in
accordance with the terms of said Plan from year to year until otherwise
directed by this Board.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of said
Employer on this 17th day of August,1993.
THE BANK OF NASHVILLE
(Name of Employer)
/s/ Joan B. Marshall
------------------------------------
Secretary's Signature
[CORPORATE SEAL] ~
By: Joan B. Marshall, Corporate Secretary
--------------------------------------
Secretary's Name
<PAGE> 2
RESOLUTION OF THE
BOARD OF DIRECTORS
OF
COMMUNITY FINANCIAL GROUP, INC.
ADOPTING
THE BANK OF NASHVILLE
RETIREMENT SAVINGS PLAN
WHEREAS, The Bank of Nashville (the "Bank") adopted The Bank of Nashville
Retirement Savings Plan (the "401-K Plan") as a plan for the benefit of
employees of the Bank, effective January 1, 1990 and the 401-K Plan was amended
March 15, 1993 (the "401-K Plan, as amended"); and
WHEREAS, effective as of the close of business on April 30, 1996, Community
Financial Group, Inc. ("CFGI") became the holding company for the Bank pursuant
to a Plan of Exchange whereby all the outstanding common stock and warrants of
the Bank were exchanged for and converted to shares and warrants of CFGI; and
WHEREAS, this Board desires to adopt the 401-K Plan, as amended, as a plan
for the benefit of the employees of CFGI.
NOW, THEREFORE, BE IT RESOLVED, that the 401-K Plan, as amended, is hereby
adopted effective as of the close of business on April 30, 1996, as a plan for
the benefit of employees of CFGI, and Mack S. Linebaugh, Jr., as Chairman,
President and Chief Executive Officer of CFGI is hereby authorized to execute an
Adoption Agreement on behalf of CFGI effecting the adoption of said Plan; and
BE IT FURTHER RESOLVED, that the officers of this Corporation are hereby
authorized and directed to execute such documents and papers and do such acts
and things as they shall deem necessary and appropriate to carry out the intent
and purposes of these resolutions.
CERTIFICATE
The undersigned, as Secretary of Community Financial Group, Inc., hereby
certifies that the foregoing resolutions were duly adopted by the Board of
Directors of the Corporation at a meeting duly called and held on September
24th, 1996, and that said resolutions are in full force and effect and have not
been altered, amended or rescinded.
This the 30th day of September, 1996.
/s/ Joan B. Marshall
-----------------
SECRETARY
<PAGE> 3
Prototype Cash or
Deferred Profit-
Sharing Plan #002
NONSTANDARDIZED
ADOPTION AGREEMENT
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING PLAN AND
TRUST/CUSTODIAL ACCOUNT
SPONSORED BY
THE BANK OF NASHVILLE
The Employer named below hereby establishes a Cash or Deferred Profit-Sharing
Plan for eligible Employees as provided in this Adoption Agreement and the
accompanying Basic Prototype Plan and Trust/Custodial Account Basic Plan
Document #04.
1. EMPLOYER INFORMATION
NOTE: If multiple Employers are adopting the Plan, complete this section
based on the lead Employer. Additional Employers may adopt this Plan
by attaching executed signature pages to the back of the Employer's
Adoption Agreement.
(a) NAME AND ADDRESS:
The Bank of Nashville
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401 Church Street
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Nashville, TN 37219
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(b) TELEPHONE NUMBER: (615) 271-2000
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(c) TAX ID NUMBER: 62-1379444
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(d) FORM OF BUSINESS:
[ ] (i) Sole Proprietor
[ ] (ii) Partnership
[X] (iii) Corporation
[ ] (iv) "S" Corporation (formerly known as Subchapter S)
[ ] (v) Other:
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(e) NAME OF INDIVIDUAL AUTHORIZED TO ISSUE INSTRUCTIONS TO THE
TRUSTEE/CUSTODIAN:
Plan Administrative Committee
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(f) NAME OF PLAN: The Bank of Nashville Retirement Savings Plan
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(g) THREE DIGIT PLAN NUMBER
FOR ANNUAL RETURN/REPORT: 001
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2. EFFECTIVE DATE
(a) This is a new Plan having an effective date of
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(b) This is an amended Plan.
The effective date of the original Plan was 01-01-90
The effective date of the amended Plan is 03-15-93 with the exception
of Sections 7(f), 7(g) and 12 herein which shall be effective as of
the first day of the 1989 Plan Year.
(c) If different from above, the Effective Date for the Plan's Elective
Deferral provisions shall be .
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3. DEFINITIONS
(a) "Collective or Commingled Funds" (Applicable to institutional Trustees
only.) Investment in collective or commingled funds as permitted at
paragraph 13.3(b) of the Basic Plan Document #04 shall only be made
to the following specifically named fund(s):
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Funds made available after the execution of this Adoption Agreement
will be listed on schedules attached to the end of this Adoption
Agreement.
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(b) "Compensation" Compensation shall be determined on the basis of the:
[ ] (i) Plan Year.
[ ] (ii) Employer's Taxable Year.
[X] (iii) Calendar Year.
Compensation [X] shall [ ] shall not include Employer contributions
made pursuant to a Salary Savings Agreement which are not includable
in the gross income of the Employee for the reasons indicated in the
definition of Compensation at 1.12 of the Basic Plan Document #04.
For purposes of the Plan, Compensation shall be limited to $ N/A , the
maximum amount which will be considered for Plan purposes. [If an
amount is specified, it will limit the amount of contributions allowed
on behalf of higher compensated Employees. Completion of this section
is not intended to coordinate with the $200,000 of Code Section
415(d), thus the amount should be less than $200,000 as adjusted for
cost-of-living increases.]
(c) Entry Date
[ ] (i) The first day of the Plan Year nearest the date on which
an Employee meets the eligibility requirements.
[ ] (ii) The earlier of the first day of the Plan Year or the
first day of the seventh month of the Plan Year
coinciding with or following the date on which an
Employee meets the eligibility requirements.
[ ] (iii) The first day of the Plan Year following the date on
which the Employee meets the eligibility requirements.
If this election is made, the Service requirement at
4(a)(ii) may not exceed l/2 year and the age requirement
at 4(b)(ii) may not exceed 20-1/2.
[X] (iv) The first day of the month coinciding with or following
the date on which an Employee meets the eligibility
requirements.
[ ] (v) The first day of the Plan Year, or the first day of the
fourth month, or the first day of the seventh month or
the f rst day of the tenth month, of the Plan Year
coinciding with or
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following the date on which an Employee meets the
eligibility requirements.
(d) "Hours of Service" Shall be determined on the basis of the method
selected below. Only one method may be selected. The method selected
shall be applied to all Employees covered under the Plan as follows:
[X] (i) On the basis of actual hours for which an Employee is
paid or entitled to payment.
[ ] (ii) On the basis of days worked. An Employee shall be
credited with ten (10) Hours of Service if under
paragraph 1.42 of the Basic Plan Document #04 such
Employee would be credited with at least one (1) Hour of
Service during the day.
[ ] (iii) On the basis of weeks worked. An Employee shall be
credited with forty-five (45) Hours of Service if
under paragraph 1.42 of the Basic Plan Document #04 such
Employee would be credited with at least one (1) Hour of
Service during the week.
[ ] (iv) On the basis of semi-monthly payroll periods. An
Employee shall be credited with ninety five (95) Hours
of Service if under paragraph 1.42 of the Basic Plan
Document #04 such Employee would be credited with at
least one (1) Hour of Service during the semi-monthly
payroll period.
[ ] (v) On the basis of months worked. An Employee shall be
credited with one hundred-ninety (190) Hours of Service
if under paragraph 1.42 of the Basic Plan Document #04
such Employee would be credited with at least one (1)
Hour of Service during the month.
(e) "Limitation Year" The 12-consecutive month period commencing on
January 1 and ending on December 31.
(f) "Net Profit"
[X] (i) Not applicable (profits will not be required for any
contributions to the Plan).
[ ] (ii) As defined in paragraph 1.49 of the Basic Plan Document
#04.
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[ ] (iii) Shall be defined as:
_________________________
_________________________
(Only use if definition in paragraph 1.49 of the Basic
Plan Document #04 is to be superseded.)
(g) "Plan Year" The 12-consecutive month period commencing on January 1
and ending on December 31.
If applicable, the first Plan Year will be a short Plan Year
commencing on______and ending on __________. Thereafter, the Plan
Year shall be as above.
(h) "Qualified Early Retirement Age" For purposes of making
distributions under the provisions of a Qualified Domestic Relations
Order, the Plan's Qualified Early Retirement Age with regard to the
Participant against whom the order is entered [X] shall [ ] shall
not be the date the order is determined to be qualified. If "shall"
is elected, this will only allow payout to the alternate payee(s).
(i) "Qualified Joint and Survivor Annuity" The safe-harbor provisions of
paragraph 8.7 of the Basic Plan Document #04 [X} are [ ] are not
applicable. If not applicable, the survivor annuity shall be______%
(50%, 66-2/3%, 75% or 100%) of the annuity payable during the lives
of the Participant and Spouse. If no answer is specified, 50% will
be used.
(j) "Taxable Wage Base"
[X] (i) Not Applicable - Plan is not integrated with Social
Security.
[ ] (ii) The maximum earnings considered wages for such Plan Year
under Code Section 3121(a).
[ ] (iii) ___% (not more than 100%) of the amount considered wages
for such Plan Year under Code Section 3121(a).
[ ] (iv) $____, provided that such amount is not in excess of the
amount determined under paragraph 3(j)(ii) above.
[ ] (v) For the 1989 Plan Year S10,000. For all subsequent Plan
Years, 20% of the maximum
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earnings considered wages for such Plan Year under Code
Section 3121(a).
NOTE: Using less than the maximum at (ii) may result in a change in
the allocation formula in Section 7.
(k) "Valuation Date(s)" Allocations to Participant Accounts will be done
in accordance with Article V of the Basic Plan Document #04:
[ ] (i) Daily
[ ] (ii) Weekly
[ ] (iii) Monthly
[ ] (iv) Bi-Monthly
[X] (v) Quarterly
[ ] (vi) Semi-Annually
[ ] (vii) Annually
(l) "Year of Service"
(i) For Eligibility Purposes: The 12-consecutive month period
during which an Employee is credited with N/A (not more than
1,000) Hours of Service.
(ii) For Allocation Accrual Purposes: The 12 consecutive month
period during which an Employee is credited with 501 (not
more than 1,000) Hours of Service.
(iii) For Vesting Purposes: The 12-consecutive month period - during
which an Employee is credited with 1000 (not more than 1,000)
Hours of Service.
4. ELIGIBILITY REQUIREMENTS
(a) Service:
[X] (i) The Plan shall have no service requirement.
[ ] (ii) The Plan shall cover only Employees having completed at
least_____[not more than
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three (3)] Years of Service. If more than one (1) is
specified, for Plan Years beginning in 1989 and later,
the answer will be deemed to be one (1).
NOTE: If the eligibility period selected is less than one year, an
Employee will not be required to complete any specified number
of Hours of Service to receive credit for such period.
(b) Age:
[X] (i) The Plan shall have no minimum age requirement.
[ ] (ii) The Plan shall cover only Employees having attained age
_____ (not more than age 21).
(c) Classification:
The Plan shall cover all Employees who have met the age and service
requirements with the following exceptions:
[ ] (i) No exceptions.
[X] (ii) The Plan shall exclude Employees included in a unit of
Employees covered by a collective bargaining agreement
between the Employer and Employee Representatives, if
retirement benefits were the subject of good faith bar
gaining. For this purpose, the term "Employee
Representative" does not include any organization more
than half of whose members are Employees who are owners,
officers, or executives of the Employer.
[ ] (iii) The Plan shall exclude Employees who are nonresident
aliens and who receive no earned income from the
Employer which constitutes income from sources within
the United States.
[X] (iv) The Plan shall exclude from participation any
nondiscriminatory classification of Employees
determined as follows:
Part-time and temporary employees who have worked, or
are scheduled to work, less than 1,000 hours during a
calendar year.
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(d) Employees on Effective Date:
[ ] (i) Employees employed on the Plan's Effective Date do not
have to satisfy the Service requirements specified
above.
[ ] (ii) Employees employed on the Plan's Effective Date do not
have to satisfy the age requirements specified above.
5. RETIREMENT AGES
(a) Normal Retirement Age:
If the Employer imposes a requirement that Employees retire upon
reaching a specified age, the Normal Retirement Age selected below
may not exceed the Employer imposed mandatory retirement age.
[X] (i) Normal Retirement Age shall be 65 (not to exceed age
65).
[ ] (ii) Normal Retirement Age shall be the later of attaining
age _______ (not to exceed age 65) or the ______ (not
to exceed the 5th) anniversary of the first day of the
first Plan Year in which the Participant commenced
participation in the Plan.
(b) Early Retirement Age:
[X] (i) Not Applicable.
[ ] (ii) The Plan shall have an Early Retirement Age of ____
(not less than 55) and completion of _____ Years of
Service.
6. EMPLOYEE CONTRIBUTIONS
[X] (a) Participants shall be permitted to make Elective Deferrals in
any amount from 0% up to 10% of their Compensation.
If (a) is applicable, Participants shall be permitted to amend
their Salary Savings Agreements to change the contribution
percentage as provided below:
[ ] (i) On the Anniversary Date of the Plan,
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[ ] (ii) On the Anniversary Date of the Plan and on the first day
of the seventh month of the Plan Year,
[X] (iii) On the Anniversary Date of the Plan and on the first day
following any Valuation Date, or
[ ] (iv) Upon 30 days notice to the Employer.
[ ] (b) Participants shall be permitted to make after tax Voluntary
Contributions.
[ ] (c) Participants shall be required to make after tax Voluntary
Contributions as follows (Thrift Savings Plan):
[ ] (i) % of Compensation.
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[ ] (ii) A percentage determined by the Employee on his or her
enrollment form.
[X] (d) If necessary to pass the Average Deferral Percentage Test,
Participants [ ] may [X] may not have Elective Deferrals
recharacterized as Voluntary Contributions.
NOTE: The Average Deferral Percentage Test will apply to contributions
under (a) above. The Average Contribution Percentage Test will apply
to contributions under (b) and (c) above, and may apply to (a).
7. EMPLOYER CONTRIBUTIONS AND ALLOCATION THEREOF
NOTE: The Employer shall make contributions to the Plan in accordance with the
formula or formulas selected below. The Employer's contribution shall be
subject to the limitations contained in Articles III and X. For this
purpose, a contribution for a Plan Year shall be limited for the
Limitation Year which ends with or within such Plan Year. Also, the
integrated allocation formulas below are for Plan Years beginning in 1989
and later. The Employer's allocation for earlier years shall be as
specified in its Plan prior to amendment for the Tax Reform Act of 1986.
(a) Profits Requirement:
(i) Current or Accumulated Net Profits are required for:
[ ] (A) Matching Contributions.
[ ] (B) Qualified Non-Elective Contributions.
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[ ] (C) discretionary contributions.
(ii) No Net Profits are required for:
[X] (A) Matching Contributions.
[X] (B) Qualified Non-Elective Contributions.
[X] (C) discretionary contributions.
NOTE: Elective Deferrals can always be contributed regardless of
profits.
[X] (b) Salary Savings Agreement:
The Employer shall contribute and allocate to each Participant's
account an amount equal to the amount withheld from the Compensation
of such Participant pursuant to his or her Salary Savings Agreement.
If applicable, the maximum percentage is specified in Section 6
above.
An Employee who has terminated his or her election under the Salary
Savings Agreement other than for hardship reasons may not make
another Elective Deferral:
[ ] (i) until the first day of the next Plan Year.
[ ] (ii) until the first day of the next valuation period.
[X] (iii) for a period of 6 month(s) (not to exceed 12 months).
[X] (c) Matching Employer Contribution [See paragraphs (h) and (i)]:
[ ] (i) Percentage Match: The Employer shall contribute and
allocate to each eligible Participant's account an
amount equal to ___% of the amount contributed and
allocated in accordance with paragraph 7(b) above and
(if checked)___% of [ ] the amount of Voluntary
Contributions made in accordance with paragraph 4.l of
the Basic Plan Document #04. The Employer shall not
match Participant Elective Deferrals as provided above
in excess of $___or in excess of % of the Participant's
Compensation or if applicable, Voluntary Contributions
in excess of $____ or in excess of ____% of the
Participant's
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Compensation. In no event will the match on both
Elective Deferrals and Voluntary Contributions exceed a
combined amount of $___ or ___%.
[X] (ii) Discretionary Match: The Employer shall contribute and
allocate to each eligible Participant's account a
percentage of the Participant's Elective Deferral
contributed and allocated in accordance with paragraph
7(b) above. The Employer shall set such percentage prior
to the end of the Plan Year. The Employer shall not
match Participant Elective Deferrals in excess of $N/A
or in excess of N/A% of the Participant's Compensation.
[X] (iii) Tiered Match: The Employer shall contribute and allocate
to each Participant's account an amount equal to 100% of
the first 2% of the Participant's contribution,
50% of the next 4% of the Participant's contribution,
N/A % Of the next N/A % of the Participant's
contribution.
NOTE: Percentages specified in (iii) above may not increase as the
percentage of Participant's contribution increases.
[ ] (iv) Flat Dollar Match: The Employer shall contribute and
allocate to each Participant's account $_____ if the
Participant defers at least 1% of Compensation.
[ ] (v) Percentage of Compensation Match: The Employer shall
contribute and allocate to each Participant's account
______% of Compensation if the Participant defers at
least 1% of Compensation.
[ ] (vi) Proportionate Compensation Match: The Employer shall
contribute and allocate to each Participant who defers
at least 1% of Compensation, an amount determined by
multiplying such Employer Matching Contribution by a
fraction the numerator of which is the Participant's
Compensation and the denominator of which is the
Compensation of
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all Participants eligible to receive such an allocation.
[ ] (vii) Qualified Match: Employer Matching Contributions will be
treated as Qualified Matching Contributions to the
extent specified below:
[ ] (A) All Matching Contributions.
[ ] (B) None.
[ ] (C) ___% of the Employer's Matching
Contribution.
[ ] (D) Up to ___% of each Participant's
Compensation.
[ ] (E) The amount necessary to meet the [ ] Average
Deferral Percentage (ADP) Test, [ ] Average
Contribution Percentage (ACP) Test, [ ] Both
the ADP and ACP Tests.
(viii) Eligibility for Match: Employer Matching Contributions,
whether or not Qualified, will only be made on Employee
Contributions not withdrawn prior to the end of the [ ]
valuation period [ ] Plan Year.
[XX] (d) Qualified Non-Elective Employer Contribution -
[See paragraphs (h) and (i)] These contributions are
fully vested when contributed.
The Employer shall have the right to make an additional
discretionary contribution which shall be allocated to
each eligible Employee in proportion to his or her
Compensation as a percentage of the Compensation of all
eligible Employees. This part of the Employer's
contribution and the allocation thereof shall be
unrelated to any Employee contributions made hereunder.
The amount of Qualified non-Elective Contributions taken
into account for purposes of meeting the ADP or ACP test
requirements is:
[ ] (i) All such Qualified non-Elective Contributions.
[X] (ii) The amount necessary to meet [ ] the ADP test, [ ] the
ACP test, [X] Both the ADP and ACP tests.
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Qualified non-Elective Contributions will be made to:
[X] (iii) All Employees eligible to participate.
[ ] (iv) Only non-Highly Compensated Employees eligible to
participate.
[X] (e) Additional Employer Contribution Other Than Qualified Non-Elective
Contributions - Non-Integrated [See paragraphs (h) and (i)]
The Employer shall have the right to make an additional
discretionary contribution which shall be allocated to each
eligible Employee in proportion to his or her Compensation as a
percentage of the Compensation of all eligible Employees. This part
of the Employer's contribution and the allocation thereof shall be
unrelated to any Employee contributions made hereunder.
[ ] (f) Additional Employer Contribution - Integrated Allocation Formula
[See paragraphs (h) and (i)]
The Employer shall have the right to make an additional discretionary
contribution. The Employer's contribution for the Plan Year plus any
forfeitures shall be allocated to the accounts of eligible
Participants as follows:
(i) First, to the extent contributions and forfeitures are
sufficient, all Participants will receive an allocation equal
to 3% of their Compensation.
(ii) Next, any remaining Employer Contributions and forfeitures
will be allocated to Participants who have Compensation in
excess of the Taxable Wage Base (excess Compensation). Each
such Participant will receive an allocation in the ratio that
his or her excess compensation bears to the excess
Compensation of all Participants. Participants may only
receive an allocation of 3 % of excess Compensation.
(iii) Next, any remaining Employer contributions and forfeitures
will be allocated to all Participants in the ratio that their
Compensation plus excess Compensation bears to the total
Compensation plus excess Compensation of all Participants.
Participants may only receive an allocation of up to 2.7% of
their Compensation plus excess Compensation, under this
allocation method. If the Taxable Wage Base defined at Section
3(j) is less than or equal to the greater of S10,000 or 20% of
the maximum, the 2.7% need not be reduced. If the
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amount specified is greater than the greater of $10,000 or 20%
of the maximum Taxable Wage Base, but not more than 80%, 2.7%
must be reduced to 1.3 %. If the amount specified is greater
than 80% but less than 100% of the maximum Taxable Wage Base,
the 2.7% must be reduced to 2.4%.
NOTE: If the Plan is not Top-Heavy or if the Top-Heavy minimum
contribution or benefit is provided under another Plan [see
Section 11 (c) (ii)] covering the same Employees,
sub-paragraphs (i) and (ii) above may be disregarded and 5.7%,
4.3% or 5.4% may be substituted for 2.7%, 1.3% or 2.4% where
it appears in (iii) above.
(iv) Next, any remaining Employer contributions and forfeitures
will be allocated to all Participants (whether or not they
received an allocation under the preceding paragraphs) in the
ratio that each Participant's Compensation bears to all
Participants' Compensation.
[ ] (g) Additional Employer Contribution-Alternative Integrated Allocation
Formula. [See paragraph (h) and (i)]
The Employer shall have the right to make an additional discre-
tionary contribution. To the extent that such contributions are
sufficient, they shall be allocated as follows:
____% of each eligible Participant's Compensation plus ____% of
Compensation in excess of the Taxable Wage Base defined at Section
3(j) hereof. The percentage on excess compensation may not exceed
the lesser of (i) the amount first specified in this paragraph or
(ii) the greater of 5.7% or the percentage rate of tax under Code
Section 311l(a) as in effect on the first day of the Plan Year
attributable to the Old Age (OA) portion of the OASDI provisions of
the Social Security Act. If the Employer specifies a Taxable Wage
Base in Section 3(j) which is lower than the Taxable Wage Base for
Social Security purposes (SSTWB) in effect as of the first day of
the Plan Year, the percentage contributed with respect to excess
Compensation must be adjusted. If the Plan's Taxable Wage Base is
greater than the larger of $10,000 or 20% of the SSTWB but not more
than 80% of the SSTWB, the excess percentage is 4.3%. If the Plan's
Taxable Wage Base is greater than 80% of the SSTWB but less than
100% of the SSTWB, the excess percentage is 5.4%.
NOTE: Only one plan maintained by the Employer may be integrated with
Social Security.
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(h) Allocation of Excess Amounts (Annual Additions)
In the event that the allocation formula above results in an Excess
Amount, such excess shall be:
[X] (i) placed in a suspense account accruing no gains or losses
for the benefit of the Participant.
[ ] (ii) reallocated as additional Employer contributions to all
other Participants to the extent that they do not have
any Excess Amount.
(i) Minimum Employer Contribution Under Top-Heavy Plans:
For any Plan Year during which the Plan is Top-Heavy, the sum of the
contributions and forfeitures as allocated to eligible Employees
under paragraphs 7(d), 7(e), 7(f), 7(g) and 9 of this Adoption
Agreement shall not be less than the amount required under paragraph
14.2 of the Basic Plan document #04. Top-Heavy minimums will be
allocated to:
[ ] (i) all eligible Participants.
[X] (ii) only eligible non-Key Employees who are Participants.
(j) Return of Excess Contributions and/or Excess Aggregate
Contributions:
In the event that one or more Highly Compensated Employees is
subject to both the ADP and ACP tests and the sum of such tests
exceeds the Aggregate Limit, the limit will be satisfied by reducing
the:
[X] (i) the ADP of the affected Highly Compensated Employees.
[ ] (ii) the ACP of the affected Highly Compensated Employees.
[ ] (iii) a combination of the ADP and ACP of the affected Highly
Compensated Employees.
8. ALLOCATIONS TO TERMINATED EMPLOYEES
[ ] (a) The Employer will not allocate Employer related contributions
to Employees who terminate during a Plan Year, unless required
to satisfy the requirements of Code
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Section 401(a)(26) and 410(b). (These requirements are
effective for 1989 and subsequent Plan Years.)
[X] (b) The Employer will allocate Employer matching and other related
contributions as indicated below to Employees who terminate
during the Plan Year as a result of:
Matching Other
[X] [X] (i) Retirement.
[X] [X] (ii) Disability.
[X] [X] (iii) death.
[X] [X] (iv) Other termination of employment
provided that the Participant has
completed a Year of Service as defined
for Allocation Accrual Purposes.
[ ] [ ] (v) Other termination of employment even
though the Participant has not
completed a Year of Service.
9. ALLOCATION OF FORFEITURES
NOTE: Subsections (a), (b) and (c) below apply to forfeitures of amounts other
than Excess Aggregate Contributions.
(a) Allocation Alternatives:
[X] (i) Forfeitures shall be allocated to Participants in the
same manner as the Employer's contribution.
If allocation to other Participants is selected, the
allocation shall be as follows:
[1] Amount attributable to Employer discretionary
contributions and Top-Heavy minimums will be
allocated to:
[ ] all eligible Participants under the Plan.
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[X] only those Participants eligible for an
allocation of Employer contributions in the
current year.
[ ] only those Participants eligible for an
allocation of matching contributions in the
current year.
[2] Amounts attributable to Employer Matching
contributions will be allocated to:
[ ] all eligible Participants.
[X] only those Participants eligible for
allocations of matching contributions in
the current year.
[ ] (ii) Forfeitures shall be applied to reduce the Employer's
contribution for such Plan Year.
[ ] (iii) Forfeitures shall be applied to offset administrative
expenses of the Plan. If forfeitures exceed these
expenses, (ii) above shall apply.
(b) Date for Reallocation:
NOTE: If no distribution has been made to a former Participant, subsection
(i) below will apply to such Participant even if the Employer elects
(ii) or (iii) below as its normal administrative policy.
[ ] (i) Forfeitures shall be reallocated at the end of the Plan
Year during which the former Participant incurs his or
her fifth consecutive one year Break In Service.
[ ] (ii) Forfeitures will be reallocated immediately (as of the
next Valuation Date).
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[X] (iii) Forfeitures shall be reallocated at the end of the Plan
Year during which the former Employee incurs his or her
1st (1st, 2nd, 3rd, or 4th) consecutive one year Break
In Service.
(c) Restoration of Forfeitures:
If amounts are forfeited prior to five consecutive 1-year Breaks in
Service, the Funds for restoration of account balances will be
obtained from the following resources in the order indicated (fill
in the appropriate number):
[1] (i) Current year's forfeitures.
[3] (ii) Additional Employer contribution.
[2] (iii) Income or gain to the Plan.
(d) Forfeitures of Excess Aggregate Contributions shall be:
[X] (i) Applied to reduce Employer contributions.
[ ] (ii) Allocated, after all other forfeitures under the Plan,
to the Matching Contribution account of each non-highly
compensated Participant who made Elective Deferrals or
Voluntary Contributions in the ratio which each such
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for such Plan
Year. Such forfeitures cannot be allocated to the
account of any Highly Compensated Employee.
Forfeitures of Excess Aggregate Contributions will be so applied at
the end of the Plan Year in which they occur.
10. CASH OPTION
[X] (a) The Employer may permit a Participant to elect to defer to the
Plan, an amount not to exceed 100% of any Employer paid cash
bonus made for such Participant for any year. A Participant
must file an election to defer such contribution at least
fifteen (15) days prior to the end of the Plan Year. If the
Employee fails to make such an election, the entire Employer
paid cash bonus to which the Participant would be entitled
shall be paid as cash and not to the Plan. Amounts deferred
under this section shall be treated for all purposes as
Elective Deferrals. Nothwithstanding the above, the election
to defer must be made before the bonus is made available to
the Participant.
18
<PAGE> 21
Prototype Cash or
Deferred Profit-
Sharing Plan #002
[ ] (b) Not Applicable.
11. LIMITATIONS ON ALLOCATIONS
[X] This is the only Plan the Employer maintains or ever maintained,
therefore, this section is not applicable.
[ ] The Employer does maintain or has maintained another Plan (including
a Welfare Benefit Fund or an individual medical account (as defined
in Code Section 415(1)(2)), under which amounts are treated as
Annual Additions) and has completed the proper sections below.
Complete (a), (b) and (c) only if the Employer maintains or ever
maintained another qualified plan, including a Welfare Benefit Fund
or an individual medical account [as defined in Code Section
415(1)(2)] in which any Participant in this Plan is (or was) a
participant or could possibly become a participant.
(a) If the Participant is covered under another qualified Defined
Contribution Plan maintained by the Employer, other than a Master or
Prototype Plan:
[ ] (i) the provisions of Article X of the Basic Plan Document
#04 will apply, as if the other plan were a Master or
Prototype Plan.
[ ] (ii) Attach provisions stating the method under which the
plans will limit total Annual Additions to the Maximum
Permissible Amount, and will properly reduce any Excess
Amounts, in a manner that precludes Employer discretion.
(b) If a Participant is or ever has been a participant in a Defined
Benefit Plan maintained by the Employer:
Attach provisions which will satisfy the 1.0 limitation of Code
Section 415(e). Such language must preclude Employer discretion. The
Employer must also specify the interest and mortality assumptions
used in determining Present Value in the Defined Benefit Plan.
(c) The minimum contribution or benefit required under Code Section 416
relating to Top-Heavy Plans shall be satisfied by:
[ ] (i) this Plan.
19
<PAGE> 22
Prototype Cash or
Deferred Profit-
Sharing Plan #002
[ ] (ii)
______________________________________
______________________________________
(Name of other qualified plan of the Employer).
[ ] (iii) Attach provisions stating the method under which the
minimum contribution and benefit provisions of Code
Section 416 will be satisfied. If a Defined Benefit Plan
is or was maintained, an attachment must be provided
showing interest and mortality assumptions used in the
Top-Heavy Ratio.
12. VESTING
Employees shall have a fully vested and nonforfeitable interest in any
Employer contribution and the investment earnings thereon made in
accordance with paragraphs (select one or more options) [ ] 7(c), [ ]
7(e), [ ] 7(f), [ ] 7(g) and [ ] 7(i) hereof. Contributions under
paragraph 7(b), 7(c)(vii) and 7(d) are always fully vested. If one or
more of the foregoing options are not selected, such Employer
contributions shall be subject to the vesting table selected by the
Employer.
Each Participant shall acquire a vested and nonforfeitable percentage in
his or her account balance attributable to Employer contributions and the
earnings thereon under the procedures selected below except with respect
to any Plan Year during which the Plan is Top-Heavy, in which case the
Two-twenty vesting schedule [Option (b)(iv)] shall automatically apply
unless the Employer has already elected a faster vesting schedule. If the
Plan is switched to option (b)(iv), because of its Top-Heavy status, that
vesting schedule will remain in effect even if the Plan later becomes
non-Top-Heavy until the Employer executes an amendment of this Adoption
Agreement indicating otherwise.
(a) Computation Period:
The computation period for purposes of determining Years of Service
and Breaks in Service for purposes of computing a Participant's
nonforfeitable right to his or her account balance derived from
Employer contributions:
[ ] (i) shall not be applicable since Participants are always
fully vested,
[ ] (ii) shall commence on the date on which an Employee first
performs an Hour of Service for the Employer and each
subsequent 12 consecutive month period shall commence on
the anniversary thereof, or
20
<PAGE> 23
Prototype Cash or
Deferred Profit-
Sharing Plan #002
[X] (iii) shall commence on the first day of the Plan Year during
which an Employee first performs an Hour of Service for
the Employer and each subsequent 12-consecutive month
period shall commence on the anniversary thereof.
A Participant shall receive credit for a Year of Service if he or she
completes at least 1,000 Hours of Service [or if lesser, the number of
hours specified at 3(1)(iii) of this Adoption Agreement] at any time
during the 12-consecutive month computation period. Consequently, a Year
of Service may be earned prior to the end of the 12-consecutive month
computation period and the Participant need not be employed at the end of
the 12-consecutive month computation period to receive credit for a Year
of Service.
(b) Vesting Schedules:
NOTE: The vesting schedules below only apply to a Participant who has at
least one Hour of Service during or after the 1989 Plan Year. If
applicable, Participants who separated from Service prior to the
1989 Plan Year will remain under the vesting schedule as in effect
in the Plan prior to amendment for the Tax Reform Act of 1986.
(i) Full and immediate Vesting.
Years of Service
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
(ii) _% 100%
(iii) 0 0% 100%
(iv) _% 20% 40% 60% 80% 100%
(v) _% _% 20% 40% 60% 80% 100%
(vi) 10% 20% 30% 40% 60% 80% 100%
(vii) _% _% _% _% 100%
(viii) _% _% _% _% _% _% 100%
</TABLE>
NOTE: The percentages selected for schedule (viii) may not be less for any
year than the percentages shown at schedule (v).
[X] All contributions other than those which are fully vested when
contributed will vest under schedule (iii) above.
[ ] Contributions other than those which are fully vested when
contributed will vest as provided below:
21
<PAGE> 24
Prototype Cash or
Deferred Profit-
Sharing Plan #002
<TABLE>
<CAPTION>
Vesting
Option Selected Type Of Employer Contribution
--------------- -----------------------------
<S> <C>
_______________ 7(c) Employer Match on Salary
Savings
_______________ 7(c) Employer Match on
Employee Voluntary
_______________ 7(e) Employer Discretionary
_______________ 7(f) & (g) Employer
Discretionary - Integrated
</TABLE>
(c) Service disregarded for Vesting:
[ ] (i) Service prior to the Effective Date of this Plan or a
predecessor plan shall be disregarded when computing a
Participant's vested and nonforfeitable interest.
[ ] (ii) Service prior to a Participant having attained age 18
shall be disregarded when computing a Participant's
vested and nonforfeitable interest.
13. SERVICE WITH PREDECESSOR ORGANIZATION
For purposes of satisfying the Service requirements for eligibility, Hours
of Service shall include Service with the following predecessor
organization(s): (These hours will also be used for vesting purposes.)
N/A
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
14. ROLLOVER/TRANSFER CONTRIBUTIONS
(a) Rollover Contributions, as described at paragraph 4.3 of the Basic
Plan Document #04,[X] shall [ ] shall not be permitted. If
permitted, Employees [X] may [ ] may not make Rollover Contributions
prior to meeting the eligibility requirements for participation in
the Plan.
(b) Transfer Contributions, as described at paragraph 4.4 of the Basic
Plan Document #04 [ ] shall [X} shall not be permitted. If
permitted, Employees [ ] may [ ] may not make Transfer Contributions
prior to meeting the eligibility requirements for participation in
the Plan.
22
<PAGE> 25
Prototype Cash or
Deferred Profit-
Sharing Plan #002
NOTE: Even if available, the Employer may refuse to accept such
contributions if its Plan meets the safe-harbor rules of
paragraph 8.7 of the Basic Plan Document #04.
15. HARDSHIP WITHDRAWALS
Hardship withdrawals, as provided for in paragraph 6.9 of the Basic
Plan Document #04, [X] are [ ] are not permitted.
16. PARTICIPANT LOANS
Participant loans, as provided for in paragraph 13.5 of the Basic Plan
Document #04, [ ] are [X] are not permitted. If permitted, repayments
of principal and interest shall be repaid to [ ] the Participant's
segregated account or [ ] the general Fund.
17. INSURANCE POLICIES
The insurance provisions of paragraph 13.6 of the Basic Plan Document
#04 [ ] shall [X] shall not be applicable.
18. EMPLOYER INVESTMENT DIRECTION
The Employer investment direction provisions, as set forth in paragraph
13.7 of the Basic Plan Document #04, [XX] Shall [ ] shall not be
applicable.
19. EMPLOYEE INVESTMENT DIRECTION
(a) The Employee investment direction provisions, as set forth in
paragraph 13.8 of the Basic Plan Document #04, [X] shall [ ]
shall not be applicable.
If applicable, Participants may direct their investments among
funds offered by the Trustee.
(b) Participants may direct the following kinds of contributions
and the earnings thereon (check all applicable):
<TABLE>
<S> <C> <C>
[ ] (i) All Contributions
[X] (ii) Elective Deferrals
[ ] (iii) Employee Voluntary Contributions (after-tax)
</TABLE>
23
<PAGE> 26
Prototype Cash or
Deferred Profit-
Sharing Plan #002
<TABLE>
<S> <C> <C> <C>
[ ] (iv) Employee Mandatory Contributions (after
tax)
[ ] (v) Employer Qualified Matching Contributions
[ ] (vi) Other Employer Matching Contributions
[ ] (vii) Employer Qualified Non-Elective Contributions
[ ] (viii) Employer Discretionary Contributions
[X] (ix) Rollover Contributions
[ ] (x) Transfer Contributions
[ ] (xi) All of above which are checked, but only to
the extent that the Participant is vested in
those contributions.
</TABLE>
NOTE: To the extent that Employee investment direction was previously
allowed, it shall continue to be allowed on those amounts and the
earnings thereon.
20. EARLY PAYMENT OPTION
(a) A Participant who separates from Service prior to retirement,
death or Disability [X] may [ ] may not make application to
the Employer requesting an early payment of his or her vested
account balance.
(b) A Participant who has attained age 59-1/2 and who has not
separated from Service [ ] may [X] may not obtain a
distribution of his or her vested Employer contributions.
Distribution can only be made if the Participant is 100%
vested.
(c) A Participant who has attained the Plan's Normal Retirement
Age and who has not separated from Service [ ] may [X] may not
receive a distribution of his or her vested account balance.
NOTE: If the Participant has had the right to withdraw his or her
account balance in the past, this right may not be taken away.
Notwithstanding the above, to the contrary, required minimum
distributions will be paid. For timing of distributions, see
item 21(a) below.
21. DISTRIBUTION OPTIONS
(a) Timing of Distributions:
In cases of termination for other than death, Disability or
retirement, benefits shall be paid:
24
<PAGE> 27
Prototype Cash or
Deferred Profit-
Sharing Plan #002
<TABLE>
<S> <C> <C> <C>
[ ] (i) As soon as administratively feasible following
the close of the Plan Year during which a
distribution is requested or is otherwise
payable.
[X] (ii) As soon as administratively feasible,
following the date on which a distribution is
requested or is otherwise payable.
[ ] (iii) As soon as administratively feasible, after
the close of the Plan Year during which the
Participant incurs ______ consecutive
one-year Breaks in Service.
[ ] (iv) Only after the Participant has achieved the
Plan's Normal Retirement Age, or Early
Retirement Age, if applicable.
</TABLE>
In cases of death, Disability or retirement, benefits shall be
paid:
<TABLE>
<S> <C> <C> <C>
[ ] (v) As soon as administratively feasible following
the close of the Plan Year during which a
distribution is requested or is otherwise
payable.
[X] (vi) As soon as administratively feasible,
following the date on which a distribution is
requested or is otherwise payable.
[ ] (vii) As soon as administratively feasible, after
the close of the Plan Year during which the
Participant incurs ______ consecutive one-year
Breaks in Service.
[ ] (viii) Only after the Participant has achieved the
Plan's Normal Retirement Age, or Early
Retirement Age, if applicable.
</TABLE>
(b) Optional Forms of Payment:
<TABLE>
<S> <C> <C>
[X] (i) Lump Sum.
[X] (ii) Installment Payments.
[ ] (iii) Life Annuity*.
[ ] (iv) Life Annuity Term Certain*.
Life Annuity with payments guaranteed for
_________ period (not to exceed 20 years,
specify all applicable).
</TABLE>
25
<PAGE> 28
Prototype Cash or
Deferred Profit-
Sharing Plan #002
<TABLE>
<S> <C> <C>
[ ] (v) Joint and [ ] 50%, [ ] 66-2/3%, [ ] 75% or
[ ] 100% survivor annuity* (specify all
applicable).
[ ] (vi) Other form(s) specified: _____________________
</TABLE>
*Not available in Plan meeting provisions of paragraph 8.7 of
Basic Plan Document #04.
(c) Recalculation of Life Expectancy:
In determining required distributions under the Plan,
Participants and/or their Spouse (Surviving Spouse) [ ] shall
[X] shall not have the right to have their life expectancy
recalculated annually.
If "shall",
<TABLE>
<S> <C>
[ ] only the Participant shall be recalculated.
[ ] both the Participant and Spouse shall be
recalculated.
[ ] who is recalculated shall be determined by the
Participant.
</TABLE>
22. SPONSOR CONTACT
Employers should direct questions concerning the language contained in
and qualification of the Prototype to:
Barbara P. Warren
(Job Title) Trust Officer
(Phone Number) (615)271-2054
In the event that the Sponsor amends, discontinues or abandons this
Prototype Plan, notification will be provided to the Employer's address
provided on the first page of this Agreement.
26
<PAGE> 29
Prototype Cash or
Deferred Profit-
Sharing Plan #002
23. SIGNATURES:
DUE TO THE SIGNIFICANT TAX RAMIFICATIONS, THE SPONSOR RECOMMENDS THAT
BEFORE YOU EXECUTE THIS ADOPTION AGREEMENT, YOU CONTACT YOUR ATTORNEY
OR TAX ADVISOR, IF ANY.
(a) EMPLOYER:
Name and address of Employer if different than specified
in Section 1 above.
___________________________________________________________
___________________________________________________________
___________________________________________________________
This agreement and the corresponding provisions of the Plan
and Trust/Custodial Account Basic Plan Document #04 were
adopted by the Employer the 15th day of March, 1993.
Signed for the Employer by: Mack S. Linebaugh, Jr.
-----------------------------
Title: President - CEO
-----------------------------
Signature: /s/ Mack S. Linebaugh Jr.
-----------------------------
-----------------------------
THE EMPLOYER UNDERSTANDS THAT ITS FAILURE TO PROPERLY COMPLETE
THE ADOPTION AGREEMENT MAY RESULT IN DISQUALIFICATION OF ITS
PLAN.
Employer's Reliance: The adopting Employer may not rely on an
opinion letter issued by the National Office of the Internal
Revenue Service as evidence that the Plan is qualified under
Code Section 401. In order to obtain reliance with respect to
Plan qualification, the Employer must apply to the appropriate
Key District Office for a determination letter.
This Adoption Agreement may only be used in conjunction with
Basic Plan Document #04.
27
<PAGE> 30
Prototype Cash or
Deferred Profit-
Sharing Plan #002
[X] (b) TRUSTEE:
Name of Trustee:
The Bank of Nashville - Trust Division
__________________________________________________________
__________________________________________________________
The assets of the Fund shall be invested in accordance with
paragraph 13.3 of the Basic Plan Document #04 as a Trust. As
such, the Employer's Plan as, contained herein was accepted
by the Trustee the herein was accepted by the Custodian the
15th day of March, 1993.
<TABLE>
<S> <C> <C>
Signed for the Trustee by: Barbara P. Warren
--------------------- ---------------------
Trust Officer
Title: --------------------- ---------------------
/s/ Barbara P. Warren
Signature: --------------------- ---------------------
</TABLE>
[ ] (c) CUSTODIAN:
Name of Custodian:
__________________________________________________________
__________________________________________________________
The assets of the Fund shall be invested in accordance with
paragraph 13.4 of the Basic Plan Document #04 as a Custodial
Account. As such, the Employer's Plan as contained herein was
accepted by the Custodian the _____ day of _________________,
19___.
<TABLE>
<S> <C> <C>
Signed for the Custodian by: --------------------- ---------------------
Title: --------------------- ---------------------
Signature: --------------------- ---------------------
</TABLE>
(d) SPONSOR:
The Employer's agreement and the corresponding provisions of
the Plan and Trust/Custodial Account basic Plan Document #04
were accepted by the Sponsor the 15th day of March, 1993.
Signed for the Sponsor by: Barbara P. Warren
---------------------
Title: Trust Officer
---------------------
Signature: /s/ Barbara P. Warren
---------------------
28
<PAGE> 31
-M-E-M-O-
DATE SEPTEMBER 8, 1993
TO: ALL ASSOCIATES
FROM: BARBARA P. WARREN
RE: SUMMARY MODIFICATION TO THE BANK OF NASHVILLE RETIREMENT SAVINGS PLAN
(401k)
With the passage of the Unemployment Compensation Act of 1992, the Plan
Administrative Committee has reviewed our procedure as it relates to
distribution of TBON stock from the 401(k) Plan. The Unemployment Compensation
Act provides that mandatory 20% withholding will generally be applicable to all
distributions from qualified plans unless the distribution is directly rolled
over into another qualified plan or an IRA. Our Plan currently provides that all
distributions of TBON stock will be made in-kind. This does not allow much
flexibility in making a Direct Rollover as generally only brokerage firm IRA's
can except stock. As a result, effective immediately, the Plan Administrative
Committee has decided to allow distributions of Employer stock account balances
from the 401(k) Plan to be made in either cash or in-kind stock (with fractional
shares being converted to cash). The method of distribution is to be determined
by the participant at the appropriate time. Should a participant choose to
receive his/her Employer stock account balance in the form of cash, the value of
the account will be based on the Valuation Date (December 31, March 31, June 30,
or September 30) preceding date of payment.
Please place this Summary Modification with your Summary Plan Description
booklet for your future reference.
If you should have any questions pertaining to the above, please do not hesitate
to give me a call.
<PAGE> 32
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING PLAN
AND TRUST/CUSTODIAL ACCOUNT
Sponsored By
BANK OF NASHVILLE
Nashville, Tennessee
BASIC PLAN DOCUMENT #04
FEBRUARY 1993
COPYRIGHT 1993 THE McKAY HOCHMAN COMPANY, INC.
<PAGE> 33
THIS DOCUMENT IS COPYRIGHTED UNDER THE LAWS OF THE UNITED STATES. USE,
DUPLICATION OR REPRODUCTION, INCLUDING THE USE OF ELECTRONIC MEANS, IS
PROHIBITED BY LAW WITHOUT THE EXPRES CONSENT OF THE AUTHOR
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH PAGE
- --------- ----
ARTICLE I
-----------
DEFINITIONS
-----------
<S> <C> <C>
1.1 Actual Deferral Percentage 1
1.2 Adoption Agreement 1
1.3 Aggregate Limit 2
1.4 Annual Additions 2
1.5 Annuity Starting Date 2
1.6 Applicable Calendar Year 2
1.7 Applicable Life Expectancy 3
1.8 Average Contribution Percentage (ACP) 3
1.9 Average Deferral Percentage (ADP) 3
1.10 Break In Service 3
1.11 Code 3
1.12 Compensation 3
1.13 Contribution Percentage 5
1.14 Custodian 6
1.15 Defined Benefit Plan 6
1.16 Defined Benefit (Plan) Fraction 6
1.17 Defined Contribution Dollar Limitation 6
1.18 Defined Contribution Plan 7
1.19 Defined Contribution (Plan) Fraction 7
1.20 Designated Beneficiary 7
1.21 Disability 7
1.22 Distribution Calendar Year 7
1.23 Early Retirement Age 7
1.24 Earned Income 8
1.25 Effective Date 8
1.26 Election Period 8
1.27 Elective Deferral 8
1.28 Eligible Participant 8
1.29 Employee 8
1.30 Employer 9
1.31 Entry Date 9
1.32 Excess Aggregate Contributions 9
1.33 Excess Amount 9
1.34 Excess Contribution 9
1.35 Excess Elective Deferrals 9
1.36 Family Member 9
1.37 First Distribution Calendar Year 10
1.38 Fund 10
1.39 Hardship 10
1.40 Highest Average Compensation 10
1.41 Highly Compensated Employee 10
1.42 Hour Of Service 10
1.43 Key Employee 12
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C>
1.44 Leased Employee 12
1.45 Limitation Year 12
1.46 Master Or Prototype Plan 12
1.47 Matching Contribution 12
1.48 Maximum Permissible Amount 12
1.49 Net Profit 13
1.50 Normal Retirement Age 13
1.51 Owner-Employee 13
1.52 Paired Plans 13
1.53 Participant 13
1.55 Permissive Aggregation Group 13
1.56 Plan 13
1.57 Plan Administrator 13
1.58 Plan Year 13
1.59 Present Value 13
1.60 Projected Annual Benefit 14
1.61 Qualified Deferred Compensation Plan 14
1.62 Qualified Domestic Relations Order 14
1.63 Qualified Early Retirement Age 14
1.64 Qualified Joint And Survivor Annuity 14
1.65 Qualified Matching Contribution 15
1.66 Qualified Non-Elective Contributions 15
1.67 Qualified Voluntary Contribution 15
1.68 Required Aggregation Group 15
1.69 Required Beginning Date 15
1.70 Rollover Contribution 15
1.71 Salary Savings Agreement 16
1.72 Self-Employed.Individual 16
1.73 Service 16
1.74 Shareholder Employee 16
1.75 Simplified Employee Pension Plan 16
1.76 Sponsor 16
1.77 Spouse (Surviving Spouse) 16
1.78 Super Top-Heavy Plan 16
1.79 Taxable Wage Base 16
1.80 Top-Heavy Determination Date 16
1.81 Top-Heavy Plan 16
1.82 Top-Heavy Ratio 17
1.83 Top-Paid Group 18
1.84 Transfer Contribution 18
1.85 Trustee 18
1.86 Valuation Date 19
1.87 Vested Account Balance 19
1.88 Voluntary Contribution 19
1.89 Welfare Benefit Fund 19
1.90 Year Of Service 19
</TABLE>
ARTICLE II
ELIGIBLITY REQUIREMENTS
<TABLE>
<S> <C> <C>
2.1 Participation 20
2.2 Change In Classification Of Employment 20
2.3 Computation Period 20
2.4 Employment Rights 20
2.5 Service With Controlled Groups 20
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C>
2.6 Owner-Employees 20
2.7 Leased Employees 21
2.8 Thrift Plans 22
</TABLE>
ARTICLE III
EMPLOYER CONTRIBUTIONS
<TABLE>
<S> <C> <C>
3.1 Amount 23
3.2 Expenses And Fees 23
3.3 Responsibility For Contributions 23
3.4 Return Of Contributions 23
</TABLE>
<TABLE>
ARTICLE IV
EMPLOYEE CONTRIBUTIONS
<S> <C> <C>
4.1 Voluntary Contributions 24
4.2 Qualified Voluntary Contributions 24
4.3 Rollover Contribution 24
4.4 Transfer Contribution 25
4.5 Employer Approval Of Transfer Contributions 25
4.6 Elective Deferrals 26
4.7 Required Voluntary Contributions 26
4.8 Direct Rollover Of Benefits 27
</TABLE>
ARTICLE V
PARTICIPANT ACCOUNTS
<TABLE>
<S> <C> <C>
5.1 Separate Accounts 28
5.2 Adjustments To Participant Accounts 28
5.3 Allocating Employer Contributions 29
5.4 Allocating Investment Earnings And Losses 29
5.5 Participant Statements 30
</TABLE>
ARTICLE VI
RETIREMENT BENEFITS AND DISTRIBUTIONS
<TABLE>
<S> <C> <C>
6.1 Normal Retirement Benefits 31
6.2 Early Retirement Benefits 31
6.3 Benefits On Termination Of Employment 31
6.4 Restrictions On Immediate Distributions 33
6.5 Normal Form Of Payment 33
6.6 Commencement Of Benefits 34
6.7 Claims Procedures 34
6.8 In-Service Withdrawals 35
6.9 Hardship Withdrawal 36
</TABLE>
<PAGE> 36
ARTICLE VII
DISTRIBUTION REQUIREMENTS
<TABLE>
<S> <C> <C>
7.1 Joint And Survivor Annuity Requirements 38
7.2 Minimum Distribution Requirements 38
7.3 Limits On Distribution Periods 38
7.4 Required Distributions On Or After The
Required Beginning Date 38
7.5 Required Beginning Date 39
7.6 Transitional Rule 40
7.7 Designation Of Beneficiary For Death Benefit 42
7.8 Nonexistence Of Beneficiary 42
7.9 Distribution Beginning-Defore Death 42
7.10 Distribution Beginning After Death 42
7.11 Distribution Of Excess Elective Deferrals 43
7.12 Distributions Of Excess Contributions 44
7.13 Distribution Of Excess Aggregate Contributions 44
</TABLE>
<TABLE>
ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
<S> <C> <C>
8.1 Applicability Of Provisions 46
8.2 Payment Of Qualified Joint And Survivor Annuity 46
8.3 Payment Of Qualified Pre-Retirement Survivor Annuity 46
8.4 Qualified Election 46
8.5 Notice Requirements For Qualified Joint And Survivor
Annuity 46
8.6 Notice Requirements For Qualified Pre Retirement Survivor Annuity 47
8.7 Special Safe-Harbor Exception For Certain Profit-Sharing Plans 48
8.8 Transitional Joint And Survivor Annuity Rules 49
8.9 Automatic Joint And Survivor Annuity And Early Survivor Annuity 49
8.10 Annuity Contracts 50
</TABLE>
<TABLE>
ARTICLE IX
VESTING
<S> <C> <C>
9.1 Employee Contributions 51
9.2 Employer Contributions 51
9.3 Computation Period 51
9.4 Requalification Prior To Five Consecutive One-Year
Breaks In Service 51
9.5 Requalification After Five Consecutive One-Year Breaks
In Service 51
9.6 Calculating Vested Interest 51
9.7 Forfeitures 52
9.8 Amendment Of Vesting Schedule 52
9.9 Service With Controlled Groups 52
</TABLE>
<PAGE> 37
ARTICLE X
LIMITATIONS ON ALLOCATIONS AND
ANTIDiSCRIMINATION TESTING
<TABLE>
<S> <C> <C>
10.1 Participation In This Plan Only 53
10.2 Disposition Of Excess Annual Additions 53
10.3 Participation In This Plan And Another
Prototype Defined Contribution Plan,
Welfare Benefit Fund, Or Other Medical
Account Maintained By The Employer 54
10.4 Disposition Of Excess Annual Additions Under Two Plans 55
10.5 Participation In This Plan And Another
Defined Contribution Plan Which Is Not
A Master Or Prototype Plan 55
10.6 Participation In This Plan And A Defined
Benefit Plan 55
10.7 Average Deferral Percentage (ADP) Test 56
10.8 Special Rules Relating To Application 56
Of ADP Test
10.9 Recharacterization 57
10.10 Average Contribution Percentage (ACP) Test 58
10.11 Special Rules Relating To Application 58
Of ACP Test
</TABLE>
ARTICLE XI
ADMINISTRATION
<TABLE>
<S> <C> <C>
11.1 Plan Administrator 61
11.2 Trustee/Custodian 61
11.3 Administrative Fees And Expenses 62
11.4 Division Of Duties And Indemnification 62
</TABLE>
ARTICLE XII
TRUST FUND/CUSTODIAL ACCOUNT
<TABLE>
<S> <C> <C>
12.1 The Fund 64
12.2 Control Of Plan Assets 64
12.3 Exclusive Benefit Rules 64
12.4 Assignment And Alienation Of Benefits 64
12.5 Determination Of Qualified Domestic
Relations Order (QDRO). 64
</TABLE>
ARTICLE XIII
INVESTMENTS
<TABLE>
<S> <C> <C>
13.1 Fiduciary Standards 66
13.2 Funding Arrangement 66
13.3 Investment Alternatives Of The Trusee 66
13.4 Investment Alternatives Of The Custdian 67
13.5 Participant Loans 67
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C>
13.6 Insurance Policies 69
13.7 Employer Investment Direction 71
13.8 Employee Investment Direction 71
</TABLE>
ARTICLE XIV
TOP-HEAVY PROVISIONS
<TABLE>
<S> <C> <C>
14.1 Applicability Of Rules 73
14.2 Minimum Contribution 73
14.3 Minimum Vesting 73
14.4 Limitations On Allocations 74
</TABLE>
ARTICLE XV
AMENDMENT AND TERMINATION
<TABLE>
<S> <C> <C>
15.1 Amendment By Sponsor 75
15.2 Amendment By Employer 75
15.3 Termination 75
15.4 Qualification Of Employer's Plan 75
15.5 Mergers And Consolidations 76
15.6 Resignation And Removal 76
15.7 Qualification Of Prototype 76
</TABLE>
ARTICLE XVI
GOVERNING LAW 77
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PROTOTYPE CASH OR DEFERRED PROFIT-SHARING PLAN AND
TRUST/CUSTODIAL ACCOUNT
Sponsored By
BANK OF NASHVILLE
The Sponsor hereby establishes the following Prototype Retirement Plan and
Trust/Custodial Account for use by those of its customers who qualify and wish
to adopt a qualified retirement program. Any Plan and Trust/Custodial Account
established hereunder shall be administered for the exclusive benefit of
Participants and their beneficiaries under the following terms and conditions:
ARTICLE I
DEFINITIONS
1.1 Actual Deferral Percentage The ratio (expressed as a percentage and
calculated separately for each Participant) of:
(a) the amount of Employer contributions [as defined at (c) and (d)]
actually paid over to the Fund on behalf of such Participant for the
Plan Year to
(b) the Participant's Compensation for such Plan Year. Compensation will
only include amounts for the period during which the Employee was
eligible to participate.
Employer contributions on behalf of any Participant shall include:
(c) any Elective Deferrals made pursuant to the Participant's deferral
election, including Excess Elective Deferrals, but excluding Elective
Deferrals that are either taken into account in the Contribution
Percentage test (provided the ADP test is satisfied both with and
without exclusion of these Elective Deferrals) or are returned as
excess Annual Additions; and
(d) at the election of the Employer, Qualified Non-Elective Contributions
and Qualified Matching Contributions.
For purposes of computing Actual Deferral Percentages, an Employee who would be
a Participant but for the failure to make Elective Deferrals shall be treated as
a Participant on whose behalf no Elective Deferrals are made.
1.2 Adoption Agreement The document attached to this Plan by which an Employer
elects to establish a qualified retirement plan and trust/custodial account
under the terms of this Prototype Plan and Trust/Custodial Account.
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1.3 Aggregate Limit The sum of:
(a) 125 percent of the greater of the ADP of the non-Highly Compensated
Employees for the Plan Year or the ACP of non-Highly Compensated
Employees under the Plan subject to Code Section 401(k) for the Plan
Year beginning with or within the Plan Year of the cash or deferred
arrangement as described in Code Section 401(k) or Code Section
402(h)(1)(B), and
(b) the lesser of 200% or two percent plus the lesser of such ADP or ACP.
Alternatively, the aggregate limit can be determined by substituting "the lesser
of 200% or 2 percent plus" for "125% of" iN (a) above, and substituting "125%
of" for "the lesser of 200% or 2 percent plus" in (b) above.
1.4 Annual Additions The sum of the following amounts credited to a
Participant's account for the Limitation Year:
(a) Employer Contributions,
(b) Employee Contributions (under Article IV),
(c) forfeitures,
(d) amounts allocated after March 31, 1984 to an individual medical
account, as defined in Code Section 415(1)(2), which is part of a
pension or annuity plan maintained by the Employer (these amounts are
treated as Annual Additions to a Defined Contribution Plan though they
arise under a Defined Benefit Plan), and
(e) amounts derived from contributions paid or accrued after 1985, in
taxable years ending after 1985, which are either attributable to
post-retirement medical benefits allocated to the account of a Key
Employee, or to a Welfare Benefit Fund maintained by the Employer, are
also treated as Annual Additions to a Defined Contribution Plan. For
purposes of this paragraph, an Employee is a Key Employee if he or she
meets the requirements of paragraph 1.43 at any time during the Plan
Year or any preceding Plan Year. Welfare Benefit Fund is defined at
paragraph 1.89.
Excess amounts applied in a Limitation Year to reduce Employer contributions
will be considered Annual Additions for such Limitation Year, pursuant to the
provisions of Article X.
1.5 Annuity Starting Date The first day of the first period for which an amount
is paid as an annuity or in any other form.
1.6 Applicable Calendar Year The First Distribution Calendar Year, and in the
event of the recalculation of life expectancy, such succeeding calendar year. If
payments commence in accordance with paragraph 7.4(e) before the Required
Beginning Date, the Applicable Calendar Year is the year such payments commence.
If distribution is in the form of an immediate annuity purchased after the
Participant's death with the participants remaining interest, the Applicable
Calendar Year is the year of purchase.
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1.7 Applicable Life Expectancy Used in determining the required minimum
distribution. the life expectancy (or joint and last survivor expectancy)
calculated using the attained age of the Participant (or Designated Beneficiary)
as of the Participant's (or Designated Beneficiary's) birthday in the Applicable
Calendar Year reduced by one for each calendar year which has elapsed since the
date life expectancy was first calculated. If life expectancy is being
recalculated, the Applicable Life Expectancy shall be the life expectancy as so
recalculated. The life expectancy of a non-Spouse Beneficiary may not be
recalculated.
1.8 Average Contribution Percentage (ACP) The average of the Contribution
Percentages for each Highly Compensated Employee and for each non-Highly
Compensated Employee.
1.9 Average Deferral Percentage (ADP) The average of the Actual Deferral
Percentages for each' Highly Compensated Employee and for each non-Highly
Compensated Employee.
1.10 Break In Service
A 12-consecutive month period during which an Employee fails to complete more
than 500 Hours of Service.
1.11 Code
The Internal Revenue Code of 1986, including any amendments.
1.12 Compensation
The Employer may select one of the following three safe harbor definitions of
Compensation in the Adoption Agreement. Compensation shall only include amounts
earned while a Participant if Plan Year is chosen as the applicable computation
period.
(a) CODE SECTION 3401(a) WAGES. Compensation is defined as wages within
the meaning of Code Section 3401(a) for the purposes of Federal income
tax withholding at the source but determined without regard to any
rules that limit the remuneration included in wages based on the
nature or location of the employment or the services performed [such
as the exception for agricultural labor in Code Section 3401(a)(2)].
(b) CODE SECTION 6041 AND 6051 Wages. Compensation is defined as wages as
defined in Code Section 3401(a) and all other payments of compensation
to an Employee by the Employer (in the course of the Employer's trade
or, business) for which the Employer is required to furnish, the
employee a written statement under Code Section 6041 (d) and 6051
(a)(3). Compensation must be determined without regard to any rules
under Code Section 3401(a) that limit the remuneration included in
wages based on the nature or location of the employment or the
services performed [such as the exception for agricultural labor in
Code Section 3401 (a)(2).
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(c) CODE SECTION 415 COMPENSATION. For purposes of applying
the limitations of Article X and Top-Heavy Minimums, the definition of
Compensation shall be Code Section 415 Compensation defined as
follows: a Participant's Earned Income, wages, salaries, and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includible in
gross income [including, but not limited to, commissions paid
salesmen, Compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe
benefits and reimbursements or other expense allowances under a
nonaccountable plan (as described in Regulation 1.62-2(c)], and
excluding the following:
1. Employer contributions to a plan of deferred compensation which
are not includible in the Employee's gross income for the taxable
year in which contributed, or Employer contributions under a
Simplified Employee Pension Plan or any distributions from a plan
of deferred compensation,
2. Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture,
3. Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
4. other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code Section 403(b) (whether or not the
contributions are actually excludible from the gross income of
the Employee).
For purposes of applying the limitations of Article X and Top-Heavy Minimums,
the definition of Compensation' shall be Code Section 415 Compensation described
in this paragraph 1.12(c). Also, for purposes of applying the limitations of
Article X, Compensation for a Limitation Year is the Compensation actually paid
or made available during such Limitation Year. Notwithstanding the preceding
sentence, Compensation for a Participant in a defined contribution plan who is
permanently and totally disabled [as defined in Code Section 22(e)(3)] is the
Compensation such Participant would have received for the Limitation Year if the
participant had been paid at the rate oF Compensation paid immediately before
becoming permanently and totally disabled. Such imputed Compensation for the
disabled Participant may be taken into account only if the participant is not a
highly compensated Employee [AS defined in Code Section 414(q)] and
contributions made on behalf of such Participant are nonforfeitable when made.
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If the Employer fails to pick the applicable period in the Adoption Agreement,
the Plan Year shall be used. Unless otherwise specified by the Employer in the
Adoption Agreement, Compensation shall be determined as provided in Code Section
3401(a) [as defined in this paragraph 1.12(a)]. In nonstandardized Adoption
Agreement 002, the Employer may choose to eliminate or exclude categories of
Compensation which do not violate the provisions of Code Sections 401(a)(4),
414(s) the regulations thereunder and Revenue Procedure 89-65.
Beginning with 1989 Plan Years, the annual Compensation of each Participant
which may be taken into account for determining all benefits provided under the
Plan (including benefits under Article XIV) for any year shall not exceed
$200,000, as adjusted under Code Section 415(d). In determining the Compensation
of a Participant for purposes of this limitation, the rules of Code Section
414(q)(6) shall apply, except in applying such rules, the term "family" shall
include only the Spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the end of the Plan year. If, as
a result of the application of such rules the adjusted $200,000 limitation is
exceeded, then (except for purposes of determining the portion of Compensation
up to the integration level if this Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in proportion to
each such individual's Compensation as determined under this section prior to
the application of this limitation.
If a Plan has a Plan Year that contains fewer than 12 calendar months, then the
annual Compensation limit for that period is an amount equal to the S200,000 as
adjusted for the calendar year in which the Compensation period begins,
multiplied by a fraction the numerator of which is the number of full months in
the Short Plan Year and the denominator of which is 12. If Compensation for any
prior Plan Year is taken into account in determining an Employee's contributions
or benefits for the current year, the Compensation for such prior year is
subject to the applicable annual Compensation limit in effect for that prior
year. For this purpose, for years beginning before January 1, 1990, the
applicable annual Compensation limit is $200,000.
Compensation shall not include deferred Compensation other than contributions
through a salary reduction agreement to a cash or deferred plan under Code
Section 401(k), a Simplified Employee Pension Plan under Code Section
402(h)(1)(B), a cafeteria plan under Code Section 125 or a tax-deferred annuity
under Code Section 403(b). Unless elected otherwise by the Employer in the
Adoption Agreement, these deferred amounts will be considered as Compensation
for Plan purposes. These deferred amounts are not counted as Compensation for
purposes of Articles X and XIV. When applicable to a Self-Employed Individual,
Compensation shall mean Earned Income.
1.13 Contribution Percentage The ratio (expressed as a percentage and calculated
separately for each Participant) of:
(a) the Participant's Contribution Percentage Amounts [as defined at
(c)-(f)] for the Plan Year, to
(b) the Participant's Compensation for the Plan Year. Compensation will
only include amounts for the period during which the Employee was
eligible to participate.
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Contribution Percentage Amounts on behalf of any Participant shall include:
(c) the amount of Employee Voluntary Contributions, Matching
Contributions, and Qualified Matching Contributions (to the extent not
taken into account for purposes of the ADP test) made under the Plan
on behalf of the Participant for the Plan Year,
(d) forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participant's account which shall be
taken into account in the year in which such forfeiture is allocated,
(e) at the election of the Employer, Qualified Non-Elective Contributions,
and
(f) the Employer also may elect to use Elective Deferrals in the
Contribution Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and continues to be
met following the exclusion of those Elective Deferrals that are used
to meet the ACP test.
Contribution Percentage Amounts shall not include Matching Contributions,
whether or not Qualified, that are forfeited either to correct Excess Aggregate
Contributions, or because the contributions to which they relate are Excess
Deferrals, Excess Contributions, or Excess Aggregate Contributions.
1.14 Custodian The Sponsor of this Prototype, or, if applicable, an affiliate or
successor, shall serve as Custodian if a Custodian is appointed in the Adoption
Agreement.
1.15 Defined Benefit Plan A Plan under which a Participant's benefit is
determined by a formula contained in the Plan and no individual accounts are
maintained for Participants.
1.16 Defined Benefit (Plan) Fraction: A fraction, the numerator of which is the
sum of the Participant's Projected Annual Benefits under all the Defined Benefit
Plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of the dollar limitation
determined for the Limitation Year under Code Sections 415(b) and (d) or 140
percent of the Highest Average Compensation, including any adjustments under
Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after 1986, in one or more Defined
Benefit Plans maintained by the Employer which were in existence on May 6, 1986,
the denominator of this fraction will not be less than 125 percent of the sum of
the annual benefits under such plans which the Participant had accrued as of the
close of the last Limitation Year beginning before 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986. The preceding
sentence applies only if the Defined Benefit Plans individually and in the
aggregate satisfied the requirements of Section 415 for all Limitation Years
beginning before 1987.
1.17 Defined Contribution Dollar Limitation Thirty thousand dollars
($30,000) or if greater, one-fourth of the defined benefit dollar limitation set
forth in Code Section 415(b)(1) as in effect for the Limitation Year.
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1.18 Defined Contribution Plan A Plan under which INDIVIDUAL ACCOUNTS ARE
maintained for each Participant to which all contributions, forfeitures,
investment income and gains or losses, and expenses are credited or deducted. A
Participant's benefit under such Plan is based solely on the fair market value
of his or her account balance.
1.19 Defined Contribution (Plan) Fraction A Fraction, the numerator of which
is the sum of the Annual Additions to the Participant's account under all the
Defined Contribution Plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years (including the Annual
Additions attributable to the Participant's nondeductible Employee contributions
to all Defined Benefit Plans, whether or not terminated, maintained by the
Employer, and the Annual Additions attributable to all Welfare Benefit Funds, as
defined in paragraph 1.89 and individual medical accounts, as defined in Code
Section 415(1)(2), maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and all prior
Limitation Years of service with the Employer (regardless of whether a Defined
Contribution Plan was maintained by the Employer). The maximum aggregate amount
in the Limitation Year is the lesser of 125 percent of the dollar limitation
determined under Code Sections 415(b) and (d) in effect under Code Section
415(c)(1)(A) or 35 percent of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the first
Limitation Year beginning after 1986, in one or more Defined Contribution Plans
maintained by the Employer which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this fraction and the Defined
Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the excess of the sum of
the fractions over 1.0 times (2) the denominator of this fraction will be
permanently subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end of the
last Limitation Year beginning before 1987, and disregarding any changes in the
terms and conditions of the Plan made after May 6, 1986, but using the Section
415 limitation applicable to the first Limitation Year beginning on or after
January 1, 1987. The Annual Addition for any Limitation Year beginning before
1987, shall not be re-computed to treat all Employee Contributions as Annual
Additions.
1.20 Designated Beneficiary The individual who is designated as the beneficiary
under the Plan in accordance with Code Section 401(a)(9) and the regulations
thereunder.
1.21 Disability An illness or injury of a potentially permanent nature,
expected to last for a continuous period of not less than 12 months, certified
by a physician selected by or satisfactory to the Employer, which prevents the
Employee from engaging in any occupation for wage or profit for which the
Employee is reasonably fitted by training, education or experience.
1.22 Distribution Calendar Year A calendar year for which a minimum
distribution is required.
1.23 Early Retirement Age The age set by the Employer in the Adoption Agreement
(but not less than 55), which is the earliest age at which a Participant may
retire and receive his or her benefits under the Plan.
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1.24 Earned Income Net earnings from self-employment in the trade or business
with respect to which the Plan is established, determined without regard to
items not included in gross income and the deductions allocable to such items,
provided that personal services of the individual are a material
income-producing factor. Earned income shall be reduced by contributions made by
an Employer to a qualified plan to the extent deductible under Code Section 404.
For tax years beginning after 1989, net earnings shall be determined taking into
account the deduction for one-half of self-employment taxes allowed to the
Employer under Code Section 164(f) to the extent deductible.
1.25 Effective Date The date on which the Employer's retirement plan or
amendment to such plan becomes effective. For amendments reflecting statutory
and regulatory changes post Tax Reform Act of 1986, the Effective Date will be
the earlier of the date upon which such amendment is first administratively
applied or the first day of the Plan Year following the date of adoption of such
amendment.
1.26 Election Period The period which begins on the first day of the Plan
Year in which the Participant attains age 35 and ends on the date of the
Participant's death. If a Participant separates from service prior to the first
day of the Plan Year in which age 35 is attained, the Election Period shall
begin on the date of separation, with respect to the account balance as of the
date of separation.
1.27 Elective Deferral Employer contributions made to the Plan at the election
of the Participant, in lieu of cash Compensation. Elective Deferrals shall also
include contributions made pursuant to a Salary Savings Agreement or other
deferral mechanism, such as a cash option contribution. With respect to any
taxable year, a Participant's Elective Deferral is the sum of all Employer
contributions made on behalf of such Participant pursuant to an election to
defer under any qualified cash or deferred arrangement as described in Code
Section 401(k), any simplified employee pension cash or deferred arrangement as
described in Code Section 402(h)(1)(B), any eligible deferred compensation plan
under Code Section 457, any plan as described under Code Section 501(c)(18), and
any Employer contributions made on the behalf of a Participant for the purchase
of an annuity contract under Code Section 403(b) pursuant to a Salary Savings
Agreement. Elective Deferrals shall not include any deferrals properly
distributed as Excess Annual Additions.
1.28 Eligible Participant Any Employee who is eligible to make a Voluntary
Contribution, or an Elective Deferral (if the Employer takes such contributions
into account in the calculation of the Contribution Percentage), or to receive a
Matching Contribution (including forfeitures) or a Qualified Matching
Contribution. If a Voluntary Contribution or Elective Deferral is required as a
condition of participation in the Plan, any Employee who would be a Participant
in the Plan if such Employee made such a contribution shall be treated as an
Eligible Participant even though no Voluntary Contributions or Elective
Deferrals are made.
1.29 Employee Any person employed by the Employer (including Self-Employed
Individuals and partners), all Employees of a member of an affiliated service
group [as defined in Code Section 414(m)], Employees of a controlled group of
corporations [as defined in Code Section 414(b)], all Employees of any
incorporated or unincorporated trade or business which is under common control
[as defined in Code Section 414(c)], Leased Employees [as defined in Code
Section 414(n)] and any Employee required to be aggregated by Code Section
414(o). All such Employees shall be treated as employed by a single Employer.
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1.30 Employer The Self-Employed Individual, partnership, corporation or other
organization which adopts this Plan including any firm that succeeds the
Employer and adopts this Plan. For purposes of Article X, Limitations on
Allocations, Employer shall mean the Employer that adopts this Plan, and all
members of a controlled group of corporations [as defined in Code Section 414(b)
as modified by Code Section 415(h)], all commonly controlled trades or
businesses [as defined in Code Section 414(c) as modified by Code Section
415(h)] or affiliated service groups [as defined in Code SECTION 414(m)] of
which the adopting Employer is a part, and any other entity required to be
aggregated with the Employer pursuant to regulations under Code Section 414(o).
1.31 Entry Date The date on which an Employee commences participation in the
Plan as determined by the Employer in the Adoption Agreement.
1.32 Excess Aggregate Contributions The excess, with respect to any Plan Year,
of:
(a) The aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually made
on behalf of Highly Compensated Employees for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by the ACP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of their Contribution Percentages
beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to paragraph 1.35 and then determining Excess Contributions
pursuant to paragraph 1.34.
1.33 Excess Amount The excess of the Participant's Annual Additions for the
Limitation Year over the Maximum Permissible Amount.
1.34 Excess Contribution With respect to any Plan Year, the excess of:
(a) The aggregate amount of Employer contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such
Plan Year, over
(b) The maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs, beginning with the highest
of such percentages).
1.35 Excess Elective Deferrals Those Elective Deferrals that are includible in
a Participant's gross income under Code Section 402(g) to the extent such
Participant's Elective Deferrals for a taxable year exceed the dollar limitation
under such Code Section. Excess Elective Deferrals shall be treated as Annual
Additions under the plan, unless such amounts are distributed no later than the
first April 15th following the close of the Participant's taxable year.
1.36 Family Member Employee's Spouse, any lineal descendants and ascendants
and the Spouse of such lineal descendants and ascendants.
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1.37 First Distribution Calendar Year For distributions beginning before the
Participant's death, the First Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains the Participant's
Required Beginning Date. For distributions beginning after the Participant's
death, the First Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to paragraph 7.10.
1.38 Fund All contributions received by the Trustee/Custodian under this Plan
and Trust/Custodial Account, investments thereof and earnings and appreciation
thereon.
1.39 Hardship An immediate and heavy financial need of the Employee where
such Employee lacks other available resources.
1.40 Highest Average Compensation The average Compensation for the three
consecutive Years of Service with the Employer that produces the highest
average. A Year of Service with the Employer is the 12-consecutive month period
defined in the Adoption Agreement.
1.41 Highly Compensated Employee Any Employee who performs service for the
Employer during the determination year and who, during the immediate prior year:
(a) received Compensation from the Employer in excess of $75,000 [as
adjusted pursuant to Code Section 415(d)]; or
(b) received Compensation from the Employer in excess of S50,000 [as
adjusted pursuant to Code Section 415(d)] and was a member of the
Top-Paid Group for such year; or
(c) was an officer of the Employer and received Compensation during such
year that is greater than 50 percent of the dollar limitation in
effect under Code Section 415(b)(1)(A).
Notwithstanding (a), (b) and (c), an Employee who was not Highly Compensated
during the preceding Plan Year shall not be treated as a Highly Compensated
Employee with respect to the current Plan Year unless such Employee is a member
of the 100 Employees paid the greatest Compensation during the year for which
such determination is being made.
(d) Employees who are five percent (5%) Owners at any time during the
immediate prior year or determination year.
Highly Compensated Employee includes Highly Compensated active Employees and
Highly Compensated former Employees.
1.42 Hour Of Service
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours shall be
credited to the Employee for the computation period in which the
duties are performed; and
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(b) Each hour for which an Employee is paid, or entitled to payment, by
the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, in capacity (including
disability), layoff, jury duty, military duty or leave of absence. No
more than 501 Hours of Service shall be credited under this paragraph
for any single continuous period (whether or not such period occurs in
a single computation period). Hours under this paragraph shall be
calculated and credited pursuant to Section 2530.200b-2 of the
Department of Labor Regulations which are incorporated herein by this
reference; and
(c) Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under paragraph (a) or paragraph
(b), as the case may be, and under this paragraph (c). These hours
shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement or payment is made.
(d) Hours of Service shall be credited for employment with the Employer
and with other members of an affiliated service group [as defined in
Code Section 414(m)], a controlled group of corporations [as defined
in Code Section 414(b)], or a group of trades or businesses under
common control [as defined in Code Section 414(c)] of which the
adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to Code Section 414(o) and the
regulations thereunder. Hours of Service shall also be credited for
any individual considered an Employee for purposes of this Plan under
Code Section 414(n) or Code Section 414(o) and the regulations
thereunder.
(e) Solely for purposes of determining whether a Break in Service, as
defined in paragraph 1.10, for participation and vesting purposes has
occurred in a computation period, an individual who is absent from
work for maternity or paternity reasons shall receive credit for the
Hours of Service which would otherwise have been credited to such
individual but for such absence, or in any case in which such hours
cannot be determined, 8 Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence by reason of the pregnancy of the
individual, by reason of a birth of a child of the individual, by
reason of the placement of a child with the individual in connection
with the adoption of such child by such individual, or for purposes of
caring for such child for a period beginning immediately following
such birth or placement. The Hours of Service credited under this
paragraph shall be credited in the computation period in which the
absence begins if the crediting is necessary to prevent a break in
Service in that period, or in all other cases, in the following
computation period. No more than 501 hours will be credited under this
paragraph.
(f) Hours of Service shall be determined on the basis of the method
selected in the Adoption Agreement.
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1.43 Key Employee Any Employee or former Employee (and the beneficiaries of
such employee) who at any time during the determination period was an officer of
the Employer if such individual's annual compensation exceeds 50% of the dollar
limitation under Code Section 415(b)(1)(A) (the defined benefit maximum annual
benefit), an owner (or considered an owner under Code Section 318) of one of the
ten largest interests in the employer if such individual's compensation exceeds
100% of the dollar limitation under Code Section 415(c)(1)(A), a 5% owner of the
Employer, or a 1% owner of the Employer who has an annual compensation of more
than S150,000. For purposes of determining who is a Key Employee, annual
compensation shall mean Compensation as defined for Article X, but including
amounts deferred through a salary reduction agreement to a cash or deferred plan
under Code Section 401(k), a Simplified Employee Pension Plan under Code Section
408(k), a cafeteria plan under Code Section 125 or a tax-deferred annuity under
Code Section 403(b). The determination period is the Plan Year containing the
Determination Date and the four preceding Plan Years. The determination of who
is a Key Employee will be made in accordance with Code Section 416(i)(1) and the
regulations thereunder.
1.44 Leased Employee Any person (other than an Employee of the recipient) who,
pursuant to an agreement between the recipient and any other person ("leasing
organization"), has performed services for the recipient [or for the recipient
and related persons determined in accordance with Code Section 414(n)(6)] on a
substantially full-time basis for a period of at least one year, and such
services are of a type historically performed by Employees in the business field
of the recipient Employer.
1.45 Limitation Year The calendar year or such other 12-consecutive month
period designated by the Employer in the Adoption Agreement for purposes of
determining the maximum Annual Addition to a Participant's account. All
qualified plans maintained by the Employer must use the same Limitation Year. If
the Limitation Year is amended to a different 12-consecutive month period, the
new Limitation Year must begin on a date within the Limitation Year in which the
amendment is made.
1.46 Master Or Prototype Plan A plan, the form of which is the subject of a
favorable opinion letter from the Internal Revenue Service.
1.47 Matching Contribution An Employer contribution made to this or any other
defined contribution plan on behalf of a Participant on account of an Employee
Voluntary Contribution made by such Participant, or on account of a
Participant's Elective Deferral, under a Plan maintained by the Employer.
1.48 Maximum Permissible Amount The maximum Annual Addition that may be
contributed or allocated to a Participant's account under the plan for any
Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation, or
(b) 25% of the Participant's Compensation for the Limitation Year.
The compensation limitation referred to in (b) shall not apply to any
contribution for medical benefits [within the meaning of Code Section 401(h) or
Code Section 419A(f)(2)] which is otherwise treated as an Annual Addition under
Code Section 415(1)(1) or 419(d)(2). If a short Limitation Year is created
because of an amendment changing the Limitation Year to a different
12-consecutive month period, the Maximum Permissible Amount will not exceed the
Defined Contribution Dollar Limitation multiplied by the following fraction:
Number of months in the short Limitation Year divided by 12.
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1.49 Net Profit The current and accumulated operating earnings of the Employer
before Federal and State income taxes, excluding nonrecurring or unusual items
of income, and before contributions to this and any other qualified plan of the
Employer. Alternatively, the Employer may fix another definition in the Adoption
Agreement.
1.50 Normal Retirement Age The age, set by the Employer in the Adoption
Agreement, at which a Participant may retire and receive his or her benefits
under the Plan.
1.51 Owner-Employee A sole proprietor, or a partner owning more than 10% of
either the capital or profits interest of the partnership.
1.52 Paired Plans Two or more Plans maintained by the Sponsor designed so that
a single or any combination of Plans adopted by an Employer will meet the
anti-discrimination rules, the contribution and benefit limitations, and the
Top-Heavy provisions of the Code.
1.53 Participant Any Employee who has met the eligibility requirements and is
participating in the Plan.
1.54 Participant's Benefit The account balance as of the last Valuation Date
in the calendar year immediately preceding the Distribution Calendar Year
(valuation calendar year) increased by the amount of any contributions or
forfeitures allocated to the account balance as of the dates in the valuation
calendar year after the Valuation Date and decreased by distributions made in
the valuation calendar year after the Valuation Date. A special exception exists
for the second distribution Calendar Year. For purposes of this paragraph, if
any portion of the minimum distribution for the First Distribution Calendar Year
is made in the second Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in the
immediately preceding Distribution Calendar Year.
1.55 Permissive Aggregation Group Used for Top-Heavy testing purposes, it is the
Required Aggregation Group of plans plus any other plan or plans of the Employer
which, when considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Code Sections 401(a)(4) and 410.
1.56 Plan The Employer's retirement plan as embodied herein and in the Adoption
Agreement.
1.57 Plan Administrator The Employer.
1.58 Plan Year The 12-consecutive month period designated by the Employer in
the Adoption Agreement.
1.59 Present Value Used for Top-Heavy test and determination purposes, when
determining the Present Value of accrued benefits, with respect to any defined
benefit Plan maintained by the Employer, interest and mortality rates shall be
determined in accordance with the provisions of the respective plan. If
applicable, interest and mortality assumptions will be specified in Section 11
of the Adoption Agreement.
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1.60 Projected Annual Benefit Used to test the maximum benefit which may be
obtained from a combination of retirement plans, it is the annual retirement
benefit (adjusted to an actuarial equivalent straight life annuity if such
benefit is expressed in a form other than a straight life annuity or Qualified
Joint and Survivor Annuity) to which the Participant would be entitled under the
terms of a Defined Benefit Plan or plans, assuming:
(a) the Participant will continue employment until Normal Retirement Age
under the plan (or current age, if later), and
(b) the Participant's Compensation for the current Limitation Year and all
other relevant factors used to determine benefits under the plan will
remain constant for all future Limitation Years.
1.61 Qualified Deferred Compensation Plan Any pension, profit-sharing, stock
bonus, or other plan which meets the requirements of Code Section 401 and
includes a trust exempt from tax under Code Section 501(a) or any annuity plan
described in Code Section 403(a).
An Eligible Retirement Plan is an individual retirement account (IRA) as
described in Code Section 408(a), an individual retirement annuity (IRA) as
described in Code Section 408(b), an annuity plan as described in Code Section
403(a), or a qualified trust as described in Code Section 401(a), which accepts
Eligible Rollover Distributions. However in the case of an Eligible Rollover
Distribution to a Surviving Spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
1.62 Qualified Domestic Relations Order A QDRO is a signed Domestic
Relations Order issued by a State Court which creates, recognizes or assigns to
an alternate payee(s) the right to receive all or part of a Participant's Plan
benefit and which meets the requirements of Code Section 414(p). An alternate
payee is a Spouse, former Spouse, child, or other dependent who is treated as a
beneficiary under the Plan as a result of the QDRO.
1.63 Qualified Early Retirement Age For purposes of paragraph 8.9, Qualified
Early Retirement Age is the latest of:
(a) the earliest date, under the Plan, on which the Participant may elect
to receive retirement benefits, or
(b) the first day of the 120th month beginning before the Participant
reaches Normal Retirement Age, or
(c) the date the Participant begins participation.
1.64 Qualified Joint And Survivor Annuity An immediate annuity for the life of
the Participant with a survivor annuity for the life of the Participant's Spouse
which is at least one-half of but not more than the amount of the annuity
payable during the joint lives of the Participant and the Participant's Spouse.
The exact amount of the Survivor Annuity is to be specified by the Employer in
the Adoption Agreement. If not designated by the Employer, the Survivor Annuity
will be 1/2 of the amount paid to the Participant during his or her lifetime.
The Qualified Joint and Survivor Annuity will be the amount of benefit which can
be provided by the Participant's Vested Account Balance.
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1.65 Qualified Matching Contribution Matching Contributions which when made are
subject to the distribution and nonforfeitability requirements under Code
Section 401(k).
1.66 Qualified Non-Elective Contributions Contributions (other than Matching
Contributions or Qualified Matching Contributions) made by the Employer and
allocated to Participants' accounts that the Participants may not elect to
receive in cash until distributed from the Plan; that are nonforfeitable when
made; and that are distributable only in accordance with the distribution
provisions that are applicable to Elective Deferrals and Qualified Matching
Contributions.
1.67 Qualified Voluntary Contribution A tax-deductible voluntary Employee
contribution. These contributions may no longer be made to the Plan.
1.68 Required Aggregation Group Used for Top-Heavy testing purposes, it consists
of:
(a) each qualified plan of the Employer in which at least one Key Employee
participates or participated at any time during the determination
period (regardless of whether the plan has terminated), and
(b) any other qualified plan of the Employer which enables a plan
described in (a) to meet the requirements of Code Sections 401(a)(4)
or 410.
1.69 Required Beginning Date The date on which a Participant is required to
take his or her first minimum distribution under the Plan. The rules are set
forth at paragraph 7.5.
1.70 Rollover Contribution A contribution made by a Participant of an amount
distributed to such Participant from another Qualified Deferred Compensation
Plan in accordance with Code Sections 402(a)(5), (6), and (7).
An Eligible Rollover Distribution is any distribution of all or any portion of
the balance to the credit of the Participant except that an Eligible Rollover
Distribution does not include:
(a) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the Participant or the joint lives (or
joint life expectancies) of the Participant and the Participant's
Designated Beneficiary, or for a specified period of ten years or
more;
(b) any distribution to the extent such distribution is required under
Code Section 401(a)(9); and
(c) the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
A Direct Rollover is a payment by the plan to the Eligible Retirement Plan
specified by the Participant.
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1.71 Salary Savings Agreement An agreement between the Employer and a
participating Employee where the Employee authorizes the Employer to withhold a
specified percentage of his or her Compensation for deposit to the Plan on
behalf of such Employee.
1.72 Self-Employed Individual An individual who has Earned Income for the
taxable year from the trade or business for which the Plan is established
including an individual who would have had Earned Income but for the fact that
the trade or business had no Net Profit for the taxable year.
1.73 Service The period of current or prior employment with the Employer. If
the Employer maintains a plan of a predecessor employer, Service for such
predecessor shall be treated as Service for the Employer.
1.74 Shareholder Employee An Employee or Officer who owns [or is considered as
owning within the meaning of Code Section 31 8(a)(1)], on any day during the
taxable year of an electing small business corporation (S Corporation), more
than 5% of such corporation's outstanding stock.
1.75 Simplified Employee Pension Plan An individual retirement account which
meets the requirements of Code Section 408(k), and to which the Employer makes
contributions pursuant to a written formula. These plans are considered for
contribution limitation and Top-Heavy testing purposes.
1.76 Sponsor Bank Of Nashville, or any successor(s) or assign(s).
1.77 Spouse (Surviving Spouse) The Spouse or Surviving Spouse of the
Participant, provided that a former Spouse will be treated as the Spouse or
Surviving Spouse and a current Spouse will not be treated as the Spouse or
Surviving Spouse to the extent provided under a Qualified Domestic Relations
Order as described in Code Section 414(p).
1.78 Super Top-Heavy Plan A Plan described at paragraph 1.81 under which the
Top-Heavy Ratio [as defined at paragraph 1.82] exceeds 90%.
1.79 Taxable Wage Base For plans with an allocation formula which takes into
account the Employer's contribution under the Federal Insurance Contributions
Act (FICA), the maximum amount of earnings which may be considered wages for
such Plan Year under the Social Security Act [Code Section 3121(a)(1)], or the
amount elected by the Employer in the Adoption Agreement.
1.80 Top-Heavy Determination Date For any Plan Year subsequent to the first
Plan Year, the last day of the preceding Plan Year. For the first Plan Year of
the Plan, the last day of that year.
1.81 Top-Heavy Plan For any Plan Year beginning after 1983, the Employer's Plan
is top-heavy if any of the following conditions exist:
(a) If the Top-Heavy Ratio for the Employer's Plan exceeds 60% and this
Plan is not part of any required Aggregation Group or Permissive
Aggregation Group of Plans.
(b) If the Employer's plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the group of plans exceeds 60%.
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(c) If the Employer's plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top Heavy
Ratio for the Permissive Aggregation Group exceeds 60%.
1.82 Top-Heavy Ratio
(a) If the Employer maintains one or more Defined Contribution plans
(including any Simplified Employee Pension Plan) and the Employer has
not maintained any Defined Benefit Plan which during the 5-year period
ending on the Determination Date(s) has or has had accrued benefits,
the Top-Heavy Ratio for this Plan alone, or for the Required or
Permissive Aggregation Group as appropriate, is a fraction,
(1) the numerator of which is the sum of the account balances of all
Key Employees as of the Determination Date(s) [including any
part of any account balance distributed in the 5-year period
ending on the Determination Date(s)], and
(2) the denominator of which is the sum of all account balances
[including any part of any account balance distributed in the
5-year period ending on the Determination Date(s)], both computed
in accordance with Code Section 416 and the regulations
thereunder.
Both the numerator and denominator of the Top-Heavy Ratio are
increased to reflect any contribution not actually made as of the
Determination Date, but which is required to be taken into account on
that date under Code Section 416 and the regulations thereunder.
(b) If the Employer maintains one or more Defined Contribution Plans
(including any Simplified Employee Pension Plan) and the Employer
maintains or has maintained one or more Defined Benefit Plans which
during the 5-year period ending on the Determination Date(s) has or
has. had any accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of account balances under the aggregated
Defined Contribution Plan or Plans for all Key Employees, determined
in accordance with (a) above, and the Present Value of accrued
benefits under the aggregated Defined Benefit Plan or Plans for all
Key Employees as of the Determination Date(s), and the denominator of
which is the sum of the account balances under the aggregated Defined
Contribution Plan or Plans for all Participants, determined in
accordance with (a) above, and the Present Value of accrued benefits
under the Defined Benefit Plan or Plans for all Participants as of
the Determination Date(s), all determined in accordance with Code
Section 416 and the regulations thereunder. The accrued benefits under
a Defined Benefit Plan in both the numerator and denominator of the
Top-Heavy Ratio are increased for any distribution of an accrued
benefit made in the 5-year period ending on the Determination Date.
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(c) For purposes of (a) and (b) above, the value of account balances
and the Present Value of accrued benefits will be determined as
of the most recent Valuation Date that falls within or ends with
the 12-month period ending on the Determination Date, except as
provided in Code Section 416 and the regulations thereunder for
the first and second plan years of a Defined Benefit Plan. The
account balances and accrued benefits of a participant (1) who is
not a Key Employee but who was a Key Employee in a prior year, or
(2) who has not been credited with at least one hour of service
with any Employer maintaining the Plan at any time during the
5-year period ending on the Determination Date, will be
disregarded. The calculation of the Top-Heavy Ratio, and the
extent to which distributions, rollovers, and transfers are taken
into account will be made in accordance with Code Section 416 and
the regulations thereunder. Qualified Voluntary Employee
Contributions will not be taken into account for purposes of
computing the Top-Heavy Ratio. When aggregating plans the value
of account balances and accrued benefits will be calculated with
reference to the Determination Dates that fall within the same
calendar year. The accrued benefit of a Participant other than a
Key Employee shall be determined under (1) the method, if any,
that uniformly applies for accrual purposes under all Defined
Benefit Plans maintained by the Employer, or (2) if there is no
such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of Code
Section 411(b)(1)(C).
1.83 Top-Paid Group The group consisting of the top 20% of Employees when
ranked on the basis of Compensation paid during such year. For purposes of
determining the number of Employees in the group (but not who is in it), the
following Employees shall be excluded:
(a) Employees who have not completed 6 months of Service.
(b) Employees who normally work less than 17-1/2 hours per week.
(c) Employees who normally do not world more than 6 months during any
year.
(d) Employees who have not attained age 21.
(e) Employees included in a collective bargaining unit, covered by an
agreement between employee representatives and the Employer,
where retirement benefits were the subject of good faith
bargaining and provided that 90% or more of the Employer's
Employees are covered by the agreement.
(f) Employees who are nonresident aliens and who receive no earned
income which constitutes income from sources within the United
States.
1.84 Transfer Contribution A non-taxable transfer of a Participant's benefit
directly from a Qualified Deferred Compensation Plan to this Plan.
1.85 Trustee The Sponsor of this Prototype Plan shall serve as Trustee.
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1.86 Valuation Date The last day of the Plan Year or such other date as agreed
to by the Employer and the Trustee/Custodian on which Participant accounts are
revalued in accordance with Article V hereof. For Top-Heavy purposes, the date
selected by the Employer as of which the Top-Heavy Ratio is calculated.
1.87 Vested Account Balance The aggregate value of the Participant's Vested
Account Balances derived from Employer and Employee contributions (including
Rollovers), whether vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life. The provisions of
Article VIII shall apply to a Participant who is vested in amounts attributable
to Employer contributions, Employee contributions (or both) at the time of death
or distribution.
1.88 Voluntary Contribution An Employee contribution made to the Plan by or on
behalf of a Participant that is included in the Participant's gross income in
the year in which made and that is maintained under a separate account to which
earnings and losses are allocated.
1.89 Welfare Benefit Fund Any fund that is part of a plan of the Employer, or
has the effect of a plan, through which the Employer provides welfare benefits
to Employees or their beneficiaries. For these purposes, Welfare Benefits means
any benefit other than those with respect to which Code Section 83(h) (relating
to transfers of property in connection with the performance of services), Code
Section 404 (relating to deductions for contributions to an Employee's trust or
annuity and Compensation under a deferred payment plan), Code Section 404A
(relating to certain foreign deferred compensation plans) apply. A "Fund" is any
social club, voluntary employee benefit association, supplemental unemployment
benefit trust or qualified group legal service organization described in Code
Section 501(c)(7), (9), (17) or (20); any trust, corporation, or other
organization not exempt from income tax, or to the extent provided in
regulations, any account held for an Employer by any person.
1.90 Year Of Service A 12-consecutive month period during which an Employee is
credited with not less than 1,000 (or such lesser number as specified by the
Employer in the Adoption Agreement) Hours of Service.
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ARTICLE II
ELIGIBILITY REQUIREMENTS
2.1 PARTICIPATION Employees who meet the eligibility requirements in the
Adoption Agreement on the Effective Date of the Plan shall become Participants
as of the Effective Date of the Plan. If so elected in the Adoption Agreement,
all Employees employed on the Effective Date of the Plan may participate, even
if they have not satisfied the Plan's specified eligibility requirements. Other
Employees shall become Participants on the Entry Date coinciding with or
immediately following the date on which they meet the eligibility requirements.
The Employee must satisfy the eligibility requirements specified in the Adoption
Agreement and be employed on the Entry Date to become a Participant in the Plan.
In the event an Employee who is not a member of the eligible class of Employees
becomes a member of the eligible class, such Employee shall participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have previously become a Participant had he or she been
in the eligible class. A former Participant shall again become a Participant
upon returning to the employ of the Employer at the next Entry Date or if
earlier, the next Valuation Date. For this purpose, Participant's Compensation
and Service shall be considered from date of rehire.
2.2 CHANGE IN CLASSIFICATION OF EMPLOYMENT In the event a Participant becomes
ineligible to participate because he or she is no longer a member of an eligible
class of Employees, such Employee shall participate upon his or her return to an
eligible class of Employees.
2.3 COMPUTATION PERIOD To determine Years of Service and Breaks in Service for
purposes of eligibility, the 12-consecutive month period shall commence on the
date on which an Employee first performs an Hour of Service for the Employer and
each anniversary thereof, such that the succeeding 12-consecutive month period
commences with the employee's first anniversary of employment and so on. If,
however, the period so specified is one year or less, the succeeding
12-consecutive month period shall commence on the first day of the Plan Year
prior to the anniversary of the date they first performed an Hour of Service
regardless of whether the Employee is entitled to be credited with 1,000 (or
such lesser number as specified by the Employer in the Adoption Agreement) Hours
of Service during their first employment year.
2.4 EMPLOYMENT RIGHTS Participation in the Plan shall not confer upon a
Participant any employment rights, nor shall it interfere with the Employer's
right to terminate the employment of any Employee at any time.
2.5 SERVICE WITH CONTROLLED GROUPS All Years of Service with other members of a
controlled group of corporations [as defined in Code Section 414(b)], trades or
businesses under common control [as defined in Code Section 414(c)], or members
of an affiliated service group [as defined in Code Section 414(m)] shall be
credited for purposes of determining an Employee's eligibility to participate.
2.6 OWNER-EMPLOYEES If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and the Plan
established for other trades or businesses must, when looked at as a single
Plan, satisfy Code Sections 401(a) and (d) for the Employees of this and all
other trades or businesses.
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If the Plan provides contributions or benefits for one or more Owner-Employees
who control one or more other trades or businesses, the Employees of the other
trades or businesses must be included in a Plan which satisfies Code Sections
40l(a) and (d) and which provides contributions and benefits not less favorable
than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or more
trades or businesses which are not controlled, and the individual controls a
trade or business, then the contributions or benefits of the Employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him or her under the most favorable plan of the trade or
business which is not controlled.
For purposes of the preceding sentences, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees together:
(a) own the entire interest in an unincorporated trade or business, or
(b) in the case of a partnership, own more than 50% of either the capital
interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control within the meaning
of the preceding sentence.
2.7 LEASED EMPLOYEES Any Leased Employee shall be treated as an Employee of the
recipient Employer; however, contributions or benefits provided by the leasing
organization which are attributable to services performed for the recipient
Employer shall be treated as provided by the recipient Employer. A Leased
Employee shall not be considered an Employee of the recipient if such Employee
is covered by a money purchase pension plan providing:
(a) a non-integrated Employer contribution rate of at least 10% of
Compensation, [as defined in Code Section 415(c)(3) but including
amounts contributed by the Employer pursuant to a salary reduction
agreement, which are excludable from the Employee's gross income under
a cafeteria plan covered by Code Section 125, a cash or Deferred
profit-sharing plan under Section 401(k) of the Code, a Simplified
Employee Pension Plan under Code Section 402(h)(1)(B ) and a
tax-sheltered annuity under Code Section 403(b)],
(b) immediate participation, and
(c) full and immediate vesting.
This exclusion is only available if Leased Employees do not constitute more than
twenty percent (20%) of the recipient's non-highly compensated work force.
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2.8 THRIFT PLANS If the Employer makes an election in the Adoption Agreement to
require Voluntary Contributions to participate in this Plan, the Employer shall
notify each eligible Employee in writing of his or her eligibility for
participation at least 30 days prior to the appropriate Entry Date. The Employee
shall indicate his or her intention to join the Plan by authorizing the Employer
to withhold a percentage of his or her Compensation as provided in the Plan.
Such authorization shall be returned to the Employer at least 10 days prior to
the Employee's Entry Date. The Employee may decline participation by so
indicating on the enrollment form or by failure to return the enrollment form to
the Employer prior to the Employee's Entry Date. If the Employee declines to
participate, such Employee shall be given the opportunity to join the Plan on
the next Entry Date. The taking of a Hardship Withdrawal under the provisions of
paragraph 6.9 will impact the Participant's ability to make these contributions.
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ARTICLE III
EMPLOYER CONTRIBUTIONS
3.1 AMOUNT The Employer intends to make periodic contributions to the Plan
in accordance with the formula or formulas selected in the Adoption Agreement.
However, the Employer's contribution for any Plan Year shall be subject to the
limitations on allocations contained in Article X.
3.2 EXPENSES AND FEES The Employer shall also be authorized to reimburse the
Fund for all expenses and fees incurred in the administration of the Plan or
Trust/Custodial Account and paid out of the assets of the Fund. Such expenses
shall include, but shall not be limited to, fees for professional services,
printing and postage. Brokerage commissions may not be reimbursed.
3.3 RESPONSIBILITY For Contributions Neither the Trustee/Custodian nor the
Sponsor shall be required to determine if the Employer has made a contribution
or if the amount contributed is in accordance with the Adoption Agreement or the
Code. The Employer shall have sole responsibility in this regard. The
Trustee/Custodian shall be accountable solely for contributions actually
received by it, within the limits of Article XI.
3.4 RETURN OF CONTRIBUTIONS Contributions made to the Fund by the Employer
shall be irrevocable except as provided below:
(a) Any contribution forwarded to the Trustee/Custodian because of a
mistake of fact, provided that the contribution is returned to the
Employer within one year of the contribution.
(b) In the event that the Commissioner of Internal Revenue determines that
the Plan is not initially qualified under the Internal Revenue Code,
any contribution made incident to that initial qualification by the
Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan is
adopted, or such later date as the Secretary of the Treasury may
prescribe.
(c) Contributions forwarded to the Trustee/Custodian are presumed to be
deductible and are conditioned on their deductibility. Contributions
which are determined to not be deductible will be returned to the
Employer.
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ARTICLE IV
EMPLOYEE CONTRIBUTIONS
4.1 VOLUNTARY CONTRIBUTIONS An Employee may make Voluntary Contributions to the
Plan established hereunder if so authorized by the Employer in a uniform and
nondiscriminatory manner. Such contributions are subject to the limitations on
Annual Additions and are subject to antidiscrimination testing.
4.2 QUALIFIED VOLUNTARY CONTRIBUTIONS A Participant may no longer make
Qualified Voluntary Contributions to the Plan. Amounts already contributed may
remain in the Trust Fund/Custodial Account until distributed to the Participant.
Such amounts will be maintained in a separate account which will be
nonforfeitable at all times. The account will share in the gains and losses of
the Trust in the same manner as described at paragraph 5.4 of the Plan. No part
of the Qualified Voluntary Contribution account will be used to purchase life
insurance. Subject to Article VIII, Joint and Survivor Annuity Requirements (if
applicable), the Participant may withdraw any part of the Qualified Voluntary
Contribution account by making a written application to the Plan Administrator.
4.3 ROLLOVER CONTRIBUTION Unless provided otherwise in the Adoption Agreement,
a Participant may make a Rollover Contribution to any Defined Contribution Plan
established hereunder of all or any part of an amount distributed or
distributable to him or her from a Qualified Deferred Compensation Plan
provided:
(a) the amount distributed to the Participant is deposited to the Plan no
later than the sixtieth day after such distribution was received by
the Participant,
(b) the amount distributed is not one of a series of substantially equal
periodic payments made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the
Participant and the Participant's Designated Beneficiary, or for a
specified period of ten years or more;
(c) the amount distributed is not required under Code Section 401(a)(9);
(d) if the amount distributed included property such property is rolled
over, or if sold the proceeds of such property may be rolled over,
(e) the amount distributed is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
In addition, if the Adoption Agreement allows Rollover Contributions, the Plan
will also accept any Eligible Rollover Distribution (as defined at paragraph
1.70) directly to the Plan.
Rollover Contributions, which relate to distributions prior to January 1, 1993,
must be made in accordance with paragraphs (a) through (e) and additionally meet
the requirements of paragraph (f):
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(f) The distribution from the Qualified Deferred Compensation Plan
constituted the Participant's entire interest in such Plan and was
distributed within one taxable year to the Participant:
(1) on account of separation from Service, a Plan termination, or in
the case of a profit-sharing or stock bonus plan, a complete
discontinuance of contributions under such plan within the
meaning of Code Section 402(a)(6)(A), or
(2) in one or more distributions which constitute a qualified lump
sum distribution within the meaning of Code Section 402(e)(44(A),
determined without reference to subparagraphs (B) and (H).
Such Rollover Contribution may also be made through an individual
retirement account qualified under Code Section 408 where the IRA was used
as a conduit from the Qualified Deferred Compensation Plan, the Rollover
Contribution is made in accordance with the rules provided under paragraphs
(a) through (e) and the Rollover Contribution does not include any regular
IRA contributions, or earnings thereon, which the Participant may have made
to the IRA. Rollover Contributions, which relate to distributions prior to
January 1, 1993, may be made through an IRA in accordance with paragraphs
(a) through (f) and additional requirements. as provided in the previous
sentence. The Trustee/Custodian shall not be held responsible for
determining the tax-free status of any Rollover Contribution made under
this Plan.
4.4 Transfer Contribution Unless provided otherwise in the Adoption
Agreement a Participant may, subject to the provisions of paragraph 4.5,
also arrange for the direct transfer of his or her benefit from a Qualified
Deferred Compensation Plan to this Plan. For accounting and record keeping
purposes, Transfer Contributions shall be treated in the same manner as Rollover
Contributions.
In the event the Employer accepts a Transfer Contribution from a Plan in which
the Employee was directing the investments of his or her account, the Employer
may continue to permit the Employee to direct his or her investments in
accordance with paragraph 13.7 with respect only to such Transfer Contribution.
Notwithstanding the above, the Employer may refuse to accept such Transfer
Contributions.
4.5 Employer Approval Of Transfer Contributions The Employer maintaining a
Safe-Harbor Profit-Sharing Plan in accordance with the provisions of paragraph
8.7, acting in a nondiscriminatory manner, may in its sole discretion refuse to
allow Transfer Contributions to its profit-sharing plan, if such contributions
are directly or indirectly being transferred from a defined benefit plan, a
money purchase pension plan (including a target benefit plan), a stock bonus
plan, or another profit-sharing plan which would otherwise provide for a life
annuity form of payment to the Participant.
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4.6 ELECTIVE DEFERRALS A Participant may enter into a Salary Savings Agreement
with the Employer authorizing the Employer to withhold a portion of such
Participant's Compensation not to exceed $7,000 per calendar year as adjusted
under Code Section 415(d) or, if lesser, the percentage of Compensation
specified in the Adoption Agreement and to deposit such amount to the Plan. No
Participant shall be permitted to have Elective Deferrals made under this Plan
or any other qualified plan maintained by the Employer, during any taxable year,
in excess of the dollar limitation contained in Code Section 402(g) in effect at
the beginning of such taxable year. Thus, the $7,000 limit may be reduced if a
Participant contributes pre-tax contributions to qualified plans of this or
other Employers. Any such contribution shall be credited to the Employee's
Salary Savings Account. Unless otherwise specified in the Adoption Agreement, a
Participant may amend his or her Salary Savings Agreement to increase, decrease
or terminate the percentage upon 30 days written notice to the Employer. If a
Participant terminates his or her agreement, such Participant shall not be
permitted to put a new Salary Savings Agreement into effect until the first pay
period in the next Plan Year, unless otherwise stated in the Adoption Agreement.
The Employer may also amend or terminate said agreement on written notice to the
Participant. If a Participant has not authorized the Employer to withhold at the
maximum rate and desires to increase the total withheld for a Plan Year, such
Participant may authorize the Employer upon 30 days notice to withhold a
supplemental amount up to 100% of his or her Compensation for one or more pay
periods. In no event may the sum of the amounts withheld under the Salary
Savings Agreement plus the supplemental withholding exceed 25% of a
Participant's Compensation for a Plan Year. The Employer may also recharacterize
as after-tax Voluntary Contributions all or any portion of amounts previously
withheld under any Salary Savings Agreement within the Plan Year as provided for
at paragraph 10.9. This may be done to insure that the Plan will meet one of the
antidiscrimination tests under Code Section 401(k). Elective Deferrals shall be
deposited in the Trust within 30 days after being withheld from the
Participant's pay.
4.7 REQUIRED VOLUNTARY CONTRIBUTIONS If the Employer makes a thrift election in
the Adoption Agreement, each eligible Participant shall be required to make
Voluntary Contributions to the Plan for credit to his or her account as provided
in the Adoption Agreement. Such Voluntary Contributions shall be withheld from
the Employee's Compensation and shall be transmitted by the Employer to the
Trustee/Custodian as agreed between the Employer and Trustee/Custodian. A
Participant may discontinue participation or change his or her Voluntary
Contribution percentage by so advising the Employer at least 10 days prior to
the date on which such discontinuance or change is to be effective. If a
Participant discontinues his or her Voluntary Contributions, such Participant
may not again authorize Voluntary Contributions for a period of one year from
the date of discontinuance. A Participant may voluntarily change his or her
Voluntary Contribution percentage once during any Plan Year and may also agree
to have a reduction in his or her contribution, if required to satisfy the
requirements of the ACP test.
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4.8 DIRECT ROLLOVER OF BENEFITS Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a Participant's election under this
paragraph, for distributions made on or after January 1, 1993, a Participant may
elect, at the time and in the manner prescribed by the Plan Administrator, to
have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Participant in a Direct Rollover. Any
portion of a distribution which is not paid directly to an Eligible Retirement
Plan shall be distributed to the Participant. For purposes of this paragraph, a
Surviving Spouse or a Spouse or former Spouse who is an alternate payee under a
Qualified Domestic Relations Order as defined in Code Section 414(p), will be
permitted to elect to have any Eligible Rollover Distribution paid directly to
an individual retirement account (IRA) or an individual retirement annuity
(IRA).
The plan provisions otherwise applicable to distributions continue to apply to
Rollover and Transfer Contributions.
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ARTICLE V
PARTICIPANT ACCOUNTS
5.1 SEPARATE ACCOUNTS The Employer shall establish a separate bookkeeping
account for each Participant showing the total value of his or her interest in
the Fund. Each Participant's account shall be separated for bookkeeping purposes
into the following sub-accounts:
(a) Employer contributions.
(1) Matching Contributions.
(2) Qualified Matching Contributions.
(3) Qualified Non-Elective Contributions.
(4) Discretionary Contributions.
(5) Elective Deferrals.
(b) Voluntary Contributions (and additional amounts including required
contributions and, if applicable, either repayments of loans
previously defaulted on and treated as "deemed distributions" on which
a tax report has been issued, and amounts paid out upon a separation
from service which have been included in income and which are repaid
after being re-hired by the Employer).
(c) Qualified Voluntary Contributions (if the Plan previously accepted
these).
(d) Rollover Contributions and Transfer Contributions.
5.2 ADJUSTMENTS TO PARTICIPANT ACCOUNTS As of each Valuation Date of the Plan,
the Employer shall add to each. account:
(a) the Participant's share of the Employer's contribution and forfeitures
as determined in the Adoption Agreement,
(b) any Elective Deferrals, Voluntary, Rollover or Transfer Contributions
made by the Participant,
(c) any repayment of amounts previously paid out to a Participant upon a
separation from Service and repaid by the Participant since the last
Valuation Date, and
(d) the Participant's proportionate share of any investment earnings and
increase in the fair market value of the Fund since the last Valuation
Date, as determined at paragraph 5.4.
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The Employer shall deduct from each account:
(e) any withdrawals or payments made from the Participant's account since
the last Valuation Date, and
(f) the Participant's proportionate share of any decrease in the fair
market value of the Fund since the last Valuation Date, as determined
at paragraph 5.4.
5.3 ALLOCATING EMPLOYER CONTRIBUTIONS The Employer's contribution shall be
allocated to Participants in accordance with the allocation formula selected by
the Employer in the Adoption Agreement, and the minimum contribution and
allocation requirements for Top-Heavy Plans. Beginning with the 1990 Plan Year
and thereafter, for plans on Standardized Adoption Agreement 001, Participants
who are credited with more than 500 Hours of Service or are employed on the last
day of the Plan Year must receive a full allocation of Employer contributions.
In Nonstandardized Adoption Agreement 002, Employer contributions shall be
allocated to the accounts of Participants employed by the Employer on the last
day of the Plan Year unless indicated otherwise in the Adoption Agreement. In
the case of a non-Top-Heavy, Nonstandardized Plan, Participants must also have
completed a Year of Service unless otherwise specified in the Adoption
Agreement. For Nonstandardized Adoption Agreement 002, the Employer may only
apply the last day of the Plan Year and Year of Service requirements if the Plan
satisfies the requirements of Code Sections 401(a)(26) and 410(b) and the
regulations thereunder including the exception for 401(k) plans. If, when
applying the last day and Year of Service requirements, the Plan fails to
satisfy the aforementioned requirements, additional Participants will be
eligible to receive an allocation of Employer Contributions until the
requirements are satisfied. Participants who are credited with a Year of
Service, but not employed at Plan Year end, are the first category of additional
Participants eligible to receive an allocation. If the requirements are still
not satisfied, Participants credited with more than 500 Hours of Service and
employed at Plan Year end are the next category of Participants eligible to
receive an allocation. Finally, if necessary to satisfy the said requirements,
any Participant credited with more than 500 Hours of Service will be eligible
for an allocation of Employer Contributions. The Service requirement is not
applicable with respect to any Plan Year during which the Employer's Plan is
Top-Heavy.
5.4 ALLOCATING INVESTMENT EARNINGS AND LOSSES A Participant's share
of investment earnings and any increase or decrease in the fair market value of
the Fund shall be based on the proportionate value of all active accounts (other
than accounts with segregated investments) as of the last Valuation Date less
withdrawals since the last Valuation Date. If Employer and/or Employee
contributions are made monthly, quarterly, or on some other systematic basis,
the adjusted value of such accounts for allocation of investment income and
gains or losses shall include one-half the contributions for such period. If
Employer and/or Employee contributions are not made on a systematic basis, it is
assumed that they are made at the end of the valuation period and therefore will
not receive an allocation of investment earnings and gains or losses for such
period. Account balances not yet forfeited shall receive an allocation of
earnings and/or losses. Accounts with segregated investments shall receive only
the income or loss on such segregated investments.
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5.5 PARTICIPANT STATEMENTS Upon completing the allocations described above for
the Valuation Date coinciding with the end of the Plan Year, the Employer shall
prepare a statement for each Participant showing the additions to and
subtractions from his or her account since the last such statement and the fair
market value of his or her account as of the current Valuation Date. Employers
so choosing may prepare Participant statements for each Valuation Date.
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ARTICLE VI
RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 NORMAL RETIREMENT BENEFITS A Participant shall be entitled to receive the
balance held in his or her account from Employer contributions upon attaining
Normal Retirement Age or at such earlier dates as the provisions of this Article
VI may allow. If the Participant elects to continue working past his or her
Normal Retirement Age, he or she will continue as an active Plan Participant and
no distribution shall be made to such Participant until his or her actual
retirement date unless the employer elects otherwise in the adoption Agreement,
or a minimum distribution is required by law. Settlement shall be made in the
normal form, or if elected, in one of the optional forms of payment provided
below.
6.2 EARLY RETIREMENT BENEFITS If the Employer so provides in the Adoption
Agreement, an Early Retirement Benefit will be available to individuals who meet
the age and Service requirements. An individual who meets the Early Retirement
Age requirements and separates from Service, will become fully vested,
regardless of any vesting schedule which otherwise might apply. If a Participant
separates from Service before satisfying the age requirements, but after having
satisfied the Service requirement, the Participant will be entitled to elect an
Early Retirement benefit upon satisfaction of the age requirement.
6.3 BENEFITS ON TERMINATION OF EMPLOYMENT
(a) If a Participant terminates employment prior to Normal Retirement
Age, such Participant shall be entitled to receive the vested balance
held in his or her account payable at Normal Retirement Age in the
normal form, or if elected, in one of the optional forms of payment
provided hereunder. If applicable, the Early Retirement Benefit
provisions may be elected. Notwithstanding the preceding sentence, a
former Participant may, if allowed in the Adoption Agreement, make
application to the Employer requesting early payment of any deferred
vested and nonforfeitable benefit due.
(b) If a Participant terminates employment, and the value of that
Participant's Vested Account Balance derived from Employer and
Employee - contributions is not greater than S3,500, the Participant
may receive a lump sum distribution of the value of the entire vested
portion of such account balance and the non-vested portion will be
treated as a forfeiture. The Employer shall continue to follow their
consistent policy, as may be established, regarding immediate
cash-outs of Vested Account Balances of $3,500 or less. For purposes
of this Article, if the value of a Participant's Vested Account
Balance is zero, the Participant shall be deemed to have received a
distribution of such Vested Account Balance immediately following
termination. Likewise, if the Participant is reemployed prior to
incurring 5 consecutive 1-year Breaks in Service they will be deemed
to have immediately repaid such distribution. For Plan Years beginning
prior to 1989, a Participant's Vested Account Balance shall not
include Qualified
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Voluntary Contributions. Notwithstanding the above, if the Employer
maintains or has maintained a policy of not distributing any amounts
until the Participant's Normal Retirement Age, the Employer can
continue to uniformly apply such policy.
(c) If a Participant terminates employment with a Vested Account Balance
derived from Employer and Employee contributions in excess of $3,500,
and elects (with his or her Spouse's consent, if required) to receive
100% of the value of his or her Vested Account Balance in a lump sum,
the non-vested portion will be treated as a forfeiture. The
Participant (and his or her Spouse, if required) must consent to any,
distribution, when the Vested Account Balance described above exceeds
$3,500 or if at the time of any prior distribution it exceeded S3,500.
For purposes of this paragraph, for Plan Years beginning prior to
1989, a Participant's Vested Account Balance shall not include
Qualified Voluntary Contributions.
(d) Distribution of less than 100% of the Participant's Vested Account
Balance shall only be permitted if the Participant is fully vested
upon termination of employment.
(e) If a Participant who is not 100% vested receives or is deemed to
receive a distribution pursuant to this paragraph and resumes
employment covered under this Plan, the Participant shall have the
right to repay to the Plan the full amount of the distribution
attributable to Employer contributions on or before the earlier of the
date that the Participant incurs 5 consecutive 1-year Breaks in
Service following the date of distribution or five years after the
first date on which the Participant is subsequently reemployed. In
such event, the Participant's account shall be restored to the value
thereof at the time the distribution was made and may further be
increased by the Plan's income and investment gains and/or losses on
the undistributed amount from the date of distribution to the date of
repayment.
(f) A Participant shall also have the option, to postpone payment of his
or her Plan benefits until the first day of April following the
calendar year in which he or she attains age 70-1/2. Any balance of a
Participant's account resulting from his or her Employee contributions
not previously withdrawn, if any, may be withdrawn by the Participant
immediately following separation from Service.
(g) If a Participant ceases to be an active Employee as a result of a
Disability as defined at paragraph 1.21, such Participant shall be
able to make an application for a disability retirement benefit
payment. The Participant's account balance will be deemed "immediately
distributable" as set forth in paragraph 6.4, and will be fully vested
pursuant to paragraph 9.2.
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6.4 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS
(a) An account balance is immediately distributable if any part of the
account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains (or would have attained if not
deceased) the later of the Normal Retirement Age or age 62.
(b) If the value of a Participant's Vested Account Balance derived from
Employer and Employee Contributions exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the Participant and his or her Spouse (or
where either the Participant or the Spouse has died, the survivor)
must consent to any distribution of such account balance. The consent
of the Participant and the Spouse shall be obtained in writing within
the 90-day period ending on the annuity starting date, which is the
first day of the first period for which an amount is paid as an
annuity or any other form. The Plan Administrator shall notify the
Participant and the Participant's Spouse of the right to defer any
distribution until the Participant's account balance is no longer
immediately distributable. Such notification shall include a general
description of the material features, and an explanation of the
relative values of, the optional forms of benefit available under the
plan in a manner that would satisfy the notice requirements of Code
Section 417(a)(3), and shall be provided no less than 30 days and no
more than 90 days prior to the annuity starting date.
(c) Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a qualified Joint
and Survivor Annuity while the account balance is immediately
distributable. Furthermore, if payment in the form of a Qualified
Joint and Survivor Annuity is not required with respect to the
Participant pursuant to paragraph 8.7 of the Plan, only the
Participant need consent to the distribution of an account balance
that is immediately distributable. Neither the consent of the
Participant nor the Participant's Spouse shall be required to the
extent that a distribution is required to satisfy Code Section
401(a)(9) or Code Section 415. In addition, upon termination of this
Plan if the Plan does not offer an annuity option (purchased from a
commercial provider), the Participant's account balance may, without
the Participant's consent, be distributed to the Participant or
transferred to another Defined Contribution Plan [other than an
employee stock ownership plan as defined in Code Section 4975(e)(7)]
within the same controlled group.
(d) For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
Plan Year beginning after 1988; the Participant's Vested Account
Balance shall not include amounts attributable to Qualified Voluntary
Contributions.
6.5 NORMAL FORM OF PAYMENT The normal form of payment for a profit sharing
plan satisfying the requirements of paragraph 8.7 hereof shall be a
lump sum with no option for annuity payments. For all other plans, the
normal form of payment hereunder shall be a Qualified Joint and
Survivor Annuity as provided
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under Article VIII. A Participant whose Vested Account Balance derived
from Employer and Employee contributions exceeds S3,500, or if at the
time of any prior distribution it exceeded $3,500, shall (with the
consent of his or her Spouse) have the right to receive his or her
benefit in a lump sum or in monthly, quarterly, semiannual or annual
payments from the Fund over any period not extending beyond the life
expectancy of the Participant and his or her Beneficiary. For purposes
of this paragraph, for Plan Years prior to 1989, a Participant's
Vested Account Balance shall not include Qualified Voluntary
Contributions. The normal form of payment shall be automatic, unless
the Participant files a written request with the Employer prior to the
date on which the benefit is automatically payable, electing a lump
sum or installment payment option. No amendment to the Plan may
eliminate one of the optional distribution forms listed above.
6.6 COMMENCEMENT OF BENEFITS
(a) Unless the Participant elects otherwise, distribution of benefits will
begin no later than the 60th day after the close of the Plan Year in
which the latest of the following events occurs:
(1) the Participant attains age 65 (or normal retirement age if
earlier),
(2) the 10th anniversary of the year in which the Participant
commenced participation in the Plan, or
(3) the Participant terminates Service with the Employer.
(b) Notwithstanding the foregoing, the failure of a Participant and Spouse
(if necessary) to consent to a distribution while a benefit is
immediately distributable, within the meaning of paragraph 6.4 hereof,
shall be deemed an election to defer commencement of payment of any
benefit sufficient to satisfy this paragraph.
6.7 CLAIMS PROCEDURES Upon retirement, death, or other severance of employment,
the Participant or his or her representative may make application to the
Employer requesting payment of benefits due and the manner of payment. If no
application for benefits is made, the Employer shall automatically pay any
vested benefit due hereunder in the normal form at the time prescribed at
paragraph 6.4. If an application for benefits is made, the Employer shall
accept, reject, or modify such request and shall notify the Participant in
writing setting forth the response of the Employer and in the case of a denial
or modification the Employer shall:
(a) state the specific reason or reasons for the denial,
(b) provide specific reference to pertinent Plan provisions on which
the denial is based,
(c) provide a description of any additional material or information
necessary for the Participant or his representative to perfect
the claim and an explanation of why such material or information
is necessary, and
(d) explain the Plan's claim review procedure as contained in this
Plan.
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In the event the request is rejected or modified, the Participant or his or her
representative may within 60 days following receipt by the Participant or
representative of such rejection or modification, submit a written request for
review by the Employer of its initial decision. Within 60 days following such
request for review, the Employer shall render its final decision in writing to
the Participant or representative stating specific reasons for such decision. If
the Participant or representative is not satisfied with the Employer's final
decision, the Participant or representative can institute an action in a federal
court of competent jurisdiction; for this purpose, process would be served on
the Employer.
6.8 IN-SERVICE WITHDRAWALS An Employee may withdraw all or any part of the fair
market value of his or her Mandatory Contributions, Voluntary Contributions,
Qualified Voluntary Contributions or Rollover Contributions, upon written
request to the Employer. Transfer Contributions, which originate from a Plan
meeting the safe-harbor provisions of paragraph 8.7, may also be withdrawn by an
Employee upon written request to the Employer. Transfer Contributions not
meeting the safe-harbor provisions may only be withdrawn upon retirement, death,
Disability, termination or termination of the Plan, and will be subject to
Spousal consent requirements contained in Code Sections 411(a)(11) and 417. No
such withdrawals are permitted from a money purchase plan until the participant
reaches Normal Retirement Age. Such request shall include the Participant's
address, social security number, birthdate, and amount of the withdrawal. If at
the time a distribution of Qualified Voluntary Contributions is received the
Participant has not attained age 591/2 and is not disabled, as defined at Code
Section 22(e)(3), the Participant will be subject to a federal income tax
penalty, unless the distribution is rolled over to a qualified plan or
individual retirement plan within 60 days of the date of distribution. A
Participant may withdraw all or any part of the fair market value of his or her
pre-1987 Voluntary Contributions with or without withdrawing the earnings
attributable thereto. Post-1986 Voluntary Contributions may only be withdrawn
along with a portion of the earnings thereon. The amount of the earnings to be
withdrawn is determined by using the formula: DA[1-(V + V + E)], where DA is the
distribution amount, V is the amount of Voluntary Contributions and V + E is the
amount of Voluntary Contributions plus the earnings attributable thereto. A
Participant withdrawing his or her other contributions prior to attaining age
59-1/2, will be subject to a federal tax penalty to the extent that the
withdrawn amounts are includible in income. Unless the Employer provides
otherwise in the Adoption Agreement, any Participant in a profit-sharing plan
who is 100% fully vested in his or her Employer contributions may withdraw all
or any part of the fair market value of any of such contributions that have been
in the account at least two years, plus the investment earnings thereon, after
attaining age 59-1/2 without separation from Service Such distributions shall
not be eligible for redeposit to the Fund. A withdrawal under this paragraph
shall not prohibit such Participant from sharing in any future Employer
Contribution he or she would otherwise be eligible to share in. A request to
withdraw amounts pursuant to this paragraph must if applicable, be consented to
by the Participant's Spouse. The consent shall comply with the requirements of
paragraph 6.4 relating to immediate distributions.
Elective Deferrals, Qualified Non-elective Contributions, and Qualified Matching
Contributions, and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or Beneficiary's or Beneficiaries' election, earlier than upon
separation from Service, death, or Disability. Such amounts may also be
distributed upon:
(a) Termination of the Plan without the establishment of another Defined
Contribution Plan.
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(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets [within the meaning of Code Section
409(d)(2)] used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the disposition, but
only with respect to Employees who continue employment with the
corporation acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary [within the meaning of Code
Section 409(d)(3)] if such corporation continues to maintain this
plan, but only with respect to Employees who continue employment with
such subsidiary.
(d) The attainment of age 59-1/2.
(e) The Hardship of the Participant as described in paragraph 6.9. All
distributions that may be made pursuant to one or more of the
foregoing distributable events are subject to the Spousal and
Participant consent requirements, if applicable, contained in Code
Sections 401(a)(11) and 417.
6.9 HARDSHIP WITHDRAWAL If permitted by the Trustee/Custodian and the Employer
in the Adoption Agreement, a Participant may request a Hardship withdrawal prior
to attaining age 59-1/2. If the Participant has not attained age 59-1/2, the
Participant may be subject to a federal income tax penalty. Such request shall
be in writing to the Employer who shall have sole authority to authorize a
Hardship withdrawal, pursuant to the rules below. Hardship withdrawals may
include Elective Deferrals regardless of when contributed and any earnings
accrued and credited thereon as of the last day of the Plan Year ending before
July 1, 1989 and Employer related contributions, including but not limited to
Employer Matching Contributions, plus the investment earnings thereon to the
extent vested. Qualified Matching Contributions, Qualified Non-Elective
Contributions and Elective Deferrals reclassified as Voluntary Contributions
plus the investment earnings thereon are only available for Hardship withdrawal
prior to age 59-1/2 to the extent that they were credited to the Participant's
Account as of the last day of the Plan Year ending prior to July 1, 1989. The
Plan Administrator may limit withdrawals to Elective Deferrals and the earnings
thereon as stipulated above. Hardship withdrawals are subject to the Spousal
consent requirements contained in Code Sections 401(a)(11) and 417. Only the
following reasons are valid to obtain Hardship withdrawal:
(a) medical expenses [within the meaning of Code Section 213(d)], incurred
or necessary for the medical care of the Participant, his or her
Spouse, children and other dependents,
(b) the purchase (excluding mortgage payments) of the principal residence
for the Participant,
(c) payment of tuition and related educational expenses for the next
twelve (12) months of post-secondary education for the Participant,
his or her Spouse, children or other dependents, or
(d) the need to prevent eviction of the Employee from or a foreclosure on
the mortgage of, the Employee's principal residence.
Furthermore, authorized: the following conditions must be met in order for a
withdrawal to be authorized:
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(e) the Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by
the Employer,
(f) all plans maintained by the Employer, other than flexible benefit
plans under Code Section 125 providing for current benefits, provide
that the Employee's Elective Deferrals and Voluntary Contributions
will be suspended for twelve months after the receipt of the Hardship
distribution,
(g) the distribution is not in excess of the amount of the immediate and
heavy financial need [(a) through (d) above, including amounts
necessary to pay any federal, state or local income tax or penalties
reasonably anticipated to result from the distribution, and
(h) all plans maintained by the Employer provide that an Employee may not
make Elective Deferrals for the Employee's taxable year immediately
following the taxable year of the Hardship distribution in excess of
the applicable limit under Code Section 402(g) for such taxable year,
less the amount of such Employee's pre-tax contributions for the
taxable year of the Hardship distribution. If a distribution is made
at a time when a Participant has a nonforfeitable right to less than
100% of the account balance derived from Employer contributions and
the Participant may increase the nonforfeitable percentage in the
account: (a) A separate account will be established for the
Participant's interest in the Plan as of the time of the distribution,
and (b) At any relevant time the Participant's nonforfeitable portion
of the separate account will be equal to an amount ("X") determined by
the formula: X = P [AB + (R X D)] - (R X D) For purposes of applying
the formula: "P" is the nonforfeitable percentage at the relevant
time, "AB" is the account balance at the relevant time, "D" is the
amount of the distribution and "R" is the ratio of the account balance
at the relevant time to the account balance after distribution.
If a distribution is made at a time when a Participant has a nonforfeitable
right to less than 100% of the account balance derived from Employer
contributions and the Participant may increase the nonforfeitable percentage in
the account:
(a) A separate account will be established for the Participant's interest
in the Plan as of the time of the distribution, and
(b) At any relevant time the Participant's nonforfeitable percentage
portion of the separate account will be equal to an amount ("X")
determined by the formula:
X = P [AB + (R X D )] - (R X D)
For purposes of applying the formula: "P" is the nonforfeitable percentage at
the relevant time, "AB" is the account balance at the relevant time, "D" is the
amount of the distribution and "R" is the ratio of the account balance at the
relevant time to the account balance after distribution.
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ARTICLE VII
DISTRIBUTION REQUIREMENTS
7.1 JOINT AND SURVIVOR ANNUITY REQUIREMENTS All distributions made under the
terms of this Plan must comply with the provisions of Article VIII including, if
applicable, the safe harbor provisions thereunder.
7.2 MINIMUM DISTRIBUTION REQUIREMENTS All distributions required under this
Article shall be determined and made in accordance with the minimum distribution
requirements of Code Section 401(a)(9) and the regulations thereunder, including
the minimum distribution incidental benefit rules found at Regulations Section
1.401(a)(9)-2. The entire interest of a Participant must be distributed or begin
to be distributed no later than the Participant's Required Beginning Date. Life
expectancy and joint and last survivor life expectancy are computed by using the
expected return multiples found in Tables V and VI of Regulations Section
1.72-9.
7.3 Limits On Distribution Periods As of the First Distribution Calendar Year,
distributions if not made in a single-sum, may only be made over one of the
following periods (or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a Designated Beneficiary,
(c) a period certain not extending beyond the life expectancy of the
participant, or
(d) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
7.4 Required Distributions On Or After The Required Beginning Date
(a) If a participant's benefit is to be distributed over (1) a period not
extending beyond the life expectancy of the Participant or the joint
life and last survivor expectancy of the Participant and the
Participant's Designated Beneficiary or (2) a period not extending
beyond the life expectancy of the Designated Beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the First Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's benefit by
the Applicable Life Expectancy.
(b) For calendar years beginning before 1989, if the Participant's Spouse
is not the Designated Beneficiary, the method of distribution selected
must have assured that at least 50% of the Present Value of the amount
available for distribution was to be paid within the life expectancy
of the Participant.
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(c) For calendar years beginning after 1988, the amount to be distributed
each year, beginning with distributions for the First Distribution
Calendar Year shall not be less than the quotient obtained by dividing
the Participant's benefit by the lesser of (1) the Applicable Life
Expectancy or (2) if the Participant's Spouse is not the Designated
Beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of Regulations Section 1.401(a)(9)-2. Distributions
after the death of the Participant shall be distributed using the
Applicable Life Expectancy as the relevant divisor without regard to
Regulations Section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's First
Distribution Calendar Year must be made on or before the Participant's
Required Beginning Date. The minimum distribution for other calendar
years, including the minimum distribution for the Distribution
Calendar Year in which the Participant's Required Beginning Date
occurs, must be made on or before December 31 of that Distribution
Calendar Year.
(e) If the Participant's benefit is distributed in the form of an annuity
purchased from an insurance company, distributions thereunder shall be
made in accordance with the requirements of Code Section 401 (a)(9)
and the Regulations thereunder.
(f) For purposes of determining the amount of the required distribution
for each Distribution Calendar Year, the account balance to be used is
the account balance determined as of the last valuation preceding the
Distribution Calendar Year. This balance will be increased by the
amount of any contributions or forfeitures allocated to the account
balance after the valuation date in such preceding calendar year. Such
balance will also be decreased by distributions made after the
Valuation Date in such preceding Calendar Year.
(g) For purposes of subparagraph 7.4(f), if any portion of the minimum
distribution for the First Distribution Calendar Year is made in the
second Distribution Calendar Year on or before the Required Beginning
Date, the amount of the minimum distribution made in the second
Distribution Calendar Year shall be treated as if it had been made in
the immediately preceding Distribution Calendar Year.
7.5 Required Beginning Date
(a) General Rule. The Required Beginning Date of a Participant is the
first day of April of the calendar year following the calendar year in
which the Participant attains age 70-1/2.
(b) Transitional Rules. The Required Beginning Date of a Participant who
attains age 70-1/2 before 1988, shall be determined in accordance with
(1) or (2) below:
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(1) Non-5-percent owners. The Required Beginning Date of a
Participant who is not a 5-percent owner is the first day of
April of the calendar year following the calendar year in which
the later of retirement or attainment of age 70-1/2 occurs. In
the case of a Participant who is not a 5-percent owner who
attains age 70-1/2 during 1988 and who has not retired as of
January 1, 1989, the Required Beginning Date is April 1, 1990.
(2) 5-percent owners. The Required Beginning Date of a Participant
who is a 5-percent owner during any year beginning after 1979, is
the first day of April following the later of:
(i) the calendar year in which the Participant attains age
70-1/2, or
(ii) the earlier of the calendar year with or within which ends
the plan year in which the Participant becomes a 5-percent
owner, or the calendar year in which the Participant
retires.
(c) A Participant is treated as a 5-percent owner for purposes of this
Paragraph if such Participant is a 5-percent owner as defined in Code
Section 416(i) (determined in accordance with Code Section 416 but
without regard to whether the Plan is Top-Heavy) at any time during
the Plan Year ending with or within the calendar year in which such
Owner attains age 66-1/2 or any subsequent Plan Year.
(d) Once distributions have begun to a 5-percent owner under this
paragraph, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
7.6 TRANSITIONAL RULE
(a) Notwithstanding the other requirements of this Article and subject to
the requirements of Article VIII, Joint and Survivor Annuity
Requirements, distribution on behalf of any Employee, including a
5-percent owner, may be made in accordance with all of the following
requirements (regardless of when such distribution commences):
(1) The distribution by the Trust is one which would not have
disqualified such Trust under Code Section 401 (a)(9) as in
effect prior to amendment by the Deficit Reduction Act of 1984.
(2) The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the Trust is being
distributed or, if the Employee is deceased, by a beneficiary of
such Employee.
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(3) Such designation was in writing, was signed by the Employee or
the beneficiary, and was made before 1984.
(4) The Employee had accrued a benefit under the Plan as of December
31, 1983.
(5) The method of distribution designated by the Employee or the
beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and
in the case of any distribution upon the Employee's death, the
beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
(c) For any distribution which commences before 1984, but continues after
1983, the Employee or the beneficiary, to whom such distribution is
being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method
of distribution was specified in writing and the distribution
satisfies the requirements in subparagraphs (a)(l) and (5) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Code Section 401(a)(9) and the regulations
thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Trust must distribute by the
end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would
have been required to have been distributed to satisfy Code Section
401(a)(9) and the regulations thereunder, but for the section
242(b)(2) election of the Tax Equity and Fiscal Responsibility Act of
1982. For calendar years beginning after 1988, such distributions must
meet the minimum distribution incidental benefit requirements in
section 1.401(a)(9)-2 of the Income Tax Regulations. Any changes in
the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another
beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long
as such substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or
indirectly (for example, by altering the relevant measuring life). In
the case in which an amount is transferred or rolled over from one
plan to another plan, the rules in Q&A J-2 and Q&A J-3 of the
regulations shall apply.
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7.7 DESIGNATION OF BENEFICIARY FOR DEATH BENEFIT Each Participant shall file a
written designation of beneficiary with the Employer upon qualifying for
participation in this Plan. Such designation shall remain in force until revoked
by the Participant by filing a new beneficiary form with the Employer. The
Participant may elect to have a portion of his or her account balance invested
in an insurance contract. If an insurance contract is purchased under the Plan,
the Trustee must be named as Beneficiary under the terms of the contract.
However, the Participant shall designate a Beneficiary to receive the proceeds
of the contract after settlement is received by the Trustee. Under a
profit-sharing plan satisfying the requirements of paragraph 8.7, the Designated
Beneficiary shall be the Participant's Surviving Spouse, if any, unless such
Spouse properly consents otherwise.
7.8 NONEXISTENCE OF BENEFICIARY Any portion of the amount payable hereunder
which is not disposed of because of the Participant's or former Participant's
failure to designate a beneficiary, or because all of the Designated
Beneficiaries predeceased the Participant, shall be paid to his or her Spouse.
If the Participant had no Spouse at the time of death, payment shall be made to
the personal representative of his or her estate in a lump sum.
7.9 DISTRIBUTION BEGINNING BEFORE DEATH If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
7.10 DISTRIBUTION BEGINNING AFTER DEATH If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to the extent
that an election is made to receive distributions in accordance with (a) or (b)
below:
(a) If any portion of the Participant's interest is payable to a
Designated Beneficiary, distributions may be made over the life or
over a period certain not greater than the life expectancy of the
Designated Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which the
Participant died;
(b) If the Designated Beneficiary is the Participant's surviving Spouse,
the date distributions are required to begin in accordance with (a)
above shall not be earlier than the later of (1) December 3l of the
calendar year immediately following the calendar year in which the
participant died or (2) December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
If the Participant has not made an election pursuant to this paragraph 7.10 by
the time of his or her death, the Participants Designated Beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the participant. If the Participant has no
Designated Beneficiary, or if the Designated Beneficiary does not elect a method
of distribution, then distribution of the Participant's entire interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
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For purposes of this paragraph if the Surviving Spouse dies after the
Participant, but before payments to such Spouse begin, the provisions of this
paragraph with the exception of paragraph (b) therein, shall be applied as if
the Surviving Spouse were the Participant. For the purposes of this paragraph
and paragraph 7.9, distribution of a Participant's interest is considered to
begin on the Participant's Required Beginning Date (or, if the preceding
sentence is applicable, the date distribution is required to begin to the
Surviving Spouse). If distribution in the form of an annuity described in
paragraph 7.4(e) irrevocably commences to the Participant before the Required
Beginning Date, the date distribution is considered to begin is the date
distribution actually commences.
For purposes of paragraph 7.9 and this paragraph, if an amount is payable to
either a minor or an individual who has been declared incompetent, the benefits
shall be paid to the legally appointed guardian for the benefit of said minor or
incompetent individual, unless the court which appointed the guardian has
ordered otherwise.
7.11 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
(a) Notwithstanding any other provision of the Plan, Excess Elective
Deferrals plus any income and minus any loss allocable thereto, shall
be distributed no later than April 15, 1988, and each April 15
thereafter, to Participants to whose accounts Excess Elective
Deferrals were allocated for the preceding taxable year, and who claim
Excess Elective Deferrals for such taxable year. Excess Elective
Deferrals shall be treated as Annual Additions under the Plan, unless
such amounts are distributed no later than the first April 15th
following the close of the Participant's taxable year. A Participant
is deemed to notify the Plan Administrator of any Excess Elective
Deferrals that arise by talking into account only those Elective
Deferrals made to this Plan and any other plans of this Employer.
(b) Furthermore, a Participant who participates in another plan allowing
Elective Deferrals may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the Participant, by notifying
the Plan Administrator of the amount of the Excess Elective Deferrals
to be assigned. The Participant's claim shall be in writing; shall be
submitted to the Plan Administrator not later than March 1 of each
year; shall specify the amount of the Participant's Excess Elective
Deferrals for the preceding taxable year; and shall be accompanied by
the Participant's written statement that if such amounts are not
distributed, such Excess Elective Deferrals, when added to amounts
deferred under other plans or arrangements described in Code Sections
401(k), 408(k) [Simplified Employee Pensions], or 403(b) [annuity
programs for public schools and charitable organizations] will exceed
the $7,000 limit as adjusted under Code Section 415(d) imposed on the
Participant - by Code Section 402(g) for the year in which the
deferral occurred.
(c) Excess Elective Deferrals shall be adjusted for any income or loss up
to the end of the taxable year, during which such excess was deferred.
Income or loss will be calculated under the method used to calculate
investment earnings and losses elsewhere in the Plan.
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(d) If the Participant receives a return of his or her Elective Deferrals,
the amount of such contributions which are returned must be brought
into the Employee's taxable income.
7.12 DISTRIBUTION OF EXCESS CONTRIBUTIONS
(a) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts are
distributed more than 2-1/2 months after the last day of the Plan Year
in which such excess amounts arose, a ten (10) percent excise tax will
be imposed on the Employer maintaining the Plan with respect to such
amounts. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees. Excess
Contributions of Participants who are subject to the Family Member
aggregation rules of Code Section 414(q)(6) shall be allocated among
the Family Members in proportion to the Elective Deferrals (and
amounts treated as Elective Deferrals) of each Family Member that is
combined to determine the Average Deferral Percentage.
(b) Excess Contributions (including the amounts recharacterized) shall be
treated as Annual Additions under the Plan.
(c) Excess Contributions shall be adjusted for any income or loss up to
the end of the Plan Year. Income or loss will be calculated under the
method used to calculate investment earnings and losses elsewhere in
the Plan.
(d) Excess Contributions shall be distributed from the Participant's
Elective Deferral account and Qualified Matching Contribution account
(if applicable) in proportion to the Participant's Elective Deferrals
and Qualified Matching Contributions (to the extent used in the ADP
test) for the Plan Year. Excess Contributions shall be distributed
from the Participant's Qualified Non-Elective Contribution account
only to the extent that such Excess Contributions exceed the balance
in the Participant's Elective Deferral account and Qualified Matching
Contribution account.
7.13 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
(a) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed
no later than the last day of each Plan Year to Participants to whose
accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions shall be allocated
to Participants who are subject to the Family Member aggregation rules
of Code Section 414(q)(6) in the manner prescribed by the regulations.
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If such Excess Aggregate Contributions are distributed more than 2-1/2
months after the last day of the Plan Year in which such excess
amounts arose, a ten (10) percent excise tax will be imposed on the
Employer maintaining the Plan with respect to those amounts. Excess
Aggregate Contributions shall be treated as Annual Additions under the
plan.
(b) Excess Aggregate Contributions shall be adjusted for any income or
loss up to the end of the Plan Year. The income or loss allocable to
Excess Aggregate Contributions is the sum of income or loss for the
Plan Year allocable to the Participant's Voluntary Contribution
account, Matching Contribution account (if any, and if all amounts
therein are not used in the ADP test) and, if applicable, Qualified
Non-Elective Contribution account and Elective Deferral account.
Income or loss will be calculated under the method used to calculate
investment earnings and losses elsewhere in the Plan.
(c) Forfeitures of Excess Aggregate Contributions may either be
reallocated to the accounts of non-Highly Compensated Employees or
applied to reduce Employer contributions, as elected by the employer
in the Adoption Agreement.
(d) Excess Aggregate Contributions shall be forfeited if such amount is
not vested. If vested, such excess shall be distributed on a prorata
basis from the Participant's Voluntary Contribution account (and, if
applicable, the Participant's Qualified Non-Elective Contribution
account, Matching Contribution account, Qualified Matching
Contribution account, or Elective Deferral account, or both).
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ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 APPLICABILITY OF PROVISIONS The provisions of this Article shall apply to
any Participant who is credited with at least one Hour of Service with the
Employer on or after August 23, 1984 and such other Participants as provided in
paragraph 8.8.
8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY Unless an optional form of
benefit is selected pursuant to a Qualified Election within the 90-day period
ending on the Annuity Starting Date, a married Participant's Vested Account
Balance will be paid in the form of a Qualified Joint and Survivor Annuity and
an unmarried Participant's Vested Account Balance will be paid in the form of a
life annuity. The Participant may elect to have such annuity distributed upon
attainment of the Early Retirement Age under the Plan.
8.3 PAYMENT OF QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY Unless an optional
form of benefit has been selected within the Election Period pursuant to a
Qualified Election, if a Participant dies before benefits have commenced then
the Participant's Vested Account Balance shall be paid in the form of an annuity
for the life of the Surviving Spouse. The Surviving Spouse may elect to have
such annuity distributed within a reasonable period after the Participant's
death.
A Participant who does not meet the age 35 requirement set forth in the Election
Period as of the end of any current Plan Year may make a special qualified
election to waive the qualified Pre-retirement Survivor Annuity for the period
beginning on the date of such election and ending on the first day of the Plan
Year in which the Participant will attain age 35. Such election shall not be
valid unless the Participant receives a written explanation of the Qualified
Pre-retirement Survivor Annuity in such terms as are comparable to the
explanation required under paragraph 8.5. Qualified Pre-retirement Survivor
Annuity coverage will be automatically reinstated as of the first day of the
Plan Year in which the Participant attains age 35. Any new waiver on or after
such date shall be subject to the full requirements of this Article.
8.4 QUALIFIED ELECTION A Qualified Election is an election to either waive a
Qualified Joint and Survivor Annuity OF a qualified Pre-retirement survivor
annuity. Any such election shall not be effective unless:
(a) the Participant's Spouse consents in writing to the election;
(b) the election designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal consent);
(c) the Spouse's consent acknowledges the effect of the election; and
(d) the Spouse's consent is witnessed by a Plan representative or notary
public.
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Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity
shall not be effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the Spouse expressly
permits designations by the Participant without any further spousal consent). If
it is established to the satisfaction of the Plan Administrator that there is no
Spouse or that the Spouse cannot be located, a waiver will be deemed a Qualified
Election. Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained) shall be
effective only with respect to such Spouse. A consent that permits designations
by the Participant without any requirement of further consent by such Spouse
must acknowledge that the Spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and that the
Spouse voluntarily elects to relinquish either or both of such rights. A
revocation of a prior waiver may be made by a Participant without the consent of
the Spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this provision shall
be valid unless the Participant has received notice as provided in paragraphs
8.5 and 8.6 below.
8.5 NOTICE REQUIREMENTS FOR QUALIFIED JOINT AND SURVIVOR ANNUITY In the case of
a Qualified Joint and Survivor Annuity, the Plan Administrator shall, no less
than 30 days and no more than 90 days prior to the Annuity Starting date,
provide each Participant a written explanation of:
(a) the terms and conditions of a Qualified Joint and Survivor Annuity;
(b) the Participant's right to make and the effect of an election to waive
the Qualified Joint and Survivor Annuity form of benefit;
(c) the rights of a Participant's Spouse; and
(d) the right to make, and the effect of, a revocation of a previous
election to waive the Qualified Joint and Survivor Annuity.
8.6 NOTICE REQUIREMENTS FOR QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY In the
case of a qualified pre-retirement survivor annuity as described in paragraph
8.3, the Plan Administrator shall provide each Participant within the applicable
period for such Participant a written explanation of the qualified
pre-retirement survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements of paragraph
8.5 applicable to a Qualified Joint and Survivor Annuity. The applicable period
for a Participant is whichever of the following periods ends last:
(a) the period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35;
(b) a reasonable period ending after the individual becomes a Participant
(c) a reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from Service in the
case of a Participant who separates from Service before attaining age
35.
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For purposes of applying the preceding paragraph, a reasonable period ending
after the events described in (b) and (c) is the end of the two-year period
beginning one year prior to the date the applicable event occurs, and ending
one-year after that date. In the case of a Participant who separates from
Service before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to separation and
ending one year after separation. If such a Participant subsequently returns to
employment with the Employer, the applicable period for such Participant shall
be re-determined.
8.7 SPECIAL SAFE-HARBOR EXCEPTION FOR CERTAIN PROFIT-SHARING PLANS
(a) This paragraph shall apply to a Participant in a profit-sharing plan, and
to any distribution, made on or after the first day of the first plan year
beginning after 1988, from or under a separate account attributable solely
to Qualified Voluntary contributions, as maintained on behalf of a
Participant in a money purchase pension plan, (including a target benefit
plan) if the following conditions are satisfied:
(1) the Participant does not or cannot elect payments in the form of a
life annuity; and
(2) on the death of a Participant, the Participant's Vested Account
Balance will be paid to the Participant's Surviving Spouse, but if
there is no Surviving Spouse, or if the Surviving Spouse has consented
in a manner conforming to a Qualified Election, then to the
Participant's Designated Beneficiary.
The Surviving Spouse may elect to have distribution of the Vested
Account Balance commence within the 90-day period following the date
of the Participant's death. The account balance shall be adjusted for
gains or losses occurring after the Participant's death in accordance
with the provisions of the Plan governing the adjustment of account
balances for other types of distributions. These safe-harbor rules
shall not be operative with respect to a Participant in a
profit-sharing plan if that plan is a direct or indirect transferee of
a Defined Benefit Plan, money purchase plan, a target benefit plan,
stock bonus plan, or profit-sharing plan which is subject to the
survivor annuity requirements of Code Section 401(a)(11) and Code
Section 417, and would therefore have a Qualified Joint and Survivor
Annuity as its normal form of benefit.
(b) The Participant may waive the spousal death benefit described in this
paragraph at any time provided that no such waiver shall be effective
unless it satisfies the conditions (described in paragraph 8.4) that
would apply to the Participant's waiver of the Qualified
Pre-Retirement Survivor Annuity.
(c) If this paragraph 8.7 is operative, then all other provisions of this
Article other than paragraph 8.8 are inoperative.
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8.8 Transitional Joint And Survivor Annuity Rules Special transition rules apply
to Participants who were not receiving benefits on August 23, 1984.
(a) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous
paragraphs of this Article, must be given the opportunity to elect to
have the prior paragraphs of this Article apply if such Participant is
credited with at least one Hour of Service under this Plan or a
predecessor Plan in a Plan Year beginning on or after January 1, 1976
and such Participant had at least 10 Years of Service for vesting
purposes when he or she separated from Service.
(b) Any living Participant not receiving benefits on August 23, 1984, who
was credited with at least one Hour of Service under this Plan or a
predecessor Plan on or after September 2, 1974, and who is not
otherwise credited with any Service in a Plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his or
her benefits paid in accordance with paragraph 8.9.
(c) The respective opportunities to elect [as described in (a) and (b)
above] must be afforded to the appropriate Participants during the
period commencing on August 23, 1984 and ending on the date benefits
would otherwise commence to said Participants.
8.9 AUTOMATIC JOINT AND SURVIVOR ANNUITY AND EARLY SURVIVOR ANNUITY Any
Participant who has elected pursuant to paragraph 8.8(b) and any Participant who
does not elect under paragraph 8.8(a) or who meets the requirements of paragraph
8.8(a), except that such Participant does not have at least 10 years of vesting
Service when he or she separates from Service, shall have his or her benefits
distributed in accordance with all of the following requirements if benefits
would have been payable in the form of a life annuity.
(a) Automatic Joint and Survivor Annuity. If benefits in the form of a
life annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after Normal
Retirement Age, or
(2) dies on or after Normal Retirement Age while still working for
the Employer, or
(3) begins to receive payments on or after the Qualified Early
Retirement Age, or
(4) separates from Service on or after attaining Normal Retirement
(or the Qualified Early Retirement Age) and after satisfying the
eligibility requirements for the payment of benefits under the
Plan and thereafter dies before beginning to receive such
benefits, then such benefits will be received under this
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Plan in the form of a Qualified Joint and Survivor Annuity,
unless the Participant has elected otherwise during the Election
Period. The Election Period must begin at least 6 months before
the Participant attains Qualified Early Retirement Age and end
not more than 90 days before the commencement of benefits. Any
election will be in writing and may be changed by the Participant
at any time.
(b) Election of Early Survivor Annuity. A Participant who is employed
after attaining the Qualified Early Retirement Age will be given
the opportunity to elect, during the Election Period, to have a
survivor annuity payable on death. If the Participant elects the
survivor annuity, payments under such annuity must not be less
than the payments which would have been made to the Spouse under
the Qualified Joint and Survivor Annuity if the Participant had
retired on the day before his or her death. Any election under
this provision will be in writing and may be changed by the
Participant at any time. The Election Period begins on the later
of:
(1) the 90th day before the Participant attains the Qualified
Early Retirement Age, or
(2) the date on which participation begins, and ends on the date
the Participant terminates employment.
8.10 ANNUITY CONTRACTS Any annuity contract distributed under this Plan must be
nontransferable. The terms of any annuity contract purchased and distributed by
the Plan to a Participant or Spouse shall comply with the requirements of this
Plan.
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ARTICLE IX
VESTING
9.1 EMPLOYEE CONTRIBUTIONS A Participant shall always have a 100% vested and
nonforfeitable interest in his or her Elective Deferrals, Voluntary
Contributions, Qualified Voluntary Contributions, Rollover Contributions, and
Transfer Contributions plus the earnings thereon. No forfeiture of Employer
related contributions (including any minimum contributions made under paragraph
14.2) will occur solely as a result of an Employee's withdrawal of any Employee
contributions.
9.2 EMPLOYER CONTRIBUTIONS A Participant shall acquire a vested and
nonforfeitable interest in his or her account attributable to Employer
contributions in accordance with the table selected in the Adoption Agreement,
provided that if a Participant is not already fully vested, he or she shall
become so upon attaining Normal Retirement Age, Early Retirement Age, on death
prior to normal retirement, on retirement due to Disability, or on termination
of the Plan.
9.3 COMPUTATION PERIOD The computation period for purposes of determining Years
of Service and Breaks in Service for purposes of computing a Participant's
nonforfeitable right to his or her account balance derived from Employer
contributions shall be determined by the Employer in the Adoption Agreement. In
the event a former Participant with no vested interest in his or her Employer
contribution account requalifies for participation in the Plan after incurring a
Break in Service, such Participant shall be credited for vesting with all
pre-break and post-break Service.
9.4 REQUALIFICATION PRIOR TO FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE The
account balance of such Participant shall consist of any undistributed amount in
his or her account as of the date of re-employment plus any future contributions
added to such account plus the investment earnings on the account. The Vested
Account Balance of such Participant shall be determined by multiplying the
Participant's account balance (adjusted to include any distribution or redeposit
made under paragraph 6.3) by such Participant's vested percentage. All Service
of the Participant, both prior to and following the break, shall be counted when
computing the Participant's vested percentage.
9.5 REQUALIFICATION AFTER FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE If such
Participant is not fully vested upon re-employment, a new account shall be
established for such Participant to separate his or her deferred vested and
nonforfeitable account, if any, from the account to which new allocations will
be made. The Participant's deferred account to the extent remaining shall be
fully vested and shall continue to share in earnings and losses of the Fund.
When computing the Participant's vested portion of the new account, all
pre-break and postbreak Service shall be counted. However, notwithstanding this
provision, no such former Participant who has had five consecutive one-year
Breaks in Service shall acquire a larger vested and nonforfeitable interest in
his or her prior account balance as a result of requalification hereunder.
9.6 CALCULATING VESTED INTEREST A PARTICIPANT'S vested and nonforfeitable
interest shall be calculated by multiplying the fair market value of his or her
account attributable to Employer contributions on the Valuation Date preceding
distribution by the decimal equivalent of the vested percentage as of his or her
termination date. The amount attributable to Employer contributions for purposes
of the calculation includes amounts previously paid out pursuant to paragraph
6.3 and
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not repaid. The Participant's vested and nonforfeitable interest, once
calculated above, shall be reduced to reflect those amounts previously paid out
to the Participant and not repaid by the Participant. The Participant's vested
and nonforfeitable interest so determined shall continue to share in the
investment earnings and any increase or decrease in the fair market value of the
Fund up to the Valuation Date preceding or coinciding with payment.
9.7 FORFEITURES Any balance in the account of a Participant who has separated
from Service to which he or she is not entitled under the foregoing provisions,
shall be forfeited and applied as provided in the Adoption Agreement. A
forfeiture may only occur if the Participant has received a distribution from
the Plan or if the Participant has incurred five consecutive 1-year Breaks in
Service. Furthermore, a Highly Compensated Employee's Matching Contributions may
be forfeited, even if vested, if the contributions to which they relate are
Excess Deferrals, Excess Contributions or Excess Aggregate Contributions.
9.8 AMENDMENT OF VESTING SCHEDULE No amendment to the Plan shall have the
effect of decreasing a Participant's vested interest determined without regard
to such amendment as of the later of the date such amendment is adopted or the
date it becomes effective. Further, if the vesting schedule of the Plan is
amended, or the Plan is amended in any way that directly or indirectly affects
the computation of any Participant's nonforfeitable percentage or if the Plan is
deemed amended by an automatic change to or from a Top-Heavy vesting schedule,
each Participant with at least three Years of Service with the Employer may
elect, within a reasonable period after the adoption of the amendment, to have
his or her nonforfeitable percentage computed under the Plan without regard to
such amendment. For Participants who do not have at least one Hour of Service in
any Plan Year beginning after 1988, the preceding sentence shall be applied by
substituting "Five Years of Service" for "Three Years of Service" where such
language appears. The period during which the election may be made shall
commence with the date the amendment is adopted and shall end on the later of:
(a) 60 days after the amendment is adopted;
(b) 60 days after the amendment becomes effective; or
(c) 60 days after the Participant is issued written notice of the
amendment by the Employer or the Trustee/Custodian. If the
Trustee/Custodian is asked to so notify, the Fund will be charged for
the costs thereof.
No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. Notwithstanding the
preceding sentence, a Participant's account balance may be reduced to the extent
permitted under section 412(c)(8) of the Code (relating to financial hardships).
For purposes of this paragraph, a Plan amendment which has the effect of
decreasing a Participant's account balance or eliminating an optional form of
benefit, with respect to benefits attributable to service before the amendment,
shall be treated as reducing an accrued benefit.
9.9 SERVICE WITH CONTROLLED GROUPS ALL YEARS OF SERVICE with other members of a
controlled group of corporations [as defined in Code Section 414(b)], trades or
businesses under common control [as defined in Code Section 414(c)], or members
of an affiliated service group [as defined in Code Section 414(m)] shall be
considered for purposes of determining a Participant's nonforfeitable
percentage.
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ARTICLE X
LIMITATIONS ON ALLOCATIONS
AND ANTIDISCRIMIINATION TESTING
10.1 PARTICIPATION IN THIS PLAN Only If the Participant does not participate in
and has never participated in another qualified plan, a Welfare Benefit Fund (as
defined in paragraph 1.89) or an individual medical account, as defined in Code
Section 415(1)(2), maintained by the adopting Employer, which provides an Annual
Addition as defined in paragraph 1.4, the amount of Annual Additions which may
be credited to the Participant's account for any Limitation Year will not exceed
the lesser of the Maximum Permissible Amount or any other limitation contained
in this Plan. If the Employer contribution that would otherwise be contributed
or allocated to the Participant's account would cause the Annual Additions for
the Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for the
Limitation Year will equal the Maximum Permissible Amount. Prior to determining
the Participant's actual Compensation for the Limitation Year, the Employer may
determine the Maximum Permissible Amount for a Participant on the basis of a
reasonable estimate of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated. As soon as is
administratively feasible after the end of the Limitation Year, the Maximum
Permissible Amount for the Limitation Year will be determined on the basis of
the Participant's actual Compensation for the Limitation Year.
10.2 DISPOSITION OF EXCESS ANNUAL ADDITIONS If, pursuant to paragraph 10.1 or
as a result of the allocation of forfeitures, there is an Excess Amount, the
excess will be disposed of under one of the following methods as determined in
the Adoption Agreement. If no election is made in the Adoption Agreement then
method "(a)" below shall apply.
(a) Suspense Account Method
(1) Any nondeductible Employee Voluntary, Required Voluntary
Contributions and unmatched Elective Deferrals to the extent they
would reduce the Excess Amount will be returned to the
Participant. To the extent necessary to reduce the Excess Amount,
non-Highly Compensated Employees will have all Elective Deferrals
returned whether or not there was a corresponding match.
(2) If after the application of paragraph (1) an Excess Amount still
exists, and the Participant is covered by the Plan at the end of
the Limitation Year, the Excess Amount in the Participant's
account will be used to reduce Employer contributions (including
any allocation of forfeitures) for such Participant in the next
Limitation Year, and each succeeding Limitation Year if
necessary.
(3) If after the application of paragraph (1) an Excess Amount still
exists, and the Participant is not covered by the Plan at the end
of the Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be
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<PAGE> 92
applied to reduce future Employer contributions (including
allocation of any forfeitures) for all remaining Participants in
the next Limitation Year, and each succeeding Limitation Year if
necessary.
(4) If a suspense account is in existence at any time during the
Limitation Year pursuant to this paragraph, it will not
participate in the allocation of investment gains and losses. If
a suspense account is in existence at any time during a
particular Limitation Year, all amounts in the suspense account
must be allocated and reallocated to Participants' accounts
before any Employer contributions or any Employee Contributions
may be made to the Plan for that Limitation Year. Excess amounts
may not be distributed to Participants or former Participants.
(b) Spillover Method
(1) Any nondeductible Employee Voluntary, Required Voluntary
Contributions and unmatched Elective Deferrals to the extent they
would reduce the Excess Amount will be returned to the
Participant. To the extent necessary to reduce the Excess Amount,
non-Highly Compensated Employees will have all Elective Deferrals
returned whether or not there was a corresponding match.
(2) Any Excess Amount which would be allocated to the account of an
individual Participant under the Plan's allocation formula will
be reallocated to other Participants in the same manner as other
Employer contributions. No such reallocation shall be made to the
extent that it will result in an Excess Amount being created in
such Participant's own account.
(3) To the extent that amounts cannot be reallocated under (1)
above, the suspense account provisions of (a) above will apply.
10.3 PARTICIPATION IN THIS PLAN AND ANOTHER MASTER AND PROTOTYPE DEFINED
CONTRIBUTION PLAN, WELFARE BENEFIT FUND OR INDIVIDUAL MEDICAL ACCOUNT MAINTAINED
BY THE EMPLOYER The Annual Additions which may be credited to a Participant's
account under this Plan for any Limitation Year will not exceed the Maximum
Permissible Amount reduced by the Annual Additions credited to a Participant's
account under the other Master or Prototype Defined Contribution Plans, Welfare
Benefit Funds, and individual medical accounts as defined in Code Section
415(1)(2), maintained by the Employer, which provide an Annual Addition as
defined in paragraph 1.4 for the same Limitation Year. If the Annual Additions,
with respect to the Participant under other Defined Contribution Plans and
Welfare Benefit Funds maintained by the Employer, are less than the Maximum
Permissible Amount and the Employer contribution that would otherwise be
contributed or allocated to the Participant's account under this Plan would
cause the Annual Additions for the Limitation Year to exceed this limitation,
the amount contributed or allocated will be reduced so that the Annual Additions
under all such plans and funds for the Limitation Year will equal the Maximum
Permissible Amount. If the Annual
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<PAGE> 93
Additions with respect to the Participant under such other Defined Contribution
Plans and Welfare Benefit Funds in the aggregate are equal to or greater than
the Maximum Permissible Amount, no amount will be contributed or allocated to
the Participant's account under this Plan for the Limitation Year. Prior to
determining the Participant's actual Compensation for the Limitation Year, the
Employer may determine the Maximum Permissible Amount for a Participant in the
manner described in paragraph 10.1. As soon as administratively feasible after
the end of the Limitation Year, the Maximum Permissible Amount for the
Limitation Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
10.4 DISPOSITION OF EXCESS ANNUAL ADDITIONS UNDER TWO PLANS If, pursuant to
paragraph 10.3 or as a result of forfeitures, a Participant's Annual Additions
under this Plan and such other plans would result in an Excess Amount for a
Limitation Year, the Excess Amount will be deemed to consist of the Annual
Additions last allocated except that Annual Additions attributable to a Welfare
Benefit Fund or Individual Medical Account as defined in Code Section 415(1)(2)
will be deemed to have been allocated first regardless of the actual allocation
date. If an Excess Amount was allocated to a Participant on an allocation date
of this Plan which coincides with an allocation date of another plan, the Excess
Amount attributed to this Plan will be the product of:
(a) the total Excess Amount allocated as of such date, times
(b) the ratio of:
(1) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under the Plan, to
(2) the total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other
qualified Master or Prototype Defined Contribution Plans.
Any Excess Amount attributed to this Plan will be disposed of in
the manner described in paragraph 10.2.
10.5 PARTICIPATION IN THIS PLAN AND ANOTHER DEFINED CONTRIBUTION PLAN WHICH IS
NOT A MASTER OR PROTOTYPE PLAN If the Participant is covered under another
qualified Defined Contribution Plan maintained by the Employer which is not a
Master or Prototype Plan, Annual Additions which may be credited to the
Participant's account under this Plan for any Limitation Year will be limited in
accordance with paragraphs 10.3 and 10.4 as though the other plan were a Master
or Prototype Plan, unless the Employer provides other limitations in the
Adoption Agreement.
10.6 PARTICIPATION IN THIS PLAN AND A DEFINED BENEFIT PLAN IF THE EMPLOYER
MAINTAINS, OR AT ANY TIME MAINTAINED, A QUALIFIED DEFINED Benefit Plan covering
any Participant in this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. For any Plan Year during which the Plan is Top-Heavy, the
Defined Benefit and Defined Contribution Plan Fractions shall be calculated in
accordance with Code Section 416(h). The Annual Additions which may be credited
to the Participant's account under this Plan for any Limitation Year will be
limited in accordance with the provisions set forth in the Adoption Agreement.
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<PAGE> 94
10.7 AVERAGE DEFERRAL PERCENTAGE (ADP) TEST With respect to any Plan Year, the
Average Deferral Percentage for Participants who are Highly Compensated
Employees and the Average Deferral Percentage for Participants who are
non-Highly Compensated Employees must satisfy one of the following tests:
(a) BASIC TEST - The Average Deferral Percentage for Participants who are
Highly Compensated Employees for the Plan Year is not more than 1.25
times the Average Deferral Percentage for Participants who are
non-Highly Compensated Employees for the same Plan Year, or
(b) ALTERNATIVE TEST - The Average Deferral Percentage for Participants
who are Highly Compensated Employees for the Plan Year does not exceed
the Average Deferral Percentage for Participants who are non-Highly
Compensated Employees for the same Plan Year by more than 2 percentage
points provided that the Average Deferral Percentage for Participants
who are Highly Compensated Employees is not more than 2.0 times the
Average Deferral Percentage for Participants who are non-Highly
Compensated Employees.
10.8 SPECIAL RULES RELATING TO APPLICATION OF ADP TEST
(a) The Actual Deferral Percentage for any Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Non-Elective Contributions or
Qualified Matching Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Code Section
401(k), that are maintained by the Employer, shall be determined as if
such Elective Deferrals (and, if applicable, such Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both) were made under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements
that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a
single arrangement.
(b) In the event that this Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4), or 410(b), only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the Actual Deferral
Percentage of Employees as if all such plans were a single plan. For
Plan Years beginning after 1989, plans may be aggregated in order to
satisfy Code Section 401(k) only if they have the same Plan Year.
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<PAGE> 95
(c) For purposes of determining the Actual Deferral Percentage of a
Participant who is a 5-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Elective Deferrals
(and Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if treated as Elective Deferrals for purposes
of the ADP test) and Compensation of such Participant shall include
the Elective Deferrals (and, if applicable, Qualified Non-Elective
Contributions and Qualified Matching Contributions, or both) for the
Plan Year of Family Members as defined in paragraph 1.36 of this Plan.
Family Members, with respect to such Highly Compensated Employees,
shall be disregarded as separate Employees in determining the ADP both
for Participants who are non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees. In the event of
repeal of the family aggregation rules under Code Section 414(q)(6),
all applications of such rules under this Plan will cease as of the
effective date of such repeal.
(d) For purposes of determining the ADP test, Elective Deferrals,
Qualified Non-Elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month
period immediately following the Plan Year to which contributions
relate.
(e) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(f) The determination and treatment of the Actual Deferral Percentage
amounts of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
10.9 RECHARACTERIZATION If the Employer allows for Voluntary Contributions in
the Adoption Agreement, a Participant may treat his or her Excess Contributions
as an amount distributed to the Participant and then contributed by the
Participant to the Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Elective Deferrals. Amounts may
not be recharacterized by a Highly Compensated Employee to the extent that such
amount in combination with other Employee Contributions made by that Employee
would exceed any stated limit under the Plan on Voluntary Contributions.
Recharacterization must occur no later than two and one-half months after the
last day of the Plan Year in which such Excess Contributions arose and is deemed
to occur no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the consequences thereof.
Recharacterized amounts will be taxable to the Participant for the Participant's
tax year in which the Participant would have received them in cash.
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<PAGE> 96
10.10 AVERAGE CONTRIBUTION PERCENTAGE (ACP) TEST If the Employer makes Matching
Contributions or if the Plan allows Employees to make Voluntary Contributions
the Plan must meet additional nondiscrimination requirements provided under Code
Section 401(m). If Employee Contributions (including any Elective Deferrals
recharacterized as Voluntary Contributions) are made pursuant to this Plan, then
in addition to the ADP test referenced in paragraph 10.7, the Average
Contribution Percentage test is also applicable. The Average Contribution
Percentage for Participants who are Highly Compensated Employees for each Plan
Year and the Average Contribution Percentage for Participants who are Non-Highly
Compensated Employees for the same Plan Year must satisfy one of the following
tests:
(a) BASIC TEST - The Average, Contribution Percentage for Participants who
are Highly Compensated Employees for the Plan Year shall not exceed
the Average Contribution Percentage for Participants who are
non-Highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(b) ALTERNATIVE TEST - The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the Average Contribution
Percentage for Participants who are non-Highly Compensated Employees
for the same Plan Year multiplied by two (2), provided that the
Average Contribution Percentage for Participants who are Highly
Compensated Employees does not exceed the Average Contribution
Percentage for Participants who are non-Highly Compensated Employees
by more than two (2) percentage points.
10.11 SPECIAL RULES RELATING TO APPLICATION OF ACP TEST
(a) If one or more Highly Compensated Employees participate in both a cash
or deferred arrangement and a plan subject to the ACP test maintained
by the Employer and the sum of the ADP and ACP of those Highly
Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the ADP or ACP of those Highly Compensated
Employees who also participate in a cash or deferred arrangement will
be reduced (beginning with such Highly Compensated Employee whose ADP
or ACP is the highest) as set forth in the Adoption Agreement so that
the limit is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amounts is reduced shall be treated
as an Excess Aggregate Contribution. The ADP and ACP of the Highly
Compensated Employees are determined after any corrections required to
meet the ADP and ACP tests. Multiple use does not occur if both the
ADP and ACP of the Highly Compensated Employees does not exceed 1.25
multiplied by the ADP and ACP of the non-Highly Compensated Employees.
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<PAGE> 97
(b) For purposes of this Article, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible
to have Contribution Percentage Amounts allocated to his or her
account under two or more plans described in Code Section 401(a), or
arrangements described in Code Section 401(k) that are maintained by
the Employer, shall be determined as if the total of such Contribution
Percentage Amounts was made under each Plan. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements
that have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a
single arrangement.
(c) In the event that this Plan satisfies the requirements of Code
Sections 401(a)(4), 401(m), or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the Contribution
Percentage of Employees as if all such plans were a single plan. For
plan years beginning after 1989, plans may be aggregated in order to
satisfy Code Section 401(m) only if the aggregated plans have the same
Plan Year.
(d) For purposes of determining the Contribution percentage of a
Participant who is a five-percent owner or one of the ten most
highly-paid, Highly Compensated Employees, the Contribution Percentage
Amounts and Compensation of such Participant shall include the
Contribution Percentage Amounts and Compensation for the Plan Year of
Family Members as defined in Paragraph 1.36 of this Plan. Family
Members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the Contribution
Percentage both for Participants who are non-Highly Compensated
Employees and for Participants who are Highly Compensated Employees.
In the event of repeal of the family aggregation rules under Code
Section 414(q)(6), all applications of such rules under this Plan will
cease as of the effective date of such repeal.
(e) For purposes of determining the Contribution Percentage test, Employee
Contributions are considered to have been made in the Plan Year in
which contributed to the trust. Matching Contributions and Qualified
Non-Elective Contributions will be considered made for a Plan Year if
made no later than the end of the twelve-month period beginning on the
day after the close of the Plan Year.
(f) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test.
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(g) The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
(h) Qualified Matching Contributions and Qualified Non-Elective
Contributions used to satisfy the ADP test may not be used to satisfy
the ACP test.
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ARTICLE XI
ADMINISTRATION
11.1 Plan Administrator The Employer shal1 be the named fiduciary and Plan
Administrator. These duties shall include:
(a) appointing the Plan's attorney, accountant, actuary, or any other
party needed to administer the Plan,
(b) directing the Trustee/Custodian with respect to payments from the
Fund,
(c) communicating with Employees regarding their participation and
benefits under the Plan, including the administration of all claims
procedures,
(d) filing any returns and reports with the Internal Revenue Service,
Department of Labor, or any other governmental agency,
(e) reviewing and approving any financial reports, investment reviews, or
other reports prepared by any party appointed by the Employer under
paragraph (a),
(f) establishing a funding policy and investment objectives consistent
with the purposes of the Plan and the Employee Retirement Income
Security Act of 1974, and
(g) construing and resolving any question of Plan interpretation. The Plan
Administrator's interpretation of Plan provisions including
eligibility and benefits under the Plan is final, and unless it can be
shown to be arbitrary and capricious will not be subject to "de nova
review.
11.2 Trustee/Custodian The Trustee/Custodian shall be responsible for the
administration of investments held in the Fund. These duties shall include:
(a) receiving contributions under the terms of the Plan,
(b) making distributions from the Fund in accordance with written
instructions received from an authorized representative of the
Employer,
(c) keeping accurate records reflecting its administration of the Fund and
making such records available to the Employer for review and audit.
Within 90 days after each Plan Year, and within 90 days after its
removal or resignation, the Trustee/Custodian shall file with the
Employer an accounting of its administration of the Fund during such
year or from the end of the preceding Plan Year to the date of removal
or resignation. Such accounting shall include a statement of cash
receipts and disbursements since the date of its last accounting and
shall contain an asset list showing the fair market value of
investments held in the Fund as of the end of the Plan Year. The value
of marketable investments shall be determined using the most recent
price quoted on a na-
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tional securities exchange or over the counter market. The value of
non-marketable investments shall be determined in the sole judgment of
the Trustee/Custodian which determination shall be binding and
conclusive. The value of investments in securities or obligations of
the Employer in which there is no market shall be determined in the
sole judgment of the Employer and the Trustee/Custodian shall have no
responsibility with respect to the valuation of such assets. The
Employer shall review the Trustee/Custodian's accounting and notify
the Trustee/Custodian in the event of its disapproval of the report
within 90 days, providing the Trustee/Custodian with a written
description of the items in question. The Trustee/Custodian shall have
60 days to provide the Employer with a written explanation of the
items in question. If the Employer again disapproves, the
Trustee/Custodian shall file its accounting in a court of competent
jurisdiction for audit and adjudication, and
(d) employing such agents, attorneys or other professionals as the Trustee
may deem necessary or advisable in the performance of its duties.
The Trustee's/Custodian's duties shall be limited to those described above. The
Employer shall be responsible for any other administrative duties required under
the Plan or by applicable law.
11.3 ADMINISTRATIVE FEES AND EXPENSES All reasonable costs, charges and
expenses incurred by the Trustee/Custodian in connection with the administration
of the Fund and all reasonable costs, charges and expenses incurred by the Plan
Administrator in connection with the administration of the Plan (including fees
for legal services rendered to the Trustee/Custodian or Plan Administrator) may
be paid by the Employer, but if not paid by the Employer when due, shall be paid
from the Fund. Such reasonable compensation to the Trustee/Custodian as may be
agreed upon from time to time between the Employer and the Trustee/Custodian and
such reasonable compensation to the Plan Administrator as may be agreed upon
from time to time between the Employer and Plan Administrator may be paid by the
Employer, but if not paid by the Employer when due shall be paid by the Fund.
The Trustee shall have the right to liquidate trust assets to cover its fees.
Notwithstanding the foregoing, no compensation other than reimbursement for
expenses shall be paid to a Plan Administrator who is the Employer or a
full-time Employee of the Employer. In the event any part of the Trust/Custodial
Account becomes subject to tax, all taxes incurred will be paid from the Fund
unless the Plan Administrator advises the Trustee/Custodian not to pay such tax.
11.4 DIVISION OF DUTIES AND INDEMNIFICATION
(a) The Trustee/Custodian shall have the authority and discretion to
manage and govern the Fund to the extent provided in this instrument,
but does not guarantee the Fund in any manner against investment loss
or depreciation in asset value, or guarantee the adequacy of the Fund
to meet and discharge all or any liabilities of the Plan.
(b) The Trustee/Custodian shall not be liable for the making, retention or
sale of any investment or reinvestment made by it, as herein provided,
or for any loss to, or diminution of the Fund, or for any other loss
or damage which may result from the discharge of its duties hereunder
except to the extent it is
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judicially determined that the Trustee/Custodian has failed to
exercise the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character with like aims.
(c) The Employer warrants that all directions issued to the
Trustee/Custodian by it or the Plan Administrator will be in
accordance with the terms of the Plan and not contrary to the
provisions of the Employee Retirement Income Security Act of 1974 and
regulations issued thereunder.
(d) The Trustee/Custodian shall not be answerable for any action taken
pursuant to any direction, consent, certificate, or other paper or
document on the belief that the same is genuine and signed by the
proper person. All directions by the Employer, Participant or the Plan
Administrator shall be in writing. The Employer shall deliver to the
Trustee/Custodian certificates evidencing the individual or
individuals authorized to act as set forth in the Adoption Agreement
or as the Employer may subsequently inform the Trustee/Custodian in
writing and shall deliver to the Trustee/Custodian specimens of their
signatures.
(e) The duties and obligations of the Trustee/Custodian shall be limited
to those expressly imposed upon it by this instrument or subsequently
agreed upon by the parties. Responsibility for administrative duties
required under the Plan or applicable law not expressly imposed upon
or agreed to by the Trustee/Custodian, shall rest solely with the
Employer.
(f) The Trustee shall be indemnified and saved harmless by the Employer
from and against any and all liability to which the Trustee/Custodian
may be subjected, including all expenses reasonably incurred in its
defense, for any action or failure to act resulting from compliance
with the instructions of the Employer, the employees or agents of the
Employer, the Plan Administrator, or any other fiduciary to the Plan,
and for any liability arising from the actions or non-actions of any
predecessor Trustee/Custodian or fiduciary or other fiduciaries of the
Plan.
(g) The Trustee/Custodian shall not be responsible in any way for the
application of any payments it is directed to make or for the adequacy
of the Fund to meet and discharge any and all liabilities under the
Plan.
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ARTICLE XII
TRUST FUND/CUSTODIAL ACCOUNT
12.1 THE FUND The Fund shall consist of all contributions made under Article III
and Article IV of the Plan and the investment thereof and earnings thereon. All
contributions and the earnings thereon less payments made under the terms of the
Plan, shall constitute the Fund. The Fund shall be administered as provided in
this document.
12.2 CONTROL OF PLAN ASSETS The assets of the Fund or evidence of ownership
shall be held by the Trustee/Custodian under the terms of the Plan and
Trust/Custodial Account. If the assets represent amounts transferred from
another trustee/custodian under a former plan, the Trustee/Custodian named
hereunder shall not be responsible for the propriety of any investment under the
former plan.
12.3 EXCLUSIVE BENEFIT RULES No part of the Fund shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants, former
Participants with a vested interest, and the beneficiary or beneficiaries of
deceased Participants having a vested interest in the Fund at death.
12.4 ASSIGNMENT AND ALIENATION OF BENEFITS No right or claim to, or interest in,
any part of the Fund, or any payment from the Fund, shall be assignable,
transferable, or subject to sale, mortgage, pledge, hypothecation, commutation,
anticipation, garnishment, attachment, execution, or levy of any kind. The
Trustee/Custodian shall not recognize any attempt to assign, transfer, sell,
mortgage, pledge, hypothecate, commute, or anticipate the same, except to the
extent required by law. The preceding sentences shall also apply to the
creation, assignment, or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order, unless such
order is determined to be a qualified domestic relations order, as defined in
Code Section 414(p), or any domestic relations order entered before January 1,
1985 which the Plan attorney and Plan Administrator deem to be qualified.
12.5 DETERMINATION OF QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) A Domestic
Relations Order shall specifically state all of the following in order to be
deemed a Qualified Domestic Relations Order ("QDRO"):
(a) The name and last known mailing address (if any) of the Participant
and of each alternate payee covered by the QDRO. However, if the QDRO
does not specify the current mailing address of the alternate payee,
but the Plan Administrator has independent knowledge of that address,
the QDRO will still be valid.
(b) The dollar amount or percentage of the Participant's benefit to be
paid by the Plan to each alternate payee, or the manner in which the
amount or percentage will be determined.
(c) The number of payments or period for which the order applies.
(d) The specific plan (by name) to which the Domestic Relations Order
applies.
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The Domestic Relations Order shall not be deemed a QDRO if it requires the Plan
to provide:
(e) any type or form of benefit, or any option not already provided for in
the Plan;
(f) increased benefits, or benefits in excess of the Participant's vested
rights;
(g) payment of a benefit earlier than allowed by the Plan's earliest
retirement provisions or in the case of a profit-sharing plan, prior
to the allowability of in-service withdrawals, or
(h) payment of benefits to an alternate payee which are required to be
paid to another alternate payee under another QDRO.
Promptly, upon receipt of a Domestic Relations Order ("Order") which may or may
not be "Qualified", the Plan Administrator shall notify the Participant and any
alternate payee(s) named in the Order of such receipt, and include a copy of
this paragraph 12.5. The Plan Administrator shall then forward the Order to the
Plan's legal counsel for an opinion as to whether or not the Order is in fact
"Qualified" as defined in Code Section 414(p). Within a reasonable time after
receipt of the Order, not to exceed 60 days, the Plan's legal counsel shall make
a determination as to its "Qualified" status and the Participant and any
alternate payee(s) shall be promptly notified in writing of the determination.
If the "Qualified" status of the Order is in question, there will be a delay in
any payout to any payee including the Participant, until the status is resolved.
In such event, the Plan Administrator shall segregate the amount that would have
been payable- to the alternate payee(s) if the Order had been deemed a QDRO. If
the Order is not Qualified, or the status is not resolved (for example, it has
been sent back to the Court for clarification or modification) within 18 months
beginning with the date the first payment would have to be made under the Order,
the Plan Administrator shall pay the segregated amounts plus interest to the
person(s) who would have been entitled to the benefits had there been no Order.
If a determination as to the Qualified status of the Order is made after the 18-
month period described above, then the Order shall only be applied on a
prospective basis. If the Order is determined to be a QDRO, the Participant and
alternate payee(s) shall again be notified promptly after such determination.
Once an Order is deemed a QDRO, the Plan Administrator shall pay to the
alternate payee(s) all the amounts due under the QDRO, including segregated
amounts plus interest which may have accrued during a dispute as to the Order's
qualification.
Unless specified otherwise in the Adoption Agreement, the earliest retirement
age with regard to the Participant against whom the order is entered shall be
the date the order is determined to be qualified. This will only allow payouts
to alternate payee(s) and not the Participant.
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ARTICLE XIII
INVESTMENTS
13.1 FIDUCIARY STANDARDS The Trustee/Custodian shall invest and reinvest
principal and income in the same Fund in accordance with the investment
objectives established by the Employer, provided that:
(a) such investments are prudent under the Employee Retirement Income
Security Act of 1974 and the regulations thereunder,
(b) such investments are sufficiently diversified or otherwise insured or
guaranteed to minimize the risk of large losses, and
(c) such investments are similar to those which would be purchased by
another professional money manager for a like plan with similar
investment objectives.
13.2 FUNDING ARRANGEMENT The Employer shall, in the Adoption Agreement, appoint
the Sponsor to serve as either Trustee or Custodian of the Fund. If the Sponsor
is appointed Trustee, the Fund shall be invested in any of the alternatives
available to the Trustee under paragraph 13.3 herein. If the Sponsor is
appointed Custodian, the Fund shall be invested only in the alternatives
available to the Custodian under paragraph 13.4 herein.
13.3 INVESTMENT ALTERNATIVES OF THE TRUSTEE AS TRUSTEE, the Sponsor shall
implement an investment program based on the Employer's investment objectives
and the Employee Retirement Income Security Act of 1974. In addition to powers
given by law, the Trustee may:
(a) invest the Fund in any form of property, including common and
preferred stocks, exchange traded put and call options, bonds, money
market instruments, mutual funds (including funds for which the
Trustee or its affiliates serve as investment advisor), savings
accounts, certificates of deposit, Treasury bills, insurance policies
and contracts, or in any other property, real or personal, having a
ready market. The Trustee may invest in time deposits (including, if
applicable, its own or those of affiliates) which bear a reasonable
interest rate. No portion of any Qualified Voluntary Contribution, or
the earnings thereon, may be invested in life insurance contracts or,
as with any Participant-directed investment, in tangible personal
property characterized by the IRS as a collectible,
(b) transfer any assets of the Fund to a group or collective trust
established to permit the pooling of funds of separate pension and
profit-sharing trusts, provided the Internal Revenue Service has ruled
such group or collective trust to be qualified under Code Section
401(a) and exempt under Code Section 501(a) (or the applicable
corresponding provision of any other Revenue Act) or to any other
common, collective, or commingled trust fund which has been or may
hereafter be established and maintained
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by the Trustee and/or affiliates of the Trustee. Such commingling of
assets of the Fund with assets of other qualified trusts is
specifically authorized, and to the extent of the investment of the
Fund in such a group or collective trust, the terms of the instrument
establishing the group or collective trust shall be a part hereof as
though set forth herein,
(c) invest up to 100% of the Fund in the common stock, debt obligations,
or any other security issued by the Employer or by an affiliate of the
Employer within the limitations provided under Sections 406, 407, and
408 of the Employee Retirement Income Security Act of 1974 and further
provided that such investment does not constitute a prohibited
transaction under Code Section 4975. Any such investment in Employer
securities shall only be made upon written direction of the Employer
who shall be solely responsible for propriety of such investment,
(d) hold cash uninvested and deposit same with any banking or savings
institution, including its own banking department,
(e) join in or oppose the reorganization, recapitalization, consolidation,
sale or merger of corporations or properties, including those in
which it is interested as Trustee, upon such terms as it deems wise,
(f) hold investments in nominee or bearer form,
(g) vote proxies and, if appropriate, pass them on to any investment
manager which may have directed the investment in the equity giving
rise to the proxy,
(h) exercise all ownership rights with respect to assets held in the Fund.
13.4 INVESTMENTS ALTERNATIVES OF THE CUSTODIAN AS CUSTODIAN, the Sponsor shall
be depository of the Fund and shall, at the direction of the Employer, invest
all contributions exclusively in savings or time accounts, savings certificates
of deposit, or other savings or time instruments offered by the Custodian and,
if offered, by an affiliate of the Custodian.
13.5 PARTICIPANT LOANS If agreed upon by the Trustee and permitted by the
Employer in the Adoption Agreement, a Plan Participant may make application to
the Employer requesting a loan from the Fund. The Employer shall have the sole
right to approve or disapprove a Participant's application provided that loans
shall be made available to all Participants on a reasonably equivalent basis.
Loans shall not be made available to Highly Compensated Employees [as defined in
Code Section 414(q)] in an amount greater than the amount made available to
other Employees. Any loan granted under the Plan shall be made subject to the
following rules:
(a) No loan, when aggregated with any outstanding Participant loan(s),
shall exceed the lesser of (i) S50,000 reduced by the excess, if any,
of the highest outstanding balance of loans during the one year period
ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made or (ii)
one-half of the fair market value of a Participant's Vested Account
Balance built up from Employer Contributions, Voluntary Contributions,
and Rollover
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Contributions. If the Participant's Vested Account Balance is $20,000 or less,
the maximum loan shall not exceed the lesser of S10,000 or 100% of the
Participant's Vested Account Balance. For the purpose of the above limitation,
all loans from all plans of the Employer and other members of a group of
employers described in Code Sections 414(b), 414(c), and 414(m) are aggregated.
An assignment or pledge of any portion of the Participant's interest in the Plan
and a loan, pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this paragraph.
(b) All applications must be made on forms provided by the Employer and
must be signed by the Participant.
(c) Any loan shall bear interest at a rate reasonable at the time of
application, considering the purpose of the loan and the rate being
charged by representative commercial banks in the local area for a
similar loan unless the Employer sets forth a different method for
determining loan interest rates in its loan procedures. The loan
agreement shall also provide that the payment of principal and
interest be amortized in level payments not less than quarterly.
(d) The term of such loan shall not exceed five years except in the case
of a loan for the purpose of acquiring any house, apartment,
condominium, or mobile home (not used on a transient basis) which is
used or is to be used within a reasonable time as the principal
residence of the Participant. The term of such loan shall be
determined by the Employer considering the maturity dates quoted by
representative commercial banks in the local area for a similar loan.
(e) The principal and interest paid by a Participant on his or her loan
shall be credited to the Fund in the same manner as for any other Plan
investment. If elected in the Adoption Agreement, loans may be treated
as segregated investments of the individual Participants. This
provision is not available if its election will result in
discrimination in operation of the Plan.
(f) If a Participant's loan application is approved by the Employer, such
Participant shall be required to sign a note, loan agreement, and
assignment of 50% of his or her interest in the Fund as collateral
for the loan. The Participant, except in the case of a profit-sharing
plan satisfying the requirements of paragraph 8.7 must obtain the
consent of his or her Spouse, if any, within the 90 day period before
the time his or her account balance is used as security for the loan.
A new consent is required if the account balance is used for any
renegotiation, extension, renewal or other revision of the loan,
including an increase in the amount thereof. The consent must be
written, must acknowledge the effect of the loan, and must be
witnessed by a plan representative or notary public. Such consent
shall subsequently be binding with respect to the consenting Spouse or
any subsequent Spouse.
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(g) If a valid Spousal consent has been obtained, then, notwithstanding
any other provision of this Plan, the portion of the Participant's
Vested Account Balance used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance
payable at the time of death or distribution, but only if the
reduction is used as repayment of the loan. If less than 100% of the
Participant's Vested Account Balance (determined without regard to the
preceding sentence) is payable to the Surviving Spouse, then the
account balance shall be adjusted by first reducing the Vested Account
Balance by the amount of the security used as repayment of the loan,
and then determining the benefit payable to the Surviving Spouse.
(h) The Employer may also require additional collateral in order to
adequately secure the loan.
(i) A Participant's loan shall immediately become due and payable if such
Participant terminates employment for any reason or fails to make a
principal and/or interest payment as provided in the loan agreement.
If such Participant terminates employment, the Employer shall
immediately request payment of principal and interest on the loan. If
the Participant refuses payment following termination, the Employer
shall reduce the Participant's Vested Account Balance by the remaining
principal and interest on his or her loan. If the Participant's Vested
Account Balance is less than the amount due, the Employer shall take
whatever steps are necessary to collect the balance due directly from
the Participant. However, no foreclosure on the Participant's note or
attachment of the Participant's account balance will occur until a
distributable event occurs in the Plan.
(j) No loans will be made to Owner-Employees (as defined in paragraph
1.51) or Shareholder-Employees (as defined in paragraph 1.74), unless
the Employer obtains a prohibited transaction exemption from the
Department of Labor.
13.6 INSURANCE POLICIES If agreed upon by the Trustee and permitted by the
Employer in the Adoption Agreement, Employees may elect the purchase of life
insurance policies under the Plan. If elected, the maximum annual premium for a
whole life policy shall not exceed 50% of the aggregate Employer contributions
allocated to the account of a Participant. For profit-sharing plans the 50% test
need only be applied against Employer contributions allocated in the last two
years. Whole life policies are policies with both nondecreasing death benefits
and nonincreasing premiums. The maximum annual premium for term contracts or
universal life policies and all other policies which are not whole life shall
not exceed 25% of aggregate Employer contributions allocated to the account of a
Participant. The two year rule for profit-sharing plans again applies. The
maximum annual premiums for a Participant with both a whole life and a term
contract or universal life policies shall be limited to one-half of the whole
life premium plus the term premium, but shall not exceed 25% of the aggregate
Employer contributions allocated to the account of a Participant, subject to the
two year rule for profit-sharing plans. Any policies purchased under this Plan
shall be held subject to the following rules:
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(a) The Trustee shall be applicant and owner of any policies issued.
(b) All policies or contracts purchased hereunder, shall be endorsed as
nontransferable, and must provide that proceeds will be payable to the
Trustee; however, the Trustee shall be required to pay over all
proceeds of the contracts to the Participant's Designated Beneficiary
in accordance with the distribution provisions of this Plan. Under no
circumstances shall the Trust retain any part of the proceeds.
(c) Each Participant shall be entitled to designate a beneficiary under
the terms of any contract issued; however, such designation will be
given to the Trustee which must be the named beneficiary on any
policy. Such designation shall remain in force, until revoked by the
Participant, by filing a new beneficiary form with the Trustee. A
Participant's Spouse will be the Designated Beneficiary of the
proceeds in all circumstances unless a Qualified Election has been
made in accordance with paragraph 8.4. The beneficiary of a deceased
Participant shall receive, in addition to the proceeds of the
Participant's policy or policies, the amount credited to such
Participant's investment account.
(d) A Participant who is uninsurable or insurable at substandard rates,
may elect to receive a reduced amount of insurance, if available, or
may waive the purchase of any insurance.
(e) All dividends or other returns received on any policy purchased shall
be applied to reduce the next premium due on such policy, or if no
further premium is due, such amount shall be credited to the Fund as
part of the account of the Participant for whom the policy is held.
(f) If Employer contributions are inadequate to pay all premiums on all
insurance policies, the Trustee may, at the option of the Employer,
utilize other amounts remaining in each Participant's account to pay
the premiums on his or her respective policy or policies, allow the
policies to lapse, reduce the policies to a level at which they may be
maintained, or borrow against the policies on a prorated basis,
provided that the borrowing does not discriminate in favor of the
policies on the lives of Officers, Shareholders, and highly
compensated Employees.
(g) On retirement or termination of employment of a Participant, the
Employer shall direct the Trustee to cash surrender the Participant's
policy and credit the proceeds to his or her account for distribution
under the terms of the Plan. However, before so doing, the Trustee
shall first offer to transfer ownership of the policy to the
Participant in exchange for payment by the Participant of the cash
value of the policy at the time of transfer. Such payment shall be
credited to the Participant's account for distribution under the terms
of the Plan. All distributions resulting from the application of this
paragraph shall be subject to the Joint and Survivor Annuity Rules of
Article VIII, if applicable.
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(h) The Employer shall be solely responsible to see that these insurance
provisions are administered properly and that if there is any conflict
between the provisions of this Plan and any insurance contracts issued
that the terms of this Plan will control.
13.7 EMPLOYER INVESTMENT DIRECTION If agreed upon by the Trustee and approved by
the Employer in the Adoption Agreement, the Employer shall have the right to
direct the Trustee with respect to investments of the Fund, may appoint an
investment manager (registered as an investment advisor under the Investment
Advisors Act of 1940) to direct investments, or may give the Trustee sole
investment management responsibility. The Employer may purchase and sell
interests in a registered investment company (i.e., mutual funds) for which the
Sponsor, its parent, affiliates, or successors, may serve as investment advisor
and receive compensation from the registered investment company for its services
as investment advisor. The Employer shall advise the Trustee in writing
regarding the retention of investment powers, the appointment of an investment
manager, or the delegation of investment powers to the Trustee. Any investment
directive under this Plan shall be made in writing by the Employer or investment
manager, as the case may be. In the absence of such written directive, the
Trustee shall automatically invest the available cash in its discretion in an
appropriate interim investment until specific investment directions are
received. Such instructions regarding the delegation of investment
responsibility shall remain in force until revoked or amended in writing. The
Trustee shall not be responsible for the propriety of any directed investment
made and shall not be required to consult with or advise the Employer regarding
the investment quality of any directed investment held hereunder. If the
Employer fails to designate an investment manager, the Trustee shall have full
investment authority. If the Employer does not issue investment directions, the
Trustee shall have authority to invest the Fund in its sole discretion. While
the Employer may direct the Trustee with respect to Plan investments, the
Employer may not:
(a) borrow from the Fund or pledge any of the assets of the Fund as
security for a loan,
(b) buy property or assets from or sell property or assets to the Fund,
(c) charge any fee for services rendered to the Fund, or
(d) receive any services from the Fund on a preferential basis.
13.8 EMPLOYEE INVESTMENT DIRECTION If agreed to by the Trustee and approved by
the Employer in the Adoption Agreement, Participants shall be given the option
to direct the investment of their personal contributions and their share of the
Employer's contribution among alternative investment funds established as part
of the overall Fund. Unless otherwise specified by the Employer in the Adoption
Agreement, such investment funds shall be under the full control of the
management of the Trustee. If investments outside the Trustee's control are
allowed, Participants may not direct that investments be made in collectibles,
other than U.S. Government or State issued gold and silver coins. In this
connection, a Participant's right to direct the investment of any contribution
shall apply only to selection of the desired fund. The following rules shall
apply to the administration of such funds.
(a) At the time an Employee becomes eligible for the Plan, he or she shall
complete an investment designation form stating the percentage of his
or her contributions to be invested in the available funds.
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(b) A Participant may change his or her election with respect to future
contributions by filing a new investment designation form with the
Employer in accordance with the procedures established by the Plan
Administrators.
(c) A Participant may elect to transfer all or part of his or her balance
from one investment fund to another by filing an investment
designation form with the Employer in accordance with the procedures
established by the Plan Administrators.
(d) The Employer shall be responsible when transmitting Employee and
Employer contributions to show the dollar amount to be credited to
each investment fund for each Employee.
(e) Except as otherwise provided in the Plan, neither the Trustee, nor the
Employer, nor any fiduciary of the Plan shall be liable to the
Participant or any of his or her beneficiaries for any loss resulting
from action taken at the direction of the Participant.
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ARTICLE XIV
TOP-HEAVY PROVISIONS
14.1 APPLICABILITY OF RULES If the Plan is or becomes Top-Heavy in any Plan Year
beginning after 1983, the provisions of this Article will supersede any
conflicting provisions in the Plan or Adoption Agreement.
14.2 MINIMUM CONTRIBUTION Notwithstanding any other provision in the Employer's
Plan, for any Plan Year in which the Plan is Top-Heavy or Super Top-Heavy, the
aggregate Employer contributions and forfeitures allocated on behalf of any
Participant (without regard to any Social Security contribution) under this
Plan and any other Defined Contribution Plan of the Employer shall be lesser of
3% of such Participant's Compensation or the largest percentage of Employer
contributions and forfeitures, as a percentage of the first $200,000, as
adjusted under Code Section 415(d), of the Key Employee's Compensation,
allocated on behalf of any Key Employee for that year.
Each Participant who is employed by the Employer on the last day of the Plan
Year shall be entitled to receive an allocation of the Employer's minimum
contribution for such Plan Year. The minimum allocation applies even though
under other Plan provisions the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the year
because the Participant fails to make Mandatory Contributions to the Plan, the
Participant's Compensation is less than a stated amount, or the Participant
fails to complete 1,000 Hours of Service (or such lesser number designated by
the Employer in the Adoption Agreement) during the Plan Year. A Paired
profit-sharing plan designated to provide the minimum Top Heavy contribution
must do so regardless of profits. An Employer may make the minimum Top-Heavy
contribution available to all Participants or just non-Key Employees.
For purposes of computing the minimum allocation, Compensation shall mean
Compensation as defined in the second paragraph of paragraph 1.12 of the Plan.
The Top-Heavy minimum contribution does not apply to any Participant to the
extent the Participant is covered under any other plan(s) of the Employer and
the Employer has provided in Section 11 of the Adoption Agreement that the
minimum allocation or benefit requirements applicable to Top-Heavy Plans will be
met in the other plan(s).
If a Key Employee makes an Elective Deferral or has an allocation of Matching
Contributions made to his or her account, a Top-Heavy minimum will be required
for non-Key Employees who are Participants, however, neither Elective Deferrals
by nor Matching Contributions to non-Key Employees may be taken into account for
purposes of satisfying the top-heavy Minimum Contribution requirement.
14.3 MINIMUM VESTING For any Plan Year in which this Plan is Top-Heavy, the
minimum vesting schedule elected by the Employer in the Adoption Agreement will
automatically apply to the Plan. If the vesting schedule selected by the
Employer in the Adoption Agreement is less liberal than the allowable schedule,
the schedule will automatically be modified. If the vesting schedule under the
Employer's Plan shifts in or out of the Top-Heavy schedule for any Plan Year,
such shift is an amendment to the vesting schedule and the election in paragraph
9.8 of the Plan applies. The minimum vesting schedule applies to all accrued
benefits within the meaning of Code Section 411(a)(7) except those attributable
to Employee contributions, including benefits accrued before the effective date
of Code Section 416 and benefits accrued
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before the Plan became Top-Heavy. Further, no reduction in vested benefits may
occur in the event the Plan's status as Top-Heavy changes for any Plan Year.
However, this paragraph does not apply to the account balances of any Employee
who does not have an Hour of Service after the Plan initially becomes Top-Heavy
and such Employee's account balance attributable to Employer contributions and
forfeitures will be determined without regard to this paragraph.
14.4 LIMITATIONS ON ALLOCATIONS In any Plan Year in which the Top-Heavy Ratio
exceeds 90% (i.e., the Plan becomes Super Top-Heavy), the denominators of the
Defined Benefit Fraction (as defined in paragraph 1.16) and Defined Contribution
Fraction (as defined in paragraph 1.19) shall be computed using 100% of the
dollar limitation instead of 125%.
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ARTICLE XV
AMENDMENT AND TERMINATION
15.1 AMENDMENT BY SPONSOR The Sponsor may amend any or all provisions of this
Plan and Trust/Custodial Account at any time without obtaining the approval or
consent of any Employer which has adopted this Plan and Trust/Custodial Account
provided that no amendment shall authorize or permit any part of the corpus or
income of the Fund to be used for or diverted to purposes other than for the
exclusive benefit of Participants and their beneficiaries, or eliminate an
optional form of distribution. In the case of a mass-submitted plan, the
mass-submitter shall amend the Plan on behalf of the Sponsor.
15.2 AMENDMENT BY EMPLOYER The Employer may amend any option in the Adoption
Agreement, and may include language as permitted in the Adoption Agreement,
(a) to satisfy Code Section 415, or
(b) to avoid duplication of minimums under Code Section 416
because of the required aggregation of multiple plans.
The Employer may add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause the Plan
to be treated as an individually designed plan for which the Employer must
obtain a separate determination letter.
If the Employer amends the Plan and Trust/Custodial Account other than as
provided above, the Employer's Plan shall no longer participate in this
Prototype Plan and will be considered an individually designed plan.
15.3 TERMINATION Employers shall have the right to terminate their Plans upon 60
days notice in writing to the Trustee/Custodian. If the Plan is terminated,
partially terminated, or if there is a complete discontinuance of contributions
under a profit-sharing plan maintained by the Employer, all amounts credited to
the accounts of Participants shall vest and become nonforfeitable. In the event
of a partial termination, only those who are affected by such partial
termination shall be fully vested. In the event of termination, the Employer
shall direct the Trustee/Custodian with respect to the distribution of accounts
to or for the exclusive benefit of Participants or their beneficiaries. The
Trustee/Custodian shall dispose of the Fund in accordance with the written
directions of the Plan Administrator, provided that no liquidation of assets and
payment of benefits, (or provision therefor), shall actually be made by the
Trustee/Custodian until after it is established by the Employer in a manner
satisfactory to the Trustee/Custodian, that the applicable requirements, if any,
of the Employee Retirement Income Security Act of 1974 and the Internal Revenue
Code governing the termination of employee benefit plans, have been or are
being, complied with, or that appropriate authorizations, waivers, exemptions,
or variances have been, or are being obtained.
15.4 QUALIFICATION OF EMPLOYER'S PLAN If the adopting Employer fails to attain
or retain Internal Revenue Service qualification, such Employer's Plan shall no
longer participate in this Prototype Plan and will be considered an individually
designed plan.
75
<PAGE> 114
15.5 MERGERS AND CONSOLIDATIONS
(a) In the case of any merger or consolidation of the Employer's Plan
with, or transfer of assets or liabilities of the Employer's Plan to,
any other plan, Participants in the Employer's Plan shall be entitled
to receive benefits immediately after the merger, consolidation, or
transfer which are equal to or greater than the benefits they would
have been entitled to receive immediately before the merger,
consolidation, or transfer if the Plan had then terminated.
(b) Any corporation into which the Trustee/Custodian or any successor
trustee/custodian may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which
the Trustee/Custodian or any successor trustee/custodian may be a
party, or any corporation to which all or substantially all the trust
business of the Trustee/Custodian or any successor trustee/custodian
may be transferred, shall be the successor of such Trustee/Custodian
without the filing of any instrument or performance of any further
act, before any court.
15.6 RESIGNATION AND REMOVAL The Trustee/Custodian may resign by written notice
to the Employer which shall be effective 60 days after delivery. The Employer
may discontinue its participation in this Prototype Plan and Trust/Custodial
Account effective upon 60 days written notice to the Sponsor. In such event the
Employer shall, prior to the effective date thereof, amend the Plan to eliminate
any reference to this Prototype Plan and Trust/Custodial Account and appoint a
successor trustee or custodian or arrange for another funding agent. The
Trustee/Custodian shall deliver the Fund to its successor on the effective date
of the resignation or removal, or as soon thereafter as practicable, provided
that this shall not waive any lien the Trustee/Custodian may have upon the Fund
for its compensation or expenses. If the Employer fails to amend the Plan and
appoint a successor trustee, custodian, or other funding agent within the said
60 days, or such longer period as the Trustee/Custodian may specify in writing,
the Plan shall be deemed individually designed and the Employer shall be deemed
the successor trustee/custodian. The Employer must then obtain its own
determination letter.
15.7 QUALIFICATION OF PROTOTYPE The Sponsor intends that this Prototype Plan
will meet the requirements of the Code as a qualified Prototype Retirement Plan
and Trust/Custodial Account. Should the Commissioner of Internal Revenue or any
delegate of the Commissioner at any time determine that the Plan and
Trust/Custodial Account fails to meet the requirements of the Code, the Sponsor
will amend the Plan and Trust/Custodial Account to maintain its qualified
status.
76
<PAGE> 115
ARTICLE XVI
GOVERNING LAW
Construction, validity and administration of the Prototype Plan and
Trust/Custodial Account, and any Employer Plan and Trust/Custodial Account as
embodied in the Prototype document and accompanying Adoption Agreement, shall be
governed by Federal law to the extent applicable and to the extent not
applicable by the laws of the State/Commonwealth in which the principal office
of the Sponsor is located.
77
<PAGE> 116
PART I - SECTION 401(a) (17) LIMITATION
[MAY BE ADOPTED BY DEFINED CONTRIBUTION
AND DEFINED BENEFIT PLANS]
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any over provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in erect for that prior determination period. For this
purpose, for determination periods beginning before the first day of the fist
Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
<PAGE> 117
MODEL AMENDMENT
Revenue Procedure 93-47
(This model amendment allows Participants removing distribution from
safe-harbored profit sharing plan to waive the 30-day period required under the
Unemployment Compensation Act of 1992. Non-safe harbored plans must still
provide notice not less than 30 days and not more than 90 days prior to the
distribution.)
If a distribution is one to which Section 401(a)(11) and 417 of
the Internal Revenue Code do not apply, such distribution may commence less than
30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax
Regulations is given, prodded that:
(1) the plan administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(2) the Participant, after receiving the notice, affirmatively elects a
distribution.
<PAGE> 1
EXHIBIT 10.08
COMMUNITY FINANCIAL GROUP, INC.
ASSOCIATES' STOCK PURCHASE PLAN
(Amended and Restated
Effective May 1, 1996)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. PURPOSE ........................................................ 1
ARTICLE 2. DEFINITIONS .................................................... 1
ARTICLE 3. ELIGIBLE ASSOCIATES ............................................ 4
ARTICLE 4. STOCK SUBJECT TO THE PLAN ...................................... 4
ARTICLE 5. GRANT OF OPTION AND PURCHASE OF STOCK .......................... 4
ARTICLE 6. INTENTION TO PURCHASE .......................................... 5
ARTICLE 7. AUTHORIZATION FOR ENTERING PLAN ................................ 6
ARTICLE 8. AMOUNT OF PAYROLL DEDUCTIONS ................................... 6
ARTICLE 9. CHANGE IN PAYROLL DEDUCTIONS ................................... 6
ARTICLE 10. HARDSHIP WITHDRAWAL ............................................ 7
ARTICLE 11. JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP; FRACTIONAL SHARES.... 7
ARTICLE 12. NO TRANSFER OR ASSIGNMENT OF ASSOCIATE'S RIGHTS ................ 8
ARTICLE 13. TERMINATION OF ASSOCIATE'S RIGHTS .............................. 8
ARTICLE 14. SUSPENSION, TERMINATION AND AMENDMENTS TO THE PLAN ............. 8
ARTICLE 15. LIMITATIONS ON SALE OF STOCK PURCHASED UNDER THE PLAN .......... 9
ARTICLE 16. COMPANY'S PAYMENT OF EXPENSES RELATED TO THE PLAN .............. 9
ARTICLE 17. ADMINISTRATION OF THE PLAN ..................................... 9
ARTICLE 18. STOCKHOLDERS ...................................................10
ARTICLE 19. APPLICATION OF FUNDS............................................10
ARTICLE 20. CHANGES IN CAPITAL .............................................10
ARTICLE 21. APPROVAL OF SHAREHOLDERS .......................................10
ARTICLE 22. ADOPTION BY SUBSIDIARIES AND AFFILIATES ........................11
</TABLE>
<PAGE> 3
ARTICLE 1
PURPOSE
The Community financial Group, Inc. Associates' Stock Purchase Plan
(the "Plan") is intended as an incentive to encourage Associates of Community
Financial Group, Inc. and its subsidiaries and affiliates which adopt the Plan
(the "Company") to identify with the fortunes of the Company through stock
ownership. Participation by all eligible Associates in this Plan consequently
shall be mandatory.
ARTICLE 2
DEFINITIONS
Unless otherwise explicitly specified, the following words and phrases
as used herein shall have the meanings set forth below and shall be interpreted
as stated in this ARTICLE.
2.01 "Account" shall mean the Account established and maintained in the name
of each participating Associate for the purpose of holding the amounts deducted
from the Associate's Compensation pursuant to ARTICLE 7 and shares of Common
Stock purchased with such amounts pursuant to ARTICLE 5.
2.02 "Administrator" shall mean, with respect to the Plan, The Bank of
Nashville.
2.03 "Associate" shall mean any employee of Community Financial Group, Inc.,
The Bank or any other subsidiary or affiliate of The Bank or Community Financial
Group, Inc. which shall adopt the Plan.
2.04 "Authorization" or "Authorization Form" shall mean an Associate's
written participation form wherein the Associate agrees to accept a deduction in
Compensation from the Company for the purpose of purchasing shares of the
Company's Common Stock hereunder. As provided in ARTICLES 7 and 10, if an
eligible Associate does not properly complete an Authorization Form, or does not
complete such form in time before any deadline, he shall be deemed to authorize
payroll deductions at the lowest level permitted in ARTICLE 8.
2.05 "Average Market Price" shall mean the average of the bona fide bid and
ask prices of Common Stock of the Company in the market on any relevant date.
2.06 "The Bank" shall mean The Bank of Nashville.
2.07 "Board" shall mean the Board of Directors of Community Financial Group,
Inc.
<PAGE> 4
2.08 "Business Day" shall mean a day on which there is trading in The Bank's
Common Stock.
2.09 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.10 "Committee" shall mean the Committee to which the Company may delegate
its administrative duties and responsibilities in the day-to-day operations of
the Plan in accordance with ARTICLE 17. The Committee shall be appointed by the
Board.
2.11 "Common Stock" shall mean voting Common Stock of Community Financial
Group, Inc.
2.11.1 "Company" shall mean Community Financial Group, Inc.When the context
requires "Company" shall include The Bank of Nashville and any other subsidiary
or affiliate of Community Financial Group, Inc. or The Bank of Nashville which
has adopted the Plan.
2.12 "Compensation" shall mean compensation paid as wages or a salary by the
Company to an Associate for services rendered during the Plan Year under
consideration, but excluding bonuses, short- or long-term disability payments,
special non-recurring payments such as performance or recognition awards,
payments for or in the nature of reimbursements, and incentive awards (including
incentive phantom stock appreciation rights awards), and all contributions by
the Company to the Plan and to any other employee benefit plan maintained by the
Company.
2.13 "Effective Date" shall mean January 1, 1990.
2.14 "Par Value" shall mean the par value of Common Stock as established by
Community Financial Group, Inc. On the Effective Date of the Plan, Par Value is
$6.00 per share.
2.15 "Payment Period" shall mean each of the twelve (12) calendar month
periods of a Plan Year during which payroll deductions will be accumulated under
the Plan and shall include only regular paydays falling within each such Payment
Period.
2.16 "Plan" shall mean the Community Financial Group, Inc. Associates' Stock
Purchase Plan, as contained herein and as amended from time to time.
2.17 "Plan Year" shall mean the 12 consecutive-month period of January 1
through December 31.
2.18 "Purchase Price" shall be, for each Payment Period, the lesser of:
2
<PAGE> 5
(a) The Market Price at which the Trustee is able to acquire the
Company's Common Stock on the open market at the Open Market Purchase
Date as defined in ARTICLE 2.18.4 below; or
(b) The Gross Purchase Price (as defined in ARTICLE 2.18.1 below), less
the Purchase Price Discount (as defined in ARTICLE 2.18.2 below),
rounded up to avoid fractions other than one-quarter (1/4), one-half
(1/2) and three-quarters (3/4); provided, however, that in no event
shall the Purchase Price be less than Par Value (as defined in ARTICLE
2.14 above).
2.18.1 "Gross Purchase Price" shall be the lesser of the:
(a) Average Market Price of the Company's Common Stock on the first
Business Day of the Payment Period; or
(b) Average Market Price of the Company's Common Stock on the last
Business Day of the Payment Period.
2.18.2 "Purchase Price Discount" shall be fifteen percent (15%) of the Gross
Purchase Price until September 30, 1996, and thereafter the Purchase Price
Discount shall be sixteen percent (16%) or such other percentage as may be
established from time to time by the Board. Nevertheless, in those Payment
Periods when the Purchase Price shall equal less than the Par Value of the
Company's Common Stock, then the Purchase Price Discount shall be decreased by
the smallest amount necessary to avoid violation of ARTICLE 5 of this Stock
Purchase Plan; provided, however, in no event shall the Purchase Price Discount
be reduced below zero percent (0%).
2.18.3 "Market Price" shall be the net purchase price of the Company's Common
Stock at which the Trustee may acquire the Company's Common Stock upon the open
market.
2.18.4 "Open Market Purchase Date" shall be the first Business Day
following the Business Day the computation of the "Purchase Price" is completed
pursuant to ARTICLE 2.18 above.
2.19 "Termination of Employment" shall mean the cessation of active work by
an Associate for the Company. However, should an Associate cease active work due
to sickness, injury, leave of absence, or temporary layoff, employment shall be
deemed to be continued according to the policies of the Company.
2.20 "Trustee" shall mean The Bank of Nashville.
When appropriate, words used in this Plan in the singular may be read
in the plural, or the plural may include the singular, or the masculine may
include the feminine.
3
<PAGE> 6
ARTICLE 3
ELIGIBLE ASSOCIATES
All full-time Associates of the Company or permanent part-time
Associates of the Company who work at least twenty (20) hours per week and five
(5) months each calendar year shall purchase shares of the Company's Common
Stock under the terms of this Plan; provided, however, that in no event may an
Associate who would own stock representing 5% or more of the total combined
voting power or value of all classes of stock of the Company after an option is
granted hereunder be or continue to be considered to be an eligible Associate
for purposes of this Plan while exceeding such stock ownership level. For
purposes of determining stock ownership under this ARTICLE, the rules of Section
425(d) of the Code shall apply and stock which the Associate may purchase under
outstanding options shall be treated as stock owned by the Associate.
In no event may individuals other than Associates be granted options to
purchase stock under this Plan.
ARTICLE 4
STOCK SUBJECT TO THE PLAN
The total number of shares of Common Stock of the Company that shall be
purchased under the Plan is 100,000 shares, which may consist, in whole or in
part, of unissued shares or treasury shares.
ARTICLE 5
GRANT OF OPTION AND PURCHASE OF STOCK
Twelve times each Plan Year, as of the first day of each Payment
Period, the Company will grant to each eligible Associate an option to purchase
Common Stock of the Company as of the last day of such Payment Period at the
Purchase Price of Common Stock for that Payment Period not to exceed ten percent
(10%) of the eligible Associate's Compensation. As a condition of employment,
each Associate shall authorize, or shall be deemed to authorize under ARTICLES 7
and 10, payroll deductions to pay for the Common Stock for which the option has
been granted. All payroll deductions of an Associate shall be credited to the
Associate's Account prior to the actual purchase of stock at the end of a
Payment Period. Deductions after the last day of a Payment Period shall be
included in the subsequent Payment Period.
4
<PAGE> 7
As of the end of each Payment Period, the Company shall purchase for
each eligible Associate who is then a participant in the Plan as of the last day
of such Payment Period, at the Purchase Price, shares of the Common Stock of the
Company to the extent of his accumulated payroll deductions as of the last day
of a Payment Period. Notwithstanding the foregoing, if the Purchase Price of the
Common Stock on the relevant Business Day is less than the Par Value of Common
Stock on that day as established by the Company, the Company shall not be
permitted hereunder to purchase Common Stock from the Company, and the
provisions of the preceding sentence shall be suspended. In the event Common
Stock cannot be purchased with respect to a Payment Period, payroll deductions
shall continue under this Plan, however, and the accumulated payroll deductions
in Accounts other than for the then current Payment Period shall be used to
purchase Common Stock on the first date such Common Stock may be purchased from
the Company at a Purchase Price which is equal to or above Par Value. If the
Purchase Price shall be the Market Price calculated pursuant to ARTICLE 2.18(a),
then the Trustee shall proceed to acquire the Company's Common Stock in the open
market on the Open Market Purchase Date.
Any cash dividends paid on Common Stock held in an Associate's Account
shall be used to purchase additional shares of Common Stock at the Purchase
Price as soon as possible on or after the dividend date. Stock dividends paid on
Common Stock held in an Associate's Account shall be held in that Account and
shall be treated as Common Stock purchased under this Plan.
No Associate shall be permitted to purchase Common Stock under the Plan
and any similar plans of the Company or any parent or subsidiary corporations
which exceeds $25,000 of fair market value of such stock (determined at the time
such purchase is made) for each calendar year in which such purchase is made.
The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code.
ARTICLE 6
INTENTION TO PURCHASE
Each eligible Associate who continues to be a participant in the Plan
on the last day of a Payment Period shall be deemed to have irrevocably stated
his intention to exercise his option and purchase from the Company the number of
such whole or fractional shares of Common Stock reserved for the purpose of the
Plan as his accumulated payroll deductions during such Payment Period will pay
for at such Purchase Price. If a participant is not an Associate on the last day
of a Payment Period, he shall not be entitled to exercise his option and
purchase such shares.
5
<PAGE> 8
ARTICLE 7
AUTHORIZATION FOR ENTERING PLAN
An Associate may enter the Plan by filling out, signing and delivering
to the Company an Authorization in the form and manner satisfactory to the
Company:
(a) stating the percentage or fixed dollar amount of Compensation to
be deducted regularly from his pay; and
(b) authorizing the purchase of stock for him in each Payment Period
in accordance with the terms of the Plan.
Such Authorization must be received by the Company no less than ten
(10) days before the beginning of a Payment Period in order to be effective for
such Payment Period and shall be effective until changed in accordance with
ARTICLE 9.
If an eligible Associate does not properly complete an Authorization
Form, or does not complete such Form in time before any deadline, he shall be
deemed to authorize payroll deductions at the lowest level permitted in ARTICLE
8.
The Company will accumulate and hold in the Associate's Account the
amounts deducted from his pay until such amounts are used to purchase Common
Stock.
ARTICLE 8
AMOUNT OF PAYROLL DEDUCTIONS
An Associate may authorize payroll deductions in an amount not less
than $5.00 per pay period, but not more than 10% of his Compensation received
during the Payment Period.
ARTICLE 9
CHANGE IN PAYROLL DEDUCTIONS
Deductions may be increased or decreased only at the beginning of a
Payment Period. A new Authorization must be received by the Committee no less
than ten (10) days before the beginning of a Payment Period in order to be
effective for such Payment Period.
6
<PAGE> 9
ARTICLE 10
HARDSHIP WITHDRAWAL
An Associate may request a withdrawal from participation in the Plan in
the event of hardship. For purposes of this Section, hardship is defined as an
immediate and heavy financial need as provided in the Code Section 401(k) plan
maintained by the Company. As Associate's request for hardship withdrawal shall
be made by delivering an Authorization to the Committee indicating such
Associate's intent to withdraw. If the Committee approves such hardship
withdrawal, the Company will promptly refund the entire balance of the
Associate's deductions accumulated during the current Payment Period and the
number of paid-up shares of Common Stock held in the Associate's Account, but
such withdrawal shall not be in excess of the amount of the immediate and heavy
financial need.
An Associate who makes a hardship withdrawal from the Plan shall be
suspended from participation in the Plan for six (6) months. To re-enter, the
Associate must file a new Authorization no less than ten (10) days before the
beginning of a Payment Period in order to be effective for such Payment Period.
If the again eligible Associate does not properly and timely complete an
Authorization Form, he shall be deemed to authorize payroll deductions at the
lowest level permitted in ARTICLE 8.
ARTICLE 11
JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP; FRACTIONAL SHARES
Stock purchased under the Plan will be held in an Account in the name
of the Associate or, if his Authorization so specifies, in the name of the
Associate and another person of legal age as joint tenants with rights of
survivorship.
While an Associate, the Associate may request, and the Plan shall
issue, Common Stock from his Account. Certificates will be issued to the
Associate, however, only in multiples of one hundred (100) shares.
As soon as possible after the Associate ceases to be an Associate as
described under ARTICLE 13, all Common Stock remaining in his Account shall be
issued, and all payroll deductions not yet used to purchase Common Stock shall
be refunded, in accordance with ARTICLE 13. The value of fractional shares of
Common Stock in his Account at that time will be issued in cash.
The distribution shall be made in a single payment (to the extent
possible) to the former Associate, or in the event of the Associate's death, to
his designated beneficiary (or estate, if
7
<PAGE> 10
no designation is made), unless there is a joint tenant with rights of
survivorship. A Participant's designation of a beneficiary will be ineffective
to the extent it purports to supersede the rights of a joint tenant with rights
of survivorship.
ARTICLE 12
NO TRANSFER OR ASSIGNMENT OF ASSOCIATE'S RIGHTS
An Associate's rights under the Plan are his alone and may not be
transferred, assigned to or availed of by any other person.
ARTICLE 13
TERMINATION OF ASSOCIATE'S RIGHTS
An Associate's participation in, and his option rights under, the Plan will
terminate when he ceases to be an Associate because of retirement, resignation,
discharge, death, change of status, or due to his Termination of Employment. A
withdrawal authorization will be considered as having been received from the
Associate on the day he ceases to be an Associate, and as soon as possible
thereafter his Account shall be distributed in accordance with ARTICLE 11.
If an Associate's payroll deductions are interrupted by any legal process, a
withdrawal authorization will be considered as having been received from him on
the day the interruption occurs to the extent that the legal process attaches
and levies upon Common Stock held in his Account and the distribution shall be
made in the name of the Associate, and for his benefit, to the court which
issued the legal process.
ARTICLE 14
SUSPENSION TERMINATION AND AMENDMENTS TO THE PLAN
The Plan may be suspended or terminated at any time by the Board of
Directors of the Company. It will terminate in any case when all or
substantially all of the shares of Common Stock available from the Company for
the purposes of the Plan have been purchased. If at any time shares of Common
Stock reserved for the purpose of the Plan remain available for purchase but not
in sufficient number to satisfy all then unfilled purchase requirements, the
available shares shall be apportioned among
8
<PAGE> 11
participants in proportion to their options and the Plan shall terminate. Upon
such termination or any other termination of the Plan, all payroll deductions
not used to purchase stock will be refunded.
The Board of Directors of the Company also reserves the right to amend
the Plan from time to time in any respect.
ARTICLE 15
LIMITATIONS ON SALE OF STOCK PURCHASED UNDER THE PLAN
The Plan is intended to provide Common Stock to Associates for investment and
not for resale. The Company does not, however, intend to restrict or influence
any Associate in the conduct of his own affairs. Since the Common Stock of the
Company is registered under Federal and State law, an Associate may, therefore,
sell stock purchased under the Plan at any time he chooses after the issuance of
such stock.
ARTICLE 16
COMPANY'S PAYMENT OF EXPENSES RELATED TO THE PLAN
The Company will bear all costs of administering and carrying out the
Plan.
ARTICLE 17
ADMINISTRATION OF THE PLAN
The Bank of Nashville shall be the Plan Administrator but the
day-to-day operation of the Plan shall be performed by the Committee, which
shall be appointed by the Board. Acts by a majority of the Committee, or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
The interpretation and construction by the Board, or by the Committee
acting for the Board, of any provisions of the Plan shall be final. The Board,
or the Committee acting for the Board, may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any option granted under it.
9
<PAGE> 12
ARTICLE 18
STOCKHOLDERS
The purchase of shares of Common Stock by an Associate constitutes
ownership of the shares by such Associate.
ARTICLE 19
APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
under the Plan will be used for general corporate purposes.
ARTICLE 20
CHANGES IN CAPITAL
If the Common Stock of the Company subject to the Plan shall at any
time be changed or exchanged by declaration of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number and kind of shares subject to this Plan and the purchase prices shall be
appropriately and equitably adjusted so as to maintain the purchases prices
thereof. In the event of a dissolution or liquidation of the Company or a
merger, consolidation, sale of all or substantially all of its assets, or other
corporate reorganization in which the Company is not the surviving corporation,
but the holders of its Common Stock receive securities of another corporation,
any outstanding options hereunder shall terminate. The existence of the Plan
shall not in any way prevent any transaction described herein and no holder of
an option shall have the right to prevent such transaction. Notwithstanding the
foregoing, the effectuation of the Agreement and Plan of Exchange whereby the
outstanding shares of The Bank were exchanged for shares of Community Financial
Group, Inc. shall not have the effect of terminating any options outstanding
under the Plan, and any and all such outstanding options shall be automatically
converted to options to purchase shares of Community Financial Group, Inc.
ARTICLE 21
APPROVAL OF SHAREHOLDERS
This Plan was initially adopted by the Board of Directors of The Bank
and was approved by the shareholders of The Bank within twelve (12) months of
such adoption date.
10
<PAGE> 13
ARTICLE 22
ADOPTION BY SUBSIDIARIES AND AFFILIATES
The Plan may be adopted by Community Financial Group, Inc. and any
subsidiary or affiliate of The Bank or of Community Financial Group, Inc. by
action of their respective Boards of Directors.
IN WITNESS WHEREOF, the Company and the Trustee hereby adopt this
Amended and Restated Plan effective as of the close of business on April 30,
1996.
THE BANK OF NASHVILLE
ATTEST:
By: /s/ Mack S. Linebaugh, Jr., President
/s/ Joan B. Marshall --------------------------------------
- ---------------------------- Mack S. Linebaugh, Jr., President
Joan B. Marshall, Secretary and Chief Executive Officer
THE BANK OF NASHVILLE, TRUSTEE
ATTEST:
By: /s/ Wirt C. McKnight
/s/ Joan B. Marshall --------------------------------------
- ---------------------------- Wirt C. McKnight
Joan B. Marshall, Secretary Senior Vice President
IN WITNESS WHEREOF, Community Financial Group, Inc. hereby adopts this
Amended and Restated Plan effective as of the close on April 30, 1996.
COMMUNITY FINANCIAL GROUP, INC.
ATTEST:
By: /s/ Mack S. Linebaugh, Jr.,
/s/ Joan B. Marshall --------------------------------------
- --------------------------- Mack S. Linebaugh, Jr., Chairman
Joan B. Marshall, Secretary President and Chief Executive Officer
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
COMMUNITY FINANCIAL GROUP, INC.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income Per Common Share(1)
- --------------------------
Net income (in thousands) $ 2,547 $ 2,514 $ 2,010
========== ========== ==========
Net income per share $ 1.15 $ 1.14 $ .92
========== ========== ==========
Weighted average common shares
outstanding 2,219,834 2,204,254 2,181,909
========== ========== ==========
Income Per Common Share,
- ------------------------
Assuming Full Dilution (1)
--------------------------
Net income (in thousands) $ 2,547 $ 2,514 $ 2,010
========== ========== ==========
Net income per share $ 1.15 $ 1.14 $ .92
========== ========== ==========
</TABLE>
(1) Net income per share has been computed using the weighted average
number of common shares and common share equivalents outstanding during
each year presented. Common stock equivalents include stock options.
Warrants have not been included in the Company's computation of
earnings per share because the market price of the Company's common
stock has been less than the exercise price of the warrants since
issue. See Note B to the Company's consolidated financial statements
included in the Annual Report to Shareholders for the year ended
December 31, 1996 incorporated herein by reference.
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Overview
Community Financial Group, Inc. (CFGI), is a bank holding company which
was formed on April 30, 1996 and is the parent company of its
wholly-owned subsidiary, The Bank of Nashville (The Bank), collectively
referred to as the Company. The Bank is a state chartered bank
incorporated in 1989 under the laws of the State of Tennessee. On April
30, 1996, following regulatory and shareholder approval, CFGI executed
a plan of exchange with The Bank, whereby CFGI became the parent bank
holding company of The Bank. Under the agreement, each share of the
common stock of The Bank was exchanged for one share of CFGI, and each
outstanding warrant and each outstanding option to purchase common
shares of The Bank automatically became warrants and options to
purchase shares of CFGI. The balances and activity for the periods
prior to April 30, 1996, are those of The Bank only. The accompanying
consolidated financial statements and notes are considered to be an
integral part of this analysis and should be read in conjunction with
the narrative.
The purpose of this discussion is to focus on significant changes in
the financial condition and results of operations of the Company during
the past two years. This discussion and analysis is intended to
supplement and highlight information contained in the accompanying
consolidated financial statements and the selected financial data
presented elsewhere in this report.
During the past two years, management has focused on maintaining
overall asset quality, providing superior personalized customer service
and beginning the implementation of a clearly defined strategic
expansion of its delivery systems and locations. Additionally,
attention to developing and maintaining a strong sales culture within
the Company continues to result in the expansion and diversification of
the Company's customer base. New products and services have been
introduced to select segments of the customer base while additional
enhancements have been added to existing products and services. During
1996, the Company began offering on-line cash management services
through "Bank On-Line" to its commercial customers and providing debit
card services through "MasterMoney" to its consumer base. During 1995,
the Company expanded its delivery system by establishing ATM's and
commercial depositories at Cummins Station and on Music Valley Drive
bringing the total number of such locations at year end 1995 to four.
These systems were further expanded during 1996 as a cash dispenser was
installed in Green Hills Mall. During 1996, the Company established a
mobile branching service, "Bank-on-Call", which provides the
convenience of "at-your-door" banking service. Also, during 1996, the
Company received approval to open its first branch location in Green
Hills at the Glendale Center. The Green Hills office opened on January
23, 1997. The establishment of "Bank-on-Call" services and the opening
of the Company's first branch location are key strategies and very
important to long-term growth plans. During 1996, the Company continued
its commitment to providing bank customers access to their accounts
through competitors' ATM's at no charge within the State of Tennessee
by implementing a program of rebating any surcharges imposed by ATM
providers within the State of Tennessee when accessed by a Bank of
Nashville ATM or MasterMoney card.
The Company's assets were $166.7 million at December 31, 1996, compared
to $152.8 million at December 31, 1995. Shareholders' equity was $22.1
million at year end 1996 compared to $20.0 million at year end 1995.
The Company paid dividends of $.16 per share in 1996 by declaring four
quarterly dividends of $.04 per share each. There were no dividends
paid during 1995. The Company reported earnings of $2.5 million or
$1.15 per share for 1996. Earnings for 1995 were $2.5 million or $1.14
per share, but benefited from a $520,000 negative provision for
possible loan losses, while no provision was reported in 1996.
Additionally, earnings were impacted in 1996 as the Company recorded a
$168,000 provision for income taxes compared to only $32,000 recorded
in 1995 as a result of utilizing all of the Federal net operating loss
carryforwards in 1996. Return on average shareholders' equity
(exclusive of SFAS 115 adjustments) was 12.18% in 1996 compared to
13.54% in 1995 while return on average assets for 1996 and 1995 was
1.61% and 1.69%, respectively.
The maintenance of asset quality and management's assessment of the
level of the allowance for possible loan losses were reflected in no
provision for possible loan losses being recorded in 1996, a period in
which net charge-offs were $156,000. During 1995, the Company
experienced net recoveries of $713,000 which resulted in management's
decision to reduce its allowance for possible loan losses by recording
a net negative provision for possible loan losses of $520,000. During
1996, net nonperforming assets increased 28.4% to
6
<PAGE> 2
$579,000 from $451,000 at year end 1995 while total loans increased
9.7% from $98.3 million at December 31, 1995 to $107.9 million at
December 31, 1996. The results of the Company's focus on maintaining
asset quality continues to be reflected in these statistics. A more
detailed analysis of nonperforming assets and the provision for
possible loan losses is presented under the captions, "Provisions for
Possible Loan Losses" and "Nonperforming Assets and Risk Elements."
Deposits increased $2.8 million, or 2.1%, from $130.5 million at year
end 1995 to $133.3 million at year end 1996. The net loan to deposit
ratio increased from 73.0% at year end 1995 to 78.8% at year end 1996,
resulting primarily from a significant increase in net loans, $9.7
million, which, among other things, reflects the Company's business
development efforts during 1996.
Income taxes of $168,000 were recorded during 1996 which compares to
only $32,000 recorded during 1995 as the Company benefited from the use
of net operating loss carryforwards during 1995 and 1996. As a result
of management's evaluation of the likelihood of receiving a tax benefit
from the net operating loss carryforward utilizing the more likely than
not standard, the Company maintained a valuation allowance to offset
the net deferred tax assets in 1995. All federal NOL's were utilized in
1996.
Net Interest Income
Net interest income is the principal component of the Company's income
stream and represents the difference or spread between interest income
generated from earning assets and the interest expense paid on
liabilities. Fluctuations in interest rates, as well as volume and mix
changes in earning assets and interest bearing liabilities, can
materially impact net interest income.
Net interest income for 1996 increased 15.1% from 1995. This increase
resulted primarily from a 6.3% increase in average earning assets which
was partially offset by a 4.8% increase in average interest bearing
liabilities. Additionally, net interest income was impacted by a
decline of 7 basis points in the average rate earned on earning assets
which was more than offset by a 41 basis point decline in the average
rate paid on interest bearing liabilities. The following two schedules
present an analysis of net interest income and the detail of changes in
interest income, interest expense and the resulting net interest income
due to the fluctuations in volume and rates.
7
<PAGE> 3
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
<TABLE>
<CAPTION>
1996 1995
--------------------------------- --------------------------------
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense Rates Balance Expense Rates
- ------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans (net of unearned income):
Commercial $ 39,858 $ 3,762 9.44% $ 37,511 $ 3,764 10.03%
Real Estate - mortgage 52,895 4,836 9.14 46,505 4,270 9.18
Real Estate - construction 8,144 770 9.45 3,702 363 9.81
Consumer 1,998 201 10.06 1,804 229 12.68
- ------------------------------------------------------------------------------------------------------------
Total loans (net of
unearned income) 102,895 9,569 9.30 89,522 8,626 9.64
- ------------------------------------------------------------------------------------------------------------
Securities 45,163 3,016 6.68 49,444 3,259 6.59
Federal funds sold 6,445 314 4.88 6,411 362 5.65
- ------------------------------------------------------------------------------------------------------------
Total earning assets $154,503 $12,899 8.35% $145,377 $12,247 8.42%
Allowance for possible
loan losses (3,124) (2,888)
Cash and due from banks 4,971 4,263
Premises and equipment, net 624 663
Accrued interest and
other assets 1,641 1,593
- ------------------------------------------------------------------------------------------------------------
$158,615 $149,008
============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
NOW accounts $ 5,610 $ 140 2.50% $ 5,120 $ 145 2.83%
Money market accounts 59,169 2,813 4.75 48,495 2,538 5.23
Time certificates less
than $100,000 29,982 1,782 5.94 34,749 2,109 6.07
Time certificates
$100,000 and greater 27,431 1,563 5.70 30,905 1,850 5.99
Federal Home Loan Bank and
other borrowings 2,745 148 5.37 -- -- --
- ------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities $124,937 $ 6,446 5.16% $119,269 $ 6,642 5.57%
Non-interest bearing demand
deposits 10,661 9,566
Accounts payable and accrued
liabilities 2,053 1,836
- ------------------------------------------------------------------------------------------------------------
Total liabilities 137,651 130,671
- ------------------------------------------------------------------------------------------------------------
Shareholders' equity 20,964 18,337
- ------------------------------------------------------------------------------------------------------------
$158,615 $149,008
============================================================================================================
Interest income/earning assets 8.35% 8.42%
Interest expense/earning assets 4.17 4.57
- ------------------------------------------------------------------------------------------------------------
Net interest margin 4.18% 3.85%
============================================================================================================
</TABLE>
Nonaccrual and 90 days or more past due loans are included in average
loans and average earning assets. Consequently, yields on these items
are lower than they would have been if all loans had earned at their
contractual rate of interest. Had nonaccrual and 90 days or more past
due loans earned income at the contractual rate, interest income of
$74,000 and $78,000 would have been recognized during 1996 and 1995,
respectively.
8
<PAGE> 4
ANALYSIS OF CHANGES IN NET INTEREST INCOME
<TABLE>
<CAPTION>
1996 Compared to 1995 1995 Compared to 1994
Increase (Decrease) Due to Increase (Decrease) Due to
- ------------------------------------------------------------------------------------------
(IN THOUSANDS) (1) RATE VOLUME NET RATE VOLUME NET
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ (310) $ 1,253 $ 943 $ 746 $ 1,469 $ 2,215
Securities 43 (286) (243) 564 160 724
Federal funds sold (50) 2 (48) 117 (184) (67)
- ------------------------------------------------------------------------------------------
Total Interest Income (317) 969 652 1,427 1,445 2,872
- ------------------------------------------------------------------------------------------
INTEREST EXPENSE:
NOW Accounts (18) 13 (5) 19 (13) 6
Money Market Accounts (248) 523 275 661 274 935
Time certificates
under $100,000 (43) (284) (327) 368 (9) 359
Time certificates
$100,000 and over (87) (200) (287) 448 141 589
Federal Home Loan Bank
and other borrowings -- 148 148 -- -- --
- ------------------------------------------------------------------------------------------
Total Interest Expense (396) 200 (196) 1,496 393 1,889
- ------------------------------------------------------------------------------------------
NET INTEREST INCOME $ 79 $ 769 $ 848 $ (69) $ 1,052 $ 983
==========================================================================================
</TABLE>
(1) Changes in net interest income are attributed to either
changes in average balances (volume change) or changes in
average rates (rate change) for earning assets and sources of
funds on which interest is received or paid. Volume change is
calculated as change in volume multipled by the old rate while
rate change is change in rate multipled by the old volume. The
rate/volume change is allocated between volume change and rate
change at the ratio each component bears to the absolute value
of their total. Nonaccrual and 90 days or more past due loans
are included in average loans for which changes due to rates
and volume are computed.
Interest income increased $.7 million, or 5.3%, in 1996 compared to
1995. This increase resulted from a 6.3% increase in the volume of
average earning assets, the effect of which was slightly diminished by
a 7 basis point decline in the average rate earned on these assets.
Average loans increased 14.9%, average investments declined 8.7%, while
average Fed Funds sold remained level. Interest income on loans
increased 10.9%, from 1995 to 1996, as a result of the increased volume
of loans outstanding which was partially offset by a decline in the
average interest rate earned on those loans of 34 basis points.
Interest income on investment securities decreased 7.5% from 1995 to
1996, as a result of a 8.7% decline in the volume of securities that
was partially offset by a 9 basis point increase in the average rate
earned on investment securities. Interest income on Federal Funds sold
declined 13.3% in 1996 compared to 1995 as a result of a 78 basis point
decline in the average rate earned on these funds. Generally, total
earning assets reflected an increase in interest income which resulted
primarily from growth in loans and a shift in asset mix from
investments to higher yielding loans.
Total interest expense decreased 3.0% in 1996 due to a 41 basis point
decrease in the average rate paid on interest bearing liabilities which
was partially offset by an increase of 4.8% in the average volume of
these liabilities. The increase in average volume of interest bearing
liabilities was the result of a 22.0% increase in average Money Market
Investment Account balances and a 9.6% increase in average NOW Account
balances as well as $2.7 million in average borrowed funds in 1996
compared to no borrowed funds during 1995. These increases were
partially offset by volume declines of 13.7% in average balances for
certificates of deposit less than $100,000 and 11.2% in certificates of
deposit $100,000 or greater. The decrease in rates paid on interest
bearing liabilities was reflected in all areas with the largest
declines in rates paid on Money Market Investment Accounts.
Trends in net interest income are commonly evaluated in terms of
average rates, using the net interest margin and the interest rate
spread. The net interest margin, or the net yield on earning assets, is
computed by dividing net interest income by average earning assets.
This ratio represents the difference between the average yield on
average earning assets and the average rate paid for all funds used to
support those earning
9
<PAGE> 5
assets, including both interest bearing and non-interest bearing
sources of funds. The Company's net interest margin increased 33 basis
points to 4.18% in 1996, primarily as the result of a decline in
deposit rates, a higher loan to deposit ratio and the impact of shifts
in the mix of earning assets to higher yielding loans.
Changes in the mix of earning assets or supporting liabilities can
either increase or decrease the net interest margin without affecting
interest rate sensitivity. In addition, the interest rate spread
between an asset and its supporting liability can vary significantly
while the timing for repricing of both the asset and the liability
remain the same, both impact net interest income. It should be noted,
therefore, that a matched interest sensitivity position, by itself,
will not ensure maximum net interest income. Management continually
evaluates the condition of the economy, the pattern of market interest
rates and other economic data to determine the types of investments
that should be made and at what maturity. Using this analysis,
management from time to time assumes calculated interest sensitivity
gap positions to maximize net interest income based upon anticipated
movement in the general level of interest rates. During the fourth
quarter of 1996, net interest income benefited from a leveraging
strategy implemented late in the third quarter which consisted of
matching Federal Home Loan Bank borrowings to fund the purchase of
additional investment securities. While this strategy contributed to
increasing net interest income, it also has the effect of lowering the
net interest margin. See "Liquidity and Asset/Liability" section.
The interest rate spread measures the difference between the average
yield on earning assets and the average rate paid on interest bearing
sources of funds. The interest rate spread eliminates the impact of
non-interest bearing funds and gives a direct perspective on the effect
of market interest rate movement. During 1996, the interest rate spread
improved compared with 1995. The following table presents an analysis
of the Company's interest rate spread and net yield on earning assets.
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------------------
1996 1995
-------------------------------------------------------------------
<S> <C> <C>
Rate earned on interest earning assets 8.35% 8.42%
Rate paid on interest bearing liabilities 5.16% 5.57%
Interest rate spread 3.19% 2.85%
Net yield on earning assets 4.18% 3.85%
</TABLE>
Total interest income in 1996 compared to 1995 increased $652,000. The
increased level of earning assets combined with the shift and mix of
earning assets and interest bearing liabilities resulted in a higher
level of net interest income. Total interest expense decreased in 1996
compared to 1995 by $196,000. Average interest bearing liabilities
increased only 4.8% while average earning assets increased 6.3%. The
average rate paid on interest bearing liabilities decreased 41 basis
points in 1996 compared to 1995 while the average rate earned on
earning assets decreased only 7 basis points. The average rate paid on
all interest bearing liabilities in 1996 was 5.2% compared with 5.6% in
1995.
Provision for Possible Loan Losses
The Company maintains an allowance for possible loan losses at a level
that, in management's evaluation, is adequate to cover estimated losses
on loans based on available information at the end of each reporting
period. Considerations in establishing the allowance include historical
net charge-offs, changes in the credit risk, mix, and volume of the
loan portfolio, and other relevant factors, such as the risk of loss on
particular loans, the level of nonperforming assets, and economic
conditions. A more detailed discussion of nonperforming assets is
presented under the caption, "Nonperforming Assets and Risk Elements."
In 1996, the Company recorded no provision for possible loan losses,
compared with a net negative provision of $520,000 in 1995. The 1995
negative provision resulted primarily from the Company having recorded
recoveries of previously charged-off loans in excess of current year
charge-offs in the amount of $713,000. In 1996, the Company recorded
net charge-offs of $156,000. The allowance for possible loan losses was
2.7% of loans at December 31, 1996, compared to 3.1% of loans at the
same date in 1995. The decision to record no provision for possible
loan losses in 1996 as well as the recording of a negative provision in
1995 reflect management's evaluation of the adequacy of the allowance
for possible loan losses considering various factors, including the
level of loans outstanding, economic conditions, and an assessment of
portfolio quality and risk characteristics. The decision in 1995 to
record negative provisions was primarily due to continued improvement
in the overall quality of the Company's loan portfolio, including
continued performance of those loans previously categorized as
substandard or special mention by the Company's internal loan rating
10
<PAGE> 6
system, and increases in the level of the allowance for possible loan
losses as a result of significant net recoveries.
Management will continue to evaluate the level of the allowance for
possible loan losses and will determine what additional adjustments, if
any, are necessary. Continued growth in the loan portfolio will be a
factor in this evaluation, as well as the quality of this portfolio and
other external and internal factors. The level of the allowance and the
amount of the provision are determined on a quarter by quarter basis
and, given the inherent uncertainties involved in the estimation
process, no assurance can be given as to the amount of the allowance at
any future date. It is anticipated that there will be a provision
expense in 1997; however, the specific amount cannot be determined at
this time. Changes in circumstances affecting the various factors
considered by the Company in establishing the level of the allowance
could significantly affect whether a provision is warranted in 1997,
and the amount thereof.
The following table represents a recap of activity in the allowance for
possible loan losses during the past two years.
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(IN THOUSANDS) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
ALLOWANCE FOR POSSIBLE LOAN LOSSES, JANUARY 1 $ 3,034 $ 2,841
LOANS CHARGED OFF:
Commercial (450) (344)
Real estate (243) _
Consumer (4) (1)
- -------------------------------------------------------------------------------
Total charge-offs (697) (345)
- -------------------------------------------------------------------------------
RECOVERIES OF LOANS PREVIOUSLY CHARGED OFF:
Commercial 494 929
Real estate 46 129
Consumer 1 _
- -------------------------------------------------------------------------------
Total recoveries 541 1,058
- -------------------------------------------------------------------------------
NET (CHARGE-OFFS) RECOVERIES (156) 713
- -------------------------------------------------------------------------------
PROVISION CREDITED TO OPERATIONS _ (520)
- -------------------------------------------------------------------------------
ALLOWANCE FOR POSSIBLE LOAN LOSSES, DECEMBER 31 $ 2,878 $ 3,034
===============================================================================
Loans, net of unearned income
Year-end $ 107,888 $ 98,340
Average during year $ 102,895 $ 89,522
Allowance for possible loan losses
to year-end loans, net of unearned income 2.7% 3.1%
Provision credited for possible loan
losses to average loans, net of
unearned income -- (.6%)
Net charge-offs (recoveries) to
average loans, net of unearned income .2% (.8%)
</TABLE>
Net charge-offs in 1996 were $156,000 compared to net recoveries in
1995 of $713,000. Gross recoveries in 1996 were $541,000 compared to
$1,058,000 in 1995. These recoveries reflect the Company's efforts to
aggressively pursue the collection of loans charged-off in prior
periods.
11
<PAGE> 7
Non-Interest Income
Total non-interest income of $927,000 in 1996 reflects an increase of
28.4% in comparison with $722,000 reported in 1995. Non-interest
income, less nonrecurring income (gains/losses on sale of securities
and other real estate), increased 35.0%, or $238,000 from 1995. Trust
income increased $80,000, or 25.1%, in 1996 compared to 1995 as a
result of an increase in assets under management, an increase in the
number of fee based services provided and fee increases. The Company's
arrangement with BFP Financial Partners, Inc. to offer certain
investment services resulted in an increase of $22,000, or 44%, in
income in 1996 compared to 1995.
Income from foreclosed assets no longer carried on the Company's books
increased $93,000, or 251.4% in 1996 compared to 1995. These increases
in non-interest income were partially offset by a decrease of $16,000,
or 7.7%, in service fee income during 1996 compared to 1995. The
Company recorded a net loss on sale of securities available for sale of
$2,000 in 1996 compared with a net loss of $11,000 in 1995. These
transactions are a result of a balance sheet management strategy to
reposition the estimated average maturity of the Company's securities
portfolio. Gains on sale of foreclosed assets of $11,000 were reported
in 1996 compared to $53,000 in 1995.
Non-Interest Expense
Strategic decisions made to expand the Company's locations and delivery
system during 1996 by establishing "Bank-on-Call", a mobile branching
service, and to establish a branch location in Green Hills at the
Glendale Center, as well as the installation of a cash dispenser in
Green Hills Mall, and the upgrading of existing ATM and commercial
depository locations caused increased expenses. However, these are key
strategies and very important to the Company's long-term growth plan.
Total non-interest expense increased 8.5% to $4.7 million in 1996 from
$4.3 million in 1995. Non-interest expense represented 2.94% of average
total assets in 1996 compared to 2.89% in 1995. The non-interest
expense to assets ratio is an industry measure of a bank's ability to
control its overhead. Control of non-interest expense is essential to
profit maximization; therefore, all non-interest expense categories
have been and will continue to be closely monitored by management
through budgetary planning and regular measurement. During 1996,
salaries and employee benefits increased $257,000, or 11.8%, to $2.4
million from $2.2 million in 1995. This increase resulted primarily
from an increased number of employees which included the staffing of
the mobile branch service and the employment of staff for the Green
Hills location during the fourth quarter of 1996. Other staff additions
were made in the loan and bank operations areas. Occupancy expense
increased $73,000, or 14.9%, primarily as a result of expenses related
to the establishment of the Green Hills office. Data processing expense
increased $30,000, or 16.8%, as a result of the Company's expansion of
its ATM program. Legal expense increased $27,000 or 81.8%, to $60,000
in 1996 compared to $33,000 in 1995. This increase related primarily to
the formation of the bank holding company, CFGI. These increases in
non-interest expense items were partially offset by a decrease in FDIC
insurance expense of $157,000 in 1996 compared to 1995. This decrease
was the result of premium decreases announced by the FDIC in 1995 as
well as a reduction in the Company's assessment rate during 1995
resulting from an improved overall condition. The premium paid during
1996 reflected full benefit of these adjustments which were implemented
during 1995. Other operating expenses during 1996 increased 10.5%
reflecting the overall growth of the Company. At December 31, 1996, the
Company had 52 employees (one employee per $3.2 million in assets)
compared with 42 employees (one employee per $3.6 million in assets) at
December 31, 1995.
Non-personnel related expenses for 1996 were $2.2 million compared to
$2.1 million for 1995. Management currently anticipates minimal growth
in most non-interest expense categories during 1997 other than expenses
related to the expansion of the Company's delivery systems and service
locations. However, economic and other factors in the market which the
Company operates could adversely affect noninterest expense in 1997.
Income Taxes
During 1996, the Company fully utilized the Federal tax loss
carryforwards which had benefited income in prior years and continued
to do so for a portion of 1996. Reported earnings in 1996 and 1995
reflect the use of these net operating loss carryforwards. As a result
of having exhausted the Federal tax loss carryforwards, the Company
recorded a $168,000 provision for income taxes in 1996 compared to only
$32,000 in 1995. As a result of management's evaluation of the
likelihood of receiving a tax benefit from the net operating loss
carryforwards utilizing the more likely than not standard, the Company
maintained a valuation allowance to
12
<PAGE> 8
offset the net deferred tax assets during both 1996 and 1995. Having
fully utilized the Federal net operating loss caryforwards, it is
anticipated that the 1997 effective tax rate will more closely
approximate the applicable statutory income tax rates. Reference should
be made to Note G of the financial statements.
Earning Assets
Average earning assets in 1996 increased 6.3% from 1995. This increase
was the result of a 14.9% increase in average loans, the effect of
which was partially offset by a 8.7% decline in average investment
securities. The average earning asset mix continued to change during
1996 with loans at 66.6%, securities at 29.2%, and Federal Funds sold
at 4.2% compared to a mix in 1995 which reflected loans at 61.6%,
securities at 34.0%, and Federal Funds sold at 4.4% of the total
average earning assets. This shift in the mix of earning assets during
1996 contributed to the higher net interest income as the percentage of
loans to total earning assets increased. This growth in loans began in
the third quarter of 1994 and continued throughout 1995 and 1996. The
mix of earning assets is monitored on a continuous basis with
adjustments made in other areas based on the availability of quality
loan demand.
The 14.9% increase in average total loans in 1996 was primarily the
result of a 21.6% increase in average real estate mortgage and real
estate construction loans. The loan portfolio table below shows the
classification of loans by major categories at December 31, 1996 and
1995. Real estate mortgage and construction loans are primarily
commercial as opposed to 1-4 family residential.
LOAN PORTFOLIO
<TABLE>
<CAPTION>
December 31 Change from Prior Year
- --------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 % TOTAL 1995 % TOTAL AMOUNT %
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LOAN CATEGORIES
Commercial $ 35,721 33.1 $40,657 41.4 $(4,936) (12.1)
Real Estate/
Mortgage loans 58,763 54.5 48,648 49.5 10,115 20.8
Real Estate/
Construction loans 9,467 8.8 5,952 6.0 3,515 59.1
Consumer 3,937 3.6 3,083 3.1 854 27.7
- --------------------------------------------------------------------------------------
Total Loans $107,888 100.0 $98,340 100.0 $ 9,548 9.7
======================================================================================
</TABLE>
The loan portfolio mix continues to reflect the Company's efforts to
serve its target market of small and mid-sized businesses in its
community. The condition of the economy is further reflected in the
loan portfolio mix with commercial loans continuing during 1996, the
growth which began in the latter half of 1994 and continued throughout
1995. As economic conditions and loan demand remained strong, the
growth of commercial loans continued during 1996. Throughout 1995 and
1996, the local economy demonstrated more strength than was reflected
by the national economy. In an attempt to encourage economic activity,
the Federal Reserve Bank adjusted interest rates during 1995 and early
1996; however, no further adjustments occurred after February 1996. At
year end 1996, loan demand appeared to be weakening slightly; however,
it would still be considered strong. Concerns about the future of
interest rates and the level of the Federal deficit continue to be
reflected in a cautious approach to expansion by many small businesses.
The Company has not invested in loans that would be considered highly
leveraged transactions ("HLT") as defined by the Federal Reserve Board
and other regulatory agencies. Loans made by companies for
recapitalization or acquisition (including acquisitions by management
or employees) which result in a material change in the borrower's
financial structure to a highly leveraged condition are considered HLT
loans. The Company has no foreign loans.
The Company's securities held as available for sale provide for
liquidity needs while contributing to profitability. During 1996, the
Company began the implementation of a leveraging strategy which was
comprised of Federal Home Loan Bank secured borrowings used to fund
matched investments of U. S. Government and municipal securities. Such
strategies require careful monitoring and measurement of interest rate
risk but have the potential for providing significant contributions to
net interest income. See the "Liquidity and Asset/Liability Management"
section. The composition of the securities portfolio reflects an
investment strategy of maximizing portfolio yields commensurate with
risk and liquidity considerations. The primary objectives of the
Company's investment strategies are to maintain an appropriate level of
13
<PAGE> 9
liquidity and to provide a tool to assist in controlling the Company's
interest rate position while, at the same time, producing adequate
levels of interest income. There were no classification changes of the
Company's securities during 1996; however, during the fourth quarter of
1995, the Company transferred securities previously classified as held
to maturity to the available for sale category during a one time window
of opportunity provided by the Financial Accounting Standards Board
under SFAS No. 115 to make such adjustments in the classification of a
financial institutions investments. Securities held as available for
sale pursuant to SFAS No. 115, are carried on the Company's balance
sheet at estimated fair value. As a result, the Company recognized an
increase in equity of $64,000 for unrealized gains on securities held
as available for sale, net of tax at December 31, 1996, which compares
with an increase of $279,000 at year end 1995. During 1996, gross
securities sales were $6.0 million and paydowns, including prepayments,
were $9.6 million, representing 13.3% and 21.3%, respectively, of the
average total portfolio for the year. Net losses associated with the
sale of securities available for sale during 1996 were $2,000 compared
with net losses in 1995 of $11,000. Total average securities decreased
8.7% during 1996 compared to 1995, while total securities at year end
1996 were 3.1% less than year end 1995. The average yield on investment
securities was 6.7% and 6.6% in 1996 and 1995, respectively. The
following table contains the carrying amount of the securities
portfolio at the end of each of the last two years.
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
December 31
- --------------------------------------------------------------------------------
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Securities and
Obligations of U.S. Government Agencies $22,714 $28,381
Securities of states and political subdivisions 368 --
Collateralized Mortgage Obligations 21,694 18,745
Other 1,661 798
- --------------------------------------------------------------------------------
Total $46,437 $47,924
================================================================================
</TABLE>
The maturities and average weighted yields of the Company's investment
portfolio at the end of 1996 are presented in the following table using
primarily the estimated expected life. While the average stated
maturity of the mortgage backed securities was 4.8 years, the estimated
life is 3.4 years. At year end 1996, all securities were held as
available for sale.
DEBT SECURITIES AVAILABLE FOR SALE MATURITY SCHEDULE
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------------
Within After 1 But After 5 But
1 Year Within 5 Yrs Within 10 Yrs
- -------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Securities and
Obligations of U.S.
Government Agencies $ 6,723 6.5% $15,990 7.16% $ -- --
Securities of states
political subdivisions -- -- -- -- 368 7.6%
- -------------------------------------------------------------------------------------
Total $ 6,723 6.5% $15,990 7.16% $368 7.6%
=====================================================================================
</TABLE>
The above table excludes collateralized mortgage obligations at an
estimated fair value of $21.7 million and investments in Federal
Reserve Bank stock and Federal Home Loan Bank stock with an estimated
fair value of $1.7 million. Maturities of collateralized mortgage
obligations can be expected to differ from scheduled maturities due to
the prepayment or early call privileges of the issuer. Federal Reserve
Bank stock and Federal Home Loan Bank stock are equity securities with
no stated maturity.
Average Federal Funds sold remained relatively level during 1996
compared to 1995. At December 31, 1996, Federal Funds sold were $6.8
million reflecting an increase of $5.8 million, or 582.5%, from
December 31, 1995. Federal Funds sold represent a short-term investment
used primarily for liquidity purposes in the Company's asset/liability
management strategies.
14
<PAGE> 10
Deposits
The Company's volume and mix of liabilities in 1996 reflected business
development efforts, asset/liability management strategies, general
economic conditions and the interest rate environment, as well as
changes in the Company's asset level and the competitive environment.
During 1996, the portion of average liabilities and stockholders'
equity represented by deposits, the primary source of funding for the
Company, stood at 83.8%, a decrease from 86.5% in 1995. Year end
deposit balances increased 2.1%, or $2.7 million in 1996 compared to
the same period in 1995. The increase in year end deposits was a result
of a 26.6% increase in Money Market Accounts and a 38.3% increase in
non-interest bearing deposits. These increases were partially offset by
a decline of 23.5% in certificates of deposit less than $100,000, 16.4%
in certificates of deposit $100,000 and greater, and 20.4% in NOW
Accounts. Average Money Market Account and NOW Account deposits
increased 22.0% and 9.6%, respectively, in 1996 compared to 1995 while
average certificates of deposit declined 12.6% in 1996 compared to
1995. The average rate paid on interest bearing liabilities decreased
41 basis points in 1996 compared to 1995. This decrease in rate further
reflected the shift in mix of the Company's deposit account types as
funds shifted from higher yielding certificates of deposit to lower
rate Money Market and NOW Accounts.
The deposit mix at December 31, 1996 reflected the changes that
occurred during the year with non-interest bearing deposits at 9.6%,
NOW Accounts at 3.7%, Money Market Accounts at 48.1%, time deposits
under $100,000 at 19.8%, and time deposits $100,000 or greater at
18.8%. This compares to a mix at year end 1995 which reflected
non-interest bearing deposits at 7.0%, NOW Accounts at 4.7%, Money
Market Accounts at 38.8%, time deposits under $100,000 at 26.5%, and
time deposits $100,000 or greater at 23.0%. This shift in the mix of
the Company's deposit base reflects continuing efforts to expand the
customer base in transaction accounts, as well as the competitive
interest rate environment. Maturities of certificates of deposit of
$100,000 or more issued by the Company at December 31, 1996, are
summarized in the following table:
MATURITIES OF CERTIFICATES OF DEPOSIT OF $100,000 AND OVER
<TABLE>
<CAPTION>
--------------------------------------------------
(IN THOUSANDS)
--------------------------------------------------
<S> <C>
Three months or less $ 7,112
Over three through six months 8,356
Over six through twelve months 2,291
Over twelve months 7,362
--------------------------------------------------
Total $25,121
==================================================
</TABLE>
At year end 1996, the Company had Federal Home Loan Bank borrowings of
$9.5 million compared to no borrowed funds at year end 1995. The
average rate paid on average total interest bearing liabilities was
5.2% in 1996 compared with 5.6% in 1995. This decrease in the average
rate paid on interest bearing liabilities reflected the shift in the
mix of deposits and included borrowed funds. The decrease in the
average rate on interest bearing deposits reflected lower rates and
shorter maturities of certificates of deposit which originated or
renewed in 1996. In 1996 compared to 1995, the average rate paid on NOW
Accounts decreased 33 basis points, the average rate on Money Market
Accounts decreased 48 basis points, the average rate on certificates of
deposit less than $100,000 decreased 13 basis points and the average
rate on certificates of deposit $100,000 or greater decreased 29 basis
points. These rates are reflective not only of rates being offered, but
also of the maturity schedule of certificates of deposit which were
originated in prior periods.
The ratio of average loans, net of unearned income and allowance for
possible loan losses to average total deposits was 75.1% in 1996,
compared to 67.2% in 1995. This higher loan to deposit ratio reflected
the increase in net loans outstanding which continued in 1996. The net
loan to deposit ratio at December 31, 1996 was 78.8%, compared to 73.0%
at year end 1995.
15
<PAGE> 11
Liquidity and Asset/Liability Management
The Company's asset/liability management process actively involved the
Board of Directors and members of senior management. The
Asset/Liability Committee of the Board of Directors meets monthly to
review strategies and the volume and mix of assets as well as funding
sources. Decisions relative to different types of securities are based
upon the assessment of various economic and financial factors,
including, but not limited to, interest rate risk, liquidity, and
capital adequacy. Interest rate sensitivity is a function of the
repricing characteristics of the Company's portfolio of assets and
liabilities. These repricing characteristics are the timeframes within
which interest bearing assets and liabilities are subject to change in
interest rate either by replacement, repricing or maturity of the
instrument. Interest rate sensitivity management focuses on the
maturity structure of assets and liabilities and their repricing
characteristics during periods of change in market interest rates.
Effective interest rate risk management seeks to ensure that both
assets and liabilities respond to changes in interest rate movement
similarly to minimize the effect on net interest income. Management
utilizes computer interest rate simulation models and analysis to
determine the Company's interest rate sensitivity. Management also
evaluates the condition of the economy, the pattern of market interest
rates, and other economic data to determine the appropriate mix and
repricing characteristics of assets and liabilities. In addition to
ongoing monitoring of interest rate sensitivity, the Company may enter
into various interest rate contracts to augment the management of the
Company's interest sensitivity. These contracts are used to supplement
the Company's objectives relating to its interest sensitivity position.
The interest rate risk factor in these contracts is considered in the
overall interest management strategy of the Company.
The Company also utilizes certain leveraging strategies within risk
tolerance guidelines established by its Board of Directors for the
purpose of increasing net income. Such strategies involve the
utilization of borrowings to fund investment securities with similar
maturities or repricing characteristics which result in an acceptable
interest rate spread. During 1996, management and the Board of
Directors reviewed the risks and advantages of utilizing a leveraging
strategy for the purpose of increasing net interest income. Several
scenarios were carefully analyzed by the Company's investment advisor,
designated representatives of the Board of Directors and management
with final recommendation presented to the full Board of Directors for
approval. Parameters were established for matching investment purchases
with Federal Home Loan Bank borrowings. The Board established a maximum
level of borrowings/investments of $25 million to be assumed over a
period of 18 months and implemented in increments not to exceed $5
million in each phase. Pro formas were reviewed resulting in the
establishment of guidelines on interest rate risk as well as the types
and quality of investments to be considered for purchase. Proformas
include evaluating the impact of interest rate changes from 25 to 300
basis points. Monitoring by the Board of Director's on a monthly basis
and reporting guidelines were established to measure the results of
each phase over time. On a monthly basis a matched investment income
report is reviewed by the Board of Director's in an effort to manage
risk. The Asset Liability Committee of the Company's Board of Directors
reviews these results each month. The Board of Directors, after
assessing risks and results, must preapprove each additional phase of
this strategy prior to implementation. During the fourth quarter of
1996, net interest income benefited from the implementation of a
portion of this approved strategy of matching Federal Home Loan Bank
borrowings to fund the purchase of additional investment securities.
While this strategy contributes to an increase in net interest income,
it also has the effect of lowering the net interest margin and
increasing the Company's exposure to interest rate risk. Managing and
regularly monitoring the interest rate risk associated with the
leveraging strategy are the responsibility of both management and the
Company's Board of Directors. Liquidity and asset/liability strategies
include the utilization of borrowings from the Federal Home Loan Bank
or drawing on correspondent bank lines of credit to satisfy liquidity
or funding needs. At December 31, 1996, the Company had borrowings
totaling $9.5 million from the Federal Home Loan Bank. Approximately $5
million of these borrowings were used to fund investment securities.
There were no borrowings at December 31, 1995.
At December 31, 1996 and 1995, the Company had interest rate floor
contracts with a combined notional value of $8 million which expire in
1997 and 1998. These contracts were purchased to protect against
declining interest rates. These contracts were purchased during 1992
and 1993, and have resulted in interest income when evaluated on a life
to date basis. The Company recorded net interest expense on these
contracts of approximately $21,000 in both 1996 and 1995.
The following interest rate gap table reflects the Company's rate
sensitive position at December 31, 1996. The carrying amount of
interest rate sensitive assets and liabilities are presented in the
periods in which they next reprice to market rates or mature and are
summed to show the interest rate sensitivity gap. To reflect
anticipated prepayments, certain investments are included in the table
based on estimated rather than contractual maturity dates.
16
<PAGE> 12
<TABLE>
<CAPTION>
Expected Repricing or Maturity Date
---------------------------------------------------------------
Within One to Two to After Five
One Year Two Years Five Years Years Total
-------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Debt and equity securities $ 16,615 $ 14,461 $ 13,332 $ 2,029 $ 46,437
Average rate 6.48% 6.84% 7.22% 6.81% 6.8%
Net interest-earning loans 63,790 2,387 29,138 12,573 107,888
Average rate 8.96% 9.43% 9.04% 8.55% 8.95%
Other 6,825 -- -- -- 6,825
Average rate 5.25% --% --% --% 5.25%
-------------------------------------------------------------------------------------------------
Total interest-bearing assets 87,230 16,848 42,470 14,602 161,150
Liabilities
Deposits 100,143 13,846 6,513 46 120,548
Average rate 4.83% 6.05% 6.34% 7.03% 5.07%
Federal Home Loan
Bank Borrowings 9,500 -- -- -- 9,500
Average rate 5.34% -- -- -- 5.34%
-------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 109,643 13,846 6,513 46 130,048
-------------------------------------------------------------------------------------------------
Interest rate sensitivity gap $ (22,413) $ 3,002 $ 35,957 $ 14,556
=================================================================================================
Cumulative interest rate
sensitivity gap $ (22,413) $ (19,411) $ 16,546 $ 31,102
=================================================================================================
</TABLE>
Liquidity is the ability of a financial institution to meet the needs
of its customers and creditors. High levels of liquidity reduce
earnings, as liquidity is normally obtained at a net interest cost as a
result of generally lower yields on short-term, interest earning assets
and the higher interest expense usually associated with the extension
of deposit maturities. The Asset/Liability Committee of the Company
determined it to be appropriate during 1996 to maintain a slightly
lower level of liquidity in short-term instruments compared to 1995
since asset quality continued to remain strong, the percentage of
nonperforming loans to total loans remained relatively level, and
profitability increased. Management continually assesses the Company's
liquidity position and makes necessary adjustments to maintain a higher
or lower level of liquidity based on internal projections, external
economic conditions, and the Company's strategic plan.
Liquidity is strengthened and reinforced by maintaining a relatively
stable funding base which is achieved by providing relationship
banking, extending contractual maturities of liabilities and reducing
reliance on volatile short-term purchased funds. Maintaining acceptable
levels of liquidity has been an ongoing consideration of the Company's'
Asset/Liability Committee and is regularly monitored and adjusted, as
appropriate. It is recognized that maintaining an acceptable level of
liquidity becomes even more important during periods of economic
uncertainty and volatile financial markets.
Due to the commercial nature of the Company's target market,
liabilities and loans are evaluated relative to industry concentration
and volatility. At December 31, 1996, approximately 24% of deposits
were related to the construction and real estate development
industries, while 4% were related to both the health care and the real
estate property management industries. These areas are the Company's
largest deposit concentrations and represent significant industries
within the Nashville area. These deposits are primarily reflected in
the Company's demand deposit and interest bearing Money Market Account
totals and are deposits of relationship commercial customers, which by
their nature are concentrated in a fewer number of customer
relationships than would be the case for consumer deposit funding
sources. At December 31, 1996 all investment securities were classified
as available for sale. The Company utilized a one time window of
opportunity in late 1995 to adjust its investment portfolio
classifications by transferring securities from the held to maturity
classification to the available for sale classification. These
classifications are defined in SFAS No. 115 and require the Company to
segregate its securities portfolio and account for any market value
fluctuations in securities classified as available for sale through the
equity section of the balance sheet. Footnote C of the notes to the
consolidated financial statements shows the components of the
securities portfolio and maturities.
17
<PAGE> 13
Nonperforming Assets and Risk Elements
Nonperforming assets, which include nonaccrual loan, restructured
loans, and other real estate owned, were $579,000 at December 31, 1996,
compared with $451,000 at December 31, 1995. The following table
presents the composition of nonperforming assets at December 31, 1996
and 1995.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995
-----------------------------------------------------------------------
<S> <C> <C>
NONPERFORMING ASSETS:
Nonaccrual loans $579 $451
Restructured loans -- --
Other real estate owned -- --
-----------------------------------------------------------------------
579 451
Less allowance for other real estate owned -- --
-----------------------------------------------------------------------
Total $579 $451
=======================================================================
Nonperforming assets as a percent of
total loans plus other real estate owned 0.5% 0.5%
=======================================================================
</TABLE>
There were no loans 90 days or more past due at December 31, 1996 and
1995 that were not included in the nonaccrual category.
During 1996, $1,968,000 of loans were transferred from earning status
to nonaccrual status, and there were no advances on nonaccrual loans.
This compares to $1,458,000 of loans transferred from earning status to
nonaccrual status in 1995. In 1996 and 1995 there were no loans removed
from nonaccrual status and placed in other real estate owned. During
1996 loans totaling $697,000 were charged-off with recoveries reported
of $541,000 resulting in net charge-offs for the year of $156,000
compared to loans charged-off in 1995 of $345,000 and recoveries of
$1,058,000 resulting in net recoveries of $713,000.
The Company evaluates the credit risk of each customer on an individual
and ongoing basis and, where deemed appropriate, obtains collateral.
Collateral values are monitored to ensure that they are maintained at
an appropriate level. The largest component of the Company's credit
risk relates to the loan portfolio. During 1996, the Company continued
its emphasis on underwriting standards and loan review procedures.
These processes, coupled with aggressive collection efforts, continue
to be reflected in the level of nonperforming assets and the level of
recoveries of previously charged-off loans. In 1996 and 1995, levels of
charged-off loans and nonperforming assets reflected, among other
things, the effectiveness of the Company's credit administration area.
As discussed in the section, "Provision for Possible Loan Losses",
asset quality and loan charge-off and recovery experience impact the
level of the allowance for possible loan losses maintained.
At December 31, 1996 and 1995, other potential problem loans totaled
$84,000 and $386,000, respectively. Other potential problem loans
consist of loans that are currently not considered nonperforming, but
where information about possible credit problems has caused the Company
to have serious doubts as the ability of the borrower to fully comply
with present repayment terms. Depending on economic changes and future
events, these loans and others, which may not be presently identified,
could become future nonperforming assets. With respect to nonperforming
assets at December 31, 1996, the following should be noted: the
allowance for possible loan loss represented 497% of nonperforming
loans. This compares with the allowance for possible loan losses at
673% of nonperforming loans at December 31, 1995. The composition of
net nonperforming assets at December 31, 1996 and 1995 was 100% in
nonaccrual loans. The largest nonperforming loan at December 31, 1996
was $250,000. Improvements made in asset quality during the past three
years has allowed management to focus more on expanding delivery
systems and locations while developing new products and services and
aggressively soliciting new relationships in our local market.
At December 31, 1996, the Company's allowance for possible loan losses
was $2.9 million, or 2.7%, of total loans compared with $3.0 million,
or 3.1%, at December 31, 1995.
The level of the allowance for possible loan losses and the amount of
the provision are determined on a quarter by quarter basis and, given
the inherent uncertainties involved in the estimation process, no
assurance can be given as to the amount of the allowance at any future
date.
18
<PAGE> 14
Capital Strength
Total shareholders' equity (excluding the SFAS No. 115 adjustment) at
December 31, 1996, was $22.0 million, or 13.2%, of total assets, which
compares with $19.7 million, or 12.9%, at December 31, 1995. This
calculation, when made after considering the effect of the Company's
adoption of SFAS No. 115, was $22.1 million, or 13.3%, at December 31,
1996, which compares with $20.0 million, or 13.1%, of total assets at
December 31, 1995. The adoption of SFAS No. 115 issued by the
Financial Accounting Standards Board is reflected in the Company's
shareholders' equity at December 31, 1996 and 1995, net of applicable
income taxes, and identified as unrealized gain (loss) on securities
available for sale, net of taxes. The increase in total equity is
primarily a result of 1996 earnings net of dividends paid and is
partially offset by a reduction in the unrealized gain on securities
available for sale of $215,000 at year end 1996 compared with
$279,000 at year end 1995. The Company's capital position continues
to be strong. Certain capital statistics are shown in the following
chart:
PRIMARY AND TOTAL CAPITAL
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------------------------------
(Dollars In Thousands) 1996 1995
-----------------------------------------------------------------------------
<S> <C> <C>
Total assets $ 166,679 $ 152,800
=============================================================================
Total shareholders' equity 22,085 20,012
=============================================================================
Total shareholders' equity to total assets 13.2% 13.1%
=============================================================================
</TABLE>
The Federal Reserve Board adopted a regulation which defines capital
measures and the thresholds for each of the five capital categories
defined in the Federal Deposit Insurance Corporation Improvement Act
of 1991. The regulation applies to the both the Company and its
wholly-owned subsidiary, which is a state chartered bank and a member
of the Federal Reserve System. The regulation requires minimum levels
of capital within five capital categories which are determined by
applying various risk ratings to categories of assets and certain off
balance sheet items. This regulation classifies capital in two tiers,
referred as Tier 1 and Tier 2. Under risk based capital requirements,
total capital consists of Tier 1 capital (essentially, common equity
less certain intangibles) and Tier 2 capital (essentially, a portion
of the allowance for possible loan losses and certain qualifying
debt). This regulation requires state chartered member banks to
maintain certain minimum capital ratios as shown in the following
chart:
CAPITAL RATIOS
<TABLE>
<CAPTION> CFGI The Bank
December 31 December 31
-------------------------------------------------------------------------------------------------------
(Dollars In Thousands) 1996 1995 1996 1995
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL COMPONENTS
TIER 1 CAPITAL:
Shareholders' equity $ 22,085 $ -- $ 22,005 $ 20,012
Disallowed portion of deffered tax assets -- -- -- (143)
Unrealized (gain) on securities AFS (64) -- (64) (279)
-------------------------------------------------------------------------------------------------------
Total Tier 1 capital 22,021 -- 21,941 19,590
TIER 2 CAPITAL:
Allowable allowance for possible loan losses 1,443 -- 1,453 1,270
-------------------------------------------------------------------------------------------------------
Total capital $ 23,464 -- $ 23,394 $ 20,860
=======================================================================================================
Risk-adjusted assets $113,971 -- $114,854 $ 99,802
Quarterly average assets $167,111 -- $167,052 $152,907
</TABLE>
<TABLE>
<CAPTION>
FDICIA
Minimum December 31 December 31
Ratios 1996 1995 1996 1995
------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL RATIOS
Total risk-based capital ratio 6-10% 20.6% -- 20.4% 20.9%
Tier 1 risk-based capital ratio 3- 6% 19.3% -- 19.1% 19.6%
Tier 1 leverage ratio 2- 5% 13.2% -- 13.1% 12.8%
</TABLE>
19
<PAGE> 15
The Company's capital ratios have continually exceeded all regulatory
requirements for all capital ratios as demonstrated in the chart
above. The Company reported dividend payments in 1996 of $352,000
while no dividend had been recorded in prior years.
The Board of Directors of The Bank and its shareholders approved
a plan of exchange with CFGI whereby CFGI became the parent holding
company of The Bank. This exchange was effective April 30, 1996. Each
share of common stock of The Bank was exchanged for one share of common
stock of CFGI, and each outstanding warrant and each outstanding option
to purchase common shares of The Bank automatically became warrants and
options to purchase shares of CFGI. This exchange of shares consummated
the formation of the holding company and received the approval of The
Bank's shareholders, the Board of Governors of the Federal Reserve
System and the Tennessee Department of Financial Institutions.
Management's Discussion and Analysis 1995 vs. 1994
The narrative which follows is management's discussion and analysis of
1995 results of operations of the Company compared to 1994.
Net income for 1995 was $2.5 million or $1.14 per share compared with
net income for 1994 of $2.0 million or $.92 per share. Return on
average assets for 1995 and 1994 was 1.69% and 1.48%, respectively.
Return on average shareholders' equity (excluding the SFAS No. 115
adjustment) improved to 13.54% in 1995 compared to 12.8% in 1994. Total
assets increased 4.6% to $152.8 million at December 31, 1995, compared
with the same period in 1994. During 1995, loans, net of unearned
income, increased $17.3 million, or 21.3%, to $98.3 million at December
31, 1995, compared with $81.1 million at year end 1994. Deposits
increased $2.2 million, or 1.7%, from $128.3 million at year end 1994
to $130.5 million at year end 1995. The net loan to deposit ratio
increased from 61.0% at year end 1994 to 73.0% at year end 1995
resulting primarily from a significant increase in loans, $17.3
million, which, among other things, reflected the Company's business
development efforts during 1995.
Reported earnings reflected the use of net operating loss
carryforwards and, as such, no significant income taxes were recorded
in either 1995 or 1994. As a result of management's evaluation of the
likelihood of receiving a tax benefit from the net operating loss
carryforward utilizing the more than likely than not standard, the
Company maintained a valuation allowance to offset the net deferred tax
assets.
Net Interest Income
Net interest income for 1995 increased 21.3% from 1994. This increase
resulted primarily from an 11.4% increase in average earning assets
which was partially offset by a 7.9% increase in average interest
bearing liabilities. Additionally, net interest income was impacted
by an increase of 124 basis points in the average rate earned on
earning assets while the average rate paid on interest bearing
liabilities increased 127 basis points. Interest income increased $2.9
million, or 30.6%, in 1995 compared to 1994. This increase resulted
from an 11.4% increase in the volume of the average earning assets, the
effect of which was enhanced by the increase in average interest rate
earned on these assets. Average loans increased 21.4%, average
investment securities increased 6.0%, while average Fed Funds sold
declined 36.6%. Interest income on loans increased 34.6% from 1994 to
1995, as a result of increased volume of loans outstanding and an
increase in the average interest rate earned on loans of 95 basis
points. Interest income on investment securities increased 28.6% from
1994 to 1995, as a result of the 6% increase in the volume of
securities and a 115 basis point increase in the average rate earned
on investment securities. These increases were partially offset by a
15.6% decline in interest income on Federal Funds sold during a year in
which the average rate earned on Federal Funds sold increased 141 basis
points offset by a 37% decrease in average volume in 1995 compared to
1994. Generally, earning assets reflected the increase in interest
income due to growth in loans and a shift in the mix from Federal Funds
sold to higher yielding loans and investments coupled with a higher
average interest rate environment.
Total interest expense increased 39.7% in 1995 due to a higher level
of interest bearing liabilities and a 127 basis point increase in
the average rate paid on interest bearing liabilities. The increase in
the average volume of interest bearing liabilities was the result of a
15.4% increase in average Money Market Investment Account balances and
a 10.4% increase in average balances for certificates of deposit
$100,000 or greater. These increases were partially offset by volume
decline of 9.2% and .5% in NOW Accounts and certificates of deposit
less than $100,000, respectively. The increase in rates paid on
interest bearing liabilities was
20
<PAGE> 16
reflected in all areas with the largest increase in certificates of
deposit $100,000 or greater and Money Market Investment Accounts.
The Company's net interest margin increased 31 basis points to 3.85%
in 1995, primarily as a result of a higher loan to deposit ratio
and the impact of shifts in the mix of earning assets to higher
yielding loans and investments. During 1995, the interest rate spread
remained relatively level compared with 1994. Total interest income
increased in 1995 compared to 1994. The increased level of earning
assets combined with an increase in yield on earning assets resulted in
a higher level of total interest income. Total interest expense also
increased in 1995 compared to 1994. Total interest bearing liabilities
increased only 7.9% while earning assets increased 11.4%; however, the
average rate paid on interest bearing liabilities increased 127 basis
points in 1995 compared to 1994 while the average rate earned on
earning assets increased 124 basis points. The average rate paid on
all interest bearing liabilities in 1995 was 5.57% compared with 4.30%
in 1994.
Provision For Possible Loan Losses
In 1995, the Company reported a net negative provision for possible
loan losses of $520,000, compared with $960,000 in 1994. In 1995 the
Company recorded recoveries of previously charged-off loans in excess
of current year charge-offs in the amount of $713,000, compared with
net recoveries of $626,000 in 1994. The allowance for possible loan
losses was 3.1% of loans at December 31, 1995, compared to 3.5% of
loans at the same date in 1994.
Non-Interest Income
Total non-interest income of $685,000 in 1995 reflected a decrease of
18.5% when compared with $840,000 reported in 1994. Non-interest
income, less nonrecurring income (gains/losses on sale of securities
and other real estate), decreased 14.0%, or $105,000 from 1994. Trust
income declined $92,000, or 22.4%, in 1995 compared to 1994 as a result
of a decrease in assets under management. Service fee income increased
4.5%, or $9,000 in 1995 from 1994 , reflecting the increase in average
deposits during 1995, as well as the increased number of deposit
accounts. The Company entered into an agreement in the fourth quarter
of 1994 with BFP Financial Partners, Inc. to offer certain investment
services which resulted in $50,000 in income in 1995 compared to $8,000
during 1994. The Company recorded net losses on sale of securities
available for sale of $11,000 in 1995 compared with a net gain on sale
of securities available for sale of $30,000 recorded in 1994. Gains on
sale of foreclosed assets of $53,000 were reported in 1995 compared to
$62,000 in 1994.
Non-Interest Expense
Total non-interest expense declined 3.4% to $4.3 million in 1995 from
$4.4 million in 1994. During 1995, net foreclosed asset expense
decreased $63,000 from $26,000 in 1994 to a net credit of $37,000 in
1995. This credit resulted from income received on previously
foreclosed assets. FDIC insurance expense decreased 51.2% in 1995
while salaries and employee benefits declined $19,000 in 1995 from the
1994 levels. Occupancy expense declined $23,000 during 1995 compared
to 1994. Data processing expense increased $66,000 during 1995
compared to 1994 as a result of the Company having implemented image
processing and having outsourced its proof and statement rendering
functions. This increase in data processing expense was partially
offset by reduced personnel expenses and decreases in stationery,
supplies and postage related to these functions. At both December 31,
1995 and 1994, the Company had 42 employees. Non-personnel related
expenses for 1995 were $2.1 million compared to $2.2 million for 1994.
Income Taxes
Reported earnings reflected the use of net operating loss
carryforwards and, as such, no significant income taxes were recorded
in either 1995 or 1994.
21
<PAGE> 17
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
--------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks - Note L $ 6,128 $ 6,279
Federal funds sold 6,825 1,000
Securities - Notes C and H:
Available for sale (amortized cost of $46,334
and $47,645, respectively) 46,437 47,924
Loans (net of unearned income of $256 and $203,
respectively) - Notes D and K:
Commercial 35,721 40,657
Real estate - mortgage loans 58,763 48,648
Real estate - construction loans 9,467 5,952
Consumer 3,937 3,083
--------------------------------------------------------------------------------------------------------
Loans, net of unearned income 107,888 98,340
Less allowance for possible loan losses (2,878) (3,034)
--------------------------------------------------------------------------------------------------------
Total net loans 105,010 95,306
--------------------------------------------------------------------------------------------------------
Premises and equipment, net - Note E 784 692
Accrued interest and other assets 1,495 1,599
--------------------------------------------------------------------------------------------------------
Total Assets $ 166,679 $ 152,800
========================================================================================================
Liabilities
Non-interest bearing demand deposits $ 12,721 $ 9,198
Interest-bearing deposits - Note C:
NOW accounts 4,865 6,110
Money market accounts 64,140 50,651
Time certificates less than $100,000 26,423 34,530
Time certificates of $100,000 and greater 25,121 30,045
--------------------------------------------------------------------------------------------------------
Total Deposits 133,270 130,534
--------------------------------------------------------------------------------------------------------
Federal Home Loan Bank borrowings (Notes C and H) 9,500 --
Accounts payable and accrued liabilities 1,824 2,254
--------------------------------------------------------------------------------------------------------
Total Liabilities 144,594 132,788
--------------------------------------------------------------------------------------------------------
Commitments and contingencies
- Notes I, J, and K
Shareholders' Equity: - Notes B, C, M and N
Common stock, $6 par value; authorized
50,000,000 shares; issued and outstanding
2,202,473 in 1996 and 2,191,500 in 1995 13,215 13,149
Additional paid-in capital 6,676 8,500
Retained earnings (deficit) 2,130 (1,916)
Unrealized gain on securities available for sale, net of taxes 64 279
--------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 22,085 20,012
--------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 166,679 $ 152,800
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 18
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------------------------------------------------------------
(In Thousands, Except Per Share Data) 1996 1995 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 9,569 $ 8,626 $ 6,411
Interest on federal funds sold 314 362 429
Interest on securities:
U.S. Treasury securities 365 653 1,000
Other U.S. government agency obligations 2,583 2,567 1,496
States and political subdivisions 5 -- --
Other securities 63 39 39
--------------------------------------------------------------------------------------------------------------
Total interest income 12,899 12,247 9,375
--------------------------------------------------------------------------------------------------------------
Interest Expense:
Interest bearing demand deposits 2,953 2,683 1,742
Time deposits less than $100,000 1,782 2,109 1,750
Time deposits $100,000 and over 1,563 1,850 1,261
Federal funds purchased 8 -- --
Federal Home Loan Bank borrowings 140 -- --
--------------------------------------------------------------------------------------------------------------
Total interest expense 6,446 6,642 4,753
--------------------------------------------------------------------------------------------------------------
Net Interest Income 6,453 5,605 4,622
Provision for possible loan losses - Note D -- 520 960
--------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 6,453 6,125 5,582
Non-interest Income:
Service fee income 193 209 200
Trust income 399 319 411
Investment Center income 72 50 8
Gain (loss) on sale of securities, net - Note C (2) (11) 30
Income (expense) from foreclosed assets 130 37 (26)
Gain on sale of other real estate owned 11 53 62
Other 124 65 129
--------------------------------------------------------------------------------------------------------------
Total non-interest income 927 722 814
--------------------------------------------------------------------------------------------------------------
Non-interest Expense:
Salaries and employee benefits 2,437 2,180 2,199
Occupancy expense 562 489 512
Legal expense 60 33 19
FDIC insurance 6 163 334
Audit, tax and accounting 205 184 189
Data processing expense 209 179 113
Other operating expenses 1,186 1,073 1,020
--------------------------------------------------------------------------------------------------------------
Total non-interest expense 4,665 4,301 4,386
--------------------------------------------------------------------------------------------------------------
Income before income taxes 2,715 2,546 2,010
Income tax expense - Note G 168 32 --
--------------------------------------------------------------------------------------------------------------
Net Income $ 2,547 $ 2,514 $ 2,010
==============================================================================================================
Net income per share - Note B $ 1.15 $ 1.14 $ .92
==============================================================================================================
Weighted average common shares outstanding - Note B 2,219,834 2,204,254 2,181,909
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 19
Consolidated Statements of Sharholders' Equity
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
Additional Retained on Securities
Common Paid-In Earnings Available
Stock Capital (Deficit) For Sale Total
-----------------------------------------------------------------------------------------------------------
(In Thousands)
-----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Balance, January 1, 1994 $ 13,082 $ 8,490 $ (6,440) $ 294 $ 15,426
Issuance of Common Stock
(3,437 shares) 21 1 -- -- 22
Net Income -- -- 2,010 -- 2,010
Change in unrealized gain (loss)
on securities available for sale,
net of taxes - Note C -- -- -- (1,187) (1,187)
-----------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 13,103 8,491 (4,430) (893) 16,271
Issuance of Common Stock
(7,712 shares) 46 9 -- -- 55
Net Income -- -- 2,514 -- 2,514
Change in unrealized gain (loss) on
securities available for sale,
net of taxes - Note C -- -- -- 1,172 1,172
-----------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 13,149 8,500 (1,916) 279 20,012
Issuance of Common Stock
(10,973 shares) 66 27 -- -- 93
Net Income -- -- 2,547 -- 2,547
Transfers to comply with state statute,
net - Note N -- (1,851) 1,851 -- --
Cash dividends - $.16 per share -- -- (352) -- (352)
Change in unrealized gain on
securities available for sale,
net of taxes - Note C -- -- -- (215) (215)
-----------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $ 13,215 $ 6,676 $ 2,130 $ 64 $ 22,085
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 20
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995 1994
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Interest received $ 13,055 $ 11,879 $ 9,066
Fees received 929 909 914
Interest paid (6,934) (6,144) (4,918)
Cash paid to suppliers and associates (4,623) (4,012) (2,753)
---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,427 2,632 2,309
---------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from sales of securities:
Available for sale 6,012 4,089 21,530
Maturities of securities:
Held to maturity -- 1,557 2,376
Available for sale 9,632 4,266 3,889
Purchases of securities:
Held to maturity -- -- (11,762)
Available for sale (14,360) (9,065) (25,547)
Loans (originated) repaid to customers, net (9,704) (16,542) (3,243)
Capital expenditures (310) (390) (105)
---------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (8,730) (16,085) (12,862)
---------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net increase (decrease) in demand,
NOW, and money market savings 15,767 (2,038) 17,873
Net increase (decrease) in time certificates (13,031) 4,229 (6,479)
Advances from Federal Home Loan Bank 9,500 -- --
Proceeds from issuance of common stock 93 55 23
Dividends paid (352) -- --
---------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities: 11,977 2,246 11,417
---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,674 (11,207) 864
Cash and cash equivalents at beginning of year 7,279 18,486 17,622
---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 12,953 $ 7,279 $ 18,486
===============================================================================================================
Reconciliation of net income to net cash provided by operating activities:
Net income $ 2,547 $ 2,514 $ 2,010
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 209 211 183
Provision for possible loan losses -- (520) (960)
Provision for deferred income taxes 82 -- --
(Gain) loss on sale of securities 2 (11) (30)
Loss on disposal of equipment 14 -- --
Gain on sale of other real estate owned (11) (53) (62)
Provision for loss on other real estate owned -- -- 51
Changes in assets and liabilities:
Decrease in other real estate -- 128 1,224
(Increase) decrease in accrued interest and other assets 6 (418) (355)
Increase (decrease) in accounts payable and accrued liabilities (422) 759 248
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 2,427 $ 2,632 $ 2,309
===============================================================================================================
Supplemental disclosures of noncash investing and financing activities:
Change in unrealized gain (loss) on securities available for sale,
net of taxes $ (215) $ 1,172 $ (1,187)
Transfer of securities to available for sale -- 20,772 --
Transfer of securities from available for sale to held to maturity -- -- 7,780
Loans made to finance sale of other real estate owned -- -- 1,061
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 21
Notes to Consolidated Financial Statements
A. Summary of Significant Accounting Policies
On April 16, 1996 the shareholders of The Bank of Nashville (The
Bank) approved the formation of a holding company. On April 30, 1996
The Bank became a wholly-owned subsidiary of the holding company,
Community Financial Group, Inc., (CFGI), a Tennessee Corporation. Each
outstanding share of The Bank's common stock was exchanged for an
outstanding share of CFGI and each outstanding warrant and each option
to purchase shares of The Bank became warrants and options to purchase
shares of CFGI.
The consolidated financial statements include the accounts of CFGI and
The Bank (collectively the Company) after elimination of material
intercompany accounts and transactions.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and to general practices
within the banking industry. Management has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these
estimates. Following is a summary of the more significant accounting
policies of the Company.
SECURITIES
Securities are designated as held to maturity or available for
sale at the time of acquisition. The Company does not have securities
designated as trading securities. Held to maturity securities are
carried at amortized cost and adjusted for amortization of premiums and
accretion of discounts using a method that approximates the level-yield
method. As of December 31, 1996 and 1995, CFGI has classified its
entire securities portfolio as available for sale. Available for sale
securities are reported at fair value. If a decline in value is
considered to be other than temporary, the securities are written down
to fair value and the amount of the writedown is included in earnings.
Unrealized gains and losses on securities available for sale are
reflected in a separate shareholders' equity account net of applicable
income taxes in accordance with SFAS No. 115 (See Note C). The
adjusted cost of a specific security sold is used to compute the gain
or loss on the sale of that security. Gains and losses on the sale of
securities available for sale are included in non-interest income.
LOANS
Loans are carried at the principal amount outstanding net of unearned
income. Interest income on loans and amortization of unearned income
is computed by methods which result in level rates of return on
principal amounts outstanding. Effective January 1, 1995, the Company
adopted SFAS No. 114, Accounting by Creditors for Impairment of a Loan,
as amended by SFAS No. 118, Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures. Management, considering
current information and events regarding the borrowers ability to
repay their obligations, considers a loan to be impaired when it is
probable that the Company will be unable to collect all amounts due
according to contractual terms of the loan agreement. When a loan is
considered impaired, the amount of the impairment is based on the
present value of the expected future cash flows at the loan's effective
interest rate, at the loan's market price or fair value of collateral
if the loan is collateral-dependent. Impairment losses are included
in the allowance for possible loan losses through a charge to provision
for loan losses. Prior periods have not been restated.
Interest income is accrued on loans except when doubt as to
collectability exists, in which case the respective loans are placed on
nonaccrual status. The decision to place a loan on nonaccrual status
is based on an evaluation of the borrower's financial condition,
collateral liquidation value, and other factors that affect the
borrower's ability to pay. At the time a loan is placed on nonaccrual
status, the accrued but unpaid interest is charged against current
income. Thereafter, interest on nonaccrual loans is recognized as
interest income only as received, unless the collectability of
outstanding principal is doubtful, in which case such interest received
is applied as a reduction of principal. Cash receipts on nonaccrual
loans are applied to reduce the principal amount of such loans until
the principal has been recovered and are recognized as interest income,
thereafter.
Loan origination, commitment fees and certain direct origination
costs are deferred and amortized over the contractual life of the
related loans, adjusted for prepayments as a yield adjustment.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses reflects an amount which, in
management's judgment, is adequate to provide for estimated loan
losses. Management's evaluation of the loan portfolio consists of
evaluating
26
<PAGE> 22
current delinquencies, the adequacy of underlying collateral,
current economic conditions, risk characteristics, and management's
internal credit review process. Accounts are charged off as soon as
the probability of loss is established. Management believes that the
allowance for possible loan losses is appropriate. While management
uses available information to recognize losses on loans, future
adjustments in the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as part
of their examinations, periodically review the Company's allowance for
possible loan losses. Such agencies may require the Company to adjust
the allowance based on their judgment and information available to them
at the time of their examinations.
OTHER REAL ESTATE OWNED (OREO)
Other real estate owned includes property acquired in situations in
which the Company has physical possession of a debtor's assets
(collateral). Such assets are carried at the lower of cost or fair
value less estimated cost to sell. Cost includes loan principal,
accrued interest, foreclosure expense and expenditures for subsequent
improvements. Losses arising from the acquisition of such property are
charged against the allowance for possible loan losses. Declines in
value subsequent to foreclosure are recorded as a valuation allowance.
Provisions for subsequent declines or losses from disposition of such
property are recognized in non-interest expense.
PREMISES AND EQUIPMENT
Premises and equipment is stated at cost less accumulated depreciation
and amortization. For financial reporting purposes, depreciation and
amortization are computed using the straight-line method over the
estimated lives of those assets. Leasehold improvements are amortized
over the lease terms or the estimated lives, whichever is less. The
estimated lives are as follows:
Years
Leasehold improvements 3 - 20
Furniture and equipment 3 - 10
INCOME TAXES
The Company accounts for income taxes in accordance with the asset
and liability method of accounting. Under such method deferred tax as
sets and liabilities are recognized for the estimated future tax
effects attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the period that includes the
enactment date.
TRUST ASSETS
Assets of the trust department, other than cash on deposit at The
Bank, are not included in these consolidated financial statements
because they are not assets of the Company.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flow, the Company has defined cash and
cash equivalents as cash and due from banks and daily federal funds
sold.
EARNINGS PER COMMON SHARE
Net income per share has been computed using the weighted average
number of common shares and common share equivalents outstanding
during each year presented. Common stock equivalents include stock
options. See Note B.
FINANCIAL INSTRUMENTS
The Company enters into interest rate floor agreements for its
asset/liability management program. Fees paid upon inception of these
agreements are deferred and amortized over the life of the agreements.
Income or expense derived from these agreements is recognized in
interest income during the period earned.
RECLASSIFICATIONS
Certain reclassifications have been made in the consolidated financial
statements for prior years to conform with the 1996 presentation.
27
<PAGE> 23
B. Shareholders' Equity
The Company can issue common stock pursuant to various plans such as
employee stock purchase, contributions to the 401(K) plan, and payment
of directors' fees. Under these plans, 5,973, 7,712, and 3,437 shares
were issued during 1996, 1995 and 1994, respectively.
The Company had outstanding stock options totaling 75,000 and
65,000 shares at December 31, 1996 and 1995, respectively. Options
totaling 15,000 shares were issued and options totaling 5,000 shares
were exercised during 1996 (See Note M).
At December 31, 1996 and 1995, warrants to purchase 4,744,927 shares
of CFGI's common stock were outstanding. The exercise price of the
warrants is $12.50, and they expire on December 31, 1998. These
warrants are common stock equivalents.
Management has used the treasury stock method to compute earnings per
share since the Company was incorporated. The Company's options
and warrants are common stock equivalents. The above mentioned
warrants have not been included in the Company's computation of
earnings per share because the market price of the Company's common
stock has been less than the exercise price of the warrants since
issuance. If the market price of the common stock exceeds the
warrants' exercise price for substantially all of any three-month
reporting period, the Company will reflect the impact of the warrants
in all future earnings per share computations using the modified
treasury stock method. The modified treasury stock method assumes the
exercise of all outstanding warrants, the repurchase of up to 20% of
the Company's stock, the retirement of any long-term and short-term
borrowings and the investment of the remaining proceeds, with
appropriate recognition of any income tax effects.
If the Company's stock price had been in excess of $12.50 per share
for substantially all of any three-month reporting period in the
years ending December 31, 1996 and 1995, earnings per share using the
modified treasury stock method for the years ended December 31, 1996
and 1995 would have been $.62 and $.74, respectively.
C. Securities
The Company has classified all securities as available for sale in
accordance with SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities since December 31, 1995. The Company
recorded increases in shareholders' equity of $64,000 and $279,000 at
December 31, 1996 and 1995, respectively, for the unrealized gain on
securities available for sale.
Proceeds from sales of debt securities during 1996, 1995, and 1994
were $6.0 million, $4.1 million and $21.5 million, respectively.
Gross gains of $5 thousand and gross losses of $7 thousand were
realized on those sales in 1996, gross gains of $10 thousand and gross
losses of $21 thousand were realized on those sales in 1994 and gross
gains of $131 thousand and gross losses of $101 thousand were realized
on those sales in 1994.
The amortized cost, gross unrealized gains and losses, and estimated
fair values of securities at December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------------------------------------------------------
(In Thousands) 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities and Obligations
of U.S. Government Agencies $ 22,420 $ 324 $ 32 $ 22,714
Collateralized Mortgage Obligations 21,893 57 254 21,694
Securities of states and political subdivisions 360 8 -- 368
Other - Equity Securities 1,661 -- -- 1,661
-----------------------------------------------------------------------------------------------------
$ 46,334 $ 389 $ 286 $ 46,437
=====================================================================================================
</TABLE>
28
<PAGE> 24
<TABLE>
<CAPTION>
Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------------------------------------------------------
(In Thousands) 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities and Obligations
of U.S. Government Agencies $ 28,102 $ 319 $ 40 $ 28,381
Collateralized Mortgage Obligations 18,745 177 177 18,745
Other - Equity Securities 798 -- -- 798
$ 47,645 $ 496 $ 217 $ 47,924
====================================================================================================
</TABLE>
At December 31, 1996 and 1995, The Company did not have any securities
which it classified as held to maturity or trading.
In November 1995, the Financial Accounting Standards Board (FASB)
issued a Special Report, "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity
Securities." The FASB permitted a one-time opportunity to reassess
the appropriateness of the designation of all securities held upon the
initial application of the Special Report. The Company reviewed its
current designation of all securities in conjunction with liquidity
needs and management of interest rate risk and transferred $20.7
million of securities from held to maturity to available for sale. At
the time of transfer, such securities had an unrealized loss of
$30,000.
The amortized cost and fair value of debt securities by contractual
maturity at December 31, 1996, are shown in the following table.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Collateralized mortgage obligations are disclosed as a separate line
item due to staggered maturity dates. Investments in Federal Reserve
Bank stock and Federal Home Loan Bank stock are excluded as they have
no stated maturity date.
<TABLE>
<CAPTION>
Available for Sale
------------------------
Estimated
Amortized Fair
Cost Value
-----------------------------------------------------------------------------------------------------
(In Thousands) 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 3,006 $ 3,010
Due after one year through five years 3,724 3,727
Due after five years through ten years 1,016 1,047
Due after ten years 15,034 15,298
-----------------------------------------------------------------------------------------------------
22,780 23,082
Collateralized Mortgage Obligations 21,893 21,694
-----------------------------------------------------------------------------------------------------
$ 44,673 $ 44,776
=====================================================================================================
</TABLE>
Securities with an aggregate amortized cost of approximately $25.6
million and $18.3 million were pledged to secure public deposits,
Federal Home Loan Bank borrowings and for other purposes as required
by law at December 31, 1996 and 1995, respectively.
29
<PAGE> 25
D. Loans and Allowance for Possible Loan Losses
An analysis of the changes in the allowance for possible loan losses
is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $ 3,034 $ 2,841 $ 3,175
Provision charged (credited) to operations -- (520) (960)
Loans charged off, net of recoveries of $541, $1,058
and $1,170 in 1996, 1995 and 1994, respectively (156) 713 626
----------------------------------------------------------------------------------------------------------
Balance, December 31 $ 2,878 $ 3,034 $ 2,841
==========================================================================================================
</TABLE>
At December 31, 1996 and 1995, loans on nonaccrual status amounted to
$579,000 and $451,000, respectively. The effect of nonaccrual loans
was to reduce interest income by approximately $74,000 in 1996,
$78,000 in 1995, and $27,000 in 1994. There were no material
commitments to lend additional funds to customers whose loans were
classified as nonaccrual at December 31, 1996 and 1995.
Renegotiated loans, which are performing in accordance with their new
terms and, therefore, not included in nonaccrual loans. The Company
had no renegotiated loans at December 31, 1996 and 1995.
The Company adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures," as of
January 1, 1995. These statements require that certain impaired loans
be measured based on the present value of expected future cash flows
discounted at the loan's original effective interest rate. As a
practical expedient, impairment may be measured based on the loan's
observable market price or the fair value of the collateral if the loan
is collateral dependent. When the measure of the impaired loan is less
that the recorded investment in the loan, the impairment is recorded
through a valuation allowance. The adoption of these statements did
not have a material impact on the Company's financial statements.
At December 31, 1996, the Company's recorded investment in impaired
loans and the related valuation allowance calculated under the
statements are $359,000 and $184,000, respectively. At December 31,
1995 the Company's recorded investment in impaired loans and the
related valuation allowance were $324,000 and $162,000, respectively.
The valuation allowance is included in the allowance for loan losses on
the consolidated balance sheets. At December 31, 1996 and 1995 there
were no impaired loans without an accompanying valuation reserve.
The average recorded investment in impaired loans for the year ended
December 31, 1996 and 1995 was $382,000 and $360,000, respectively.
Interest payments received on impaired loans are recorded as
reductions in principal outstanding or recoveries of principal
previously charged off. Once the entire principal has been collected
any additional payments received are recognized as interest income. No
interest income was recognized on impaired loans in 1996 or 1995.
In the ordinary course of business, the Company makes loans to
directors, executive officers, and principal shareholders, including
related interests. In management's opinion, these loans are made on
substantially the same terms, including interest and collateral, as
those prevailing at the time for comparable transactions with other
borrowers and they did not involve more than the normal risk of
collectability or present other unfavorable features at the time such
loans were made. During 1996, $2.5 million of new loans were made and
repayments and other reductions totaled $3.6 million. Outstanding
loans to executive officers and directors, including their associates
and affiliated companies, were $2.9 million and $4.0 million at
December 31, 1996 and 1995, respectively. Unfunded lines to executive
officers and directors were $4.2 million and $4.9 million at December
31, 1996 and 1995, respectively.
30
<PAGE> 26
E. Premises and Equipment
Premises and equipment is summarized as follows:
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Leasehold improvements $ 232 $ 155
Furniture and equipment 1,823 1,618
-------------------------------------------------------------------------------------------------------------
2,055 1,773
Less accumulated depreciation and amortization (1,271) (1,081)
-------------------------------------------------------------------------------------------------------------
$ 784 $ 692
=============================================================================================================
</TABLE>
F. Other Real Estate Owned
An analysis of the changes in the valuation allowance for other real
estate owned is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995 1994
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $ -- $ 25 $ 947
Provision Charged Against Income -- -- 51
Recoveries -- (25) (973)
-------------------------------------------------------------------------------------------------------------
Balance, December 31 $ -- $ -- $ 25
=============================================================================================================
</TABLE>
G. Income Taxes
As discussed in Note A, the Company accounts for income taxes in
accordance with SFAS No. 109.
Actual income tax expense for the years ended December 31, 1996,
1995 and 1994 differed from an "expected" tax expense (computed by
applying the U.S. Federal corporate tax rate of 34% to income before
income taxes as follows:
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995 1994
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense $ 923 $ 866 $ 683
Benefit of net operating loss carryforward (755) (834) (683)
-------------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 168 $ 32 $ --
=============================================================================================================
</TABLE>
The components of income tax expense (benefit) were as follows:
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995 1994
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current income tax expense:
Federal $ 86 $ 32 $ --
State -- -- --
-------------------------------------------------------------------------------------------------------------
86 32 --
-------------------------------------------------------------------------------------------------------------
Deferred income tax expense:
Federal 82 -- --
State -- -- --
-------------------------------------------------------------------------------------------------------------
82 -- --
-------------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 168 $ 32 $ --
=============================================================================================================
</TABLE>
31
<PAGE> 27
Significant temporary differences and carryforwards that give rise to
the deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Deferred fees, principally due to timing differences
in the recognition of income $ 134 $ 119
Net operating loss carryforwards 73 960
Alternative minimum tax credit carryforwards 30 73
Other 67 41
-------------------------------------------------------------------------------------------------------------
Total gross deferred tax assets 304 1,193
-------------------------------------------------------------------------------------------------------------
Less valuation allowance -- (760)
-------------------------------------------------------------------------------------------------------------
Net deferred tax assets 304 433
-------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Unrealized gain securities available for sale (39) (106)
Discount on securities deferred for tax purposes (97) (53)
Loans, principally due to provision for possible loan losses (213) (213)
Premises and equipment, principally due to differences
in depreciation methods (66) (61)
Other (10) --
-------------------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities (425) (433)
-------------------------------------------------------------------------------------------------------------
Net $ 121 $ --
=============================================================================================================
</TABLE>
The net decrease during 1996 and 1995 in the valuation allowance for
deferred tax assets was $760,000 and $1,466,000, respectively.
At December 31, 1996, the Company had a net operating loss
carryforward of $1.9 million for state income tax purposes. This
state net operating loss carryforward expires in the year 2007.
H. Long Term Debt and Lines of Credit
The Bank maintains an arrangement with the Federal Home LoanBank
of Cincinnati to provide for certain borrowing needs of The Bank. The
arrangement requires The Bank to hold stock in the Federal Home Loan
Bank and requires The Bank to pledge investment securities, to be held
by the Federal Home Loan Bank, as collateral. During 1996, $9,500,000
was advanced under this arrangement. At December 31, 1996 indebtedness
under the arrangement totaled $9,500,000. These advances mature in
September, 2001 and are eligible for prepayment at The Bank's option
beginning in September, 1998. The interest rate on these advances is
tied to the one-month LIBOR rate minus 5 basis points and adjusts
monthly. Interest is payable monthly. The maximum advance outstanding
was $9,500,000, the average balance outstanding was $2,745,000 and the
weighted average interest rate on the advances was 5.37% for the year
ended 1996. The Bank has pledged investment securities with an
amortized cost of approximately $11.3 million at December 31, 1996 as
collateral under terms of the loan agreement.
On December 31, 1996 and 1995, the Company had available for its
use $15.0 million and $13.5 million, respectively, of unsecured
short-term bank lines of credit. Such short-term lines serve as backup
for loan and investment needs. There are no compensating balance
requirements. These lines facilitate federal funds borrowings and bear
a rate equal to the current lending rate for federal funds purchased.
No amounts were outstanding under these lines of credit at December 31,
1996 and 1995.
I. Lease Commitments
The Company occupies space under noncancelable operating leases.
The leases provide annual escalating rents for periods through 2000
with options for renewals. Rent expense is recognized in equal monthly
amounts over the lease term. Rent expense was $284,000, $209,000 and
$238,000 for 1996, 1995 and 1994, respectively.
32
<PAGE> 28
Future lease payments under noncancelable operating leases are
payable as follows:
<TABLE>
<CAPTION>
--------------------------------------------------
(In Thousands)
--------------------------------------------------
<S> <C>
1997 $ 396
1998 378
1999 301
2000 142
2001 123
--------------------------------------------------
$ 1,340
==================================================
</TABLE>
J. Financial Instruments with Off-Balance Sheet Risk
The Company 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 and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to
extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk
in excess of the amount recognized on the balance sheets. The contract
amounts of those instruments reflect the extent of involvement and the
related credit risk the Company has in particular classes of financial
instruments. The Company, through regular reviews of these
arrangements, does not anticipate any material losses as a result of
these transactions.
At December 31, 1996 and 1995 unused lines of credit were approximately
$30.5 million and $23.5 million, respectively, with the majority
generally having terms at origination of one year. Additionally, the
Company had standby letters of credit of $1,612,000 and $1,902,000 at
December 31, 1996 and 1995, respectively.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many
of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness
on a case-by-case basis. The amounts of collateral obtained, if deemed
necessary by the Company, upon extension of credit is based on
management's credit evaluation of the customer.
Standby letters of credit are commitments issued by The Company to
guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. Most guarantees extend from one to two years. The
credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers.
The Company has entered into interest rate floor agreements for its
asset/liability management program to reduce interest rate risk. These
interest rate floors represent obligations by third parties whereby the
Company receives payment when the underlying rate index falls below an
agreed upon level. The Company paid a fee, which is amortized as an
adjustment of yield. The unamortized portion of this fee was $31,000
and $51,000 at December 31, 1996 and 1995, respectively. At December
31, 1996, the Company held interest rate floor contracts with notional
amounts totaling $8.0 million which expire in 1997 and 1998, and were
entered into to protect the Company from falling interest rates.
K. Significant Concentrations of Credit Risk
Most of the Company's business activity is with customers located in
the Middle Tennessee region. Generally, loans are secured by stocks,
real estate, time certificates, or other assets. The loans are
expected to be repaid from cash flow or proceeds from the sale of
selected assets of the borrowers. The Company grants residential,
consumer, and commercial loans to customers throughout the Middle
Tennessee region. Real estate mortgage and construction loans
reflected in the accompanying consolidated balance sheets are comprised
primarily of loans to commercial borrowers.
33
<PAGE> 29
At December 31, 1996 funded and unfunded loan commitments as classified
by Standard Industry Classification codes include borrowers in the real
estate industry approximating $21.3 million and $3.9 million,
respectively, and loans to building contractors approximating $7.8
million and $7.5 million, respectively. At December 31, 1995, funded
and unfunded commitments to borrowers in the real estate industry were
approximately $18 million and $2 million, respectively, and to building
contractors approximately $6.7 million and $5.3 million, respectively.
L. Cash Restrictions
The Company is required to maintain average balances with the Federal
Reserve Bank. The average amounts of these balances maintained during
the years ended December 31, 1996 and 1995, were $652,000 and $780,000,
respectively. The required balance at December 31, 1996 was $704,000.
M. Employee Benefits
Effective January 1, 1990, the Board of Directors approved the
creation of an Incentive Phantom Stock Appreciation Rights Plan, an
Associates Stock Purchase Plan, and a Retirement Savings Plan 401(K).
Stock Appreciation Rights (SARs) were granted to selected officers.
Payment of the SARs was made in cash based on the increase in the book
value of the Company's common stock at the conclusion of the plan
(December 31, 1994), compared to the book value at the grant date.
Under the Plan, the Board of Directors has authorized 400,000
SARs of which 234,500 SARs were outstanding to various officers at
December 31, 1994. During 1994, $100,000 of compensation expense was
recorded relating to SARs outstanding. Subsequent to the year ended
December 31, 1994, the Company paid $122,000 of previously accrued
expenses in order to terminate the SAR plan.
The Retirement Savings Plan 401(K) provides for the maximum deferral
of employee compensation allowable by the IRS under provisions
of Section 401(A) and 401(K). The Plan is available to all associates
who meet the plan eligibility requirements. The Company provides
various levels of employer matching of contributions up to 4% of the
associate's compensation. Employer contributions are invested
exclusively in the Company's common stock. Associates fully vest in the
employer's contributions after three years of service as defined in the
Plan. Total plan expense for 1996, 1995 and 1994 was approximately
$61,000, $63,000 and $55,000, respectively.
The Associates Stock Purchase Plan (ASPP), under which 100,000 shares
of the Company's common stock may be issued, allows associates
to purchase the Company's common stock through payroll deductions at
84% of the existing market value, not to fall below par value.
Incidental expenses regarding the administration of the plan are
absorbed by the Company.
Prior to January 1, 1996, the Company accounted for its stock option
plan and ASPP in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. As such, compensation expense
related to stock options would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the exercise
price. On January 1, 1996 The Company adopted SFAS No. 123, Accounting
for Stock-Based Compensation, which permits entities to recognize as
expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows
entitles to continue to apply the provisions of APB No. 25 and provide
proforma net income and proforma earnings per share disclosures for
employee stock option grants and purchases under the ASPP made in 1995
and future years as if the fair-value-based method detailed in SFAS No.
123 had been applied. The Company has elected to continue to apply the
provisions of APB No. 25. The provisions of SFAS No. 123 need not be
applied to immaterial items. As such, proforma disclosures are not
provided.
As of December 31, 1996, the Company's Board of Directors had approved
the issuance of stock options to purchase 75,000 shares of the
Company's common stock. Compensation expense was not recorded in
connection with the issuance of these options as the option price was
equal to or exceeded the market price of the Company's common stock at
the date of grant. The following table presents information on stock
options:
34
<PAGE> 30
<TABLE>
<CAPTION>
Total Exercisable Option
Option Shares Options Price Range
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at January 1, 1994 60,000 25,000 $ 6.00-7.125
Granted 5,000 -- $ 7.00-7.125
Options that became exercisable -- 18,000 $ 6.00-7.125
---------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1994 65,000 43,000 $ 6.00-7.125
Granted -- -- --
Options that became exercisable -- 8,000 $ 6.00-7.125
---------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1995 65,000 51,000 $ 6.00-7.125
Granted 15,000 3,000 $ 10.125
Options that became exercisable -- 8,000 $ 6.00-7.125
Options exercised (5,000) (5,000) $ 7.125
---------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1996 75,000 57,000 $ 6.00-10.125
===============================================================================================================
</TABLE>
The stock options are exercisable ratably through 1997 and become
exercisable in full in the event of a merger, sale or change in
majority control of the Company. The options expire in the years 2002,
2003, 2004 and 2006.
N. Restrictions on Retained Earnings, Regulatory Matters and Litigation
In order to fund dividends in 1996, and in accordance with state
statute, The Bank transferred $1,925,000 from additional paid-in
capital to retained earnings and $74,000 from retained earnings to
additional paid-in capital, resulting in a net reduction of $1,851,000
in additional paid-in capital at March 31, 1996. Subsequent to its
acquisition by CFGI, The Bank transferred $187,000 from retained
earnings to additional paid-in capital. In order to declare dividends
in the future The Bank must transfer a minimum of ten percent of
current net income from retained earnings to additional paid-in capital
until additional paid-in capital equals common stock. At December 31,
1996, approximately $1.9 million of The Bank's retained earnings were
available for dividend declaration and payment to its shareholder CFGI
(parent company), without regulatory approval.
Also, there are from time to time other legal proceedings pending
against the Company. In the opinion of management, liabilities,
if any, arising from such proceedings presently pending would not have
a material adverse effect on the consolidated financial statements of
the Company.
CFGI and The Bank are subject to various regulatory capital
requirements administered by 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 Company's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company must
meet specific capital guidelines that involve quantitative measures of
the Company's assets, liabilities, and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Company'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 Company to maintain minimum amounts and
ratios (set forth in the following table) 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 the Company meets all capital adequacy requirements
to which it is subject as of December 31, 1996.
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized The Bank as adequately
capitalized under the regulatory framework for prompt corrective
action. To be categorized as adequately capitalized the Company must
maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table below. There are no
conditions or events since that notification that management believes
have changed the Company's category.
35
<PAGE> 31
CFGI and The Bank's actual capital amounts and ratios are also
presented in the table.
CAPITAL RATIOS
<TABLE>
<CAPTION>
CFGI The Bank
December 31 December 31
-------------------------------------------------------------------------------------------------------------------
(Dollars In Thousands) 1996 1995 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL COMPONENTS
TIER 1 CAPITAL:
Shareholders' equity $ 22,085 $ -- $ 22,005 $ 20,012
Disallowed portion of deffered tax assets -- -- -- (143)
Unrealized (gain) on securities AFS (64) -- (64) (279)
-------------------------------------------------------------------------------------------------------------------
Total Tier 1 capital 22,021 -- 21,941 19,590
TIER 2 CAPITAL:
Allowable allowance for possible loan losses 1,443 -- 1,453 1,270
-------------------------------------------------------------------------------------------------------------------
Total capital $ 23,464 -- $ 23,394 $ 20,860
===================================================================================================================
Risk-adjusted assets $113,971 -- $114,854 $ 99,802
Quarterly average assets $167,111 -- $167,052 $152,907
</TABLE>
<TABLE>
<CAPTION>
FDICIA
Minimum December 31 December 31
Ratios 1996 1995 1996 1995
------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL RATIOS
Total risk-based capital ratio 6-10% 20.6% -- 20.4% 20.9%
Tier 1 risk-based capital ratio 3- 6% 19.3% -- 19.1% 19.6%
Tier 1 leverage ratio 2- 5% 13.2% -- 13.1% 12.8%
</TABLE>
O. Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial
instruments for both on and off-balance sheet assets and liabilities
for which it is practicable to estimate fair value. The techniques
used for this valuation are significantly affected by the assumptions
used, including the amount and timing of future cash flows and the
discount rate. Such estimates involve uncertainties and matters of
judgment and therefore cannot be determined with precision. In that
regard, the derived fair value estimates cannot be substantiated by
comparison to independent markets. Accordingly, the aggregate fair
value amounts presented are not meant to represent the underlying value
of the Company.
The following table presents the carrying amounts and the estimated
fair value of the Company's financial instruments at December 31:
<TABLE>
<CAPTION>
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1996 1995 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks, and federal funds sold $ 12,953 $ 12,953 $ 7,279 $ 7,279
Investment securities 46,437 46,437 47,924 47,924
Loans, net of unearned income 107,888 107,974 98,340 98,255
Financial liabilities:
Deposits 133,270 133,633 130,534 131,210
Federal Home Loan Bank borrowings 9,500 9,500 -- --
-------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 32
<TABLE>
<CAPTION>
Contractual Contractual
or or
Notional Estimated Notional Estimated
Amounts Fair Value Amounts Fair Value
-------------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1996 1995 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Off-balance items:
Interest rate floors $ 8,000 $ * $ 8,000 $ *
Commitments to extend credit 30,521 * 23,510 *
Standby letters of credit 1,612 * 1,902 *
-------------------------------------------------------------------------------------------------------------------
* The estimated fair value of these items was not significant at December 31, 1996 or 1995.
===================================================================================================================
</TABLE>
The following summary presents the methodologies and assumptions used
to estimate the fair value of the Company's financial instruments
presented above.
CASH DUE FROM BANKS AND FEDERAL FUNDS SOLD
For cash due from banks and federal funds sold, the carrying amount
is a reasonable estimate of fair value. These instruments expose the
Company to limited credit risk and carry interest rates which
approximate market.
INVESTMENT SECURITIES
In estimating fair values, management makes use of prices or dealer
quotes for U.S. Treasury securities, other U.S. government agency
securities, and mortgage-backed certificates. As required by
SFAS 115, securities available for sale are recorded at fair value.
LOANS
The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings for the same remaining
maturities adjusted for differences in loan characteristics. The risk
of default is measured as an adjustment to the discount rate, and no
future interest income is assumed for nonaccrual loans.
The fair value of loans does not include the value of the customer
relationship or the right to fees generated by the account.
DEPOSIT LIABILITIES
The fair value of deposits with no stated maturities (which includes
demand deposits, NOW accounts, and money market deposits) is the
amount payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using a discounted
cash flow model based on the rates currently offered for deposits of
similar maturities.
SFAS No. 107 requires deposit liabilities with no stated maturity to
be reported at the amount payable on demand without regard for
the inherent funding value of these instruments. The Company believes
that significant value exists in this funding source.
FEDERAL HOME LOAN BANK BORROWINGS
The fair value of Federal Home Loan Bank borrowings is estimated
using discounted cash flows, based on current incremental borrowing
rates for similar types of borrowing arrangements.
INTEREST RATE FLOORS
The fair value of interest rate floors is established by the issuer
based on the market price to purchase a like instrument with
comparable terms.
37
<PAGE> 33
P. Parent Company Financial Information
Condensed financial information for Community Financial Group, Inc.
(Parent Company only), as of December 31, 1996 and the period from
May 1, 1996 to December 31, 1996 was as follows:
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
December 31
--------------------------------------------------------------------------------------------------------------
(In Thousands) 1996
--------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Cash $ 37
Investment in bank subsidiary, at cost adjusted for equity in earnings 22,005
Other assets 61
--------------------------------------------------------------------------------------------------------------
Total Assets $ 22,103
Liabilities and Shareholders' Equity
Other liabilities $ 18
--------------------------------------------------------------------------------------------------------------
Total Liabilities 18
Total Shareholders' Equity 22,085
--------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 22,103
=============================================================================================================
</TABLE>
CONDENSED INCOME STATEMENT
<TABLE>
<CAPTION>
Eight Month
Period Ended
December 31
--------------------------------------------------------------------------------------------------------------
(In Thousands) 1996
--------------------------------------------------------------------------------------------------------------
<S> <C>
Income
Dividends from bank subsidiary $ 231
--------------------------------------------------------------------------------------------------------------
Total income 231
Expenses
Interest expense on short-term borrowings 1
Other expenses 50
--------------------------------------------------------------------------------------------------------------
Total expenses 51
--------------------------------------------------------------------------------------------------------------
Income before income taxes 180
Reduction to consolidated income taxes arising
from parent company taxable loss 19
Equity in undistributed earnings of subsidiary bank 2,348
--------------------------------------------------------------------------------------------------------------
Net Income $ 2,547
==============================================================================================================
</TABLE>
38
<PAGE> 34
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Eight Month
Period Ended
December 31
--------------------------------------------------------------------------------------------------------------
(In Thousands) 1996
--------------------------------------------------------------------------------------------------------------
<S> <C>
Operating activities
Net income $ 2,547
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed earnings of subsidiaries (2,348)
(Increase) in other assets (43)
Increase in other liabilities 18
--------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 174
--------------------------------------------------------------------------------------------------------------
Cash provided by investing activities --
--------------------------------------------------------------------------------------------------------------
Financing activities
Repayment of short-term borrowing (20)
Proceeds from issuance of common stock 56
Cash dividends paid (176)
--------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (140)
--------------------------------------------------------------------------------------------------------------
Increase in cash and due from banks 34
Cash and due from banks, beginning of period 3
--------------------------------------------------------------------------------------------------------------
Cash and due from banks, end of year $ 37
==============================================================================================================
</TABLE>
39
<PAGE> 35
REPORT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Community Financial Group, Inc. and subsidiary
(the Company) is responsible for preparing the accompanying
consolidated financial statements in accordance with generally accepted
accounting principles. The amounts therein are based on management's
best estimates and judgments. Management has also prepared other
information in the annual report and is responsible for its accuracy
and consistency with the consolidated financial statements.
The Company maintains a system of internal accounting control which
it believes, taken as a whole, is sufficient to provide reasonable
assurance that assets are properly safeguarded and that transactions
are executed in accordance with proper authorization and are
recorded and reported properly. In establishing and maintaining any
system of internal accounting control, estimates and judgments are
required to assess the relative costs and expected benefits. The
Company also maintains a program that independently assesses the
effectiveness of their internal controls.
The Company's consolidated financial statements have been audited by
independent certified public accountants. Their Independent
Auditors' Report, which follows, is based on an audit made in
accordance with generally accepted auditing standards and expresses an
opinion as to the fair presentation of the Company's consolidated
financial statements. In performing their audit, the Company's
independent certified public accountants consider the Company's
internal control structure to the extent they deem necessary in order
to issue their opinion on the consolidated financial statements.
The Board of Directors pursues its oversight role for the consolidated
financial statements through the Audit Committee, which consists
solely of outside directors. The Audit Committee meets periodically
with both management and the independent auditors to assure that each
is carrying out its responsibilities.
/s/ Mark S. Linebaugh, Jr.
--------------------------
Mack S. Linebaugh, Jr.
Chairman of the Board
President and CEO
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
COMMUNITY FINANCIAL GROUP, INC.:
We have audited the accompanying consolidated balance sheets of
Community Financial Group, Inc. and subsidiary (the Company) as of
December 31, 1996 and 1995, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the years in
the three-year period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial
position of Community Financial Group, Inc. and subsidiary as of
December 31, 1996 and 1995, and the results of their operations and
their cash flows for each of the years in the three-year period ended
December 31, 1996 in conformity with generally accepted accounting
principles.
/s/
Nashville, Tennessee
January 22, 1997
40
<PAGE> 36
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARY (UNAUDITED)
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
1996
Three Months Ended
----------------------------------------------------------------------------------------------------------------
(In Thousands, except per share data) December 31 September 30 June 30 March 31
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 3,431 $ 3,186 $ 3,174 $ 3,108
Interest expense 1,691 1,598 1,558 1,599
----------------------------------------------------------------------------------------------------------------
Net interest income 1,740 1,588 1,616 1,509
Provision for possible loan losses -- -- -- --
Non-interest income 215 217 229 266
Non-interest expense 1,282 1,173 1,180 1,030
----------------------------------------------------------------------------------------------------------------
Income before income taxes 673 632 665 745
Provision for income taxes 76 62 15 15
----------------------------------------------------------------------------------------------------------------
Net income $ 597 $ 570 $ 650 $ 730
================================================================================================================
Income per share:
Net income $ .27 $ .26 $ .29 $ .33
================================================================================================================
Weighted Average Common
Shares Outstanding 2,225,525 2,219,082 2,215,507 2,213,284
================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1995
Three Months Ended
----------------------------------------------------------------------------------------------------------------
(In Thousands, except per share data) December 31 September 30 June 30 March 31
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 3,256 $ 3,075 $ 3,075 $ 2,841
Interest expense 1,672 1,691 1,767 1,512
----------------------------------------------------------------------------------------------------------------
Net interest income 1,584 1,384 1,308 1,329
Provision for possible loan losses -- -- -- (520)
Non-interest income 145 207 196 174
Non-interest expense 1,173 993 1,045 1,090
----------------------------------------------------------------------------------------------------------------
Income before income taxes 556 598 459 933
Provision for income taxes 32 -- -- --
----------------------------------------------------------------------------------------------------------------
Net income $ 524 $ 598 $ 459 $ 933
================================================================================================================
Income per share:
Net income $ .24 $ .27 $ .21 $ .42
================================================================================================================
Weighted Average Common
Shares Outstanding 2,209,855 2,206,085 2,199,802 2,195,748
================================================================================================================
</TABLE>
41
<PAGE> 37
COMMON STOCK INFORMATION
The common stock of Community Financial Group, Inc., is traded
over-the-counter on the National Association of Securities Dealers,
Inc. (NASDAQ) under the symbol CFGI. The trading symbol for the
detachable warrants is CFGIW. The quotes appear weekly in the Wall
Street Journal under the heading, "NASDAQ Weekly Bid & Asked
Quotations" and daily in The New York Times under the heading "NASDAQ
Supplemental List". As of December 31, 1996, there were 532
shareholders of record of CFGI common stock.
The following table sets forth the Company's high and low prices
during each quarter for the past two years.
<TABLE>
<CAPTION>
Market Price
---------------------------------------------------
1996 High Low
---------------------------------------------------
<S> <C> <C>
First quarter $ 11.00 $ 10.00
Second quarter 11.00 9.75
Third quarter 10.75 9.75
Fourth quarter 11.75 10.50
</TABLE>
<TABLE>
<CAPTION>
Market Price
---------------------------------------------------
1995 High Low
---------------------------------------------------
<S> <C> <C>
First quarter $ 8.50 $ 6.75
Second quarter 8.75 7.75
Third quarter 10.25 8.00
Fourth quarter 10.75 9.75
</TABLE>
Quarterly stock price quotations were provided by the National
Association of Securities Dealers, Inc., and reflect prices without
retail markup, markdown or commissions and may not reflect actual
transactions.
42
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State of Name Under Which
Subsidiary Incorporation Does Business
---------- ------------- -------------
<S> <C> <C>
The Bank of Nashville Tennessee The Bank of Nashville
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,128
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,825
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,437
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 107,888
<ALLOWANCE> 2,878
<TOTAL-ASSETS> 166,679
<DEPOSITS> 133,270
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,824
<LONG-TERM> 9,500
0
0
<COMMON> 13,215
<OTHER-SE> 8,870
<TOTAL-LIABILITIES-AND-EQUITY> 22,085
<INTEREST-LOAN> 9,569
<INTEREST-INVEST> 3,016
<INTEREST-OTHER> 314
<INTEREST-TOTAL> 12,899
<INTEREST-DEPOSIT> 6,298
<INTEREST-EXPENSE> 6,446
<INTEREST-INCOME-NET> 6,453
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (2)
<EXPENSE-OTHER> 4,665
<INCOME-PRETAX> 2,715
<INCOME-PRE-EXTRAORDINARY> 2,715
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,547
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
<YIELD-ACTUAL> 4.18
<LOANS-NON> 579
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 84
<ALLOWANCE-OPEN> 3,034
<CHARGE-OFFS> 697
<RECOVERIES> 541
<ALLOWANCE-CLOSE> 2,878
<ALLOWANCE-DOMESTIC> 1,873
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,005
</TABLE>
