<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1999
-------------------------------
Commission File Number: 0-28496
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Community Financial Group, Inc.
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(Exact name of Registrant as specified in its charter)
Tennessee 62-1626938
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
401 Church Street, Nashville, Tennessee 37219-2213
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(Address of principal executive offices) (Zip Code)
(615) 271-2000 (Registrant's telephone number, including area code)
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Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common shares outstanding 3,931,316 as of November 5, 1999.
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<TABLE>
<CAPTION>
Page(s)
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<S> <C>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- Consolidated Balance Sheets - September 30, 1999 and December 31, 1998....... 1
- Consolidated Statements of Shareholders' Equity and Other
Comprehensive Income - Nine Months Ended September 30, 1998 and 1999...... 2
- Consolidated Statements of Income - Three and Nine Months Ended
September 30, 1999 and 1998............................................... 3
- Consolidated Statements of Cash Flows
- Nine Months Ended September 30, 1999 and 1998............................ 4 - 5
- Notes to Consolidated Financial Statements - September 30, 1999.............. 6 - 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................................... 9 - 17
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................ 18
Signatures ............................................................................ 19
Exhibit 10 ............................................................................ 20 - 79
Exhibit 11 ............................................................................ 80
</TABLE>
<PAGE> 3
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks $ 15,120 $ 13,243
Federal funds sold 27,000 --
Securities available for sale (amortized cost $69,330 in 1999 and $71,113 in 1998) 68,312 71,662
Loans (net of unearned income of $2,152 in 1999 and $295 in 1998):
Commercial 65,337 51,970
Real estate - mortgage loans 96,047 79,455
Real estate - construction loans 17,257 14,667
Consumer 4,818 6,583
Leases 7,307 --
--------- ---------
Loans, net of unearned income 190,766 152,675
Less allowance for loan losses (3,973) (3,646)
--------- ---------
Total Net Loans 186,793 149,029
Premises and equipment, net 3,404 2,726
Accrued interest and other assets 2,458 1,525
--------- ---------
Total Assets $ 303,087 $ 238,185
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Non-interest bearing demand deposits $ 23,989 $ 17,980
Interest-bearing deposits:
NOW accounts 14,193 13,368
Money market accounts 109,027 71,263
Time certificates less than $100,000 48,253 27,757
Time certificates $100,000 and greater 43,165 32,185
--------- ---------
Total Deposits 238,627 162,553
--------- ---------
Federal Home Loan Bank borrowings 14,500 14,500
Federal funds purchased -- 8,000
Accounts payable and accrued liabilities 2,746 1,961
--------- ---------
Total Liabilities 255,873 187,014
--------- ---------
Commitments and contingencies (Note G) -- --
Shareholders' equity:
Common stock, $6 par value; authorized 50,000,000 shares; issued and
outstanding shares, 3,930,699 in 1999 and 4,216,531 in 1998 23,584 25,299
Additional paid-in capital 17,446 19,773
Retained earnings 6,816 5,759
Accumulated other comprehensive income (loss) (632) 340
--------- ---------
Total Shareholders' Equity 47,214 51,171
--------- ---------
Total Liabilities and Shareholders' Equity $ 303,087 $ 238,185
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 4
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND OTHER
COMPREHENSIVE INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-In Retained Comprehensive
Stock Capital Earnings Income (loss) Total
-------- -------- ------- ------------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 $ 13,275 $ 6,736 $ 3,747 $ 294 $ 24,052
Comprehensive income:
Net income -- -- 1,873 -- --
Change in unrealized gain (loss) on securities
available for sale -- -- -- 142 --
Total comprehensive income -- -- -- -- 2,015
Issuance of common stock - (248,475 shares) 1,490 1,620 -- -- 3,110
Cash dividends - $.18 per share -- -- (420) -- (420)
-------- -------- ------- ----- --------
Balance, September 30, 1998 $ 14,765 $ 8,356 $ 5,200 $ 436 $ 28,757
======== ======== ======= ===== ========
Balance, January 1, 1999 $ 25,299 $ 19,773 $ 5,759 $ 340 $ 51,171
Comprehensive income:
Net income -- -- 2,426 -- --
Change in unrealized gain (loss) on securities
available for sale -- -- -- (972) --
Total comprehensive income -- -- -- -- 1,454
Issuance of common stock - (8,668 shares) 52 62 -- -- 114
Repurchase of common stock (294,500 shares) (1,767) (2,389) -- -- (4,156)
Cash dividends - $.33 per share -- -- (1,369) -- (1,369)
-------- -------- ------- ----- --------
Balance, September 30, 1999 $ 23,584 $ 17,446 $ 6,816 $(632) $ 47,214
======== ======== ======= ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ---------------------------
1999 1998 1999 1998
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 4,312 $ 3,164 $ 11,269 $ 9,099
Interest on federal funds sold 282 68 409 258
Interest on balances in other banks 2 2 14 5
Interest on securities:
U.S. Treasury securities -- -- -- 54
U.S. government agency obligations 948 855 2,913 2,752
States and political subdivisions 16 16 47 42
Other securities 57 57 160 130
---------- ---------- ----------- ----------
Total interest income 5,617 4,162 14,812 12,340
---------- ---------- ----------- ----------
Interest expense:
Interest bearing demand deposits 1,198 993 3,016 2,901
Savings and time deposits less than $100,000 609 443 1,303 1,384
Time deposits $100,000 and over 514 407 1,249 1,248
Interest on Federal Home Loan Bank borrowings 182 125 548 512
Federal funds purchased -- 5 156 9
---------- ---------- ----------- ----------
Total interest expense 2,503 1,973 6,272 6,054
---------- ---------- ----------- ----------
Net interest income 3,114 2,189 8,540 6,286
Provision for loan losses 6 25 54 103
---------- ---------- ----------- ----------
Net interest income after provision for loan losses 3,108 2,164 8,486 6,183
Non-interest income:
Service fee income 249 162 659 420
Trust income -- 42 13 121
Investment Center income 354 302 996 392
Gain (loss) on sale of securities -- -- (5) 52
Income from foreclosed assets -- -- 3 --
Gain on sale of foreclosed assets -- 6 7 26
Other 90 66 250 222
---------- ---------- ----------- ----------
Total non-interest income 693 578 1,923 1,233
---------- ---------- ----------- ----------
Non-interest expense:
Salaries and employee benefits 1,207 1,005 3,329 2,400
Occupancy expense 343 214 950 598
Advertising 66 48 215 94
Audit, tax and accounting 73 53 207 147
Data processing expense 57 47 143 140
Other operating expenses 734 328 1,634 1,005
---------- ---------- ----------- ----------
Total non-interest expense 2,480 1,695 6,478 4,384
---------- ---------- ----------- ----------
Income before income taxes 1,321 1,047 3,931 3,032
Provision for income taxes 510 403 1,505 1,159
---------- ---------- ----------- ----------
Net income $ 811 $ 644 $ 2,426 $ 1,873
========== ========== =========== ==========
Net income per share
Basic $ 0.20 $ 0.26 $ .59 $ .80
========== ========== =========== ==========
Diluted $ 0.20 $ 0.23 $ .58 $ .62
========== ========== =========== ==========
Weighted average common shares outstanding
Basic 3,995,843 2,457,131 4,133,469 2,344,596
========== ========== =========== ==========
Diluted 4,096,048 2,753,786 4,175,165 3,011,615
========== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 6
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 14,693 $ 12,128
Fees received 1,923 1,233
Interest paid (6,127) (6,473)
Cash paid to suppliers and associates (7,214) (4,998)
-------- --------
Net cash provided by operating activities 3,275 1,890
-------- --------
Cash flows from investing activities:
Maturities of securities available for sale 48,832 25,887
Sales of securities available for sale 8,203 3,060
Purchases of securities available for sale (55,182) (15,747)
Purchases of leases (5,970) --
Loans originated by customers, net (31,848) (19,988)
Purchases of premises and equipment (1,096) (1,559)
-------- --------
Net cash used by investing activities (37,061) (8,347)
-------- --------
Cash flows from financing activities:
Net increase in demand deposits, NOW, and money market accounts 44,598 5,376
Net increase (decrease) in certificates of deposit 31,476 (5,384)
Payments to Federal Home Loan Bank -- (5,000)
Proceeds from issuance of common stock 114 3,110
Repurchase of common stock (4,156) --
Cash dividends paid (1,369) (420)
-------- --------
Net cash provided (used) by financing activities 70,663 (2,318)
-------- --------
Net increase (decrease) in cash and cash equivalents 36,877 (8,775)
Cash and cash equivalents - beginning of period 5,243 16,591
-------- --------
Cash and cash equivalents - end of period $ 42,120 $ 7,816
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 7
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1999 1998
------- -------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income $ 2,426 $ 1,873
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 515 297
Provision for loan losses 54 103
Provision for deferred taxes (142) (51)
Gain on sale of foreclosed assets (7) (26)
Loss (gain) on sale of securities 5 (52)
Stock dividend income (117) (112)
Changes in assets and liabilities:
(Increase) decrease in accrued interest and other assets (981) 183
Increase (decrease) in accounts payable and accrued liabilities 1,522 (325)
------- -------
Net cash provided by operating activities $ 3,275 $ 1,890
======= =======
Supplemental Disclosure:
Non Cash Transactions:
Change in unrealized gain on securities available for sale, net of tax $ (972) $ 142
======= =======
Cash paid for:
Income taxes $ 1,467 $ 1,126
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 8
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
A. HOLDING COMPANY INFORMATION AND PRINCIPLES OF CONSOLIDATION
Community Financial Group, Inc. (CFGI), a Tennessee corporation, is a
bank holding company operating according to federal bank holding
company law. It owns The Bank of Nashville (The Bank), TBON-Mooreland
Joint Venture, LLC and a majority interest in The Bank's subsidiary
Machinery Leasing Company of North America, Inc., (BON Leasing).
The accompanying unaudited consolidated financial statements include
the accounts of CFGI, The Bank and its subsidiaries Mooreland Title and
BON Leasing, the operations of which are collectively referred herein
as the Company. All significant intercompany balances and transactions
have been eliminated in the accompanying consolidated financial
statements.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with general practices within the banking
industry and generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements. In the
opinion of management, all adjustments consisting of normal recurring
accruals considered necessary for a fair presentation of interim
results have been included.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
The interim consolidated financial statements should be read in
conjunction with the Summary of Significant Accounting Policies and the
Notes to the Financial Statements presented in the Company's 1998
Annual Report to Shareholders. The results for the interim period are
not necessarily indicative of results to be expected for the complete
calendar year.
B. JOINT VENTURE AND BUSINESS COMBINATIONS
In April, 1999, The Bank formed TBON-Mooreland Joint Venture, LLC. The
new company, a joint venture of The Bank and Mooreland Title Company,
LLC, will provide title services within the office of Mooreland Title.
This new title agency has the ability to underwrite title insurance on
most real estate loan transactions. The Bank owns 100% of the title
agency and consolidates all of its operations, and participates in a
revenue sharing agreement with Mooreland for 50% of the revenue.
On June 18, 1999 The Bank of Nashville acquired 80% ownership in
Machinery Leasing Company of North America, Inc. for $1.3 million in
cash. The transaction has been accounted for using the purchase method
of accounting and closed in June 1999. The leasing company is included
in the consolidated financial statements of The Bank. The primary asset
acquired was the equipment lease portfolio of approximately $6.0
million. The total premium and goodwill recorded in the transaction was
$676,000. During the three and nine month period ended September 30,
1999 approximately $41,000 and $54,000 in amortization expense was
recorded, respectively.
C. SECURITIES
Securities with an aggregate fair market value of $30.9 million at
September 30, 1999, were pledged to secure public deposits, Federal
Home Loan Bank borrowings and for other purposes as required or
permitted by law.
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<PAGE> 9
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
D. ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
------------------ ------------------
<S> <C> <C>
Balance, beginning of period $ 3,859 $ 3,646
Provision charged to operations 6 54
Allowance of purchased subsidiary -- 92
Loans charged off (150) (658)
Recoveries 258 839
------- -------
Balance, end of period $ 3,973 $ 3,973
======= =======
Allowance ratios are as follows:
Balance, to loans outstanding end of period 2.08% 2.08%
Net recoveries to average loans .06% .11%
</TABLE>
E. INCOME TAXES
Actual income tax expense for the three and nine months ended September
30, 1999 differed from "expected" tax expense (computed by applying the
U.S. Federal corporate tax rate of 34% to income before income taxes)
as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
------------------ ------------------
<S> <C> <C>
Computed "expected" tax expense $449 $1,337
State tax expense, net of federal benefit 52 156
Other 9 12
---- ------
Total Income Tax Expense $510 $1,505
==== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1999 and December 31, 1998, are presented below (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----- -----
<S> <C> <C>
Deferred tax assets:
Unrealized loss on securities available for sale $ 386 $ --
Deferred fees, principally due to timing differences in
the recognition of income 214 141
Other 21 4
----- -----
Total gross deferred tax assets 621 145
----- -----
Deferred tax liabilities:
Discount on securities deferred for tax purposes (105) (130)
Unrealized gain on securities available for sale -- (209)
Loans, principally due to provision for loan losses (70) (126)
Other (109) (80)
----- -----
Total gross deferred tax liabilities (284) (545)
----- -----
Net deferred tax asset (liabilities) $ 337 $(400)
===== =====
</TABLE>
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<PAGE> 10
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
F. SHAREHOLDERS' EQUITY
The Company had outstanding stock options totaling 248,177 and 142,627
shares at September 30, 1999 and December 31, 1998, respectively. The
following table is a reconciliation of net income and average shares
outstanding used in calculating basic and diluted earnings per share.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net income available to
common shareholders: $ 811,000 $ 644,000 $2,426,000 $1,873,000
========== ========== ========== ==========
Weighted average basic
common shares outstanding 3,995,843 2,457,131 4,113,469 2,344,596
Dilutive effect of
Options 100,205 36,714 61,696 42,429
Warrants -- 259,941 -- 624,590
---------- ---------- ---------- ----------
Weighted average diluted
common shares outstanding 4,096,048 2,753,786 4,175,165 3,011,615
========== ========== ========== ==========
Net income per share:
Basic $ .20 $ .26 $ .59 $ .80
Diluted $ .20 $ .23 $ .58 $ .62
</TABLE>
There was a significant change in the capital structure of the Company
in December 1998, as 1,996,807 warrants, each representing the right to
acquire a common share at a price of $12.50 were exercised. The
warrants had an expiration date of December 31, 1998 and all
unexercised warrants expired.
Accumulated other comprehensive income consists solely of the
unrealized gain or loss on securities available for sale net of the
income tax effect.
G. COMMITMENTS AND CONTINGENCIES
In the normal course of business, there are various commitments
outstanding to extend credit, such as the funding of undrawn lines of
credit or standby letters of credit, which generally accepted
accounting principles do not require to be recognized in the financial
statements. The Company, through regular reviews of these arrangements,
does not anticipate any material losses as a result of these
transactions. At September 30, 1999 and December 31, 1998, the Company
had unfunded commitments to extend credit totaling $67.6 and $58.2
million, respectively. Additionally, the Company had standby letters of
credit of $3.7 and $4.8 million as of September 30, 1999 and December
31, 1998, respectively.
The Bank is required to maintain average balances with the Federal
Reserve Bank and in vault cash to meet its reserve requirements. The
average amount of these balances at the Federal Reserve Bank and vault
cash for the three and nine month periods ended September 30, 1999,
totaled approximately $3,769,000 and $4,027,000, respectively. The
required balance at September 30, 1999 was $2,877,000.
During the quarter ended September 30, 1999 the Company entered into
standard employment agreements with members of senior management.
-8-
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Community Financial Group, Inc. (CFGI), is a bank holding company and owns The
Bank of Nashville (The Bank), TBON-Mooreland Joint Venture, LLC and a majority
interest in The Bank's subsidiary, Machinery Leasing Company of North America,
Inc., (BON Leasing) all of which are collectively referred to as the Company.
The following discussion compares the Company's financial condition at September
30, 1999 and December 31, 1998, and results of operations for the three month
and nine month periods ended September 30, 1999, compared with the same periods
in 1998.
The quarterly consolidated financial statements reflect all adjustments which
are, in the opinion of management, necessary for fair presentation of results of
interim periods. The results for interim periods are not necessarily indicative
of results to be expected for the complete calendar year. References should also
be made to the Company's 1998 Annual Report for a more complete discussion of
factors that impact the results of the operations, liquidity, and capital. To
the extent that statements in this discussion relate to the plans, objectives,
or future performance of the Company, these statements may be deemed to be
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are based on management's current
expectations and the current economic environment. Actual strategies and results
of future periods may differ materially from those currently expected due to
various risks and uncertainties.
In March of 1999, the Company's Board of Directors approved the repurchase of up
to 400,000 shares of the Company's stock. As of September 30, 1999, 294,500
shares of the Company's stock had been repurchased. Community Financial Group,
Inc. is listed on the NASDAQ Stock Market and traded under the symbol CFGI.
PERFORMANCE OVERVIEW
For the quarter ended September 30, 1999, net income totaled $811,000, a
$167,000 or 25.93% increase over the $644,000 reported for the third quarter of
1998. Earnings in the third quarter of 1999 were positively impacted by income
from BON Leasing, earnings on investments and income from the Company's expanded
relationship with LM Financial Partners, Inc. Earnings in the third quarter of
1999 were negatively impacted by a $235,000 pre-tax expense that resulted from
an instance of fraudulent deposit account activity. The expense reported
represents the maximum pre-tax loss, excluding legal fees, in this matter. The
Company is vigorously pursuing recovery efforts on this loss. Additionally,
there was a related loan of $150,000 which has been deemed uncollectible and was
charged against the allowance for loan losses in the third quarter of 1999.
Other increased expenses in the third quarter of 1999 resulted from a full
quarter of operation for the company's Hendersonville and Brentwood offices,
which opened in April, 1999 and September, 1998, respectively, increased
advertising expense, and increased audit tax and accounting expense as well as
amortization of expenses related to the purchase of BON Leasing. Basic earnings
per share were $.20 in the third quarter of 1999, down 23% from $.26 for the
same period in 1998. Diluted earnings per share were $.20 in the third quarter
of 1999, compared to $.23 for the same period in 1998. The decrease in basic
earnings per share resulted from the increased number of shares outstanding due
to the exercise of warrants in December 1998. Reference should be made to Note F
regarding computation of earnings per common share.
During the third quarter of 1999, the Company recorded $6,000 in provision for
loan losses, compared to $25,000 during the third quarter of 1998. Despite the
growth in the Company's loan portfolio, management felt it was appropriate to
reduce the provision for loan losses as the Company had net recoveries of
$108,000 during the quarter. This compares to net recoveries of $246,000 for the
third quarter of 1998. Net recoveries have the effect of increasing the
allowance for loan losses. The allowance for loan losses was 2.08% of loans at
September 30, 1999, compared with 2.51% for the same period in 1998.
The Company's annualized return on average assets was 1.13% for the third
quarter of 1999, compared to 1.23% for the third quarter of 1998. Annualized
return on average equity was 6.70% for the third quarter of 1999 and 9.12% for
the same period in 1998. The decline in return on average assets was the result
a $77.2 million, or 37.30% increase in average assets at September 30, 1999,
compared with the same period in 1998. The decline in return on average equity
resulted from a $19.7 million, or 69.80% increase in average equity at September
30, 1999, compared with the same period in 1998. The increase in average equity
resulted primarily from the exercise of warrants during December 1998.
-9-
<PAGE> 12
The Company's non-performing assets were $664,000 at September 30, 1999,
compared to $709,000 at September 30, 1998 and $460,000 December 31, 1998. Total
loans, net of unearned income, were $190.8 million at September 30, 1999, an
increase of $47.7 million, or 33.30% from September 30, 1998, and an increase of
$38.1 million, or 24.90%, from December 31, 1998.
Net income for the nine months ended September 30, 1999, was $2,426,000 compared
with net income of $1,873,000 during the first nine months of 1998. Basic
earnings per share were $.59 for the nine months ended September 30, 1999, down
$.21, or 26.30%, from $.80 for the same period in 1998. Diluted earnings per
share were $.58 for the nine month period ended September 30, 1999, compared to
$.62 for the same period in 1998. Net interest income increased $2.3 million, or
35.90%, during the first nine months of 1999 compared with the same period in
1998. Non-interest income increased $690,000, or 56.00%, during the first nine
months of 1999, compared with the same period in 1998. The increase in net
interest income reflected earnings on additional capital, lower cost of funds
and an increase in the Company's average loans outstanding. The increase in
non-interest income resulted primarily from increases in investment center
income and service fee income. These increases in non-interest income were
partially offset by decreases in trust income and gains on sale of foreclosed
assets compared to the same period in 1998. Non-interest expense increased $2.1
million during the first nine months of 1999, compared to the same period in
1998. Increases in non-interest expense occurred in salaries and employee
benefits, occupancy expense, advertising expense, audit tax and accounting
expense, and other operating expenses which included the loss on fraudulent
deposit account activity previously discussed. These increases in non-interest
expense reflected the Company's expansion in Hendersonville in the second
quarter of 1999 and in Brentwood during the third quarter of 1998 as well as
expansion in its investment center operations and the purchase of a majority
interest in Machinery Leasing Company of North America, Inc. (BON Leasing). It
is expected that non-interest expense will continue to increase in future
periods as the Company implements its strategic plan to expand its banking
services and to enter related lines of business, as appropriate. The Company's
annualized return on average assets was 1.25% for the nine months ended
September 30, 1999, and 1.22% for the same period in 1998. Annualized return on
average equity was 6.50% for the first nine months of 1999, compared with 9.58%
for the same period in 1998. The decline in annualized return on average equity
reflected the Company's increased equity that resulted from the exercise of
warrants during December 1998.
NET INTEREST INCOME
Net interest income is the principal component of the Company's income stream
and represents the difference or spread between interest generated from earning
assets and interest paid on interest bearing liabilities. Fluctuations in
interest rates, as well as volume and mix changes in earning assets and interest
bearing liabilities, materially impact net interest income.
Net interest income before provision for loan losses for the third quarter of
1999 was $3.1 million, an increase of $.9 million, or 40.90%, compared to the
third quarter in 1998. The increase in net interest income resulted from a
38.20% increase in the volume of average earning assets and a decline of 30
basis points in the average rate paid on interest bearing liabilities. These
increases were partially offset by a decline in the average rate earned on
earning assets of 20 basis points and an increase of 35.20% in the average
volume of interest bearing liabilities. The increase in the volume of average
earning assets may be attributed to a $50.8 million increase in average loans
outstanding, an increase of $6.8 million in average investments and an increase
of $17.7 million in average federal funds sold. The mix of assets changed during
the third quarter of 1999, compared to the same period in 1998, as the
percentage of average investment securities decreased from 28.70% to 23.20%
while average federal funds sold increased from 2.60% to 8.40%. Average loans
represented 68.40% of average earning assets in the third quarter of 1999
compared to 68.70% for the same period in 1998. Net interest income was also
impacted by a shift in the mix of interest bearing liabilities during the third
quarter of 1999, compared to the same period in 1998. The average volume of
certificates of deposit less than $100,000 increased $14.4 million, or 47.30%,
certificates of deposit $100,000 or greater increased $9.6 million, or 34.00%,
money market accounts increased $24.5 million, or 31.70%, NOW accounts increased
$2.3 million, or 19.40%, and the average volume of Federal Home Loan Bank and
other borrowings increased $4.7 million, or 47.30%. The increase in average
certificates of deposit was a result of the Company's certificate of deposit
promotion conducted during the second and third quarters of 1999 designed to
increase funding to support increasing loan demand, enhance liquidity as a part
of the Company's Year 2000 Liquidity Plan and to promote the opening of the
Company's Hendersonville location. During the third quarter of 1999, compared
with the same period in 1998, the average rate paid on interest bearing
liabilities declined 30 basis points which was comprised of a decline of 76
basis points in NOW account rates, 28 basis in money market account rates, 38
basis points in rates on certificates of deposit less than $100,000, 30 basis
points on rates on
-10-
<PAGE> 13
certificates of deposit $100,000 or greater and 22 basis points on Federal Home
Loan Bank and other borrowings. These declining rates on interest bearing
liabilities are not expected to continue as the third quarter did not reflect
the full effect of the Company's certificate of deposit marketing campaign or of
the Federal Reserve system's rate increases that occurred during the second and
third quarters of 1999.
The net interest margin (net interest income expressed as a percentage of
average earning assets) was 4.58% and 4.46% for the quarters ended September 30,
1999 and 1998, respectively. The increase in net interest margin resulted
primarily from the Company's reduced dependence on interest bearing liabilities
due to having received additional capital resulting from the exercise of
warrants in December 1998. The net interest margin was also impacted by a
significant growth in the loan portfolio during 1999 and by an increase in
interest bearing liabilities resulting from a certificate of deposit campaign
conducted during the second and third quarters of 1999. Fluctuations in net
interest margin were further affected by the differences in the interest rate
sensitivity of the Company's earning assets and interest bearing liabilities.
Net interest income for the first nine months of 1999 was $8.5 million, an
increase of 35.90%, compared to $6.3 million during the first nine months of
1998. The increase in net interest income during the first nine months of 1999
resulted from an increase of 25.20% in the volume of average earning assets and
a decline of 56 basis points in the average rate paid on interest bearing
liabilities. These items were partially offset by a 34 basis point decline in
the average rate earned on average earning assets and an increase of 16.60% in
the volume of average interest bearing liabilities. Net interest income was also
impacted by a shift in the mix of average earning assets that reflected loans
increasing by 30.10%, investments increasing by 9.60% and federal funds sold
increasing by 74.40%. Further impacting net interest income was a shift in the
mix of interest bearing liabilities which reflected increases of 17.00% in money
market accounts, 29.70% in NOW accounts, 2.50% in certificates of deposit less
than $100,000, 9.90% in certificates of deposit $100,000 or greater and 55.10%
in Federal Home Loan Bank and other borrowings. The increase in higher rate
certificates of deposit occurred primarily during the third quarter of 1999 as
the Company advertised a promotional certificate of deposit as part of its Year
2000 liquidity plan and in conjunction with its marketing efforts in
Hendersonville, Brentwood and Green Hills. Growth in interest bearing
liabilities overall may be attributed to branch expansion and increased
marketing effort. The certificate of deposit promotion, which began in June
1999, will impact the cost of funds during future periods. This campaign
generated $10 million in certificates with a ten month maturity at an interest
rate of 5.40% and $17 million in certificates with seventeen month maturity and
a interest rate of 5.70%. Customers purchasing these certificates have the
opportunity to increase the rate during the term, provided they initiate this
action during a period where the Company's standard rate for like maturities
exceeds the current rate on the certificate.
The net interest margin was 4.62% for the nine month period ended September 30,
1999, compared to 4.26% for the same period in 1998. The increase in net
interest margin resulted primarily from the utilization of increased capital and
certain repricing strategies implemented during the first six months of 1999
designed to reduce the overall cost of interest bearing liabilities for this
period. The certificate of deposit promotion, which began late in the second
quarter of 1999, resulted in increased cost of funds in the third quarter and is
expected to lower the net interest margin in future periods. The Company
discontinued its utilization of an asset liability management leveraging
strategy during the second quarter of 1999, which had consisted of matching
Federal Home Loan Bank borrowings to fund the purchase of additional investment
securities. The Asset Liability Committee of the Board of Directors and
management of the Company continues to review this strategy and approved
additional leveraging strategies during third quarter of 1999, which has not yet
been implemented. Average borrowings increased 55.10% during the first nine
months of 1999, compared to the same period in 1998, primarily as a result of
increased levels of federal funds purchased during the first six months of 1999.
The increased level of certificates of deposit during the third quarter of 1999
reduced the level of borrowings and increased the amount of federal funds sold.
Liquidity and asset liability strategies include the utilization of borrowings
from the Federal Home Loan Bank or draws on lines of credit established with
correspondent banks to satisfy liquidity or funding needs. At September 30,
1999, the Company had borrowings from the Federal Home Loan Bank totaling $14.5
million and had no outstanding draws on lines of credit with correspondent
banks.
-11-
<PAGE> 14
NON-INTEREST INCOME
Non-interest income was $693,000 for the third quarter of 1999, compared with
$578,000 for the same period in 1998. Non-interest income, excluding gains
(losses) on sale of securities and foreclosed assets and income from foreclosed
assets, increased $121,000, or 21.20%, during the third quarter of 1999 compared
with the same period of 1998. There were no gains or losses on the sale of
foreclosed assets or securities during the third quarter of 1999, compared to
gains of $6,000 on sale of foreclosed assets during the same period in 1998.
During the third quarter of 1999, compared to the same period in 1998,
investment center income increased $52,000 reflecting the growth in the
Company's arrangement with LM Financial Partners, Inc. Service fee income
increased $87,000 due to increased number of transaction accounts resulting from
branch expansion. These increases were partially offset by a decline of $42,000
in trust income due the discontinuation of traditional trust services.
Total non-interest income was $1,923,000 for the first nine months of 1999,
compared with $1,233,000 for the same period in 1998. Non-interest income,
excluding gains (losses) on sale of securities and foreclosed assets and income
on foreclosed assets, increased $721,000 for the first nine months of 1999,
compared with the same period in 1998. This increase is attributed to a $604,000
increase in investment center income and a $239,000 increase in service fee
income, which were partially offset by a decline of $108,000 in trust income due
to the Bank's discontinuing most traditional trust services. These increases
reflect the success of the Company's investment center and branch expansion
efforts.
NON-INTEREST EXPENSE
Total non-interest expense increased $785,000, or 46.30%, during the third
quarter of 1999, compared with the third quarter of 1998. This increase was the
result of increases of $202,000 in salaries and employee benefits, $129,000 in
occupancy expense, $18,000 in advertising expense, $20,000 in audit tax and
accounting expense, $10,000 in data processing expense, and $406,000 in other
operating expense which included a loss of $235,000 resulting from fraudulent
deposit activity during the third quarter of 1999. Increases in other operating
expense occurred in the areas of telecommunications expense, expenses related to
an accounts receivable financing program, legal expenses, correspondent bank
service charges and training and education. There was also an increase of
$54,000 in state franchise tax expense related to the Company's additional
capital. The increases in salaries and employee benefits and occupancy expense
resulted from the Company's expansion of its investment center, its lending
activities and the opening of the Hendersonville Branch location. Increased
advertising expenses resulted from costs associated with advertising promotion
certificates of deposit and an institutional advertising campaign. As the
Company continues its expansion and growth plans within The Bank, additional
expenses are anticipated in many of these areas.
Total non-interest expense increased $2,094,000, or 47.80%, during the first
nine months of 1999, compared with the same period of 1998. This in increase in
non-interest expense reflected the Company's growth and consisted of an increase
of $929,000 in salaries and employee benefits, $352,000 in occupancy expense,
$121,000 in advertising expense, $60,000 in audit tax and accounting expense and
$629,000 in other operating expenses. Increases in salaries and employee
benefits were related primarily to the expansion of the Company's investment
center, staffing of the new Hendersonville Branch Office and expansion of the
lending staff and support staff in other areas of The Bank. Advertising expense
increased as a result of promotions related to the opening of the Hendersonville
Office and a marketing campaign for certificates of deposit and an institutional
advertising campaign which began in the summer of 1999. The increase in audit
tax and accounting expenses was primarily related to the Company's purchase of a
majority interest in Machinery Leasing of North America, Inc. At September 30,
1999, the Company had 75 employees (one employee per $4.0 million in assets),
compared with 62 employees (one employee per $3.5 million in assets) at
September 30, 1998. Plans for the remainder of 1999 include continued expansion
in lending and support areas of the Company's commercial banking activities.
Other areas of expansion include offering investment services in conjunction
with LM Financial Partners, Inc. at locations other than the Main Office and
Green Hills, and further expansion in the Company's mobile branching system. An
investment in an internet banking cash management system available to commercial
customers is planned for introduction in late fall of 1999. The increases in
other operating expenses during the nine month period ended September 30, 1999,
compared to the same period in 1998 consisted of $235,000 related to fraudulent
activity on a deposit account, $54,000 in state franchise tax resulting from
increased capital, a $67,000 increase in telephone and network access fees,
$49,000 in expense on a loan program for accounts receivable financing, $39,000
for other outside services primarily consulting fees, $33,000 for bank security
and protection services, $21,000 for amortization of goodwill and minority
interest expense related to the acquisition of
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<PAGE> 15
BON Leasing, $17,000 in training and education, and an $11,000 increase in legal
fees. It is expected that the Company's non-interest expense will also increase
slightly during the remainder of 1999 due to expenses related to Year 2000. The
costs related to this project have been projected and are not expected to exceed
$135,000 during 1999. Year to date 1999 expenses have been approximately
$75,000. A more detailed discussion of Year 2000 issues is presented under the
caption, "Year 2000". It should also be noted that economic conditions and other
factors in the market could further impact non-interest expense.
INCOME TAXES
During the third quarter of 1999, the Company recorded provision for income
taxes of $510,000, compared to $403,000 during the same period in 1998.
During the first nine months of 1999, the Company recorded provisions for income
taxes of $1,505,000, an increase of $346,000, or 29.90%, compared to $1,159,000
recorded for the same period of 1998. The effective tax rate for each period was
38.00%.
NON-PERFORMING ASSETS AND RISK ELEMENTS
Non-performing assets, which include non-accrual loans, restructured loans and
other real estate owned, were $664,000 at September 30, 1999, an increase of
$204,000 from $460,000 at December 31, 1998, and a decrease of $45,000 from the
$709,000 reported at September 30, 1998. The Company maintains an allowance for
loan losses at a level which, in Management's evaluation, is adequate to cover
estimated losses inherent in the loan portfolio 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 or leases, the level of non-performing assets and
current and forecasted economic conditions.
During the third quarter of 1999, the Company recorded $6,000 in expense related
to provision for loan losses compared with $25,000 for the same period in 1998.
The provision for loan losses was deemed appropriate due to the acquisition of
Machinery Leasing Company of North America, Inc. and due to the level of net
recoveries experienced by The Bank coupled with the trend of growth in the loan
portfolio. All expenses recorded to provision for loan losses during the third
quarter of 1999 were in BON Leasing and The Bank did not make additional
provisions for loan losses during this quarter due to the level of net
recoveries from loans charged off in prior periods. There were no loans 90 days
or more past due and still accruing interest at September 30, 1999 or September
30, 1998.
Other potential problem loans at September 30, 1999 totaled approximately
$294,000 compared with $208,000 at September 30, 1998, and $256,000 at December
31, 1998. Other potential problem loans consist of loans that are currently not
considered non-performing, but where information about possible credit problems
has caused the Company to have serious doubts as to 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 non-performing assets. The composition of non-performing
assets at September 30, 1999, was 92.20% in non-accrual loans and 7.80% in other
real estate owned. This compares to 100% in non-accrual loans at September 30,
1998 and 88.70% in non-accrual loans and 11.30% in other real estate owned at
December 31, 1998. The allowance for loan losses was $4.0 million at September
30, 1999, compared with $3.6 million at September 30, 1998 and December 31,
1998. The allowance for loan losses as a percentage of total non-performing
assets was 598% at September 30, 1999, 506% at September 30, 1998, and 793% at
December 31, 1998. The allowance for loan losses as a percentage of period end
loans was 2.08% at September 30, 1999, 2.51% at September 30, 1998, and 2.40% at
December 31, 1998. The level of this allowance and the amount of the provision
are determined on a quarter by quarter basis, and, given the inherent
uncertainties in the estimation process, no assurance can be given as to the
amount of the allowance at any future date. It is anticipated that provisions
will be made in future periods based on anticipated growth in loan portfolio
which will be evaluated together with specific credit risk and economic
conditions. As of September 30, 1999, the allocated and unallocated portions of
the allowance were $2.9 million and $1.0 million, respectively.
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<PAGE> 16
YEAR 2000
Management and the Board of Directors have continued their emphasis on the Year
2000 (Y2K) Readiness. All systems, both mission critical and non-mission
critical, have been validated and all necessary remediations have been
completed, with all systems now deemed to be Y2K compliant. Additionally, during
the second and third quarters of 1999, the Company developed contingency plans
for all functional areas and validated these plans as well as having them
reviewed by a third party to further ensure their completeness. Although the
Company has validated all systems as Year 2000 compliant and system tests have
been reviewed by a third party, it is also deemed to be prudent to have well
established contingency plans and procedures should there be a Year 2000 failure
outside of the Company's control. The Company recognizes the technological and
financial risks to both the Company and its customers as the new millennium
approaches and has taken appropriate steps as outlined in the Company's "Year
2000 Readiness Disclosure Statement" to combat these risks. The software system
utilized for the Company's primary core application processing is fully
warranted by a financially strong, publicly traded company that supplies this
software to over 200 financial institutions nationwide. The Company has no
internally developed systems. Additionally, the Company has actively
participated in proxy testing with external vendors upon whom the Company is
reliant and has carefully reviewed the results of all tests to ensure these
systems are Year 2000 compliant. All system testing was completed prior to June
30, 1999. The costs related to this project are not expected to exceed $135,000
in 1999 and have been considered in the Company's budgeting process. Year to
date 1999 expenses have been approximately $75,000.
In addition to testing, remediation and/or replacing systems, as appropriate,
the Company has established a Year 2000 Event Plan which will be implemented by
key managers during the period beginning September 15, 1999 and continuing
through March 31, 2000. The Company is also cognizant of the potential impact of
Y2K on its borrowing customers and large depositors and has, therefore,
established a system for monitoring the Y2K compliance of these customers. The
Company has also assessed its investment portfolio relative to Y2K risk
exposure. The portfolio consists primarily of securities guaranteed by agencies
of the federal government. These agencies are required to be Y2K compliant.
Approximately $1.3 million of debt securities are issued by municipalities. Y2K
questionnaires were sent to these issuers and responses were received,
evaluated, and deemed to be satisfactory. Additionally, the Company's Y2K task
force has carefully monitored the implementation of new systems and changes to
any systems to ensure no additional risk is being assumed due to changes in
technology systems subsequent to Y2K compliance testing. There are no changes or
renovations planned for the Company's core processing systems during the
remainder of 1999. The Company has prepared contingency plans and liquidity
plans relative to customer activity, which will be implemented, as appropriate,
during 1999 to ensure the Company is well prepared to serve its customers.
During the second and third quarters of 1999, the Company conducted a
certificate of deposit advertising campaign, which resulted in a significant
increase in the level of deposits further ensuring the Company's liquidity
during the period of the Year 2000 Event. These plans are being carefully
monitored and implemented to ensure the Company continues to be well prepared to
serve its customers prior to, during and after the Y2K Event. The Company has
also established a Y2K communication plan and will continue to communicate with
its customers for the remainder of 1999. Y2K credit risk continues to be
assessed on all loans above a pre-determined amount, Y2K language has been
incorporated into contracts and loan agreements, and the Company continues to
educate all officers and staff to be attuned to the potential risks associated
with Y2K. A Year 2000 compliance review was performed on Machinery Leasing
Company of North America, Inc. prior to the Company's purchase of a majority
interest in this company. Members of senior management of the Company have been
actively involved in the Year 2000 Project both within The Bank and on a
national basis on behalf of the financial services industry. Management and the
Board of Directors remain committed to ensuring that the Company's customers and
shareholders will not be impacted by the Y2K issue.
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<PAGE> 17
MARKET RISK MANAGEMENT
Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from interest rate risk inherent in
its lending and deposit taking activities. To that end, management actively
monitors and manages its interest rate risk exposure. The Company's
profitability is affected by fluctuations in interest rates. A sudden and
substantial movement in interest rates may adversely impact the Company's
earnings to the extent that the interest rates borne by assets and liabilities
do not change at the same speed, to the same extent, or on the same basis. The
Company monitors the impact of changes on interest rates on its net interest
income and market value of equity using several tools. At least quarterly, the
Asset Liability Committee (ALCO) of the Board of Directors reviews interest rate
risk considering results compared to policy, current rate and economic outlooks,
loan and deposit demand levels, pricing and maturity of assets and liabilities,
impact on net interest income under varying rate scenarios, regulatory
developments, comparison of modified duration of both assets and liabilities as
well as any appropriate strategies to counteract adverse interest rate
projections. The Company's imbalance between the duration of assets and
liabilities is limited to under one year and generally should not exceed
one-half year. One measure of the Company's exposure to changes in interest
rates between assets and liabilities is shown in the Company's September 30,
1999 gap table below:
<TABLE>
<CAPTION>
Expected Repricing or Maturity Date
----------------------------------------------------------------
Within One Two After
One to Two to Five Five
(Dollars In Thousands) Year Years Years Year Total
- ---------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C>
Debt and equity securities $ 22,079 $34,200 $ 3,508 $ 8,525 $ 68,312
Average rate 6.39% 6.63% 7.04% 6.57% 6.57%
Net interest-earning loans 134,721 10,375 33,129 12,541 190,766
Average rate 8.45% 8.79% 8.51% 8.19% 8.46%
Federal funds sold 27,000 -- -- -- 27,000
Average rate 5.25% -- -- -- 5.25%
Other 317 -- -- -- 317
Average rate 5.25% -- -- -- 5.25%
- ---------------------------------------------------------------------------------------------------
Total interest-earning assets 184,117 44,575 36,637 21,066 286,395
Liabilities
Deposits 180,665 30,026 3,944 3 214,638
Average rate 4.58% 5.53% 5.87% 4.95% 4.74%
Federal Home Loan
Bank borrowings 14,500 -- -- -- 14,500
Average rate 5.57% -- -- -- 5.57%
- ---------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 195,165 30,026 3,944 3 229,138
- ---------------------------------------------------------------------------------------------------
Interest rate sensitivity gap $ (11,048) $14,549 $32,693 $21,063
- ---------------------------------------------------------------------------------------------------
Cumulative interest rate
sensitivity gap $ (11,048) $ 3,501 $36,194 $57,257
===================================================================================================
</TABLE>
Management recommends appropriate levels of interest rate risk to be assumed
within limits approved by the Board of Directors regarding the maximum
fluctuations acceptable in the market value of equity and in earnings, assuming
sudden rate movements (rising or falling) up to 200 basis points. The Company's
policy establishes a maximum change in annual pre-tax net interest income with a
200 basis point change in rates to 10% while establishing a maximum change
allowable in pre-tax market value of equity to 12% in the same assumed rate
environment. The Company's primary objective in managing interest rate risk is
to minimize the adverse impact of changes in interest rates on the Company's net
interest income and capital while structuring the Company's assets and
liabilities to obtain the maximum yield-cost spread. The Company relies
primarily on its asset liability structure to control interest rate risk. Based
on September 30, 1999 financial statements, a 200 basis point change in rates
would produce net interest income variations of a .44% decrease assuming rising
rates and a 1.86% decrease assuming falling rates. Additionally, the 200 basis
point rate shock would produce changes in the market value of equity reflecting
a decrease of 4.91% assuming rising rates and a 4.55% increase assuming falling
rates.
-15-
<PAGE> 18
BALANCE SHEET
The Company's total assets at September 30, 1999, were $303.1 million, an
increase of $64.9 million, or 27.20%, from December 31, 1998. This increase was
due to a $38.1 million increase in total loans outstanding, a $27.0 million
increase in federal funds sold, a $1.9 million increase in cash and due from
banks, a $.7 million increase in premises and equipment, and a $.9 million in
accrued interest and other assets. These increases were partially offset by a
decrease of $3.4 million in investment securities. Total deposits at September
30, 1999, were $238.6 million, an increase of $76.1 million, or 46.80%, from
$162.6 million at December 31, 1998. The increase in deposits was comprised of a
$37.8 million increase in money market accounts, a $20.5 million increase in
time certificates of deposit less than $100,000, $11.0 million increase in
certificates of deposit $100,000 or greater, $6.0 million increase in
non-interest bearing demand deposits and an increase of $.8 million in NOW
accounts. The increases in all deposit categories reflects the Company's efforts
in expanding its branches and increasing its marketing efforts. Borrowed funds
remained level at $14.5 million at September 30, 1999 compared to December 31,
1998. Borrowed funds consisted solely of borrowings from The Federal Home Loan
Bank.
CAPITAL ADEQUACY AND LIQUIDITY
The Bank's capital position continued to remain strong during the first nine
months of 1999. The Company experienced a significant change in its capital
structure in December of 1998 as 2.0 million warrants, each representing the
right to acquire a common share of stock at a price of $12.50, were exercised
resulting in the addition of $25.0 million in new equity capital. All warrants
had an expiration date of December 31, 1998 and there are no remaining warrants
outstanding. Management and the Board of Directors employed Dorland & Associates
to assist in the evaluation of potential long-term strategies to more
effectively deploy the additional capital. During the first nine months of 1999,
the Company created a title agency through a joint venture with Mooreland Title
Company, LLC of Brentwood, Tennessee, and purchased a majority interest in
Machinery Leasing Company of North America, Inc., as well as opening the
Hendersonville location of The Bank of Nashville. Additionally, the Company
began the implementation of an internal growth plan by expanding its lending
capabilities through the addition of loan officers with experience in the local
market area. In March of 1999, the Board of Directors approved the repurchase of
up to 400,000 shares of the Company's stock. As of September 30, 1999, 294,500
shares had been repurchased by the Company. The evaluation and implementation of
appropriate long-term business opportunities are expected to continue throughout
the remainder of 1999.
Shareholders' equity (excluding other comprehensive income) at September 30,
1999, was $47.8 million, or 15.80% of total assets, which compares with $28.3
million, or 13.20% of total assets, at September 30, 1998 and $50.8 million, or
21.30% of total assets at December 31, 1998.
Shareholders' equity was $47.2 million, or 15.80% of total assets, at September
30, 1999, which compares with $28.8 million, or 13.20%, of total assets at
September 30, 1998 and $51.2 million, or 21.50%, of total assets at December 31,
1998. The decrease in total equity during the first nine months of 1999 resulted
from the repurchase of common stock, dividends paid, and a decrease of $972,000
in accumulated other comprehensive income, net of taxes, resulting from the
decline in unrealized gain/losses on securities for sale at September 30, 1999,
compared with year end 1998. These decreases were partially offset by earnings
during the first nine months of 1999.
-16-
<PAGE> 19
While, in the past, the Company's capital ratios have exceeded all regulatory
requirements, currently its ratios indicate a significant amount of excess
capital based on industry standards and Federal Deposit Insurance Corporation
Improvement Act ("FDICIA") minimum ratios, resulting from the addition of new
capital in late 1998. The Company reported dividend payments of $1.4 million
during the first nine months of 1999 compared with $.4 million for the same
period in 1998. A quarterly dividend payment of $.07 per share was made during
the first quarter of 1999 and dividends of $.13 per share was paid during the
second and third quarters of 1999. It should be noted that the increases in the
dividend payment per share combined with approximately 1.5 million additional
shares outstanding in 1999 significantly increased the total amount of dividend
payments. The Company repurchased 294,500 shares of stock during the first nine
months of 1999 under a plan approved by its Board of Directors to repurchase up
to 400,000 shares of the Company's stock. At September 30, 1999, the Company's
primary and total capital ratios to adjusted assets were 17.95% and its total
risk based capital ratio was 23.50%. These ratios compare to primary and total
capital ratios to adjusted assets of 24.30% at December 31, 1998 and a risk
based capital ratio at December 31, 1998, of 31.60%. Federal Deposit Insurance
Corporation Improvement Act minimum primary and total capital ratios for "well
capitalized" banks are 4% and 8%, respectively.
The Company's principal sources of asset liquidity are marketable securities
available for sale and federal funds sold, as well as maturities of securities.
The estimated average maturity of securities was 6.3 years at September 30,
1999, compared to 7.0 years at December 31, 1998. At September 30, 1999 and
December 31, 1998, all securities were held as available for sale. Securities
available for sale were $68.3 million at September 30, 1999, compared to $71.7
million at December 31, 1998. The Company had federal funds sold at September
30, 1999, of $27.0 million, compared to no federal funds sold at December 31,
1998. Core deposits, a relatively stable funding base, comprised 81.91% of total
deposits at September 30, 1999, and 80.20% at December 31, 1998. Core deposits
represent total deposits excluding time certificates of $100,000 or greater. The
increased liquidity reflected at September 30, 1999, in the Company's marketable
securities portfolio and federal funds sold is deemed appropriate as a part of
the Company's Year 2000 Liquidity Plan.
-17-
<PAGE> 20
PART II
OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit No. Description
- ----------- -----------
10 Material Contracts
10.18 Executive Employment Agreement between Community Financial Group, Inc.,
The Bank of Nashville and Mack S. Linebaugh, Jr. dated September 14,
1999
10.19 Executive Employment Agreement between Community Financial Group, Inc.,
The Bank of Nashville and Julian C. Cornett dated September 14, 1999
10.20 Executive Employment Agreement between Community Financial Group, Inc.,
The Bank of Nashville and Anne J. Cheatham dated September 14, 1999
10.21 Executive Employment Agreement between Community Financial Group, Inc.,
The Bank of Nashville and T. Wayne Hood dated September 14, 1999
10.22 Executive Employment Agreement between Community Financial Group, Inc.,
The Bank of Nashville and Joan B. Marshall dated September 14, 1999
11 Statement regarding computation of earnings per share.
27 Financial Data Schedule (for SEC use only)
(B) The were no reports on Form 8-K filed during the quarter ended
September 30, 1999.
-18-
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
COMMUNITY FINANCIAL GROUP, INC.
Registrant
November 15, 1999 /s/ Mack S. Linebaugh, Jr.
- ---------------------- ----------------------------------------
Date Mack S. Linebaugh, Jr.
President, Chairman of the Board,
Chief Executive Officer and
Chief Financial Officer
-19-
<PAGE> 1
EXHIBIT 10.18
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement entered into this 14 day of
September, 1999 by and among Community Financial Group, Inc., a Tennessee
corporation (the "Company"), The Bank of Nashville, a banking corporation
organized under the laws of the State of Tennessee (the "Bank"), and Mack S.
Linebaugh, Jr. (the "Executive").
WITNESSETH:
WHEREAS, the Company is a one-bank holding company which owns one
hundred per cent (100%) of the outstanding stock of the Bank;
WHEREAS, the Company and the Bank desire to retain the services of
Executive on the terms and conditions set forth herein and, for purposes of
effecting the same, the Boards of Directors of the Company and the Bank have
approved this Employment Agreement and authorized its execution and delivery to
the Executive on behalf of the Company and the Bank;
WHEREAS, the Executive serves as the Chairman of the Board, President
and Chief Executive Officer and a Director of the Company and, as such, is a key
executive officer of the Company whose continued dedication, availability,
advice and counsel to the Company is deemed important to the Company, the Board
of Directors of the Company, and the present and future stockholders of the
Company;
WHEREAS, the Executive serves as the Chairman of the Board, President
and Chief Executive Officer and a Director of the Bank and, as such, is a key
executive officer of the Bank whose continued dedication, availability, advice
and counsel to the Bank is deemed important to the Board of Directors of the
Bank, the Bank and the Company;
WHEREAS, the Company and the Bank wish to attract and retain
well-qualified executives, and it is in the best interests of the Company, the
Bank and the Executive, notwithstanding any change in control of the Company or
the Bank, to secure the services of the Executive, whose experience and
knowledge of the affairs of the Company and the Bank, and whose reputation and
contacts in the industry, are extremely valuable to the Company and the Bank;
and
WHEREAS, the Company and the Bank consider the establishment and
maintenance of a sound and vital management team to be part of their overall
corporate strategy and to be essential to protecting and enhancing the best
interests of the Bank, the Company, and its stockholders.
NOW, THEREFORE, to assure the Company and the Bank of the Executive's
continued dedication, the availability of Executive's advice and counsel to the
Boards of Directors of the Company and the Bank, the availability of Executive's
management skills to the Company and the Bank, and to induce the Executive to
remain and continue in the employ of the Company and the Bank in Executive's
current capacities, and for other good and valuable consideration, the receipt
and adequacy of which each party hereby acknowledged, the Company, the Bank and
the Executive hereby agree as follows:
1. EMPLOYMENT. The Company and the Bank agree to, and do hereby, employ
Executive and Executive agrees to, and does hereby, accept such employment, all
upon the terms and conditions hereinafter set forth.
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2. TERM: The initial term of employment under this Agreement shall be
for a period of one (1) year, commencing on the date first above written and
ending at the close of business one year from said date. This Agreement shall be
automatically renewed for succeeding terms of one (1) year each, unless either
party shall, at least thirty (30) days, but not more than one hundred eighty
(180) days, prior to the expiration of any term, give written notice of his or
its intention not to renew this Agreement.
3. EMPLOYMENT; DUTIES, AUTHORITY, AND RESPONSIBILITIES:
(a) During the term of employment of the Executive by the Company
and the Bank, the Executive shall devote Executive's full business time and
attention to the rendition of services as Chairman, President and Chief
Executive Officer and Director of the Company and as Chairman, President and
Chief Executive Officer and Director of the Bank, and to the furtherance of the
best interests of the Company and the Bank, and shall exert Executive's best
efforts in the rendition of such services. The Executive agrees that in the
rendition of such services and in all aspects of such employment Executive will
comply with the policies, standards and regulations of the Company and the Bank
as from time to time established by their respective Boards of Directors. The
expenditure by the Executive of reasonable amounts of time for charitable,
professional and similar activities is encouraged and shall not be deemed a
breach of this Agreement provided such activities do not materially interfere
with the services to be rendered to the Company and the Bank hereunder.
(b) As Chairman, President and Chief Executive Officer of the
Company, the Executive shall have the general powers and duties of supervision
and management of the Company (the Company includes any and all subsidiaries,
ventures and related business) which usually pertain to such offices and shall
perform all such other duties as are properly required of Executive by the Board
of Directors of the Company. In performing the services hereunder, the Executive
shall be responsible to and shall report only to the Board of Directors of the
Company.
(c) The Board of Directors of the Company hereby grants the
Executive the necessary authority and responsibility for the day-to-day
operations of the Company and the implementation of the policies set by the
Board of Directors of the Company. All officers of the Company shall be
supervised by, be responsible to, and shall report, directly or indirectly, to
the Executive pursuant to such reporting structure as shall be established from
time to time by the Executive. A material reduction or limitation in these
duties and responsibilities by the Company shall constitute a breach of this
Agreement by the Company. In the event of any breach of any provision of this
Agreement by the Company which breach is not cured within ten (10) days after
written notice of the breach to the Company by the Executive shall entitle the
Executive to terminate his employment by the Company pursuant to this Agreement
by not less than sixty (60) days written notice to the Board of Directors of the
Company and, at the option of Executive, to terminate his employment by the Bank
pursuant to this Agreement by not less than sixty (60) days written notice to
the Board of Directors of the Bank. Any such termination by the Executive of his
employment by the Bank hereunder resulting from a breach of the terms of this
Agreement shall be treated the same as a termination by the Bank without cause
and governed by Section 9 below, unless such breach occurs in Contemplation of a
Change of Control or within twelve (12) months after a Change of Control, and
constitutes Good Reason for the Executive to terminate Executive's employment,
in which case it shall be governed by Section 15 below.
(d) As Chairman, President and Chief Executive Officer of the Bank,
the Executive shall have the general powers and duties of supervision and
management of the Bank (the Bank includes any and all subsidiaries, ventures and
related business) which usually pertain to such offices and shall perform all
such other duties as are properly required of him by the Board of Directors. In
performing the services hereunder, the Executive shall be responsible to and
shall report only to the Board of Directors of the Bank.
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(e) The Board of Directors of the Bank hereby grants the Executive
the necessary authority and responsibility for the day-to-day operations of the
Bank and the implementation of the policies set by the Board of Directors of the
Bank. All officers of the Bank shall be supervised by, be responsible to, and
shall report, directly or indirectly, to the Executive pursuant to such
reporting structure as shall be established from time to time by the Executive.
A material reduction or limitation in these duties and responsibilities by the
Bank shall constitute a breach of this Agreement by the Bank. In the event of
any breach of any provision of this agreement by the Bank which breach is not
cured within ten (10) days after written notice of the breach to the Bank by the
Executive shall entitle the Executive to terminate his employment by the Bank
pursuant to this Agreement by not less than sixty (60) days written notice to
the Board of Directors of the Bank and, at the option of Executive, to terminate
his employment by the Company pursuant to this Agreement by not less than sixty
(60) days written notice to the Board of Directors of the Company. Any such
termination by the Executive of his employment by the Bank hereunder resulting
from a breach of the terms of this Agreement shall be treated as a termination
by the Bank without cause and governed by Section 9 below, unless such breach
occurs in Contemplation of a Change of Control or within twelve (12) months
after a Change of Control, and constitutes Good Reason for the Executive to
terminate Executive's employment, in which case it shall be governed by Section
15 below.
4. COMPENSATION: The Bank agrees to pay Executive, and Executive agrees
to accept, as compensation for all services rendered by him to the Company, the
Bank and their affiliates during the period of his employment under this
Agreement, base compensation at the annual rate of not less than $200,000, which
shall be payable in accordance with the normal payroll policies of the Bank and
shall be subject to all appropriate withholding taxes.
5. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF BUSINESS EXPENSES
AND MOVING EXPENSES:
(a) During the term of this Agreement, Executive shall be entitled
to participate in all pension, group insurance, hospitalization, deferred
compensation, Company paid life insurance, or incentive plans, and any other
benefit plan of the Company or the Bank presently in effect or hereafter adopted
by the Company or the Bank and generally available to all employees of either
organization of senior executive status (the "Benefit Plans").
(b) During the term of this Agreement, to the extent that such
expenditures meet the requirements of the Internal Revenue Code for
deductibility by the Company or the Bank for federal income tax purposes and are
substantiated by the Executive as required by the Internal Revenue Service and
policies of the Company and the Bank, the Bank shall reimburse the Executive
promptly for all expenditures (including travel, entertainment, parking,
business meetings, and the monthly costs, including dues, of maintaining
memberships at appropriate clubs, including, but not limited to, Nashville City
Club) made in accordance with rules and policies established from time to time
by the Board of Directors of the Bank in pursuance and furtherance of the
Company's and the Bank's business and good will.
(c) During the term of this Agreement, in the event that the Company
or the Bank relocates its principal executive offices to a location more than
one hundred (100) miles from Nashville, Tennessee, or the Board of Directors of
either the Company or the Bank requires the Executive to be based anywhere more
than one hundred (100) miles from the Bank's principal executive offices, the
Bank shall pay (or reimburse the Executive for) all reasonable moving expenses
incurred by Executive relating to a change of Executive's principal residence in
connection with such relocation, provided that the Executive furnishes the Bank
with adequate records and documentary evidence for the substantiation of such
reimbursement.
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6. ILLNESS: In the event Executive is unable to perform Executive's
duties under this Agreement on a full-time basis for a period of six (6)
consecutive months by reason of illness or other physical or mental disability,
and at or before the end of such period Executive does not return to work on a
full-time basis, the Company and the Bank may jointly terminate Executive's
Employment pursuant to this Agreement without further or additional compensation
being due the Executive from the Bank pursuant to this Agreement, except that
the Executive shall be paid Executive's base compensation from the Bank at the
rate in effect at the time of Executive's termination for a period of twelve
(12) months from the date of the commencement of the Executive's inability to
perform his duties, less any disability payments payable during such time under
any disability plans maintained and paid for by the Bank, and Executive shall
continue to participate in all Benefit Plans in effect at the time of
Executive's termination for a period of twelve (12) months from the date of the
commencement of the Executive's inability to perform his duties.
7. DEATH: In the event of the Executive's death during the term of this
Agreement, Executive's estate, legal representatives or named beneficiaries (as
directed by the Executive in writing) shall be paid Executive's base
compensation from the Bank at the rate in effect at the time of the Executive's
death under this Agreement for the period of twelve (12) months from the date of
the Executive's death, less any amounts payable to Executive's estate or
beneficiaries under life insurance policies on the life of Executive maintained
and paid for by Bank.
8. TERMINATION BY COMPANY: Notwithstanding the provisions of Section 2
above, the Board of Directors of the Company may, in its sole discretion,
terminate the Executive's employment with the Company under this Agreement at
any time in any lawful manner by not less than thirty (30) days written notice
to the Executive, in which event the Executive shall be entitled to elect to
have such termination likewise constitute a termination of Executive's
employment by the Bank. If Executive so elects, then unless such termination is
for Cause as defined in Section 10 of this Agreement or unless the Executive's
employment is terminated in Contemplation of a Change of Control or within
twelve (12) months after a Change of Control, Executive shall be entitled to the
compensation provided for in Section 9 below.
9. TERMINATION BY BANK: Notwithstanding the provisions of Section 2 of
this Agreement, the Board of Directors of the Bank may, in its sole discretion,
terminate the Executive's employment with the Bank under this Agreement at any
time in any lawful manner by not less than thirty (30) days written notice to
the Executive (or, at the Bank's option, pay for such thirty days in lieu of
notice) and in such event, unless the Bank terminates the Executive's employment
with the Bank for Cause as defined in with Section 10 of this Agreement or,
unless the Executive's employment is terminated in Contemplation of a Change of
Control or within twelve (12) months after a Change of Control, the Executive
shall be paid, during the twelve (12) months following such termination at such
times as payment was theretofore made, the base compensation that the Executive
would have been entitled to receive during such period of time had such
termination not occurred, such payments to be in addition to any payment in lieu
of notice. Furthermore, the Bank shall pay to the Executive in equal monthly
payments an amount sufficient to fully fund any Benefit Plans of the Bank, with
respect to the Executive, commencing at the beginning of the first month
following termination of Executive's employment with the Bank pursuant to this
paragraph, and ending twelve (12) months after such termination. In the event
that a payment made with respect to any benefit plan or program would otherwise
violate the terms of the plan or program, an equivalent amount shall be paid
directly to Executive. Executive shall owe no duty to mitigate these payments,
and shall not be required to obtain or attempt to obtain alternate employment
during such twelve (12) month period. If Executive obtains other gainful
employment during such twelve (12) month period, the compensation and benefits
received by Executive during said period from such other employment shall not
reduce the payments otherwise due to Executive pursuant to this section.
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10. TERMINATION FOR CAUSE:
(a) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Company may, in its sole discretion, terminate the Executive's
employment with the Company for Cause. For the purposes of this Agreement, the
Company shall have "Cause" to terminate the Executive's employment hereunder:
(i) because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses), willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Bank terminates
the employment of Executive with the Bank for Cause pursuant to subsection (c)
of this Section 10. For purposes of this paragraph, no act, or failure to act,
on the Executive's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith or without reasonable belief that his action
or omission was in the best interest of the Company; provided that any act or
omission to act on the Executive's behalf in reliance upon an opinion of counsel
to either the Company or the Bank shall not be deemed to be "willful."
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been a resolution
approved by a majority of the non-officer members of the Board of Directors of
the Company finding that, in the good faith opinion of such majority, the
Executive was guilty of conduct which is deemed to be Cause within the meaning
of this paragraph, after notice to the Executive and an opportunity for him,
together with his counsel, to be heard before such majority (with the Company
Board retaining the right to deliberate without the Executive and his counsel
present before and/or after such hearing).
(b) If the Company terminates the Executive's employment with the
Company for Cause in accordance with Section 10(a) of this Agreement, the
Company shall have no obligation to make any further payments to or provide
benefits for the Executive, provided that the Executive shall be entitled to
receive any accrued compensation or benefits, insured or otherwise, that he
would otherwise have been eligible to receive under any Benefit Plans of the
Company through the date of such termination.
(c) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Bank may, in its sole discretion, terminate the Executive's
employment with the Bank for Cause. For the purposes of this Agreement, the Bank
shall have "Cause" to terminate the Executive's employment hereunder: (i)
because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses) , willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, the imposition of any sanction
upon the Executive by any such regulatory agency, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Company
terminates Executive's employment with the Company for Cause pursuant to
subsection (a) of this Section 10. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith or without reasonable
belief that his action or omission was in the best interest of the Bank;
provided that any act or omission to act on the Executive's behalf in reliance
upon an opinion of counsel to either the Company or the Bank shall not be deemed
to be "willful." Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall have been
a resolution approved by a majority of the non-officer members of the Board of
Directors of the Bank finding that, in the good faith opinion of such majority,
the Executive was guilty of conduct which is deemed to be Cause within the
meaning of this paragraph, after notice to the Executive and an opportunity for
him, together with his counsel to be heard before such majority (with the Bank
Board retaining the right to deliberate without the Executive and his counsel
present before and/or after such hearing).
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(d) If the Bank terminates the Executive's employment with the Bank
for Cause in accordance with Section 10(c) of this Agreement, the Bank shall
have no obligation to make any further payments to or provide benefits for the
Executive, provided that the Executive shall be entitled to receive any accrued
compensation or benefits, insured or otherwise, which Executive would otherwise
have been eligible to receive under any Benefit Plans of the Bank through the
date of such termination.
11. TERMINATION BY THE EXECUTIVE: The Executive may terminate the
Executive's employment with the Company or with the Bank hereunder at any time
upon sixty (60) days written notice to the affected entity. If the Executive
terminates the Executive's employment with either the Company or the Bank other
than for breach of this Agreement as provided in Section 3, for Good Reason, in
Contemplation of a Change of Control or within twelve (12) months after a Change
of Control, Executive shall be deemed to have voluntarily terminated Executive's
employment with both the Company and the Bank ("Voluntary Termination"), and
thereupon the Company and the Bank shall have no obligation to make any further
payments to or provide benefits for the Executive, provided that the Executive
shall be entitled to receive any accrued compensation and benefits, insured or
otherwise, that he would otherwise have been eligible to receive under any
Benefit Plans of the Company or the Bank through the date of such termination.
12. DEFINITION OF CHANGE OF CONTROL OF THE COMPANY: A "Change of
Control" of the Company shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 ("Exchange Act") or
such item thereof which may hereafter pertain to the same subject; provided
that, and notwithstanding the foregoing, a Change of Control shall be deemed to
have occurred if (i) any person (as that term is used in Sections 13(d) and
14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing thirty-five percent (35%)
or more of the combined voting power of the Company's then outstanding
securities, or (ii) the Company shall cease to be a publicly owned corporation,
as defined in the Exchange Act.
13. DEFINITION OF CHANGE OF CONTROL OF THE BANK: A "Change of Control"
of the Bank shall mean any Change of Control of the Company, or any change or
series of changes in circumstances which result in the Company ceasing to own,
control, and vote an absolute majority of the voting securities of the Bank.
14. TERMINATION BY COMPANY OR BANK AFTER CHANGE IN CONTROL: If a Change
of Control of the Company or a Change of Control of the Bank shall have
occurred, this Agreement shall continue in full force and effect. If the
Executive's Employment is terminated by the Company or the Bank within twelve
(12) months after a Change of Control of the Company, as defined in Section 12
above, or a Change of Control of the Bank, as defined in Section 13 above, or in
Contemplation of a Change of Control of either, as defined below, Executive
shall be entitled to be paid an amount equal to two and ninety-nine hundredths
(2.99) times the sum of Executive's annual base cash compensation plus the
annual value of Executive's participation in all Benefit Programs in effect at
the time of such termination. At Executive's option, the sums payable pursuant
to this Section will be paid in full in a lump sum and without discount within
thirty (30) days of the termination of Executive's employment, or in equal
monthly installments over twelve (12) months. Any termination of Executive's
employment hereunder during any period of time when the Board of Directors of
the Company has formed an intent to offer the Bank for sale or to promote an
acquisition of or merger of the Company or the Bank, or when the Company has
knowledge that any person(s), entity or concern has taken steps reasonably
calculated to effect a Change of Control of the Company shall constitute a
termination of Executive's employment "In Contemplation of a Change of Control".
The period of Contemplation of Change of Control shall continue until the Board
of Directors of the Company no longer intends to promote an acquisition of or
merger of the
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Company or the Bank, or until in the opinion of the Company's Board of
Directors, the person(s), concern or entity has abandoned or terminated its
efforts to effect a Change of Control of the Company, as applicable. Any good
faith determination by the Company's Board of Directors that Board no longer has
such an intent, or that the person(s), concern or entity has abandoned or
terminated its efforts to effect a Change of Control of the Company shall be
conclusive and binding on the Executive. Such determination shall be promptly
communicated to the Executive in writing by the Chairman of the Compensation
Committee or Vice Chairman of the Board of the Company. Notwithstanding the
foregoing, any termination of the Executive by the Company or by the Bank within
ninety (90) days prior to a Change of Control of the Company shall be
conclusively presumed to have been in Contemplation of Change of Control.
15. TERMINATION BY EXECUTIVE FOR GOOD REASON; During the term of
Executive's employment hereunder, the Executive may terminate his employment
with both the Company and the Bank if the Executive has Good Reason, as defined
below. Termination by the Executive of Executive's employment with either entity
shall be deemed termination with both. For purposes of this Agreement, "Good
Reason" shall mean:
(i) The assignment of duties to the Executive by the Company
or the Bank which (1) are significantly different from the Executive's duties
immediately prior to the Change of Control, or (2) result in the Executive
having significantly less authority and/or responsibility than Executive had as
an executive officer of the Company or the Bank prior to the Change of Control,
without the express written consent of Executive;
(ii) The removal of the Executive from or any failure to
re-elect Executive to the positions set forth in Section 3 above, except in
connection with a termination of his employment by the Company or the Bank for
Cause or Executive's resignation other than for Good Reason.
(iii) A reduction of the Executive's base salary as in effect
on the date of the Change of Control, unless the reduction in the Executive's
salary is waived in writing by the Executive;
(iv) The failure of the Company and the Bank collectively to
provide the Executive with substantially the same fringe benefits (including
paid vacations) that were provided to Executive immediately prior to the Change
of Control, or with a package of fringe benefits that, though one or more of
such benefits may vary from those in effect immediately prior to such Change of
Control, is substantially comparable in all material respects to such fringe
benefits taken as a whole; or
(v) Requiring the Executive to perform a significant part of
Executive's duties in locations more than one hundred (100) miles from
Nashville, Tennessee.
Further, and notwithstanding any other provision of this Agreement, the
Executive may terminate his employment without Good Reason at any time within
ninety (90) days after a Change of Control shall have occurred.
16. PAYMENTS ON TERMINATION: Upon termination of Executive's employment
by the Company or the Bank, the Company and the Bank shall have the following
payment obligations to Executive:
(a) If the Executive's Employment is terminated due to illness of
the Executive, the provisions of Section 6 shall apply.
(b) If the Executive's Employment is terminated due to the death of
the Executive, the provisions of Section 7 shall apply.
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(c) If the Executive's Employment is terminated by the Company other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 8 shall apply, and therefore the payment
provisions of Section 9 apply.
(d) If the Executive's Employment is terminated by the Bank other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 9 shall apply.
(e) If the Executive's Employment is terminated by the Company for
Cause, or by the Bank for Cause, the provisions of Section 10 shall apply.
(f) If the Executive's Employment is terminated by the Executive as
a result of a breach of the agreement by the Company or the Bank, the provisions
of Section 3 apply, and therefore the payment provisions of Section 9 apply.
(g) In the event of a Voluntary Termination of Executive's
Employment as defined in Section 11, the provisions of Section 11 apply.
(h) If the Executive's Employment is terminated by the Company or
the Bank within twelve (12) months after a Change of Control of the Company, as
defined in Section 12 above, or a Change of Control of the Bank, as defined in
Section 13 above, or in Contemplation of a Change of Control of either, as
defined in Section 14, the provisions of Section 14 shall apply.
(i) If the Executive's Employment is terminated by the Executive for
Good Reason, as defined in Section 15 above, the Executive's employment with the
Company and with the Bank shall be deemed to have been terminated without Cause
by the Company and by the Bank at the time of such termination by Executive for
Good Reason. If such termination is during a period of Contemplation of Change
of Control, or within twelve (12) months after a Change of Control, the
provisions of Section 14 shall apply.
(j) Termination of Executive's Employment by the Company or by the
Bank or by the Executive shall be communicated by written Notice of Termination
to the other parties hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision(s) in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated.
17. CONFIDENTIALITY: In the course of the Executive's employment, the
Company and the Bank may disclose or make known to the Executive, and the
Executive may be given access to or may become acquainted with, certain
information, including but not limited to confidential information which relates
to or is useful in the businesses of the Company and the Bank and which is not
available from public records or other generally available sources
(collectively, "Confidential Information"), and which the Company or the Bank
consider proprietary and desire to maintain confidential. During the term of
this Agreement and at all times thereafter, the Executive shall not in any
manner, either directly or indirectly, divulge, disclose or communicate to any
person or firm, except to legal counsel for the Company or the Bank or otherwise
to or for the benefit of the Company or the Bank as directed by the Company or
the Bank, and except to the Executive's legal counsel in connection with the
resolution of any dispute between the Executive and the Company or the Bank
under this Agreement, any of the Confidential Information which Executive may
have acquired in the course of or as an incident to Executive's employment by
the Company or the Bank, the parties agreeing that such Confidential Information
affects the successful and effective conduct of the business and their goodwill
of the Company and the Bank, and that any material breach of the terms of this
Section 17 is a material breach of this Agreement.
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18. COVENANT NOT TO COMPETE. During the Term of this Agreement and, if
Executive terminates Executive's employment in a Voluntary Termination or for
Good Reason, or if the Company or the Bank terminate Executive's employment in
Contemplation of a Change of Control, or within twelve (12) months after a
Change of Control, or for Cause, for the period of twelve (12) months following
the termination of Executive's employment with the Company or the Bank,
Executive agrees that Executive will not directly or indirectly own, become
interested in, or become involved in any manner whatsoever in any business which
is similar or competitive with any aspect of the business of the Company or the
Bank as conducted at the time of such termination. Without limiting the
foregoing, Executive agrees during the applicable period not to engage in the
Banking or Leasing businesses, whether as an owner, partner, director, officer,
employee, consultant, stockholder, agent, salesman, or in any other capacity for
any person, partnership, firm, corporation or other entity without the express
written consent of the President of the Company. Executive specifically
acknowledges and agrees that the foregoing restriction on competition with the
Company and the Bank will not prevent Executive from obtaining gainful
employment following termination of Executive's employment with the Company and
the Bank, and is a reasonable restriction upon Executive's ability to compete
with the Company and the Bank, given the economic benefits afforded to Executive
under this Agreement.
19. NO ENTICEMENT OF EMPLOYEES. Executive agrees that Executive will
not, directly or indirectly, entice or induce, or attempt to entice or induce
any employee of the Company or Bank to leave the employ of the Company or the
Bank during the period covered by the Non-Competition provisions of Section 18
above.
20. NO SOLICITATION. Executive will not, directly or indirectly,
solicit, entice or induce, or attempt to entice or induce any customer or user
of the products or services of the Bank or the Company during the period covered
by the Non-Competition provisions of Section 18 above.
21. REMEDIES. Executive acknowledges and agrees that the breach or
threatened breach of any of the provisions of Sections 17, 18, 19 and 20 of this
Agreement will cause irreparable harm to the Company and the Bank, and cannot be
adequately compensated by the payment of damages. Accordingly, Executive
covenants and agrees that the Company and the Bank, in addition to any other
rights or remedies which they may have, will be entitled to such equitable and
injunctive relief as may be available from any court of competent jurisdiction
to restrain Executive from breaching or threatening to breach any of the
provisions of this Sections 17, 18, 19 and 20, without posting bond or other
surety. Such right to obtain injunctive relief may be exercised at the option of
the Company or the Bank in addition to, concurrently with, prior to, after, or
in lieu of the exercise of any other rights or remedies which the Company or the
Bank may have as a result of any such breach or threatened breach. In addition
to all other remedies, in the event of the breach or threatened breach of any of
the provisions of Sections 17, 18, 19 or 20 of this Agreement, the Company and
Bank shall be relieved of any obligation to continue payments to the Executive
pursuant to the provisions of this agreement.
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22. NOTICES: For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
Community Financial Group, Inc.
401 Church Street, 2nd Floor
Nashville, TN 37219
Attention: Chairman of Compensation Committee
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
If to the Bank:
The Bank of Nashville
401 Church Street
Nashville, TN 37219
Attention: Chairman of Compensation Committee
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
If to the Executive:
Mack S. Linebaugh, Jr.
400 Wilsonia Avenue
Nashville, TN 37205
with a copy to:
Gerrish & McCreary, P.C.
Washington Square
222 Second Avenue North, Suite 424
Nashville, TN 37201
Attn: J. Franklin McCreary, Esq.
or at such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
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23. MODIFICATION; WAIVERS; APPLICABLE LAW: No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by the Executive, and on behalf of
the Company by such officer as may be specifically designated by the Board of
Directors of the Company after approval of the modification by the Board of
Directors, and on behalf of the Bank by such officer as may be specifically
designated by the Board of Directors of the Bank after approval of the
modification by the Board of Directors. No waiver by either party hereto at any
time of any breach by the other party hereto of, 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. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Tennessee.
24. INVALIDITY; ENFORCEABILITY: The invalidity or unenforceability of
any provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
25. ASSIGNMENTS: This Agreement is personal to the Executive, who may
not assign his obligations hereunder.
26. SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and
be binding upon the Company, its successors and assigns, the Bank, its
successors and assigns and upon the Executive, and his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable
to him hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to his devisee, legatee or
other designee or, if there is no such designee, to his estate.
27. HEADINGS: Descriptive headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
28. ARBITRATION: Any dispute, controversy or claim arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators, in Nashville, Tennessee, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Unless otherwise provided in the rules of the American Arbitration
Association, the arbitrators shall, in their award, allocate between the parties
the costs of arbitration, which shall include reasonable attorneys' fees and
expenses of the parties, as well as the arbitrator's fees and expenses, in such
proportions as the arbitrators deem just.
29. ENTIRE AGREEMENT: This Agreement represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and supersedes or amends all other agreements,
negotiations, understandings and representations (if any) made by and between
the parties hereto; provided, however, that nothing herein shall affect in any
way agreements granting or evidencing the Executive's options to acquire shares
of the Company.
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30. REGULATORY AND OTHER PROCEEDINGS: The provisions of this Section 30
shall control as to continuing rights and obligations under this Agreement,
notwithstanding any other provision of this Agreement, for as long as they are
required to be included in employment contracts between an institution insured
by the FDIC and its officers and as long as the Bank is such an insured
institution.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank or the Company by a
Notice served under applicable Federal or State statutes or regulations, the
Bank's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank and the Company shall pay the Executive all of the
compensation withheld while their obligations hereunder were suspended and
reinstate their obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the affairs of the Bank or the Company by an
order issued under applicable Federal or State statutes or regulations, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, provided that vested rights of the
contracting parties shall not be affected.
(c) If the Company or the Bank become insolvent or taken over by
regulatory entities, all obligations under this Agreement shall terminate as of
the date of default, provided that this paragraph shall not affect any vested
rights of the contracting parties.
(d) All obligations under this Agreement may be terminated, except
to the extent determined that continuation thereof is necessary for the
continued operation of the Company or the Bank, by the FDIC at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Bank or
approves a supervisory merger to resolve problems related to operation of the
Bank, provided that any rights of the parties that have already vested shall not
be affected by such action.
31. SURVIVAL. This agreement shall remain in effect notwithstanding the
termination of Executive's employment hereunder, and in any case, the provisions
of Sections 18, 19, and 20 shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
Executive:
/s/ Mack S. Linebaugh, Jr.
-----------------------------------------
Mack S. Linebaugh, Jr.
Community Financial Group, Inc.
By: /s/ Julian B. Baker
-----------------------------------------
Name: Julian B. Baker
Title: Chairman, Compensation Committee
of the Board of Directors
The Bank of Nashville
By: /s/ Julian B. Baker
-----------------------------------------
Name: Julian B. Baker
Title: Chairman, Compensation Committee
of the Board of Directors
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EXHIBIT 10.19
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement entered into this 14th day of
September, 1999 by and among Community Financial Group, Inc., a Tennessee
corporation (the "Company"), The Bank of Nashville, a banking corporation
organized under the laws of the State of Tennessee (the "Bank"), and Julian C.
Cornett (the "Executive").
WITNESSETH:
WHEREAS, the Company is a one-bank holding company which owns one
hundred per cent (100%) of the outstanding stock of the Bank;
WHEREAS, the Company and the Bank desire to retain the services of
Executive on the terms and conditions set forth herein and, for purposes of
effecting the same, the Boards of Directors of the Company and the Bank have
approved this Employment Agreement and authorized its execution and delivery to
the Executive on behalf of the Company and the Bank;
WHEREAS, the Executive serves as the Executive Vice President - Credit
Administration of the Company and, as such, is a key executive officer of the
Company whose continued dedication, availability, advice and counsel to the
Company is deemed important to the Company, the Board of Directors of the
Company, and the present and future stockholders of the Company;
WHEREAS, the Executive serves as the Executive Vice President - Credit
Administration of the Bank and, as such, is a key executive officer of the Bank
whose continued dedication, availability, advice and counsel to the Bank is
deemed important to the Board of Directors of the Bank, the Bank and the
Company;
WHEREAS, the Company and the Bank wish to attract and retain
well-qualified executives, and it is in the best interests of the Company, the
Bank and the Executive, notwithstanding any change in control of the Company or
the Bank, to secure the services of the Executive, whose experience and
knowledge of the affairs of the Company and the Bank, and whose reputation and
contacts in the industry, are extremely valuable to the Company and the Bank;
and
WHEREAS, the Company and the Bank consider the establishment and
maintenance of a sound and vital management team to be part of their overall
corporate strategy and to be essential to protecting and enhancing the best
interests of the Bank, the Company, and its stockholders.
NOW, THEREFORE, to assure the Company and the Bank of the Executive's
continued dedication, the availability of Executive's advice and counsel to the
Boards of Directors of the Company and the Bank, the availability of Executive's
management skills to the Company and the Bank, and to induce the Executive to
remain and continue in the employ of the Company and the Bank in Executive's
current capacities, and for other good and valuable consideration, the receipt
and adequacy of which each party hereby acknowledged, the Company, the Bank and
the Executive hereby agree as follows:
1. EMPLOYMENT. The Company and the Bank agree to, and do hereby, employ
Executive and Executive agrees to, and does hereby, accept such employment, all
upon the terms and conditions hereinafter set forth.
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2. TERM: The initial term of employment under this Agreement shall be
for a period of one (1) year, commencing on the date first above written and
ending at the close of business one year from said date. This Agreement shall be
automatically renewed for succeeding terms of one (1) year each, unless either
party shall, at least thirty (30) days, but not more than one hundred eighty
(180) days, prior to the expiration of any term, give written notice of his or
its intention not to renew this Agreement.
3. EMPLOYMENT; DUTIES, AUTHORITY, AND RESPONSIBILITIES:
(a) During the term of employment of the Executive by the Company
and the Bank, the Executive shall devote Executive's full business time and
attention to the rendition of services as Executive Vice President - Credit
Administration of the Company and as Executive Vice President - Credit
Administration of the Bank, and to the furtherance of the best interests of the
Company and the Bank, and shall exert Executive's best efforts in the rendition
of such services. The Executive agrees that in the rendition of such services
and in all aspects of such employment Executive will comply with the policies,
standards and regulations of the Company and the Bank as from time to time
established by their respective Boards of Directors. The expenditure by the
Executive of reasonable amounts of time for charitable, professional and similar
activities shall not be deemed a breach of this Agreement provided such
activities do not materially interfere with the services to be rendered to the
Company and the Bank hereunder.
(b) As Executive Vice President - Credit Administration of the
Company and the Bank, the Executive shall have the general powers and duties of
supervision which usually pertain to such office and shall perform all such
duties as are properly required of Executive by the Chief Executive Officer of
the Company and the Bank.
(c) If after a Change of Control occurs, a material reduction or
limitation of the duties of the Executive that were in effect immediately prior
to the Change of Control occurs, this action shall be considered a breach of
this Agreement by the Company and the Bank. In the event of any breach of any
provision of this Agreement by the Bank which breach is not cured within ten
(10) days after written notice of the breach to the Bank by the Executive shall
entitle the Executive to terminate his employment by the Bank pursuant to this
Agreement by not less than sixty (60) days written notice to the Board of
Directors of the Bank and, at the option of Executive, to terminate his
employment by the Company pursuant to this Agreement by not less than sixty (60)
days written notice to the Board of Directors of the Company. Any such
termination by the Executive of his employment by the Bank hereunder resulting
from a breach of the terms of this Agreement shall be treated as a termination
by the Bank without cause and governed by Section 9 below, unless such breach
occurs in Contemplation of a Change of Control or within twelve (12) months
after a Change of Control, and constitutes Good Reason for the Executive to
terminate Executive's employment, in which case it shall be governed by Section
15 below.
4. COMPENSATION: The Bank agrees to pay Executive, and Executive agrees
to accept, as compensation for all services rendered by him to the Company, the
Bank and their affiliates during the period of his employment under this
Agreement, base compensation at the annual rate of not less than $152,000, which
shall be payable in accordance with the normal payroll policies of the Bank and
shall be subject to all appropriate withholding taxes.
5. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF BUSINESS EXPENSES
AND MOVING EXPENSES:
(a) During the term of this Agreement, Executive shall be entitled
to participate in all pension, group insurance, hospitalization, deferred
compensation, Company paid life insurance, or incentive plans, and any other
benefit plan of the Company or the Bank presently in effect or hereafter adopted
by the Company or the Bank and generally available to all employees of either
organization of senior executive status (the "Benefit Plans").
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<PAGE> 3
(b) During the term of this Agreement, to the extent that such
expenditures meet the requirements of the Internal Revenue Code for
deductibility by the Company or the Bank for federal income tax purposes and are
substantiated by the Executive as required by the Internal Revenue Service and
policies of the Company and the Bank, the Bank shall reimburse the Executive
promptly for all expenditures (including travel, entertainment, parking,
business meetings, and the monthly costs, including dues, of maintaining
memberships at appropriate clubs, including, but not limited to, Nashville City
Club) made in accordance with rules and policies established from time to time
by the Board of Directors of the Bank in pursuance and furtherance of the
Company's and the Bank's business and good will.
(c) During the term of this Agreement, in the event that the Company
or the Bank relocates its principal executive offices to a location more than
one hundred (100) miles from Nashville, Tennessee, or the Board of Directors of
either the Company or the Bank requires the Executive to be based anywhere more
than one hundred (100) miles from the Bank's principal executive offices, the
Bank shall pay (or reimburse the Executive for) all reasonable moving expenses
incurred by Executive relating to a change of Executive's principal residence in
connection with such relocation, provided that the Executive furnishes the Bank
with adequate records and documentary evidence for the substantiation of such
reimbursement.
6. ILLNESS: In the event Executive is unable to perform Executive's
duties under this Agreement on a full-time basis for a period of six (6)
consecutive months by reason of illness or other physical or mental disability,
and at or before the end of such period Executive does not return to work on a
full-time basis, the Company and the Bank may jointly terminate Executive's
Employment pursuant to this Agreement without further or additional compensation
being due the Executive from the Bank pursuant to this Agreement, except that
the Executive shall be paid Executive's base compensation from the Bank at the
rate in effect at the time of Executive's termination for a period of twelve
(12) months from the date of the commencement of the Executive's inability to
perform his duties, less any disability payments payable during such time under
any disability plans maintained and paid for by the Bank, and Executive shall
continue to participate in all Benefit Plans in effect at the time of
Executive's termination for a period of twelve (12) months from the date of the
commencement of the Executive's inability to perform his duties.
7. DEATH: In the event of the Executive's death during the term of this
Agreement, Executive's estate, legal representatives or named beneficiaries (as
directed by the Executive in writing) shall be paid Executive's base
compensation from the Bank at the rate in effect at the time of the Executive's
death under this Agreement for the period of twelve (12) months from the date of
the Executive's death, less any amounts payable to Executive's estate or
beneficiaries under life insurance policies on the life of Executive maintained
and paid for by Bank.
8. TERMINATION BY COMPANY: Notwithstanding the provisions of Section 2
above, the Board of Directors of the Company may, in its sole discretion,
terminate the Executive's employment with the Company under this Agreement at
any time in any lawful manner by not less than thirty (30) days written notice
to the Executive, in which event the Executive shall be entitled to elect to
have such termination likewise constitute a termination of Executive's
employment by the Bank. If Executive so elects, then unless such termination is
for Cause as defined in Section 10 of this Agreement or unless the Executive's
employment is terminated in Contemplation of a Change of Control or within
twelve (12) months after a Change of Control, Executive shall be entitled to the
compensation provided for in Section 9 below.
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9. TERMINATION BY BANK: Notwithstanding the provisions of Section 2 of
this Agreement, the Board of Directors of the Bank may, in its sole discretion,
terminate the Executive's employment with the Bank under this Agreement at any
time in any lawful manner by not less than thirty (30) days written notice to
the Executive (or, at the Bank's option, pay for such thirty days in lieu of
notice) and in such event, unless the Bank terminates the Executive's employment
with the Bank for Cause as defined in with Section 10 of this Agreement or,
unless the Executive's employment is terminated in Contemplation of a Change of
Control or within twelve (12) months after a Change of Control, the Executive
shall be paid, during the twelve (12) months following such termination at such
times as payment was theretofore made, the base compensation that the Executive
would have been entitled to receive during such period of time had such
termination not occurred, such payments to be in addition to any payment in lieu
of notice. Furthermore, the Bank shall pay to the Executive in equal monthly
payments an amount sufficient to fully fund any Benefit Plans of the Bank, with
respect to the Executive, commencing at the beginning of the first month
following termination of Executive's employment with the Bank pursuant to this
paragraph, and ending twelve (12) months after such termination. In the event
that a payment made with respect to any benefit plan or program would otherwise
violate the terms of the plan or program, an equivalent amount shall be paid
directly to Executive. Executive shall owe no duty to mitigate these payments,
and shall not be required to obtain or attempt to obtain alternate employment
during such twelve (12) month period. If Executive obtains other gainful
employment during such twelve (12) month period, the compensation and benefits
received by Executive during said period from such other employment shall not
reduce the payments otherwise due to Executive pursuant to this section.
10. TERMINATION FOR CAUSE:
(a) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Company may, in its sole discretion, terminate the Executive's
employment with the Company for Cause. For the purposes of this Agreement, the
Company shall have "Cause" to terminate the Executive's employment hereunder:
(i) because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses), willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Bank terminates
the employment of Executive with the Bank for Cause pursuant to subsection (c)
of this Section 10. For purposes of this paragraph, no act, or failure to act,
on the Executive's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith or without reasonable belief that his action
or omission was in the best interest of the Company; provided that any act or
omission to act on the Executive's behalf in reliance upon an opinion of counsel
to either the Company or the Bank shall not be deemed to be "willful."
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been a resolution
approved by a majority of the non-officer members of the Board of Directors of
the Company finding that, in the good faith opinion of such majority, the
Executive was guilty of conduct which is deemed to be Cause within the meaning
of this paragraph, after notice to the Executive and an opportunity for him,
together with his counsel, to be heard before such majority (with the Company
Board retaining the right to deliberate without the Executive and his counsel
present before and/or after such hearing).
(b) If the Company terminates the Executive's employment with the
Company for Cause in accordance with Section 10(a) of this Agreement, the
Company shall have no obligation to make any further payments to or provide
benefits for the Executive, provided that the Executive shall be entitled to
receive any accrued compensation or benefits, insured or otherwise, that he
would otherwise have been eligible to receive under any Benefit Plans of the
Company through the date of such termination.
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(c) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Bank may, in its sole discretion, terminate the Executive's
employment with the Bank for Cause. For the purposes of this Agreement, the Bank
shall have "Cause" to terminate the Executive's employment hereunder: (i)
because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses) , willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, the imposition of any sanction
upon the Executive by any such regulatory agency, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Company
terminates Executive's employment with the Company for Cause pursuant to
subsection (a) of this Section 10. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith or without reasonable
belief that his action or omission was in the best interest of the Bank;
provided that any act or omission to act on the Executive's behalf in reliance
upon an opinion of counsel to either the Company or the Bank shall not be deemed
to be "willful." Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall have been
a resolution approved by a majority of the non-officer members of the Board of
Directors of the Bank finding that, in the good faith opinion of such majority,
the Executive was guilty of conduct which is deemed to be Cause within the
meaning of this paragraph, after notice to the Executive and an opportunity for
him, together with his counsel to be heard before such majority (with the Bank
Board retaining the right to deliberate without the Executive and his counsel
present before and/or after such hearing).
(d) If the Bank terminates the Executive's employment with the Bank
for Cause in accordance with Section 10(c) of this Agreement, the Bank shall
have no obligation to make any further payments to or provide benefits for the
Executive, provided that the Executive shall be entitled to receive any accrued
compensation or benefits, insured or otherwise, which Executive would otherwise
have been eligible to receive under any Benefit Plans of the Bank through the
date of such termination.
11. TERMINATION BY THE EXECUTIVE: The Executive may terminate the
Executive's employment with the Company or with the Bank hereunder at any time
upon sixty (60) days written notice to the affected entity. If the Executive
terminates the Executive's employment with either the Company or the Bank other
than for breach of this Agreement as provided in Section 3, for Good Reason, in
Contemplation of a Change of Control or within twelve (12) months after a Change
of Control, Executive shall be deemed to have voluntarily terminated Executive's
employment with both the Company and the Bank ("Voluntary Termination"), and
thereupon the Company and the Bank shall have no obligation to make any further
payments to or provide benefits for the Executive, provided that the Executive
shall be entitled to receive any accrued compensation and benefits, insured or
otherwise, that he would otherwise have been eligible to receive under any
Benefit Plans of the Company or the Bank through the date of such termination.
12. DEFINITION OF CHANGE OF CONTROL OF THE COMPANY: A "Change of
Control" of the Company shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 ("Exchange Act") or
such item thereof which may hereafter pertain to the same subject; provided
that, and notwithstanding the foregoing, a Change of Control shall be deemed to
have occurred if (i) any person (as that term is used in Sections 13(d) and
14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing thirty-five percent (35%)
or more of the combined voting power of the Company's then outstanding
securities, or (ii) the Company shall cease to be a publicly owned corporation,
as defined in the Exchange Act.
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13. DEFINITION OF CHANGE OF CONTROL OF THE BANK: A "Change of Control"
of the Bank shall mean any Change of Control of the Company, or any change or
series of changes in circumstances which result in the Company ceasing to own,
control, and vote an absolute majority of the voting securities of the Bank.
14. TERMINATION BY COMPANY OR BANK AFTER CHANGE IN CONTROL: If a Change
of Control of the Company or a Change of Control of the Bank shall have
occurred, this Agreement shall continue in full force and effect. If the
Executive's Employment is terminated by the Company or the Bank within twelve
(12) months after a Change of Control of the Company, as defined in Section 12
above, or a Change of Control of the Bank, as defined in Section 13 above, or in
Contemplation of a Change of Control of either, as defined below, Executive
shall be entitled to be paid an amount equal to two (2) times the sum of
Executive's annual base cash compensation plus the annual value of Executive's
participation in all Benefit Programs in effect at the time of such termination.
At Executive's option, the sums payable pursuant to this Section will be paid in
full in a lump sum and without discount within thirty (30) days of the
termination of Executive's employment, or in equal monthly installments over
twelve (12) months. Any termination of Executive's employment hereunder during
any period of time when the Board of Directors of the Company has formed an
intent to offer the Bank for sale or to promote an acquisition of or merger of
the Company or the Bank, or when the Company has knowledge that any person(s),
entity or concern has taken steps reasonably calculated to effect a Change of
Control of the Company shall constitute a termination of Executive's employment
"In Contemplation of a Change of Control." The period of Contemplation of Change
of Control shall continue until the Board of Directors of the Company no longer
intends to promote an acquisition of or merger of the Company or the Bank, or
until in the opinion of the Company's Board of Directors, the person(s), concern
or entity has abandoned or terminated its efforts to effect a Change of Control
of the Company, as applicable. Any good faith determination by the Company's
Board of Directors that Board no longer has such an intent, or that the
person(s), concern or entity has abandoned or terminated its efforts to effect a
Change of Control of the Company shall be conclusive and binding on the
Executive. Such determination shall be promptly communicated to the Executive in
writing by the Chief Executive of the Company or Chairman of the Board of the
Company. Notwithstanding the foregoing, any termination of the Executive by the
Company or by the Bank within ninety (90) days prior to a Change of Control of
the Company shall be conclusively presumed to have been in Contemplation of
Change of Control.
15. TERMINATION BY EXECUTIVE FOR GOOD REASON; During the term of
Executive's employment hereunder, the Executive may terminate his employment
with both the Company and the Bank if the Executive has Good Reason, as defined
below. Termination by the Executive of Executive's employment with either entity
shall be deemed termination with both. For purposes of this Agreement, "Good
Reason" shall mean:
(i) The assignment of duties to the Executive by the Company
or the Bank which (1) are significantly different from the Executive's duties
immediately prior to the Change of Control, or (2) result in the Executive
having significantly less authority and/or responsibility than Executive had as
an executive officer of the Company or the Bank prior to the Change of Control,
without the express written consent of Executive;
(ii) The removal of the Executive from or any failure to
re-elect Executive to the positions set forth in Section 3 above, except in
connection with a termination of his employment by the Company or the Bank for
Cause or Executive's resignation other than for Good Reason.
(iii) A reduction of the Executive's base salary as in effect
on the date of the Change of Control, unless the reduction in the Executive's
salary is waived in writing by the Executive;
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(iv) The failure of the Company and the Bank collectively to
provide the Executive with substantially the same fringe benefits (including
paid vacations) that were provided to Executive immediately prior to the Change
of Control, or with a package of fringe benefits that, though one or more of
such benefits may vary from those in effect immediately prior to such Change of
Control, is substantially comparable in all material respects to such fringe
benefits taken as a whole; or
(v) Requiring the Executive to perform a significant part of
Executive's duties in locations more than one hundred (100) miles from
Nashville, Tennessee.
Further, and notwithstanding any other provision of this Agreement, the
Executive may terminate his employment without Good Reason at any time within
ninety (90) days after a Change of Control shall have occurred.
16. PAYMENTS ON TERMINATION: Upon termination of Executive's employment
by the Company or the Bank, the Company and the Bank shall have the following
payment obligations to Executive:
(a) If the Executive's Employment is terminated due to illness of
the Executive, the provisions of Section 6 shall apply.
(b) If the Executive's Employment is terminated due to the death of
the Executive, the provisions of Section 7 shall apply.
(c) If the Executive's Employment is terminated by the Company other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 8 shall apply, and therefore the payment
provisions of Section 9 apply.
(d) If the Executive's Employment is terminated by the Bank other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 9 shall apply.
(e) If the Executive's Employment is terminated by the Company for
Cause, or by the Bank for Cause, the provisions of Section 10 shall apply.
(f) If the Executive's Employment is terminated by the Executive as
a result of a breach of the agreement by the Company or the Bank, the provisions
of Section 3 apply, and therefore the payment provisions of Section 9 apply.
(g) In the event of a Voluntary Termination of Executive's
Employment as defined in Section 11, the provisions of Section 11 apply.
(h) If the Executive's Employment is terminated by the Company or
the Bank within twelve (12) months after a Change of Control of the Company, as
defined in Section 12 above, or a Change of Control of the Bank, as defined in
Section 13 above, or in Contemplation of a Change of Control of either, as
defined in Section 14, the provisions of Section 14 shall apply.
(i) If the Executive's Employment is terminated by the Executive for
Good Reason, as defined in Section 15 above, the Executive's employment with the
Company and with the Bank shall be deemed to have been terminated without Cause
by the Company and by the Bank at the time of such termination by Executive for
Good Reason. If such termination is during a period of Contemplation of Change
of Control, or within twelve (12) months after a Change of Control, the
provisions of Section 14 shall apply.
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(j) Termination of Executive's Employment by the Company or by the
Bank or by the Executive shall be communicated by written Notice of Termination
to the other parties hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision(s) in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated.
17. CONFIDENTIALITY: In the course of the Executive's employment, the
Company and the Bank may disclose or make known to the Executive, and the
Executive may be given access to or may become acquainted with, certain
information, including but not limited to confidential information which relates
to or is useful in the businesses of the Company and the Bank and which is not
available from public records or other generally available sources
(collectively, "Confidential Information"), and which the Company or the Bank
consider proprietary and desire to maintain confidential. During the term of
this Agreement and at all times thereafter, the Executive shall not in any
manner, either directly or indirectly, divulge, disclose or communicate to any
person or firm, except to legal counsel for the Company or the Bank or otherwise
to or for the benefit of the Company or the Bank as directed by the Company or
the Bank, and except to the Executive's legal counsel in connection with the
resolution of any dispute between the Executive and the Company or the Bank
under this Agreement, any of the Confidential Information which Executive may
have acquired in the course of or as an incident to Executive's employment by
the Company or the Bank, the parties agreeing that such Confidential Information
affects the successful and effective conduct of the business and their goodwill
of the Company and the Bank, and that any material breach of the terms of this
Section 17 is a material breach of this Agreement.
18. COVENANT NOT TO COMPETE. During the Term of this Agreement and, if
Executive terminates Executive's employment in a Voluntary Termination or for
Good Reason, or if the Company or the Bank terminate Executive's employment in
Contemplation of a Change of Control, or within twelve (12) months after a
Change of Control, or for Cause, for the period of twelve (12) months following
the termination of Executive's employment with the Company or the Bank,
Executive agrees that Executive will not directly or indirectly own, become
interested in, or become involved in any manner whatsoever in any business which
is similar or competitive with any aspect of the business of the Company or the
Bank as conducted at the time of such termination. Without limiting the
foregoing, Executive agrees during the applicable period not to engage in the
Banking or Leasing businesses, whether as an owner, partner, director, officer,
employee, consultant, stockholder, agent, salesman, or in any other capacity for
any person, partnership, firm, corporation or other entity without the express
written consent of the President of the Company. Executive specifically
acknowledges and agrees that the foregoing restriction on competition with the
Company and the Bank will not prevent Executive from obtaining gainful
employment following termination of Executive's employment with the Company and
the Bank, and is a reasonable restriction upon Executive's ability to compete
with the Company and the Bank, given the economic benefits afforded to Executive
under this Agreement.
19. NO ENTICEMENT OF EMPLOYEES. Executive agrees that Executive will
not, directly or indirectly, entice or induce, or attempt to entice or induce
any employee of the Company or Bank to leave the employ of the Company or the
Bank during the period covered by the Non-Competition provisions of Section 18
above.
20. NO SOLICITATION. Executive will not, directly or indirectly,
solicit, entice or induce, or attempt to entice or induce any customer or user
of the products or services of the Bank or the Company during the period covered
by the Non-Competition provisions of Section 18 above.
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21. REMEDIES. Executive acknowledges and agrees that the breach or
threatened breach of any of the provisions of Sections 17, 18, 19 and 20 of this
Agreement will cause irreparable harm to the Company and the Bank, and cannot be
adequately compensated by the payment of damages. Accordingly, Executive
covenants and agrees that the Company and the Bank, in addition to any other
rights or remedies which they may have, will be entitled to such equitable and
injunctive relief as may be available from any court of competent jurisdiction
to restrain Executive from breaching or threatening to breach any of the
provisions of this Sections 17, 18, 19 and 20, without posting bond or other
surety. Such right to obtain injunctive relief may be exercised at the option of
the Company or the Bank in addition to, concurrently with, prior to, after, or
in lieu of the exercise of any other rights or remedies which the Company or the
Bank may have as a result of any such breach or threatened breach. In addition
to all other remedies, in the event of the breach or threatened breach of any of
the provisions of Sections 17, 18, 19 or 20 of this Agreement, the Company and
Bank shall be relieved of any obligation to continue payments to the Executive
pursuant to the provisions of this agreement.
22. NOTICES: For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
Community Financial Group, Inc.
401 Church Street, 2nd Floor
Nashville, TN 37219
Attention: Chief Executive Officer
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
If to the Bank:
The Bank of Nashville
401 Church Street
Nashville, TN 37219
Attention: Chief Executive Officer
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
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<PAGE> 10
If to the Executive:
Julian C. Cornett
9311 Chesapeake Drive
Brentwood, TN 37027
or at such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
23. MODIFICATION; WAIVERS; APPLICABLE LAW: No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by the Executive, and on behalf of
the Company by such officer as may be specifically designated by the Board of
Directors of the Company after approval of the modification by the Board of
Directors, and on behalf of the Bank by such officer as may be specifically
designated by the Board of Directors of the Bank after approval of the
modification by the Board of Directors. No waiver by either party hereto at any
time of any breach by the other party hereto of, 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. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Tennessee.
24. INVALIDITY; ENFORCEABILITY: The invalidity or unenforceability of
any provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
25. ASSIGNMENTS: This Agreement is personal to the Executive, who may
not assign his obligations hereunder.
26. SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and
be binding upon the Company, its successors and assigns, the Bank, its
successors and assigns and upon the Executive, and his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable
to him hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to his devisee, legatee or
other designee or, if there is no such designee, to his estate.
27. HEADINGS: Descriptive headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
28. ARBITRATION: Any dispute, controversy or claim arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators, in Nashville, Tennessee, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Unless otherwise provided in the rules of the American Arbitration
Association, the arbitrators shall, in their award, allocate between the parties
the costs of arbitration, which shall include reasonable attorneys' fees and
expenses of the parties, as well as the arbitrator's fees and expenses, in such
proportions as the arbitrators deem just.
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29. ENTIRE AGREEMENT: This Agreement represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and supersedes or amends all other agreements,
negotiations, understandings and representations (if any) made by and between
the parties hereto; provided, however, that nothing herein shall affect in any
way agreements granting or evidencing the Executive's options to acquire shares
of the Company.
30. REGULATORY AND OTHER PROCEEDINGS: The provisions of this Section 30
shall control as to continuing rights and obligations under this Agreement,
notwithstanding any other provision of this Agreement, for as long as they are
required to be included in employment contracts between an institution insured
by the FDIC and its officers and as long as the Bank is such an insured
institution.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank or the Company by a
Notice served under applicable Federal or State statutes or regulations, the
Bank's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank and the Company shall pay the Executive all of the
compensation withheld while their obligations hereunder were suspended and
reinstate their obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the affairs of the Bank or the Company by an
order issued under applicable Federal or State statutes or regulations, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, provided that vested rights of the
contracting parties shall not be affected.
(c) If the Company or the Bank become insolvent or taken over by
regulatory entities, all obligations under this Agreement shall terminate as of
the date of default, provided that this paragraph shall not affect any vested
rights of the contracting parties.
(d) All obligations under this Agreement may be terminated, except
to the extent determined that continuation thereof is necessary for the
continued operation of the Company or the Bank, by the FDIC at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Bank or
approves a supervisory merger to resolve problems related to operation of the
Bank, provided that any rights of the parties that have already vested shall not
be affected by such action.
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31. SURVIVAL. This agreement shall remain in effect notwithstanding the
termination of Executive's employment hereunder, and in any case, the provisions
of Sections 18, 19, and 20 shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
Executive:
/s/ Julian C. Cornett
------------------------------------------
Julian C. Cornett
Community Financial Group, Inc.
By: /s/ Mack S. Linebaugh, Jr.
------------------------------------------
Name: Mack S. Linebaugh, Jr.
Title: President
The Bank of Nashville
By: /s/ Mack S. Linebaugh, Jr.
------------------------------------------
Name: Mack S. Linebaugh, Jr.
Title: President
The Bank of Nashville
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<PAGE> 1
EXHIBIT 10.20
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement entered into this 14th day of
September, 1999 by and among Community Financial Group, Inc., a Tennessee
corporation (the "Company"), The Bank of Nashville, a banking corporation
organized under the laws of the State of Tennessee (the "Bank"), and Anne J.
Cheatham (the "Executive").
WITNESSETH:
WHEREAS, the Company is a one-bank holding company which owns one
hundred per cent (100%) of the outstanding stock of the Bank;
WHEREAS, the Company and the Bank desire to retain the services of
Executive on the terms and conditions set forth herein and, for purposes of
effecting the same, the Boards of Directors of the Company and the Bank have
approved this Employment Agreement and authorized its execution and delivery to
the Executive on behalf of the Company and the Bank;
WHEREAS, the Executive serves as the Senior Vice President - Bank
Administration of the Company and, as such, is a key executive officer of the
Company whose continued dedication, availability, advice and counsel to the
Company is deemed important to the Company, the Board of Directors of the
Company, and the present and future stockholders of the Company;
WHEREAS, the Executive serves as the Senior Vice President - Bank
Administration of the Bank and, as such, is a key executive officer of the Bank
whose continued dedication, availability, advice and counsel to the Bank is
deemed important to the Board of Directors of the Bank, the Bank and the
Company;
WHEREAS, the Company and the Bank wish to attract and retain
well-qualified executives, and it is in the best interests of the Company, the
Bank and the Executive, notwithstanding any change in control of the Company or
the Bank, to secure the services of the Executive, whose experience and
knowledge of the affairs of the Company and the Bank, and whose reputation and
contacts in the industry, are extremely valuable to the Company and the Bank;
and
WHEREAS, the Company and the Bank consider the establishment and
maintenance of a sound and vital management team to be part of their overall
corporate strategy and to be essential to protecting and enhancing the best
interests of the Bank, the Company, and its stockholders.
NOW, THEREFORE, to assure the Company and the Bank of the Executive's
continued dedication, the availability of Executive's advice and counsel to the
Boards of Directors of the Company and the Bank, the availability of Executive's
management skills to the Company and the Bank, and to induce the Executive to
remain and continue in the employ of the Company and the Bank in Executive's
current capacities, and for other good and valuable consideration, the receipt
and adequacy of which each party hereby acknowledged, the Company, the Bank and
the Executive hereby agree as follows:
1. EMPLOYMENT. The Company and the Bank agree to, and do hereby, employ
Executive and Executive agrees to, and does hereby, accept such employment, all
upon the terms and conditions hereinafter set forth.
2. TERM: The initial term of employment under this Agreement shall be
for a period of one (1) year, commencing on the date first above written and
ending at the close of business one year from said date. This Agreement shall be
automatically renewed for succeeding terms of one (1) year each, unless either
party shall, at least thirty (30) days, but not more than one hundred eighty
(180) days, prior to the expiration of any term, give written notice of her or
its intention not to renew this Agreement.
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<PAGE> 2
3. EMPLOYMENT; DUTIES, AUTHORITY, AND RESPONSIBILITIES:
(a) During the term of employment of the Executive by the Company
and the Bank, the Executive shall devote Executive's full business time and
attention to the rendition of services as Senior Vice President - Bank
Administration of the Company and as Senior Vice President - Bank Administration
of the Bank, and to the furtherance of the best interests of the Company and the
Bank, and shall exert Executive's best efforts in the rendition of such
services. The Executive agrees that in the rendition of such services and in all
aspects of such employment Executive will comply with the policies, standards
and regulations of the Company and the Bank as from time to time established by
their respective Boards of Directors. The expenditure by the Executive of
reasonable amounts of time for charitable, professional and similar activities
shall not be deemed a breach of this Agreement provided such activities do not
materially interfere with the services to be rendered to the Company and the
Bank hereunder.
(b) As Senior Vice President - Bank Administration of the Company
and the Bank, the Executive shall have the general powers and duties of
supervision which usually pertain to such office and shall perform all such
duties as are properly required of Executive by the Chief Executive Officer of
the Company and the Bank.
(c) If after a Change of Control occurs, a material reduction or
limitation of the duties of the Executive that were in effect immediately prior
to the Change of Control occurs, this action shall be considered a breach of
this Agreement by the Company and the Bank. In the event of any breach of any
provision of this Agreement by the Bank which breach is not cured within ten
(10) days after written notice of the breach to the Bank by the Executive shall
entitle the Executive to terminate her employment by the Bank pursuant to this
Agreement by not less than sixty (60) days written notice to the Board of
Directors of the Bank and, at the option of Executive, to terminate her
employment by the Company pursuant to this Agreement by not less than sixty (60)
days written notice to the Board of Directors of the Company. Any such
termination by the Executive of her employment by the Bank hereunder resulting
from a breach of the terms of this Agreement shall be treated as a termination
by the Bank without cause and governed by Section 9 below, unless such breach
occurs in Contemplation of a Change of Control or within twelve (12) months
after a Change of Control, and constitutes Good Reason for the Executive to
terminate Executive's employment, in which case it shall be governed by Section
15 below.
4. COMPENSATION: The Bank agrees to pay Executive, and Executive agrees
to accept, as compensation for all services rendered by her to the Company, the
Bank and their affiliates during the period of her employment under this
Agreement, base compensation at the annual rate of not less than $102,000, which
shall be payable in accordance with the normal payroll policies of the Bank and
shall be subject to all appropriate withholding taxes.
5. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF BUSINESS EXPENSES
AND MOVING EXPENSES:
(a) During the term of this Agreement, Executive shall be entitled
to participate in all pension, group insurance, hospitalization, deferred
compensation, Company paid life insurance, or incentive plans, and any other
benefit plan of the Company or the Bank presently in effect or hereafter adopted
by the Company or the Bank and generally available to all employees of either
organization of senior executive status (the "Benefit Plans").
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<PAGE> 3
(b) During the term of this Agreement, to the extent that such
expenditures meet the requirements of the Internal Revenue Code for
deductibility by the Company or the Bank for federal income tax purposes and are
substantiated by the Executive as required by the Internal Revenue Service and
policies of the Company and the Bank, the Bank shall reimburse the Executive
promptly for all expenditures (including travel, entertainment, parking,
business meetings, and the monthly costs, including dues, of maintaining
memberships at appropriate clubs, including, but not limited to, Nashville City
Club) made in accordance with rules and policies established from time to time
by the Board of Directors of the Bank in pursuance and furtherance of the
Company's and the Bank's business and good will.
(c) During the term of this Agreement, in the event that the Company
or the Bank relocates its principal executive offices to a location more than
one hundred (100) miles from Nashville, Tennessee, or the Board of Directors of
either the Company or the Bank requires the Executive to be based anywhere more
than one hundred (100) miles from the Bank's principal executive offices, the
Bank shall pay (or reimburse the Executive for) all reasonable moving expenses
incurred by Executive relating to a change of Executive's principal residence in
connection with such relocation, provided that the Executive furnishes the Bank
with adequate records and documentary evidence for the substantiation of such
reimbursement.
6. ILLNESS: In the event Executive is unable to perform Executive's
duties under this Agreement on a full-time basis for a period of six (6)
consecutive months by reason of illness or other physical or mental disability,
and at or before the end of such period Executive does not return to work on a
full-time basis, the Company and the Bank may jointly terminate Executive's
Employment pursuant to this Agreement without further or additional compensation
being due the Executive from the Bank pursuant to this Agreement, except that
the Executive shall be paid Executive's base compensation from the Bank at the
rate in effect at the time of Executive's termination for a period of twelve
(12) months from the date of the commencement of the Executive's inability to
perform her duties, less any disability payments payable during such time under
any disability plans maintained and paid for by the Bank, and Executive shall
continue to participate in all Benefit Plans in effect at the time of
Executive's termination for a period of twelve (12) months from the date of the
commencement of the Executive's inability to perform her duties.
7. DEATH: In the event of the Executive's death during the term of this
Agreement, Executive's estate, legal representatives or named beneficiaries (as
directed by the Executive in writing) shall be paid Executive's base
compensation from the Bank at the rate in effect at the time of the Executive's
death under this Agreement for the period of twelve (12) months from the date of
the Executive's death, less any amounts payable to Executive's estate or
beneficiaries under life insurance policies on the life of Executive maintained
and paid for by Bank.
8. TERMINATION BY COMPANY: Notwithstanding the provisions of Section 2
above, the Board of Directors of the Company may, in its sole discretion,
terminate the Executive's employment with the Company under this Agreement at
any time in any lawful manner by not less than thirty (30) days written notice
to the Executive, in which event the Executive shall be entitled to elect to
have such termination likewise constitute a termination of Executive's
employment by the Bank. If Executive so elects, then unless such termination is
for Cause as defined in Section 10 of this Agreement or unless the Executive's
employment is terminated in Contemplation of a Change of Control or within
twelve (12) months after a Change of Control, Executive shall be entitled to the
compensation provided for in Section 9 below.
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<PAGE> 4
9. TERMINATION BY BANK: Notwithstanding the provisions of Section 2 of
this Agreement, the Board of Directors of the Bank may, in its sole discretion,
terminate the Executive's employment with the Bank under this Agreement at any
time in any lawful manner by not less than thirty (30) days written notice to
the Executive (or, at the Bank's option, pay for such thirty days in lieu of
notice) and in such event, unless the Bank terminates the Executive's employment
with the Bank for Cause as defined in with Section 10 of this Agreement or,
unless the Executive's employment is terminated in Contemplation of a Change of
Control or within twelve (12) months after a Change of Control, the Executive
shall be paid, during the twelve (12) months following such termination at such
times as payment was theretofore made, the base compensation that the Executive
would have been entitled to receive during such period of time had such
termination not occurred, such payments to be in addition to any payment in lieu
of notice. Furthermore, the Bank shall pay to the Executive in equal monthly
payments an amount sufficient to fully fund any Benefit Plans of the Bank, with
respect to the Executive, commencing at the beginning of the first month
following termination of Executive's employment with the Bank pursuant to this
paragraph, and ending twelve (12) months after such termination. In the event
that a payment made with respect to any benefit plan or program would otherwise
violate the terms of the plan or program, an equivalent amount shall be paid
directly to Executive. Executive shall owe no duty to mitigate these payments,
and shall not be required to obtain or attempt to obtain alternate employment
during such twelve (12) month period. If Executive obtains other gainful
employment during such twelve (12) month period, the compensation and benefits
received by Executive during said period from such other employment shall not
reduce the payments otherwise due to Executive pursuant to this section.
10. TERMINATION FOR CAUSE:
(a) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Company may, in its sole discretion, terminate the Executive's
employment with the Company for Cause. For the purposes of this Agreement, the
Company shall have "Cause" to terminate the Executive's employment hereunder:
(i) because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses), willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Bank terminates
the employment of Executive with the Bank for Cause pursuant to subsection (c)
of this Section 10. For purposes of this paragraph, no act, or failure to act,
on the Executive's part shall be considered "willful" unless done, or omitted to
be done, by her not in good faith or without reasonable belief that her action
or omission was in the best interest of the Company; provided that any act or
omission to act on the Executive's behalf in reliance upon an opinion of counsel
to either the Company or the Bank shall not be deemed to be "willful."
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been a resolution
approved by a majority of the non-officer members of the Board of Directors of
the Company finding that, in the good faith opinion of such majority, the
Executive was guilty of conduct which is deemed to be Cause within the meaning
of this paragraph, after notice to the Executive and an opportunity for her,
together with her counsel, to be heard before such majority (with the Company
Board retaining the right to deliberate without the Executive and her counsel
present before and/or after such hearing).
(b) If the Company terminates the Executive's employment with the
Company for Cause in accordance with Section 10(a) of this Agreement, the
Company shall have no obligation to make any further payments to or provide
benefits for the Executive, provided that the Executive shall be entitled to
receive any accrued compensation or benefits, insured or otherwise, that she
would otherwise have been eligible to receive under any Benefit Plans of the
Company through the date of such termination.
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<PAGE> 5
(c) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Bank may, in its sole discretion, terminate the Executive's
employment with the Bank for Cause. For the purposes of this Agreement, the Bank
shall have "Cause" to terminate the Executive's employment hereunder: (i)
because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses) , willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, the imposition of any sanction
upon the Executive by any such regulatory agency, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Company
terminates Executive's employment with the Company for Cause pursuant to
subsection (a) of this Section 10. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by her not in good faith or without reasonable
belief that her action or omission was in the best interest of the Bank;
provided that any act or omission to act on the Executive's behalf in reliance
upon an opinion of counsel to either the Company or the Bank shall not be deemed
to be "willful." Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall have been
a resolution approved by a majority of the non-officer members of the Board of
Directors of the Bank finding that, in the good faith opinion of such majority,
the Executive was guilty of conduct which is deemed to be Cause within the
meaning of this paragraph, after notice to the Executive and an opportunity for
her, together with her counsel to be heard before such majority (with the Bank
Board retaining the right to deliberate without the Executive and her counsel
present before and/or after such hearing).
(d) If the Bank terminates the Executive's employment with the Bank
for Cause in accordance with Section 10(c) of this Agreement, the Bank shall
have no obligation to make any further payments to or provide benefits for the
Executive, provided that the Executive shall be entitled to receive any accrued
compensation or benefits, insured or otherwise, which Executive would otherwise
have been eligible to receive under any Benefit Plans of the Bank through the
date of such termination.
11. TERMINATION BY THE EXECUTIVE: The Executive may terminate the
Executive's employment with the Company or with the Bank hereunder at any time
upon sixty (60) days written notice to the affected entity. If the Executive
terminates the Executive's employment with either the Company or the Bank other
than for breach of this Agreement as provided in Section 3, for Good Reason, in
Contemplation of a Change of Control or within twelve (12) months after a Change
of Control, Executive shall be deemed to have voluntarily terminated Executive's
employment with both the Company and the Bank ("Voluntary Termination"), and
thereupon the Company and the Bank shall have no obligation to make any further
payments to or provide benefits for the Executive, provided that the Executive
shall be entitled to receive any accrued compensation and benefits, insured or
otherwise, that she would otherwise have been eligible to receive under any
Benefit Plans of the Company or the Bank through the date of such termination.
12. DEFINITION OF CHANGE OF CONTROL OF THE COMPANY: A "Change of
Control" of the Company shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 ("Exchange Act") or
such item thereof which may hereafter pertain to the same subject; provided
that, and notwithstanding the foregoing, a Change of Control shall be deemed to
have occurred if (i) any person (as that term is used in Sections 13(d) and
14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing thirty-five percent (35%)
or more of the combined voting power of the Company's then outstanding
securities, or (ii) the Company shall cease to be a publicly owned corporation,
as defined in the Exchange Act.
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13. DEFINITION OF CHANGE OF CONTROL OF THE BANK: A "Change of Control"
of the Bank shall mean any Change of Control of the Company, or any change or
series of changes in circumstances which result in the Company ceasing to own,
control, and vote an absolute majority of the voting securities of the Bank.
14. TERMINATION BY COMPANY OR BANK AFTER CHANGE IN CONTROL: If a Change
of Control of the Company or a Change of Control of the Bank shall have
occurred, this Agreement shall continue in full force and effect. If the
Executive's Employment is terminated by the Company or the Bank within twelve
(12) months after a Change of Control of the Company, as defined in Section 12
above, or a Change of Control of the Bank, as defined in Section 13 above, or in
Contemplation of a Change of Control of either, as defined below, Executive
shall be entitled to be paid an amount equal to one (1) times the sum of
Executive's annual base cash compensation plus the annual value of Executive's
participation in all Benefit Programs in effect at the time of such termination.
At Executive's option, the sums payable pursuant to this Section will be paid in
full in a lump sum and without discount within thirty (30) days of the
termination of Executive's employment, or in equal monthly installments over
twelve (12) months. Any termination of Executive's employment hereunder during
any period of time when the Board of Directors of the Company has formed an
intent to offer the Bank for sale or to promote an acquisition of or merger of
the Company or the Bank, or when the Company has knowledge that any person(s),
entity or concern has taken steps reasonably calculated to effect a Change of
Control of the Company shall constitute a termination of Executive's employment
"In Contemplation of a Change of Control." The period of Contemplation of Change
of Control shall continue until the Board of Directors of the Company no longer
intends to promote an acquisition of or merger of the Company or the Bank, or
until in the opinion of the Company's Board of Directors, the person(s), concern
or entity has abandoned or terminated its efforts to effect a Change of Control
of the Company, as applicable. Any good faith determination by the Company's
Board of Directors that Board no longer has such an intent, or that the
person(s), concern or entity has abandoned or terminated its efforts to effect a
Change of Control of the Company shall be conclusive and binding on the
Executive. Such determination shall be promptly communicated to the Executive in
writing by the Chief Executive of the Company or Chairman of the Board of the
Company. Notwithstanding the foregoing, any termination of the Executive by the
Company or by the Bank within ninety (90) days prior to a Change of Control of
the Company shall be conclusively presumed to have been in Contemplation of
Change of Control.
15. TERMINATION BY EXECUTIVE FOR GOOD REASON; During the term of
Executive's employment hereunder, the Executive may terminate her employment
with both the Company and the Bank if the Executive has Good Reason, as defined
below. Termination by the Executive of Executive's employment with either entity
shall be deemed termination with both. For purposes of this Agreement, "Good
Reason" shall mean:
(i) The assignment of duties to the Executive by the Company
or the Bank which (1) are significantly different from the Executive's duties
immediately prior to the Change of Control, or (2) result in the Executive
having significantly less authority and/or responsibility than Executive had as
an executive officer of the Company or the Bank prior to the Change of Control,
without the express written consent of Executive;
(ii) The removal of the Executive from or any failure to
re-elect Executive to the positions set forth in Section 3 above, except in
connection with a termination of her employment by the Company or the Bank for
Cause or Executive's resignation other than for Good Reason.
(iii) A reduction of the Executive's base salary as in effect
on the date of the Change of Control, unless the reduction in the Executive's
salary is waived in writing by the Executive;
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(iv) The failure of the Company and the Bank collectively to
provide the Executive with substantially the same fringe benefits (including
paid vacations) that were provided to Executive immediately prior to the Change
of Control, or with a package of fringe benefits that, though one or more of
such benefits may vary from those in effect immediately prior to such Change of
Control, is substantially comparable in all material respects to such fringe
benefits taken as a whole; or
(v) Requiring the Executive to perform a significant part of
Executive's duties in locations more than one hundred (100) miles from
Nashville, Tennessee.
Further, and notwithstanding any other provision of this Agreement, the
Executive may terminate her employment without Good Reason at any time within
ninety (90) days after a Change of Control shall have occurred.
16. PAYMENTS ON TERMINATION: Upon termination of Executive's employment
by the Company or the Bank, the Company and the Bank shall have the following
payment obligations to Executive:
(a) If the Executive's Employment is terminated due to illness of
the Executive, the provisions of Section 6 shall apply.
(b) If the Executive's Employment is terminated due to the death of
the Executive, the provisions of Section 7 shall apply.
(c) If the Executive's Employment is terminated by the Company other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 8 shall apply, and therefore the payment
provisions of Section 9 apply.
(d) If the Executive's Employment is terminated by the Bank other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 9 shall apply.
(e) If the Executive's Employment is terminated by the Company for
Cause, or by the Bank for Cause, the provisions of Section 10 shall apply.
(f) If the Executive's Employment is terminated by the Executive as
a result of a breach of the agreement by the Company or the Bank, the provisions
of Section 3 apply, and therefore the payment provisions of Section 9 apply.
(g) In the event of a Voluntary Termination of Executive's
Employment as defined in Section 11, the provisions of Section 11 apply.
(h) If the Executive's Employment is terminated by the Company or
the Bank within twelve (12) months after a Change of Control of the Company, as
defined in Section 12 above, or a Change of Control of the Bank, as defined in
Section 13 above, or in Contemplation of a Change of Control of either, as
defined in Section 14, the provisions of Section 14 shall apply.
(i) If the Executive's Employment is terminated by the Executive for
Good Reason, as defined in Section 15 above, the Executive's employment with the
Company and with the Bank shall be deemed to have been terminated without Cause
by the Company and by the Bank at the time of such termination by Executive for
Good Reason. If such termination is during a period of Contemplation of Change
of Control, or within twelve (12) months after a Change of Control, the
provisions of Section 14 shall apply.
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(j) Termination of Executive's Employment by the Company or by the
Bank or by the Executive shall be communicated by written Notice of Termination
to the other parties hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision(s) in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated.
17. CONFIDENTIALITY: In the course of the Executive's employment, the
Company and the Bank may disclose or make known to the Executive, and the
Executive may be given access to or may become acquainted with, certain
information, including but not limited to confidential information which relates
to or is useful in the businesses of the Company and the Bank and which is not
available from public records or other generally available sources
(collectively, "Confidential Information"), and which the Company or the Bank
consider proprietary and desire to maintain confidential. During the term of
this Agreement and at all times thereafter, the Executive shall not in any
manner, either directly or indirectly, divulge, disclose or communicate to any
person or firm, except to legal counsel for the Company or the Bank or otherwise
to or for the benefit of the Company or the Bank as directed by the Company or
the Bank, and except to the Executive's legal counsel in connection with the
resolution of any dispute between the Executive and the Company or the Bank
under this Agreement, any of the Confidential Information which Executive may
have acquired in the course of or as an incident to Executive's employment by
the Company or the Bank, the parties agreeing that such Confidential Information
affects the successful and effective conduct of the business and their goodwill
of the Company and the Bank, and that any material breach of the terms of this
Section 17 is a material breach of this Agreement.
18. COVENANT NOT TO COMPETE. During the Term of this Agreement and, if
Executive terminates Executive's employment in a Voluntary Termination or for
Good Reason, or if the Company or the Bank terminate Executive's employment in
Contemplation of a Change of Control, or within twelve (12) months after a
Change of Control, or for Cause, for the period of twelve (12) months following
the termination of Executive's employment with the Company or the Bank,
Executive agrees that Executive will not directly or indirectly own, become
interested in, or become involved in any manner whatsoever in any business which
is similar or competitive with any aspect of the business of the Company or the
Bank as conducted at the time of such termination. Without limiting the
foregoing, Executive agrees during the applicable period not to engage in the
Banking or Leasing businesses, whether as an owner, partner, director, officer,
employee, consultant, stockholder, agent, salesman, or in any other capacity for
any person, partnership, firm, corporation or other entity without the express
written consent of the President of the Company. Executive specifically
acknowledges and agrees that the foregoing restriction on competition with the
Company and the Bank will not prevent Executive from obtaining gainful
employment following termination of Executive's employment with the Company and
the Bank, and is a reasonable restriction upon Executive's ability to compete
with the Company and the Bank, given the economic benefits afforded to Executive
under this Agreement.
19. NO ENTICEMENT OF EMPLOYEES. Executive agrees that Executive will
not, directly or indirectly, entice or induce, or attempt to entice or induce
any employee of the Company or Bank to leave the employ of the Company or the
Bank during the period covered by the Non-Competition provisions of Section 18
above.
20. NO SOLICITATION. Executive will not, directly or indirectly,
solicit, entice or induce, or attempt to entice or induce any customer or user
of the products or services of the Bank or the Company during the period covered
by the Non-Competition provisions of Section 18 above.
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21. REMEDIES. Executive acknowledges and agrees that the breach or
threatened breach of any of the provisions of Sections 17, 18, 19 and 20 of this
Agreement will cause irreparable harm to the Company and the Bank, and cannot be
adequately compensated by the payment of damages. Accordingly, Executive
covenants and agrees that the Company and the Bank, in addition to any other
rights or remedies which they may have, will be entitled to such equitable and
injunctive relief as may be available from any court of competent jurisdiction
to restrain Executive from breaching or threatening to breach any of the
provisions of this Sections 17, 18, 19 and 20, without posting bond or other
surety. Such right to obtain injunctive relief may be exercised at the option of
the Company or the Bank in addition to, concurrently with, prior to, after, or
in lieu of the exercise of any other rights or remedies which the Company or the
Bank may have as a result of any such breach or threatened breach. In addition
to all other remedies, in the event of the breach or threatened breach of any of
the provisions of Sections 17, 18, 19 or 20 of this Agreement, the Company and
Bank shall be relieved of any obligation to continue payments to the Executive
pursuant to the provisions of this agreement.
22. NOTICES: For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
Community Financial Group, Inc.
401 Church Street, 2nd Floor
Nashville, TN 37219
Attention: Chief Executive Officer
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
If to the Bank:
The Bank of Nashville
401 Church Street
Nashville, TN 37219
Attention: Chief Executive Officer
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
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If to the Executive:
Anne J. Cheatham
111 Robin Springs Road
Nashville, TN 37220
or at such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
23. MODIFICATION; WAIVERS; APPLICABLE LAW: No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by the Executive, and on behalf of
the Company by such officer as may be specifically designated by the Board of
Directors of the Company after approval of the modification by the Board of
Directors, and on behalf of the Bank by such officer as may be specifically
designated by the Board of Directors of the Bank after approval of the
modification by the Board of Directors. No waiver by either party hereto at any
time of any breach by the other party hereto of, 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. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Tennessee.
24. INVALIDITY; ENFORCEABILITY: The invalidity or unenforceability of
any provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
25. ASSIGNMENTS: This Agreement is personal to the Executive, who may
not assign her obligations hereunder.
26. SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and
be binding upon the Company, its successors and assigns, the Bank, its
successors and assigns and upon the Executive, and her personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable
to her hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to her devisee, legatee or
other designee or, if there is no such designee, to her estate.
27. HEADINGS: Descriptive headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
28. ARBITRATION: Any dispute, controversy or claim arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators, in Nashville, Tennessee, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Unless otherwise provided in the rules of the American Arbitration
Association, the arbitrators shall, in their award, allocate between the parties
the costs of arbitration, which shall include reasonable attorneys' fees and
expenses of the parties, as well as the arbitrator's fees and expenses, in such
proportions as the arbitrators deem just.
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29. ENTIRE AGREEMENT: This Agreement represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and supersedes or amends all other agreements,
negotiations, understandings and representations (if any) made by and between
the parties hereto; provided, however, that nothing herein shall affect in any
way agreements granting or evidencing the Executive's options to acquire shares
of the Company.
30. REGULATORY AND OTHER PROCEEDINGS: The provisions of this Section 30
shall control as to continuing rights and obligations under this Agreement,
notwithstanding any other provision of this Agreement, for as long as they are
required to be included in employment contracts between an institution insured
by the FDIC and its officers and as long as the Bank is such an insured
institution.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank or the Company by a
Notice served under applicable Federal or State statutes or regulations, the
Bank's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank and the Company shall pay the Executive all of the
compensation withheld while their obligations hereunder were suspended and
reinstate their obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the affairs of the Bank or the Company by an
order issued under applicable Federal or State statutes or regulations, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, provided that vested rights of the
contracting parties shall not be affected.
(c) If the Company or the Bank become insolvent or taken over by
regulatory entities, all obligations under this Agreement shall terminate as of
the date of default, provided that this paragraph shall not affect any vested
rights of the contracting parties.
(d) All obligations under this Agreement may be terminated, except
to the extent determined that continuation thereof is necessary for the
continued operation of the Company or the Bank, by the FDIC at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Bank or
approves a supervisory merger to resolve problems related to operation of the
Bank, provided that any rights of the parties that have already vested shall not
be affected by such action.
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31. SURVIVAL. This agreement shall remain in effect notwithstanding the
termination of Executive's employment hereunder, and in any case, the provisions
of Sections 18, 19, and 20 shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
Executive:
/s/ Anne J. Cheatham
------------------------------------------
Anne J. Cheatham
Community Financial Group, Inc.
By: /s/ Mack S. Linebaugh, Jr.
------------------------------------------
Name: Mack S. Linebaugh, Jr.
Title: President
The Bank of Nashville
By: /s/ Mack S. Linebaugh, Jr.
------------------------------------------
Name: Mack S. Linebaugh, Jr.
Title: President
The Bank of Nashville
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EXHIBIT 10.21
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement entered into this 14th day of
September, 1999 by and among Community Financial Group, Inc., a Tennessee
corporation (the "Company"), The Bank of Nashville, a banking corporation
organized under the laws of the State of Tennessee (the "Bank"), and T. Wayne
Hood (the "Executive").
WITNESSETH:
WHEREAS, the Company is a one-bank holding company which owns one
hundred per cent (100%) of the outstanding stock of the Bank;
WHEREAS, the Company and the Bank desire to retain the services of
Executive on the terms and conditions set forth herein and, for purposes of
effecting the same, the Boards of Directors of the Company and the Bank have
approved this Employment Agreement and authorized its execution and delivery to
the Executive on behalf of the Company and the Bank;
WHEREAS, the Executive serves as the Senior Vice President and Trust
Officer of the Company and, as such, is a key executive officer of the Company
whose continued dedication, availability, advice and counsel to the Company is
deemed important to the Company, the Board of Directors of the Company, and the
present and future stockholders of the Company;
WHEREAS, the Executive serves as the Senior Vice President and Trust
Officer of the Bank and, as such, is a key executive officer of the Bank whose
continued dedication, availability, advice and counsel to the Bank is deemed
important to the Board of Directors of the Bank, the Bank and the Company;
WHEREAS, the Company and the Bank wish to attract and retain
well-qualified executives, and it is in the best interests of the Company, the
Bank and the Executive, notwithstanding any change in control of the Company or
the Bank, to secure the services of the Executive, whose experience and
knowledge of the affairs of the Company and the Bank, and whose reputation and
contacts in the industry, are extremely valuable to the Company and the Bank;
and
WHEREAS, the Company and the Bank consider the establishment and
maintenance of a sound and vital management team to be part of their overall
corporate strategy and to be essential to protecting and enhancing the best
interests of the Bank, the Company, and its stockholders.
NOW, THEREFORE, to assure the Company and the Bank of the Executive's
continued dedication, the availability of Executive's advice and counsel to the
Boards of Directors of the Company and the Bank, the availability of Executive's
management skills to the Company and the Bank, and to induce the Executive to
remain and continue in the employ of the Company and the Bank in Executive's
current capacities, and for other good and valuable consideration, the receipt
and adequacy of which each party hereby acknowledged, the Company, the Bank and
the Executive hereby agree as follows:
1. EMPLOYMENT. The Company and the Bank agree to, and do hereby, employ
Executive and Executive agrees to, and does hereby, accept such employment, all
upon the terms and conditions hereinafter set forth.
2. TERM: The initial term of employment under this Agreement shall be
for a period of one (1) year, commencing on the date first above written and
ending at the close of business one year from said date. This Agreement shall be
automatically renewed for succeeding terms of one (1) year each, unless either
party shall, at least thirty (30) days, but not more than one hundred eighty
(180) days, prior to the expiration of any term, give written notice of his or
its intention not to renew this Agreement.
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3. EMPLOYMENT; DUTIES, AUTHORITY, AND RESPONSIBILITIES:
(a) During the term of employment of the Executive by the Company
and the Bank, the Executive shall devote Executive's full business time and
attention to the rendition of services as Senior Vice President and Trust
Officer of the Company and as Senior Vice President and Trust Officer of the
Bank, and to the furtherance of the best interests of the Company and the Bank,
and shall exert Executive's best efforts in the rendition of such services. The
Executive agrees that in the rendition of such services and in all aspects of
such employment Executive will comply with the policies, standards and
regulations of the Company and the Bank as from time to time established by
their respective Boards of Directors. The expenditure by the Executive of
reasonable amounts of time for charitable, professional and similar activities
shall not be deemed a breach of this Agreement provided such activities do not
materially interfere with the services to be rendered to the Company and the
Bank hereunder.
(b) As Senior Vice President and Trust Officer of the Company and
the Bank, the Executive shall have the general powers and duties of supervision
which usually pertain to such offices and shall perform all such duties as are
properly required of Executive by the Chief Executive Officer of the Company and
the Bank.
(c) If after a Change of Control occurs, a material reduction or
limitation of the duties of the Executive that were in effect immediately prior
to the Change of Control occurs, this action shall be considered a breach of
this Agreement by the Company and the Bank. In the event of any breach of any
provision of this Agreement by the Bank which breach is not cured within ten
(10) days after written notice of the breach to the Bank by the Executive shall
entitle the Executive to terminate his employment by the Bank pursuant to this
Agreement by not less than sixty (60) days written notice to the Board of
Directors of the Bank and, at the option of Executive, to terminate his
employment by the Company pursuant to this Agreement by not less than sixty (60)
days written notice to the Board of Directors of the Company. Any such
termination by the Executive of his employment by the Bank hereunder resulting
from a breach of the terms of this Agreement shall be treated as a termination
by the Bank without cause and governed by Section 9 below, unless such breach
occurs in Contemplation of a Change of Control or within twelve (12) months
after a Change of Control, and constitutes Good Reason for the Executive to
terminate Executive's employment, in which case it shall be governed by Section
15 below.
4. COMPENSATION: The Bank agrees to pay Executive, and Executive agrees
to accept, as compensation for all services rendered by him to the Company, the
Bank and their affiliates during the period of his employment under this
Agreement, base compensation at the annual rate of not less than $84,500, which
shall be payable in accordance with the normal payroll policies of the Bank and
shall be subject to all appropriate withholding taxes.
5. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF BUSINESS EXPENSES
AND MOVING EXPENSES:
(a) During the term of this Agreement, Executive shall be entitled
to participate in all pension, group insurance, hospitalization, deferred
compensation, Company paid life insurance, or incentive plans, and any other
benefit plan of the Company or the Bank presently in effect or hereafter adopted
by the Company or the Bank and generally available to all employees of either
organization of senior executive status (the "Benefit Plans").
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(b) During the term of this Agreement, to the extent that such
expenditures meet the requirements of the Internal Revenue Code for
deductibility by the Company or the Bank for federal income tax purposes and are
substantiated by the Executive as required by the Internal Revenue Service and
policies of the Company and the Bank, the Bank shall reimburse the Executive
promptly for all expenditures (including travel, entertainment, parking,
business meetings, and the monthly costs, including dues, of maintaining
memberships at appropriate clubs, including, but not limited to, Nashville City
Club) made in accordance with rules and policies established from time to time
by the Board of Directors of the Bank in pursuance and furtherance of the
Company's and the Bank's business and good will.
(c) During the term of this Agreement, in the event that the Company
or the Bank relocates its principal executive offices to a location more than
one hundred (100) miles from Nashville, Tennessee, or the Board of Directors of
either the Company or the Bank requires the Executive to be based anywhere more
than one hundred (100) miles from the Bank's principal executive offices, the
Bank shall pay (or reimburse the Executive for) all reasonable moving expenses
incurred by Executive relating to a change of Executive's principal residence in
connection with such relocation, provided that the Executive furnishes the Bank
with adequate records and documentary evidence for the substantiation of such
reimbursement.
6. ILLNESS: In the event Executive is unable to perform Executive's
duties under this Agreement on a full-time basis for a period of six (6)
consecutive months by reason of illness or other physical or mental disability,
and at or before the end of such period Executive does not return to work on a
full-time basis, the Company and the Bank may jointly terminate Executive's
Employment pursuant to this Agreement without further or additional compensation
being due the Executive from the Bank pursuant to this Agreement, except that
the Executive shall be paid Executive's base compensation from the Bank at the
rate in effect at the time of Executive's termination for a period of twelve
(12) months from the date of the commencement of the Executive's inability to
perform his duties, less any disability payments payable during such time under
any disability plans maintained and paid for by the Bank, and Executive shall
continue to participate in all Benefit Plans in effect at the time of
Executive's termination for a period of twelve (12) months from the date of the
commencement of the Executive's inability to perform his duties.
7. DEATH: In the event of the Executive's death during the term of this
Agreement, Executive's estate, legal representatives or named beneficiaries (as
directed by the Executive in writing) shall be paid Executive's base
compensation from the Bank at the rate in effect at the time of the Executive's
death under this Agreement for the period of twelve (12) months from the date of
the Executive's death, less any amounts payable to Executive's estate or
beneficiaries under life insurance policies on the life of Executive maintained
and paid for by Bank.
8. TERMINATION BY COMPANY: Notwithstanding the provisions of Section 2
above, the Board of Directors of the Company may, in its sole discretion,
terminate the Executive's employment with the Company under this Agreement at
any time in any lawful manner by not less than thirty (30) days written notice
to the Executive, in which event the Executive shall be entitled to elect to
have such termination likewise constitute a termination of Executive's
employment by the Bank. If Executive so elects, then unless such termination is
for Cause as defined in Section 10 of this Agreement or unless the Executive's
employment is terminated in Contemplation of a Change of Control or within
twelve (12) months after a Change of Control, Executive shall be entitled to the
compensation provided for in Section 9 below.
9. TERMINATION BY BANK: Notwithstanding the provisions of Section 2 of
this Agreement, the Board of Directors of the Bank may, in its sole discretion,
terminate the Executive's employment with the Bank under this Agreement at any
time in any lawful manner by not less than thirty (30) days written notice to
the Executive (or, at the Bank's option, pay for such thirty days in lieu of
notice) and in such event, unless the Bank terminates the Executive's employment
with the Bank for Cause as defined in with Section 10 of this Agreement or,
unless the Executive's employment is terminated in
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Contemplation of a Change of Control or within twelve (12) months after a Change
of Control, the Executive shall be paid, during the twelve (12) months following
such termination at such times as payment was theretofore made, the base
compensation that the Executive would have been entitled to receive during such
period of time had such termination not occurred, such payments to be in
addition to any payment in lieu of notice. Furthermore, the Bank shall pay to
the Executive in equal monthly payments an amount sufficient to fully fund any
Benefit Plans of the Bank, with respect to the Executive, commencing at the
beginning of the first month following termination of Executive's employment
with the Bank pursuant to this paragraph, and ending twelve (12) months after
such termination. In the event that a payment made with respect to any benefit
plan or program would otherwise violate the terms of the plan or program, an
equivalent amount shall be paid directly to Executive. Executive shall owe no
duty to mitigate these payments, and shall not be required to obtain or attempt
to obtain alternate employment during such twelve (12) month period. If
Executive obtains other gainful employment during such twelve (12) month period,
the compensation and benefits received by Executive during said period from such
other employment shall not reduce the payments otherwise due to Executive
pursuant to this section.
10. TERMINATION FOR CAUSE:
(a) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Company may, in its sole discretion, terminate the Executive's
employment with the Company for Cause. For the purposes of this Agreement, the
Company shall have "Cause" to terminate the Executive's employment hereunder:
(i) because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses), willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Bank terminates
the employment of Executive with the Bank for Cause pursuant to subsection (c)
of this Section 10. For purposes of this paragraph, no act, or failure to act,
on the Executive's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith or without reasonable belief that his action
or omission was in the best interest of the Company; provided that any act or
omission to act on the Executive's behalf in reliance upon an opinion of counsel
to either the Company or the Bank shall not be deemed to be "willful."
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been a resolution
approved by a majority of the non-officer members of the Board of Directors of
the Company finding that, in the good faith opinion of such majority, the
Executive was guilty of conduct which is deemed to be Cause within the meaning
of this paragraph, after notice to the Executive and an opportunity for him,
together with his counsel, to be heard before such majority (with the Company
Board retaining the right to deliberate without the Executive and his counsel
present before and/or after such hearing).
(b) If the Company terminates the Executive's employment with the
Company for Cause in accordance with Section 10(a) of this Agreement, the
Company shall have no obligation to make any further payments to or provide
benefits for the Executive, provided that the Executive shall be entitled to
receive any accrued compensation or benefits, insured or otherwise, that he
would otherwise have been eligible to receive under any Benefit Plans of the
Company through the date of such termination.
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(c) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Bank may, in its sole discretion, terminate the Executive's
employment with the Bank for Cause. For the purposes of this Agreement, the Bank
shall have "Cause" to terminate the Executive's employment hereunder: (i)
because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses) , willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, the imposition of any sanction
upon the Executive by any such regulatory agency, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Company
terminates Executive's employment with the Company for Cause pursuant to
subsection (a) of this Section 10. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith or without reasonable
belief that his action or omission was in the best interest of the Bank;
provided that any act or omission to act on the Executive's behalf in reliance
upon an opinion of counsel to either the Company or the Bank shall not be deemed
to be "willful." Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall have been
a resolution approved by a majority of the non-officer members of the Board of
Directors of the Bank finding that, in the good faith opinion of such majority,
the Executive was guilty of conduct which is deemed to be Cause within the
meaning of this paragraph, after notice to the Executive and an opportunity for
him, together with his counsel to be heard before such majority (with the Bank
Board retaining the right to deliberate without the Executive and his counsel
present before and/or after such hearing).
(d) If the Bank terminates the Executive's employment with the Bank
for Cause in accordance with Section 10(c) of this Agreement, the Bank shall
have no obligation to make any further payments to or provide benefits for the
Executive, provided that the Executive shall be entitled to receive any accrued
compensation or benefits, insured or otherwise, which Executive would otherwise
have been eligible to receive under any Benefit Plans of the Bank through the
date of such termination.
11. TERMINATION BY THE EXECUTIVE: The Executive may terminate the
Executive's employment with the Company or with the Bank hereunder at any time
upon sixty (60) days written notice to the affected entity. If the Executive
terminates the Executive's employment with either the Company or the Bank other
than for breach of this Agreement as provided in Section 3, for Good Reason, in
Contemplation of a Change of Control or within twelve (12) months after a Change
of Control, Executive shall be deemed to have voluntarily terminated Executive's
employment with both the Company and the Bank ("Voluntary Termination"), and
thereupon the Company and the Bank shall have no obligation to make any further
payments to or provide benefits for the Executive, provided that the Executive
shall be entitled to receive any accrued compensation and benefits, insured or
otherwise, that he would otherwise have been eligible to receive under any
Benefit Plans of the Company or the Bank through the date of such termination.
12. DEFINITION OF CHANGE OF CONTROL OF THE COMPANY: A "Change of
Control" of the Company shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 ("Exchange Act") or
such item thereof which may hereafter pertain to the same subject; provided
that, and notwithstanding the foregoing, a Change of Control shall be deemed to
have occurred if (i) any person (as that term is used in Sections 13(d) and
14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing thirty-five percent (35%)
or more of the combined voting power of the Company's then outstanding
securities, or (ii) the Company shall cease to be a publicly owned corporation,
as defined in the Exchange Act.
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13. DEFINITION OF CHANGE OF CONTROL OF THE BANK: A "Change of Control"
of the Bank shall mean any Change of Control of the Company, or any change or
series of changes in circumstances which result in the Company ceasing to own,
control, and vote an absolute majority of the voting securities of the Bank.
14. TERMINATION BY COMPANY OR BANK AFTER CHANGE IN CONTROL: If a Change
of Control of the Company or a Change of Control of the Bank shall have
occurred, this Agreement shall continue in full force and effect. If the
Executive's Employment is terminated by the Company or the Bank within twelve
(12) months after a Change of Control of the Company, as defined in Section 12
above, or a Change of Control of the Bank, as defined in Section 13 above, or in
Contemplation of a Change of Control of either, as defined below, Executive
shall be entitled to be paid an amount equal to one (1) times the sum of
Executive's annual base cash compensation plus the annual value of Executive's
participation in all Benefit Programs in effect at the time of such termination.
At Executive's option, the sums payable pursuant to this Section will be paid in
full in a lump sum and without discount within thirty (30) days of the
termination of Executive's employment, or in equal monthly installments over
twelve (12) months. Any termination of Executive's employment hereunder during
any period of time when the Board of Directors of the Company has formed an
intent to offer the Bank for sale or to promote an acquisition of or merger of
the Company or the Bank, or when the Company has knowledge that any person(s),
entity or concern has taken steps reasonably calculated to effect a Change of
Control of the Company shall constitute a termination of Executive's employment
"In Contemplation of a Change of Control." The period of Contemplation of Change
of Control shall continue until the Board of Directors of the Company no longer
intends to promote an acquisition of or merger of the Company or the Bank, or
until in the opinion of the Company's Board of Directors, the person(s), concern
or entity has abandoned or terminated its efforts to effect a Change of Control
of the Company, as applicable. Any good faith determination by the Company's
Board of Directors that Board no longer has such an intent, or that the
person(s), concern or entity has abandoned or terminated its efforts to effect a
Change of Control of the Company shall be conclusive and binding on the
Executive. Such determination shall be promptly communicated to the Executive in
writing by the Chief Executive of the Company or Chairman of the Board of the
Company. Notwithstanding the foregoing, any termination of the Executive by the
Company or by the Bank within ninety (90) days prior to a Change of Control of
the Company shall be conclusively presumed to have been in Contemplation of
Change of Control.
15. TERMINATION BY EXECUTIVE FOR GOOD REASON; During the term of
Executive's employment hereunder, the Executive may terminate his employment
with both the Company and the Bank if the Executive has Good Reason, as defined
below. Termination by the Executive of Executive's employment with either entity
shall be deemed termination with both. For purposes of this Agreement, "Good
Reason" shall mean:
(i) The assignment of duties to the Executive by the Company
or the Bank which (1) are significantly different from the Executive's duties
immediately prior to the Change of Control, or (2) result in the Executive
having significantly less authority and/or responsibility than Executive had as
an executive officer of the Company or the Bank prior to the Change of Control,
without the express written consent of Executive;
(ii) The removal of the Executive from or any failure to
re-elect Executive to the positions set forth in Section 3 above, except in
connection with a termination of his employment by the Company or the Bank for
Cause or Executive's resignation other than for Good Reason.
(iii) A reduction of the Executive's base salary as in effect
on the date of the Change of Control, unless the reduction in the Executive's
salary is waived in writing by the Executive;
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(iv) The failure of the Company and the Bank collectively to
provide the Executive with substantially the same fringe benefits (including
paid vacations) that were provided to Executive immediately prior to the Change
of Control, or with a package of fringe benefits that, though one or more of
such benefits may vary from those in effect immediately prior to such Change of
Control, is substantially comparable in all material respects to such fringe
benefits taken as a whole; or
(v) Requiring the Executive to perform a significant part of
Executive's duties in locations more than one hundred (100) miles from
Nashville, Tennessee.
Further, and notwithstanding any other provision of this Agreement, the
Executive may terminate his employment without Good Reason at any time within
ninety (90) days after a Change of Control shall have occurred.
16. PAYMENTS ON TERMINATION: Upon termination of Executive's employment
by the Company or the Bank, the Company and the Bank shall have the following
payment obligations to Executive:
(a) If the Executive's Employment is terminated due to illness of
the Executive, the provisions of Section 6 shall apply.
(b) If the Executive's Employment is terminated due to the death of
the Executive, the provisions of Section 7 shall apply.
(c) If the Executive's Employment is terminated by the Company other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 8 shall apply, and therefore the payment
provisions of Section 9 apply.
(d) If the Executive's Employment is terminated by the Bank other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 9 shall apply.
(e) If the Executive's Employment is terminated by the Company for
Cause, or by the Bank for Cause, the provisions of Section 10 shall apply.
(f) If the Executive's Employment is terminated by the Executive as
a result of a breach of the agreement by the Company or the Bank, the provisions
of Section 3 apply, and therefore the payment provisions of Section 9 apply.
(g) In the event of a Voluntary Termination of Executive's
Employment as defined in Section 11, the provisions of Section 11 apply.
(h) If the Executive's Employment is terminated by the Company or
the Bank within twelve (12) months after a Change of Control of the Company, as
defined in Section 12 above, or a Change of Control of the Bank, as defined in
Section 13 above, or in Contemplation of a Change of Control of either, as
defined in Section 14, the provisions of Section 14 shall apply.
(i) If the Executive's Employment is terminated by the Executive for
Good Reason, as defined in Section 15 above, the Executive's employment with the
Company and with the Bank shall be deemed to have been terminated without Cause
by the Company and by the Bank at the time of such termination by Executive for
Good Reason. If such termination is during a period of Contemplation of Change
of Control, or within twelve (12) months after a Change of Control, the
provisions of Section 14 shall apply.
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(j) Termination of Executive's Employment by the Company or by the
Bank or by the Executive shall be communicated by written Notice of Termination
to the other parties hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision(s) in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated.
17. CONFIDENTIALITY: In the course of the Executive's employment, the
Company and the Bank may disclose or make known to the Executive, and the
Executive may be given access to or may become acquainted with, certain
information, including but not limited to confidential information which relates
to or is useful in the businesses of the Company and the Bank and which is not
available from public records or other generally available sources
(collectively, "Confidential Information"), and which the Company or the Bank
consider proprietary and desire to maintain confidential. During the term of
this Agreement and at all times thereafter, the Executive shall not in any
manner, either directly or indirectly, divulge, disclose or communicate to any
person or firm, except to legal counsel for the Company or the Bank or otherwise
to or for the benefit of the Company or the Bank as directed by the Company or
the Bank, and except to the Executive's legal counsel in connection with the
resolution of any dispute between the Executive and the Company or the Bank
under this Agreement, any of the Confidential Information which Executive may
have acquired in the course of or as an incident to Executive's employment by
the Company or the Bank, the parties agreeing that such Confidential Information
affects the successful and effective conduct of the business and their goodwill
of the Company and the Bank, and that any material breach of the terms of this
Section 17 is a material breach of this Agreement.
18. COVENANT NOT TO COMPETE. During the Term of this Agreement and, if
Executive terminates Executive's employment in a Voluntary Termination or for
Good Reason, or if the Company or the Bank terminate Executive's employment in
Contemplation of a Change of Control, or within twelve (12) months after a
Change of Control, or for Cause, for the period of twelve (12) months following
the termination of Executive's employment with the Company or the Bank,
Executive agrees that Executive will not directly or indirectly own, become
interested in, or become involved in any manner whatsoever in any business which
is similar or competitive with any aspect of the business of the Company or the
Bank as conducted at the time of such termination. Without limiting the
foregoing, Executive agrees during the applicable period not to engage in the
Banking or Leasing businesses, whether as an owner, partner, director, officer,
employee, consultant, stockholder, agent, salesman, or in any other capacity for
any person, partnership, firm, corporation or other entity without the express
written consent of the President of the Company. Executive specifically
acknowledges and agrees that the foregoing restriction on competition with the
Company and the Bank will not prevent Executive from obtaining gainful
employment following termination of Executive's employment with the Company and
the Bank, and is a reasonable restriction upon Executive's ability to compete
with the Company and the Bank, given the economic benefits afforded to Executive
under this Agreement.
19. NO ENTICEMENT OF EMPLOYEES. Executive agrees that Executive will
not, directly or indirectly, entice or induce, or attempt to entice or induce
any employee of the Company or Bank to leave the employ of the Company or the
Bank during the period covered by the Non-Competition provisions of Section 18
above.
20. NO SOLICITATION. Executive will not, directly or indirectly,
solicit, entice or induce, or attempt to entice or induce any customer or user
of the products or services of the Bank or the Company during the period covered
by the Non-Competition provisions of Section 18 above.
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21. REMEDIES. Executive acknowledges and agrees that the breach or
threatened breach of any of the provisions of Sections 17, 18, 19 and 20 of this
Agreement will cause irreparable harm to the Company and the Bank, and cannot be
adequately compensated by the payment of damages. Accordingly, Executive
covenants and agrees that the Company and the Bank, in addition to any other
rights or remedies which they may have, will be entitled to such equitable and
injunctive relief as may be available from any court of competent jurisdiction
to restrain Executive from breaching or threatening to breach any of the
provisions of this Sections 17, 18, 19 and 20, without posting bond or other
surety. Such right to obtain injunctive relief may be exercised at the option of
the Company or the Bank in addition to, concurrently with, prior to, after, or
in lieu of the exercise of any other rights or remedies which the Company or the
Bank may have as a result of any such breach or threatened breach. In addition
to all other remedies, in the event of the breach or threatened breach of any of
the provisions of Sections 17, 18, 19 or 20 of this Agreement, the Company and
Bank shall be relieved of any obligation to continue payments to the Executive
pursuant to the provisions of this agreement.
22. NOTICES: For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
Community Financial Group, Inc.
401 Church Street, 2nd Floor
Nashville, TN 37219
Attention: Chief Executive Officer
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
If to the Bank:
The Bank of Nashville
401 Church Street
Nashville, TN 37219
Attention: Chief Executive Officer
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
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If to the Executive:
T. Wayne Hood
408 Honeysuckle Circle
Franklin, TN 37067
or at such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
23. MODIFICATION; WAIVERS; APPLICABLE LAW: No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by the Executive, and on behalf of
the Company by such officer as may be specifically designated by the Board of
Directors of the Company after approval of the modification by the Board of
Directors, and on behalf of the Bank by such officer as may be specifically
designated by the Board of Directors of the Bank after approval of the
modification by the Board of Directors. No waiver by either party hereto at any
time of any breach by the other party hereto of, 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. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Tennessee.
24. INVALIDITY; ENFORCEABILITY: The invalidity or unenforceability of
any provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
25. ASSIGNMENTS: This Agreement is personal to the Executive, who may
not assign his obligations hereunder.
26. SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and
be binding upon the Company, its successors and assigns, the Bank, its
successors and assigns and upon the Executive, and his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable
to him hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to his devisee, legatee or
other designee or, if there is no such designee, to his estate.
27. HEADINGS: Descriptive headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
28. ARBITRATION: Any dispute, controversy or claim arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators, in Nashville, Tennessee, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Unless otherwise provided in the rules of the American Arbitration
Association, the arbitrators shall, in their award, allocate between the parties
the costs of arbitration, which shall include reasonable attorneys' fees and
expenses of the parties, as well as the arbitrator's fees and expenses, in such
proportions as the arbitrators deem just.
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29. ENTIRE AGREEMENT: This Agreement represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and supersedes or amends all other agreements,
negotiations, understandings and representations (if any) made by and between
the parties hereto; provided, however, that nothing herein shall affect in any
way agreements granting or evidencing the Executive's options to acquire shares
of the Company.
30. REGULATORY AND OTHER PROCEEDINGS: The provisions of this Section 30
shall control as to continuing rights and obligations under this Agreement,
notwithstanding any other provision of this Agreement, for as long as they are
required to be included in employment contracts between an institution insured
by the FDIC and its officers and as long as the Bank is such an insured
institution.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank or the Company by a
Notice served under applicable Federal or State statutes or regulations, the
Bank's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank and the Company shall pay the Executive all of the
compensation withheld while their obligations hereunder were suspended and
reinstate their obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the affairs of the Bank or the Company by an
order issued under applicable Federal or State statutes or regulations, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, provided that vested rights of the
contracting parties shall not be affected.
(c) If the Company or the Bank become insolvent or taken over by
regulatory entities, all obligations under this Agreement shall terminate as of
the date of default, provided that this paragraph shall not affect any vested
rights of the contracting parties.
(d) All obligations under this Agreement may be terminated, except
to the extent determined that continuation thereof is necessary for the
continued operation of the Company or the Bank, by the FDIC at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Bank or
approves a supervisory merger to resolve problems related to operation of the
Bank, provided that any rights of the parties that have already vested shall not
be affected by such action.
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31. SURVIVAL. This agreement shall remain in effect notwithstanding the
termination of Executive's employment hereunder, and in any case, the provisions
of Sections 18, 19, and 20 shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
Executive:
/s/ T. Wayne Hood
-------------------------------------------
T. Wayne Hood
Community Financial Group, Inc.
By: /s/ Mack S. Linebaugh, Jr.
-------------------------------------------
Name: Mack S. Linebaugh, Jr.
Title: President
The Bank of Nashville
By: /s/ Mack S. Linebaugh, Jr.
-------------------------------------------
Name: Mack S. Linebaugh, Jr.
Title: President
The Bank of Nashville
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EXHIBIT 10.22
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement entered into this 14th day of
September, 1999 by and among Community Financial Group, Inc., a Tennessee
corporation (the "Company"), The Bank of Nashville, a banking corporation
organized under the laws of the State of Tennessee (the "Bank"), and Joan B.
Marshall (the "Executive").
WITNESSETH:
WHEREAS, the Company is a one-bank holding company which owns one
hundred per cent (100%) of the outstanding stock of the Bank;
WHEREAS, the Company and the Bank desire to retain the services of
Executive on the terms and conditions set forth herein and, for purposes of
effecting the same, the Boards of Directors of the Company and the Bank have
approved this Employment Agreement and authorized its execution and delivery to
the Executive on behalf of the Company and the Bank;
WHEREAS, the Executive serves as the Senior Vice President and
Corporate Secretary of the Company and, as such, is a key executive officer of
the Company whose continued dedication, availability, advice and counsel to the
Company is deemed important to the Company, the Board of Directors of the
Company, and the present and future stockholders of the Company;
WHEREAS, the Executive serves as the Senior Vice President and
Corporate Secretary of the Bank and, as such, is a key executive officer of the
Bank whose continued dedication, availability, advice and counsel to the Bank is
deemed important to the Board of Directors of the Bank, the Bank and the
Company;
WHEREAS, the Company and the Bank wish to attract and retain
well-qualified executives, and it is in the best interests of the Company, the
Bank and the Executive, notwithstanding any change in control of the Company or
the Bank, to secure the services of the Executive, whose experience and
knowledge of the affairs of the Company and the Bank, and whose reputation and
contacts in the industry, are extremely valuable to the Company and the Bank;
and
WHEREAS, the Company and the Bank consider the establishment and
maintenance of a sound and vital management team to be part of their overall
corporate strategy and to be essential to protecting and enhancing the best
interests of the Bank, the Company, and its stockholders.
NOW, THEREFORE, to assure the Company and the Bank of the Executive's
continued dedication, the availability of Executive's advice and counsel to the
Boards of Directors of the Company and the Bank, the availability of Executive's
management skills to the Company and the Bank, and to induce the Executive to
remain and continue in the employ of the Company and the Bank in Executive's
current capacities, and for other good and valuable consideration, the receipt
and adequacy of which each party hereby acknowledged, the Company, the Bank and
the Executive hereby agree as follows:
1. EMPLOYMENT. The Company and the Bank agree to, and do hereby, employ
Executive and Executive agrees to, and does hereby, accept such employment, all
upon the terms and conditions hereinafter set forth.
2. TERM: The initial term of employment under this Agreement shall be
for a period of one (1) year, commencing on the date first above written and
ending at the close of business one year from said date. This Agreement shall be
automatically renewed for succeeding terms of one (1) year each, unless either
party shall, at least thirty (30) days, but not more than one hundred eighty
(180) days, prior to the expiration of any term, give written notice of her or
its intention not to renew this Agreement.
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3. EMPLOYMENT; DUTIES, AUTHORITY, AND RESPONSIBILITIES:
(a) During the term of employment of the Executive by the Company
and the Bank, the Executive shall devote Executive's full business time and
attention to the rendition of services as Senior Vice President and Corporate
Secretary of the Company and as Senior Vice President and Corporate Secretary of
the Bank, and to the furtherance of the best interests of the Company and the
Bank, and shall exert Executive's best efforts in the rendition of such
services. The Executive agrees that in the rendition of such services and in all
aspects of such employment Executive will comply with the policies, standards
and regulations of the Company and the Bank as from time to time established by
their respective Boards of Directors. The expenditure by the Executive of
reasonable amounts of time for charitable, professional and similar activities
shall not be deemed a breach of this Agreement provided such activities do not
materially interfere with the services to be rendered to the Company and the
Bank hereunder.
(b) As Senior Vice President and Corporate Secretary of the Company
and the Bank, the Executive shall have the general powers and duties of
supervision which usually pertain to such offices and shall perform all such
duties as are properly required of Executive by the Chief Executive Officer of
the Company and the Bank.
(c) If after a Change of Control occurs, a material reduction or
limitation of the duties of the Executive that were in effect immediately prior
to the Change of Control occurs, this action shall be considered a breach of
this Agreement by the Company and the Bank. In the event of any breach of any
provision of this Agreement by the Bank which breach is not cured within ten
(10) days after written notice of the breach to the Bank by the Executive shall
entitle the Executive to terminate her employment by the Bank pursuant to this
Agreement by not less than sixty (60) days written notice to the Board of
Directors of the Bank and, at the option of Executive, to terminate her
employment by the Company pursuant to this Agreement by not less than sixty (60)
days written notice to the Board of Directors of the Company. Any such
termination by the Executive of her employment by the Bank hereunder resulting
from a breach of the terms of this Agreement shall be treated as a termination
by the Bank without cause and governed by Section 9 below, unless such breach
occurs in Contemplation of a Change of Control or within twelve (12) months
after a Change of Control, and constitutes Good Reason for the Executive to
terminate Executive's employment, in which case it shall be governed by Section
15 below.
4. COMPENSATION: The Bank agrees to pay Executive, and Executive agrees
to accept, as compensation for all services rendered by her to the Company, the
Bank and their affiliates during the period of her employment under this
Agreement, base compensation at the annual rate of not less than $75,000, which
shall be payable in accordance with the normal payroll policies of the Bank and
shall be subject to all appropriate withholding taxes.
5. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF BUSINESS EXPENSES
AND MOVING EXPENSES:
(a) During the term of this Agreement, Executive shall be entitled
to participate in all pension, group insurance, hospitalization, deferred
compensation, Company paid life insurance, or incentive plans, and any other
benefit plan of the Company or the Bank presently in effect or hereafter adopted
by the Company or the Bank and generally available to all employees of either
organization of senior executive status (the "Benefit Plans").
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(b) During the term of this Agreement, to the extent that such
expenditures meet the requirements of the Internal Revenue Code for
deductibility by the Company or the Bank for federal income tax purposes and are
substantiated by the Executive as required by the Internal Revenue Service and
policies of the Company and the Bank, the Bank shall reimburse the Executive
promptly for all expenditures (including travel, entertainment, parking,
business meetings, and the monthly costs, including dues, of maintaining
memberships at appropriate clubs, including, but not limited to, Nashville City
Club) made in accordance with rules and policies established from time to time
by the Board of Directors of the Bank in pursuance and furtherance of the
Company's and the Bank's business and good will.
(c) During the term of this Agreement, in the event that the Company
or the Bank relocates its principal executive offices to a location more than
one hundred (100) miles from Nashville, Tennessee, or the Board of Directors of
either the Company or the Bank requires the Executive to be based anywhere more
than one hundred (100) miles from the Bank's principal executive offices, the
Bank shall pay (or reimburse the Executive for) all reasonable moving expenses
incurred by Executive relating to a change of Executive's principal residence in
connection with such relocation, provided that the Executive furnishes the Bank
with adequate records and documentary evidence for the substantiation of such
reimbursement.
6. ILLNESS: In the event Executive is unable to perform Executive's
duties under this Agreement on a full-time basis for a period of six (6)
consecutive months by reason of illness or other physical or mental disability,
and at or before the end of such period Executive does not return to work on a
full-time basis, the Company and the Bank may jointly terminate Executive's
Employment pursuant to this Agreement without further or additional compensation
being due the Executive from the Bank pursuant to this Agreement, except that
the Executive shall be paid Executive's base compensation from the Bank at the
rate in effect at the time of Executive's termination for a period of twelve
(12) months from the date of the commencement of the Executive's inability to
perform her duties, less any disability payments payable during such time under
any disability plans maintained and paid for by the Bank, and Executive shall
continue to participate in all Benefit Plans in effect at the time of
Executive's termination for a period of twelve (12) months from the date of the
commencement of the Executive's inability to perform her duties.
7. DEATH: In the event of the Executive's death during the term of this
Agreement, Executive's estate, legal representatives or named beneficiaries (as
directed by the Executive in writing) shall be paid Executive's base
compensation from the Bank at the rate in effect at the time of the Executive's
death under this Agreement for the period of twelve (12) months from the date of
the Executive's death, less any amounts payable to Executive's estate or
beneficiaries under life insurance policies on the life of Executive maintained
and paid for by Bank.
8. TERMINATION BY COMPANY: Notwithstanding the provisions of Section 2
above, the Board of Directors of the Company may, in its sole discretion,
terminate the Executive's employment with the Company under this Agreement at
any time in any lawful manner by not less than thirty (30) days written notice
to the Executive, in which event the Executive shall be entitled to elect to
have such termination likewise constitute a termination of Executive's
employment by the Bank. If Executive so elects, then unless such termination is
for Cause as defined in Section 10 of this Agreement or unless the Executive's
employment is terminated in Contemplation of a Change of Control or within
twelve (12) months after a Change of Control, Executive shall be entitled to the
compensation provided for in Section 9 below.
9. TERMINATION BY BANK: Notwithstanding the provisions of Section 2 of
this Agreement, the Board of Directors of the Bank may, in its sole discretion,
terminate the Executive's employment with the Bank under this Agreement at any
time in any lawful manner by not less than thirty
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(30) days written notice to the Executive (or, at the Bank's option, pay for
such thirty days in lieu of notice) and in such event, unless the Bank
terminates the Executive's employment with the Bank for Cause as defined in with
Section 10 of this Agreement or, unless the Executive's employment is terminated
in Contemplation of a Change of Control or within twelve (12) months after a
Change of Control, the Executive shall be paid, during the twelve (12) months
following such termination at such times as payment was theretofore made, the
base compensation that the Executive would have been entitled to receive during
such period of time had such termination not occurred, such payments to be in
addition to any payment in lieu of notice. Furthermore, the Bank shall pay to
the Executive in equal monthly payments an amount sufficient to fully fund any
Benefit Plans of the Bank, with respect to the Executive, commencing at the
beginning of the first month following termination of Executive's employment
with the Bank pursuant to this paragraph, and ending twelve (12) months after
such termination. In the event that a payment made with respect to any benefit
plan or program would otherwise violate the terms of the plan or program, an
equivalent amount shall be paid directly to Executive. Executive shall owe no
duty to mitigate these payments, and shall not be required to obtain or attempt
to obtain alternate employment during such twelve (12) month period. If
Executive obtains other gainful employment during such twelve (12) month period,
the compensation and benefits received by Executive during said period from such
other employment shall not reduce the payments otherwise due to Executive
pursuant to this section.
10. TERMINATION FOR CAUSE:
(a) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Company may, in its sole discretion, terminate the Executive's
employment with the Company for Cause. For the purposes of this Agreement, the
Company shall have "Cause" to terminate the Executive's employment hereunder:
(i) because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses), willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Bank terminates
the employment of Executive with the Bank for Cause pursuant to subsection (c)
of this Section 10. For purposes of this paragraph, no act, or failure to act,
on the Executive's part shall be considered "willful" unless done, or omitted to
be done, by her not in good faith or without reasonable belief that her action
or omission was in the best interest of the Company; provided that any act or
omission to act on the Executive's behalf in reliance upon an opinion of counsel
to either the Company or the Bank shall not be deemed to be "willful."
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been a resolution
approved by a majority of the non-officer members of the Board of Directors of
the Company finding that, in the good faith opinion of such majority, the
Executive was guilty of conduct which is deemed to be Cause within the meaning
of this paragraph, after notice to the Executive and an opportunity for her,
together with her counsel, to be heard before such majority (with the Company
Board retaining the right to deliberate without the Executive and her counsel
present before and/or after such hearing).
(b) If the Company terminates the Executive's employment with the
Company for Cause in accordance with Section 10(a) of this Agreement, the
Company shall have no obligation to make any further payments to or provide
benefits for the Executive, provided that the Executive shall be entitled to
receive any accrued compensation or benefits, insured or otherwise, that she
would otherwise have been eligible to receive under any Benefit Plans of the
Company through the date of such termination.
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(c) Notwithstanding the provisions of this Agreement, the Board of
Directors of the Bank may, in its sole discretion, terminate the Executive's
employment with the Bank for Cause. For the purposes of this Agreement, the Bank
shall have "Cause" to terminate the Executive's employment hereunder: (i)
because of the Executive's personal dishonesty, incompetence, willful
misconduct, gross negligence, willful breach of fiduciary duty (including
involving personal profit), failure to substantially perform stated duties
described in Section 3 of this Agreement, willful violation of any material law,
rule, regulation (other than traffic violations or similar offenses) , willful
violation of any final cease-and-desist order issued by any regulatory agency
having jurisdiction over the Company or the Bank, the imposition of any sanction
upon the Executive by any such regulatory agency, or material breach by the
Executive of any provision of this Agreement or any related agreement entered
into by the Executive; or (ii) if the Board of Directors of the Company
terminates Executive's employment with the Company for Cause pursuant to
subsection (a) of this Section 10. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by her not in good faith or without reasonable
belief that her action or omission was in the best interest of the Bank;
provided that any act or omission to act on the Executive's behalf in reliance
upon an opinion of counsel to either the Company or the Bank shall not be deemed
to be "willful." Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall have been
a resolution approved by a majority of the non-officer members of the Board of
Directors of the Bank finding that, in the good faith opinion of such majority,
the Executive was guilty of conduct which is deemed to be Cause within the
meaning of this paragraph, after notice to the Executive and an opportunity for
her, together with her counsel to be heard before such majority (with the Bank
Board retaining the right to deliberate without the Executive and her counsel
present before and/or after such hearing).
(d) If the Bank terminates the Executive's employment with the Bank
for Cause in accordance with Section 10(c) of this Agreement, the Bank shall
have no obligation to make any further payments to or provide benefits for the
Executive, provided that the Executive shall be entitled to receive any accrued
compensation or benefits, insured or otherwise, which Executive would otherwise
have been eligible to receive under any Benefit Plans of the Bank through the
date of such termination.
11. TERMINATION BY THE EXECUTIVE: The Executive may terminate the
Executive's employment with the Company or with the Bank hereunder at any time
upon sixty (60) days written notice to the affected entity. If the Executive
terminates the Executive's employment with either the Company or the Bank other
than for breach of this Agreement as provided in Section 3, for Good Reason, in
Contemplation of a Change of Control or within twelve (12) months after a Change
of Control, Executive shall be deemed to have voluntarily terminated Executive's
employment with both the Company and the Bank ("Voluntary Termination"), and
thereupon the Company and the Bank shall have no obligation to make any further
payments to or provide benefits for the Executive, provided that the Executive
shall be entitled to receive any accrued compensation and benefits, insured or
otherwise, that she would otherwise have been eligible to receive under any
Benefit Plans of the Company or the Bank through the date of such termination.
12. DEFINITION OF CHANGE OF CONTROL OF THE COMPANY: A "Change of
Control" of the Company shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 ("Exchange Act") or
such item thereof which may hereafter pertain to the same subject; provided
that, and notwithstanding the foregoing, a Change of Control shall be deemed to
have occurred if (i) any person (as that term is used in Sections 13(d) and
14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing thirty-five percent (35%)
or more of the combined voting power of the Company's then outstanding
securities, or (ii) the Company shall cease to be a publicly owned corporation,
as defined in the Exchange Act.
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13. DEFINITION OF CHANGE OF CONTROL OF THE BANK: A "Change of Control"
of the Bank shall mean any Change of Control of the Company, or any change or
series of changes in circumstances which result in the Company ceasing to own,
control, and vote an absolute majority of the voting securities of the Bank.
14. TERMINATION BY COMPANY OR BANK AFTER CHANGE IN CONTROL: If a Change
of Control of the Company or a Change of Control of the Bank shall have
occurred, this Agreement shall continue in full force and effect. If the
Executive's Employment is terminated by the Company or the Bank within twelve
(12) months after a Change of Control of the Company, as defined in Section 12
above, or a Change of Control of the Bank, as defined in Section 13 above, or in
Contemplation of a Change of Control of either, as defined below, Executive
shall be entitled to be paid an amount equal to one (1) times the sum of
Executive's annual base cash compensation plus the annual value of Executive's
participation in all Benefit Programs in effect at the time of such termination.
At Executive's option, the sums payable pursuant to this Section will be paid in
full in a lump sum and without discount within thirty (30) days of the
termination of Executive's employment, or in equal monthly installments over
twelve (12) months. Any termination of Executive's employment hereunder during
any period of time when the Board of Directors of the Company has formed an
intent to offer the Bank for sale or to promote an acquisition of or merger of
the Company or the Bank, or when the Company has knowledge that any person(s),
entity or concern has taken steps reasonably calculated to effect a Change of
Control of the Company shall constitute a termination of Executive's employment
"In Contemplation of a Change of Control." The period of Contemplation of Change
of Control shall continue until the Board of Directors of the Company no longer
intends to promote an acquisition of or merger of the Company or the Bank, or
until in the opinion of the Company's Board of Directors, the person(s), concern
or entity has abandoned or terminated its efforts to effect a Change of Control
of the Company, as applicable. Any good faith determination by the Company's
Board of Directors that Board no longer has such an intent, or that the
person(s), concern or entity has abandoned or terminated its efforts to effect a
Change of Control of the Company shall be conclusive and binding on the
Executive. Such determination shall be promptly communicated to the Executive in
writing by the Chief Executive of the Company or Chairman of the Board of the
Company. Notwithstanding the foregoing, any termination of the Executive by the
Company or by the Bank within ninety (90) days prior to a Change of Control of
the Company shall be conclusively presumed to have been in Contemplation of
Change of Control.
15. TERMINATION BY EXECUTIVE FOR GOOD REASON; During the term of
Executive's employment hereunder, the Executive may terminate her employment
with both the Company and the Bank if the Executive has Good Reason, as defined
below. Termination by the Executive of Executive's employment with either entity
shall be deemed termination with both. For purposes of this Agreement, "Good
Reason" shall mean:
(i) The assignment of duties to the Executive by the Company
or the Bank which (1) are significantly different from the Executive's duties
immediately prior to the Change of Control, or (2) result in the Executive
having significantly less authority and/or responsibility than Executive had as
an executive officer of the Company or the Bank prior to the Change of Control,
without the express written consent of Executive;
(ii) The removal of the Executive from or any failure to
re-elect Executive to the positions set forth in Section 3 above, except in
connection with a termination of her employment by the Company or the Bank for
Cause or Executive's resignation other than for Good Reason.
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(iii) A reduction of the Executive's base salary as in effect
on the date of the Change of Control, unless the reduction in the Executive's
salary is waived in writing by the Executive;
(iv) The failure of the Company and the Bank collectively to
provide the Executive with substantially the same fringe benefits (including
paid vacations) that were provided to Executive immediately prior to the Change
of Control, or with a package of fringe benefits that, though one or more of
such benefits may vary from those in effect immediately prior to such Change of
Control, is substantially comparable in all material respects to such fringe
benefits taken as a whole; or
(v) Requiring the Executive to perform a significant part of
Executive's duties in locations more than one hundred (100) miles from
Nashville, Tennessee.
Further, and notwithstanding any other provision of this Agreement, the
Executive may terminate her employment without Good Reason at any time within
ninety (90) days after a Change of Control shall have occurred.
16. PAYMENTS ON TERMINATION: Upon termination of Executive's employment
by the Company or the Bank, the Company and the Bank shall have the following
payment obligations to Executive:
(a) If the Executive's Employment is terminated due to illness of
the Executive, the provisions of Section 6 shall apply.
(b) If the Executive's Employment is terminated due to the death of
the Executive, the provisions of Section 7 shall apply.
(c) If the Executive's Employment is terminated by the Company other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 8 shall apply, and therefore the payment
provisions of Section 9 apply.
(d) If the Executive's Employment is terminated by the Bank other
than for Cause, and not In Contemplation of a Change of Control of the Company
or the Bank or within twelve months after a Change of Control of the Company or
the Bank, the provisions of Section 9 shall apply.
(e) If the Executive's Employment is terminated by the Company for
Cause, or by the Bank for Cause, the provisions of Section 10 shall apply.
(f) If the Executive's Employment is terminated by the Executive as
a result of a breach of the agreement by the Company or the Bank, the provisions
of Section 3 apply, and therefore the payment provisions of Section 9 apply.
(g) In the event of a Voluntary Termination of Executive's
Employment as defined in Section 11, the provisions of Section 11 apply.
(h) If the Executive's Employment is terminated by the Company or
the Bank within twelve (12) months after a Change of Control of the Company, as
defined in Section 12 above, or a Change of Control of the Bank, as defined in
Section 13 above, or in Contemplation of a Change of Control of either, as
defined in Section 14, the provisions of Section 14 shall apply.
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(i) If the Executive's Employment is terminated by the Executive for
Good Reason, as defined in Section 15 above, the Executive's employment with the
Company and with the Bank shall be deemed to have been terminated without Cause
by the Company and by the Bank at the time of such termination by Executive for
Good Reason. If such termination is during a period of Contemplation of Change
of Control, or within twelve (12) months after a Change of Control, the
provisions of Section 14 shall apply.
(j) Termination of Executive's Employment by the Company or by the
Bank or by the Executive shall be communicated by written Notice of Termination
to the other parties hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision(s) in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated.
17. CONFIDENTIALITY: In the course of the Executive's employment, the
Company and the Bank may disclose or make known to the Executive, and the
Executive may be given access to or may become acquainted with, certain
information, including but not limited to confidential information which relates
to or is useful in the businesses of the Company and the Bank and which is not
available from public records or other generally available sources
(collectively, "Confidential Information"), and which the Company or the Bank
consider proprietary and desire to maintain confidential. During the term of
this Agreement and at all times thereafter, the Executive shall not in any
manner, either directly or indirectly, divulge, disclose or communicate to any
person or firm, except to legal counsel for the Company or the Bank or otherwise
to or for the benefit of the Company or the Bank as directed by the Company or
the Bank, and except to the Executive's legal counsel in connection with the
resolution of any dispute between the Executive and the Company or the Bank
under this Agreement, any of the Confidential Information which Executive may
have acquired in the course of or as an incident to Executive's employment by
the Company or the Bank, the parties agreeing that such Confidential Information
affects the successful and effective conduct of the business and their goodwill
of the Company and the Bank, and that any material breach of the terms of this
Section 17 is a material breach of this Agreement.
18. COVENANT NOT TO COMPETE. During the Term of this Agreement and, if
Executive terminates Executive's employment in a Voluntary Termination or for
Good Reason, or if the Company or the Bank terminate Executive's employment in
Contemplation of a Change of Control, or within twelve (12) months after a
Change of Control, or for Cause, for the period of twelve (12) months following
the termination of Executive's employment with the Company or the Bank,
Executive agrees that Executive will not directly or indirectly own, become
interested in, or become involved in any manner whatsoever in any business which
is similar or competitive with any aspect of the business of the Company or the
Bank as conducted at the time of such termination. Without limiting the
foregoing, Executive agrees during the applicable period not to engage in the
Banking or Leasing businesses, whether as an owner, partner, director, officer,
employee, consultant, stockholder, agent, salesman, or in any other capacity for
any person, partnership, firm, corporation or other entity without the express
written consent of the President of the Company. Executive specifically
acknowledges and agrees that the foregoing restriction on competition with the
Company and the Bank will not prevent Executive from obtaining gainful
employment following termination of Executive's employment with the Company and
the Bank, and is a reasonable restriction upon Executive's ability to compete
with the Company and the Bank, given the economic benefits afforded to Executive
under this Agreement.
19. NO ENTICEMENT OF EMPLOYEES. Executive agrees that Executive will
not, directly or indirectly, entice or induce, or attempt to entice or induce
any employee of the Company or Bank to leave the employ of the Company or the
Bank during the period covered by the Non-Competition provisions of Section 18
above.
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20. NO SOLICITATION. Executive will not, directly or indirectly,
solicit, entice or induce, or attempt to entice or induce any customer or user
of the products or services of the Bank or the Company during the period covered
by the Non-Competition provisions of Section 18 above.
21. REMEDIES. Executive acknowledges and agrees that the breach or
threatened breach of any of the provisions of Sections 17, 18, 19 and 20 of this
Agreement will cause irreparable harm to the Company and the Bank, and cannot be
adequately compensated by the payment of damages. Accordingly, Executive
covenants and agrees that the Company and the Bank, in addition to any other
rights or remedies which they may have, will be entitled to such equitable and
injunctive relief as may be available from any court of competent jurisdiction
to restrain Executive from breaching or threatening to breach any of the
provisions of this Sections 17, 18, 19 and 20, without posting bond or other
surety. Such right to obtain injunctive relief may be exercised at the option of
the Company or the Bank in addition to, concurrently with, prior to, after, or
in lieu of the exercise of any other rights or remedies which the Company or the
Bank may have as a result of any such breach or threatened breach. In addition
to all other remedies, in the event of the breach or threatened breach of any of
the provisions of Sections 17, 18, 19 or 20 of this Agreement, the Company and
Bank shall be relieved of any obligation to continue payments to the Executive
pursuant to the provisions of this agreement.
22. NOTICES: For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
Community Financial Group, Inc.
401 Church Street, 2nd Floor
Nashville, TN 37219
Attention: Chief Executive Officer
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
If to the Bank:
The Bank of Nashville
401 Church Street
Nashville, TN 37219
Attention: Chief Executive Officer
with a copy to:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
P. O. Box 198062
Nashville, TN 37219
Attention: Patrick L. Alexander, Esq.
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If to the Executive:
Joan B. Marshall
88 Blue Ridge Trace
Hendersonville, TN 37075
or at such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
23. MODIFICATION; WAIVERS; APPLICABLE LAW: No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by the Executive, and on behalf of
the Company by such officer as may be specifically designated by the Board of
Directors of the Company after approval of the modification by the Board of
Directors, and on behalf of the Bank by such officer as may be specifically
designated by the Board of Directors of the Bank after approval of the
modification by the Board of Directors. No waiver by either party hereto at any
time of any breach by the other party hereto of, 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. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Tennessee.
24. INVALIDITY; ENFORCEABILITY: The invalidity or unenforceability of
any provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
25. ASSIGNMENTS: This Agreement is personal to the Executive, who may
not assign her obligations hereunder.
26. SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and
be binding upon the Company, its successors and assigns, the Bank, its
successors and assigns and upon the Executive, and her personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable
to her hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to her devisee, legatee or
other designee or, if there is no such designee, to her estate.
27. HEADINGS: Descriptive headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
28. ARBITRATION: Any dispute, controversy or claim arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators, in Nashville, Tennessee, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Unless otherwise provided in the rules of the American Arbitration
Association, the arbitrators shall, in their award, allocate between the parties
the costs of arbitration, which shall include reasonable attorneys' fees and
expenses of the parties, as well as the arbitrator's fees and expenses, in such
proportions as the arbitrators deem just.
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29. ENTIRE AGREEMENT: This Agreement represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and supersedes or amends all other agreements,
negotiations, understandings and representations (if any) made by and between
the parties hereto; provided, however, that nothing herein shall affect in any
way agreements granting or evidencing the Executive's options to acquire shares
of the Company.
30. REGULATORY AND OTHER PROCEEDINGS: The provisions of this Section 30
shall control as to continuing rights and obligations under this Agreement,
notwithstanding any other provision of this Agreement, for as long as they are
required to be included in employment contracts between an institution insured
by the FDIC and its officers and as long as the Bank is such an insured
institution.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank or the Company by a
Notice served under applicable Federal or State statutes or regulations, the
Bank's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank and the Company shall pay the Executive all of the
compensation withheld while their obligations hereunder were suspended and
reinstate their obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the affairs of the Bank or the Company by an
order issued under applicable Federal or State statutes or regulations, all
obligations of the Company and the Bank under this Agreement shall terminate as
of the effective date of the order, provided that vested rights of the
contracting parties shall not be affected.
(c) If the Company or the Bank become insolvent or taken over by
regulatory entities, all obligations under this Agreement shall terminate as of
the date of default, provided that this paragraph shall not affect any vested
rights of the contracting parties.
(d) All obligations under this Agreement may be terminated, except
to the extent determined that continuation thereof is necessary for the
continued operation of the Company or the Bank, by the FDIC at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Bank or
approves a supervisory merger to resolve problems related to operation of the
Bank, provided that any rights of the parties that have already vested shall not
be affected by such action.
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31. SURVIVAL. This agreement shall remain in effect notwithstanding the
termination of Executive's employment hereunder, and in any case, the provisions
of Sections 18, 19, and 20 shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
Executive:
/s/ Joan B. Marshall
----------------------------------------
Joan B. Marshall
Community Financial Group, Inc.
By: /s/ Mack S. Linebaugh, Jr.
----------------------------------------
Name: Mack S. Linebaugh, Jr.
Title: President
The Bank of Nashville
By: /s/ Mack S. Linebaugh, Jr.
----------------------------------------
Name: Mack S. Linebaugh, Jr.
Title: President
The Bank of Nashville
-79-
<PAGE> 1
EXHIBIT 11
COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
STATEMENT REGARDING: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Basic Income Per Common Share (1)
Net income (in thousands) $ 811 $ 644 $ 2,426 $ 1,873
========== ========== ========== ==========
Net income per share $ .20 $ .26 $ .59 $ .80
========== ========== ========== ==========
Weighted average common shares outstanding 3,995,843 2,457,131 4,113,469 2,344,596
========== ========== ========== ==========
Diluted Income Per Common Share (2)
Net income (in thousands) $ 811 $ 644 $ 2,426 $ 1,873
========== ========== ========== ==========
Net income per share $ .20 $ .23 $ .58 $ .62
========== ========== ========== ==========
Weighted average common shares outstanding 4,096,048 2,753,786 4,175,165 3,011,615
========== ========== ========== ==========
</TABLE>
(1) Basic net income per share has been computed using the weighted average
number of common shares outstanding during each period presented.
(2) Diluted net income per share has been computed using the weighted
average number of common share outstanding and the dilutive effect of
stock options and warrants outstanding during the periods presented.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 15,120
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,312
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 190,766
<ALLOWANCE> 3,973
<TOTAL-ASSETS> 303,087
<DEPOSITS> 238,627
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,746
<LONG-TERM> 14,500
0
0
<COMMON> 23,584
<OTHER-SE> 23,630
<TOTAL-LIABILITIES-AND-EQUITY> 303,087
<INTEREST-LOAN> 11,269
<INTEREST-INVEST> 3,120
<INTEREST-OTHER> 423
<INTEREST-TOTAL> 14,812
<INTEREST-DEPOSIT> 5,568
<INTEREST-EXPENSE> 6,272
<INTEREST-INCOME-NET> 8,540
<LOAN-LOSSES> 54
<SECURITIES-GAINS> (5)
<EXPENSE-OTHER> 6,478
<INCOME-PRETAX> 3,931
<INCOME-PRE-EXTRAORDINARY> 3,931
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,426
<EPS-BASIC> .59
<EPS-DILUTED> .58
<YIELD-ACTUAL> 4.62
<LOANS-NON> 612
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 294
<ALLOWANCE-OPEN> 3,646
<CHARGE-OFFS> 658
<RECOVERIES> 839
<ALLOWANCE-CLOSE> 3,973
<ALLOWANCE-DOMESTIC> 2,901
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,072
</TABLE>
