<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
TWIN CITY BANCORP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
TWIN CITY BANCORP, INC. COMMON STOCK, $1.00 PAR VALUE PER SHARE
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
1,121,388 SHARES OF COMMON STOCK (PLUS OPTIONS TO ACQUIRE 125,632
SHARES OF COMMON STOCK)
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$17.15 PER SHARE OF COMMON STOCK AND THE DIFFERENCE BETWEEN $17.15 AND
THE PER SHARE EXERCISE PRICE FOR EACH SHARE SUBJECT TO OPTION
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$20,183,652
----------------------------------------------------------------------
(5) Total fee paid:
$4,037
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE>
[TWIN CITY LOGO]
__________________, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of
Twin City Bancorp, Inc., to be held at __________________________________,
Bristol, Tennessee, on _________, 2000 at __:__ _.m., local time.
On July 18, 2000, Twin City Bancorp, Inc. agreed to merge with Citco
Community Bancshares, Inc. IF THE MERGER IS COMPLETED, YOU WILL RECEIVE A CASH
PAYMENT OF $17.15 FOR EACH SHARE OF TWIN CITY COMMON STOCK THAT YOU OWN. Upon
completion of the merger you will no longer own any stock or have any interest
in Twin City Bancorp, Inc., nor will you receive, as a result of the merger, any
stock of Citco Community Bancshares, Inc.
At the special meeting, you will be asked to approve and adopt the merger
agreement. A majority of the votes entitled to be cast at the special meeting
must vote for approval and adoption of the merger agreement for the merger to be
completed. If the merger agreement is approved, and all other conditions
described in the merger agreement have been met or waived, the merger is
expected to occur during the fourth quarter of 2000.
Your board of directors believes that the merger is in the best interests
of Twin City's shareholders and unanimously recommends that you vote FOR the
adoption of the merger agreement. Your board of directors has received the
opinion of Trident Securities that the consideration to be received by Twin
City's shareholders in the merger is fair from a financial point of view.
This proxy statement provides you with detailed information about the
proposed merger and includes, as Appendix A, a complete text of the merger
agreement. We urge you to read the enclosed materials carefully for a complete
description of the merger. Please complete, sign and return the enclosed proxy
card as promptly as possible. We look forward to seeing you at the special
meeting.
Sincerely,
Thad R. Bowers
President and Chief Executive Officer
<PAGE>
TWIN CITY BANCORP, INC.
310 STATE STREET
BRISTOL, TENNESSEE 37620
(423) 989-4400
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of shareholders of Twin City Bancorp, Inc. will be held
on __________________, 2000, at __:__ __.m., local time, at ___________________,
Bristol, Tennessee, for the following purposes.
1. To adopt the Agreement and Plan of Merger, dated July 18, 2000, by and
among Twin City Bancorp, Inc., Twin City Federal Savings Bank, Citco
Community Bancshares, Inc. and Citizens Bank.
2. To transact such other business as may properly come before the
special meeting including a proposal to adjourn or postpone the
special meeting.
The Board of Directors is not aware of any other business to come before
the special meeting.
Any action may be taken on this proposal at the special meeting or on any
date or dates to which the special meeting may be adjourned or postponed. You
can vote at the special meeting if you owned Twin City common stock at the close
of business on _____________, 2000.
As a shareholder of Twin City, you have the right to dissent from the
merger and demand payment of the fair value of your shares of Twin City common
stock under applicable provisions of Tennessee law. In order to perfect
dissenters' rights, you must give written demand for appraisal of your shares
before the merger is voted on at the special meeting and must not vote in favor
of the merger. A copy of the Tennessee statutory provisions regarding
dissenters' rights is included as Appendix D to the accompanying proxy statement
and a summary of these provisions can be found under "THE AGREEMENT AND THE
MERGER - Dissenters' Appraisal Rights."
In the event there are not sufficient votes to approve the proposal for the
adoption of the merger agreement at the time of the meeting, the meeting may be
adjourned in order to permit further solicitation by Twin City Bancorp, Inc.
Your attention is directed to the proxy statement accompanying this notice
for a more complete statement regarding the matters to be acted upon at the
special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
JOANNE STURGILL
ASSISTANT SECRETARY
Bristol, Tennessee
______________, 2000
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE TWIN CITY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE SPECIAL MEETING. PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY MAIL IT IN THE ENCLOSED
ENVELOPE. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE PROXY
STATEMENT AT ANY TIME BEFORE IT IS EXERCISED.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY OF TERMS...........................................................2
GLOSSARY ..................................................................4
SUMMARY ..................................................................5
The Companies..............................................................5
The Special Meeting........................................................5
Reasons for the Merger.....................................................6
The Merger and the Bank Merger.............................................6
The Stock Option Agreement.................................................6
What You Will Receive for Your Shares of Twin City Common Stock............7
Vote Required to Adopt the Agreement.......................................7
Recommendation to Twin City's Shareholders.................................7
Opinion of Twin City's Financial Advisor...................................7
Interests of Certain Persons in the Merger.................................7
Dissenters' Rights of Appraisal............................................8
Taxable Transaction to Twin City Shareholders..............................8
TWIN CITY BANCORP, INC. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA.....9
MARKET PRICE AND DIVIDEND DATA FOR TWIN CITY COMMON STOCK.................10
THE SPECIAL MEETING.......................................................11
Date, Place and Time......................................................11
Matters to be Considered..................................................11
Record Date; Voting Rights; Vote Required.................................11
Voting and Revocation of Proxies..........................................11
Solicitation of Proxies...................................................12
Important Information for Shareholders Whose Stock is Held in
Street Name............................................................12
Important Information for Participants in the Twin City ESOP..............13
THE AGREEMENT AND THE MERGER..............................................13
The Parties to the Agreement..............................................13
Description of the Agreement and the Merger...............................13
Page
----
Background of the Merger..................................................14
Reasons for the Merger and Recommendation of the Board of Directors.......15
Opinion of Twin City's Financial Advisor..................................16
Payment Procedures........................................................22
Closing...................................................................22
Conditions to Completion of the Merger....................................22
Restrictions on Operations................................................24
Other Acquisition Proposals...............................................27
Representations and Warranties............................................26
Regulatory Approvals......................................................27
Termination of the Agreement..............................................28
Amendment of the Agreement................................................29
Waiver of Performance of Obligations......................................29
Accounting Treatment......................................................30
Expenses..................................................................30
Tax Consequences to Shareholders..........................................30
Dissenters' Appraisal Rights..............................................31
Interests of Certain Persons in the Merger................................35
THE STOCK OPTION AGREEMENT................................................38
General...................................................................38
Effect of Option..........................................................38
Exercise of the Stock Option..............................................39
Repurchase Election.......................................................40
PRINCIPAL HOLDERS OF TWIN CITY COMMON STOCK...............................40
OTHER MATTERS.............................................................42
SHAREHOLDER PROPOSALS.....................................................42
Appendix A - Agreement and Plan of Merger..............................A-1
Appendix B - Stock Option Agreement....................................B-1
Appendix C - Fairness Opinion of Trident Securities....................C-1
Appendix D - Dissenters' Rights Statutes...............................D-1
<PAGE>
TWIN CITY BANCORP, INC.
310 STATE STREET
BRISTOL, TENNESSEE 37620
(423) 989-4400
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _________, 2000 AT _:__ _.M.
AT ____________, BRISTOL, TENNESSEE
Twin City Bancorp, Inc. (referred to as "Twin City" in this Proxy
Statement) is holding a special meeting of shareholders to vote on an Agreement
and Plan of Merger by and among Twin City, Twin City Federal Savings Bank, Citco
Community Bancshares, Inc. and Citizens Bank. If shareholders approve the
Agreement and the other conditions described below are met, Twin City will merge
with Citco and each shareholder of Twin City (other than shareholders who
dissent from the merger and comply with all applicable procedures) will receive
$17.15 in cash for each share of Twin City common stock that the shareholder
owns.
There were 1,121,388 shares of Twin City common stock outstanding and
entitled to vote as of the Record Date. Each share is entitled to one vote on
the approval of the Agreement. The merger cannot occur unless the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation and the Tennessee Department of Financial Institutions approve the
merger.
Twin City has granted to Citco an option to purchase up to 223,156 shares
of Twin City common stock at $15.50 per share in connection with the Agreement.
In addition, the directors of Twin City have agreed to vote all of their shares
of Twin City common stock in favor of the approval of the Agreement.
Twin City is furnishing this Proxy Statement to its shareholders on
approximately ____________, 2000. The Record Date to determine who may vote at
the meeting is ____________, 2000. Please see the "GLOSSARY" on page 4 for
definitions of capitalized and certain other terms used in this Proxy Statement.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE TO SIGNIFY
HOW YOU WANT TO VOTE YOUR SHARES
THE BOARD OF DIRECTORS OF TWIN CITY BANCORP, INC. UNANIMOUSLY RECOMMENDS THAT
YOU VOTE IN FAVOR OF THE AGREEMENT AND PLAN OF MERGER
<PAGE>
SUMMARY OF TERMS
This is a summary of the most material terms of the proposed merger.
o If the merger occurs, each shareholder of Twin City will receive
$17.15 in cash for each share of Twin City common stock owned.
See the discussion under the caption "THE AGREEMENT AND THE
MERGER - Description of the Agreement and the Merger" beginning
on page 13 for more information.
o The merger cannot occur unless Twin City's shareholders approve
the merger by a majority of the total number of shares
outstanding and each of the Federal Reserve Board, the FDIC and
the Tennessee Department of Financial Institutions approves the
merger. See the discussions under the caption "THE SPECIAL
MEETING - Record Date; Voting Rights; Vote Required" beginning on
page 11 and "THE AGREEMENT AND THE MERGER - Regulatory Approvals"
beginning on page 27 for more information.
o Shareholders will generally recognize a taxable gain or loss
measured by the difference between the cash received in the
merger and their tax basis in the shares of Twin City common
stock. See the discussion under the caption "THE AGREEMENT AND
THE MERGER - Tax Consequences to Shareholders" beginning on page
30 for more information.
o Twin City's Board of Directors has approved the merger and has
unanimously recommended that Twin City shareholders vote in favor
of it. See the discussion under the caption "THE AGREEMENT AND
THE MERGER - Reasons for the Merger and Recommendations of the
Board of Directors" beginning on page 15 for more information.
o Trident has issued a fairness opinion dated July 18, 2000 and
updated on _______, 2000 that, as of such dates, the amount which
will be paid to Twin City shareholders in the merger is fair from
a financial point of view. See the discussion under the heading
"THE AGREEMENT AND THE MERGER -- Opinion of Twin City's Financial
Advisor" beginning on page 16 for more information.
o Twin City has given Citco an option to purchase 223,156 shares of
Twin City common stock for $15.50 per share. See the discussion
under the caption "THE STOCK OPTION AGREEMENT" beginning on page
38 for more information.
o Twin City has agreed that it will not seek or encourage a
competing transaction to acquire Twin City or Twin City Federal
except in very limited circumstances in which an unsolicited
offer is made. See the discussion under the caption "THE
AGREEMENT AND THE MERGER - Other Acquisition Proposals" beginning
on page 26 for more information.
2
<PAGE>
o Twin City's directors have agreed to vote their shares in favor
of the merger and the Agreement and against any other acquisition
proposal. See page 38 under the caption "THE AGREEMENT AND THE
MERGER - Interests of Certain Persons in the Merger - Support
Agreements" for more information.
o The directors and executive officers of Twin City and Twin City
Federal who have stock options under the 1995 Stock Option and
Incentive Plan will receive cash payments for their options based
upon the difference between $17.15 and the exercise price of
their options. They will also receive continued directors and
officers liability insurance and indemnification from Citco.
Certain executive officers whose employment will terminate as a
result of the merger will also receive severance and other
payments. See the discussion under the caption "THE AGREEMENT AND
THE MERGER - Interests of Certain Persons in the Merger"
beginning on page 35 for more information.
o Shareholders who dissent from the merger and follow statutory
procedures have the right to demand the fair value of the shares
if the merger is consummated, provided that they satisfy the
requirements under Tennessee law. See the discussion under the
caption "THE AGREEMENT AND THE MERGER - Dissenters' Appraisal
Rights" beginning on page 31 for more information.
o Twin City and Citco expect that the merger will be completed in
the fourth quarter of 2000.
3
<PAGE>
GLOSSARY
The following terms are used in this Proxy Statement.
"Agreement" means the Agreement and Plan of Merger, dated July 18, 2000, by
and among Twin City, Twin City Federal, Citco and Citizens Bank. A copy of the
Agreement is attached as Appendix A to this Proxy Statement.
"Bank Merger" means the merger of Twin City Federal into Citizens Bank
which will occur simultaneously with the Merger.
"Board of Directors" or "Board" means the board of directors of Twin City
Bancorp, Inc.
"Citco" means Citco Community Bancshares, Inc.
"Citizens Bank" means Citizens Bank, a wholly-owned subsidiary of Citco.
"Common Stock" means the common stock of Twin City, all of which will be
acquired by Citco in the Merger.
"ESOP" means the Twin City Bancorp, Inc. Employee Stock Ownership Plan, as
amended.
"Merger" means the transaction in which Twin City will merge into Citco and
each shareholder of Twin City will be entitled to receive $17.15 in cash for
each share of Twin City common stock owned by the shareholder.
"MRP" means the Twin City Management Recognition Plan, as amended.
"Record Date" means ____________, 2000, the date which Twin City will use
to determine which Twin City shareholders of record are entitled to vote at the
special meeting.
"Special Meeting" means the special meeting of Twin City's shareholders to
be on ___________, 2000 and any adjournments or postponements of that special
meeting at which Twin City will present the Agreement to its shareholders for
approval.
"Stock Option Agreement" means the Stock Option Agreement, dated July 19,
2000, between Twin City and Citco under which Citco has the right to acquire
223,156 shares of Twin City common stock for $15.50 per share in certain
circumstances. A copy of the Stock Option Agreement is attached as Appendix B to
this Proxy Statement.
"Stock Option Plan" means the Twin City Bancorp, Inc. 1995 Stock Option and
Incentive Plan, as amended.
"Trident" means Trident Securities, a division of McDonald Investments,
Inc., the financial advisor to Twin City.
"Twin City" means Twin City Bancorp, Inc.
"Twin City Federal" means Twin City Federal Savings Bank, a wholly-owned
subsidiary of Twin City.
4
<PAGE>
SUMMARY
This brief summary highlights selected information contained in this proxy
statement. It does not contain all of the information that is important to you.
To fully understand the merger, Twin City urges you to carefully read the entire
proxy statement including the Agreement. Twin City has attached the Agreement to
this proxy statement as Appendix A. Twin City encourages you to read the
Agreement because it is the legal document that governs the merger of Twin City
and Citco.
THE COMPANIES
CITCO COMMUNITY BANCSHARES, INC.
CITIZENS BANK
300 BROAD STREET
ELIZABETHTON, TENNESSEE 37643
(423) 543-2265
Citco Community Bancshares, Inc. is the holding company for Citizens Bank,
a Tennessee commercial bank. Citco and Citizens Bank are both headquartered in
Elizabethton, Tennessee. Citizens Bank was founded in 1934 in Carter County and
currently operates eight offices in Elizabethton, Kingsport and Johnson City,
Tennessee.
At June 30, 2000, Citco Community Bancshares, Inc., had consolidated assets
of $406 million, net loans of $303 million, deposits of $279 million and
shareholders' equity of $37.8 million.
TWIN CITY BANCORP, INC.
TWIN CITY FEDERAL SAVINGS BANK
310 STATE AT EDGEMONT
BRISTOL, TENNESSEE 37620
(423) 989-4400
Twin City Bancorp, Inc. is a Tennessee corporation and was incorporated in
1994 for the purpose of becoming the holding company for Twin City Federal
Savings Bank upon its conversion to stock form.
Twin City Federal was organized in 1958. At June 30, 2000, Twin City had
consolidated assets of $124 million, net loans of $93 million, deposits of $96
million and shareholders' equity of $14 million.
THE SPECIAL MEETING
A special meeting will be held on ______________, 2000, at
______________________________________, Bristol, Tennessee, to vote on the
proposal to approve the merger agreement. You can vote at the special meeting if
you owned Twin City common stock on the Record Date.
5
<PAGE>
REASONS FOR THE MERGER
The Board of Directors of Twin City reviewed a number of items in deciding
to enter into the Agreement with Citco including the following:
o the strategic options available to Twin City;
o that the merger price exceeded the estimated value that could be
realized by Twin City shareholders over the intermediate term,
given the rapidly changing nature of banking, competition and
delivery systems;
o the premium to recent market prices and book value represented by
the $17.15 per share to be received by the shareholders of Twin
City;
o the historically limited liquidity of Twin City's common stock;
o Citco's community orientation and expanded services that would be
available to existing customers;
o the return to shareholders who purchased stock in Twin City's
initial public offering; and
o the opinion of Twin City's financial advisor, Trident, that the
transaction is fair to Twin City's shareholders from a financial
point of view.
Generally, the Board of Directors concluded that in the long term Twin City
could not produce shareholder value in excess of the merger price, and that the
merger price was fair, from a financial point of view, to Twin City's
shareholders.
THE MERGER AND THE BANK MERGER
If the Agreement is adopted by Twin City's shareholders and the parties
satisfy the other conditions of the Agreement, Twin City will be merged with and
into Citco. As a result of this merger, each share of Twin City common stock
(other than shares the owners of which have perfected dissenters' rights), will
be converted into the right to receive $17.15 in cash.
Simultaneously, Twin City Federal will be merged with and into Citizens
Bank and will thereafter operate as a separate division of Citizens Bank. All of
the offices of Twin City Federal will become offices of Citizens Bank
immediately following the effective date of the merger. If the Agreement is not
adopted, Twin City and Citizens Bank will continue as separate entities.
THE STOCK OPTION AGREEMENT
To increase the likelihood that the merger will be completed, and to
discourage other persons who may be interested in acquiring Twin City, Citco
required Twin City to grant it a stock option. This option allows Citco to
purchase up to 223,156 shares of Twin City common stock, which represents 19.9%
of the outstanding shares of Twin City common stock before giving effect to the
exercise of the entire option. The exercise price of the option is $15.50 per
share, subject to adjustment under specified circumstances. Twin City may be
required to repurchase the option or shares acquired upon exercise of the
option. A copy of the Stock Option Agreement is attached to this document as
Appendix B.
6
<PAGE>
WHAT YOU WILL RECEIVE FOR YOUR SHARES OF TWIN CITY COMMON STOCK
As a Twin City shareholder, each of your shares of Twin City's common stock
will automatically become exchangeable for $17.15 in cash. You will have to
surrender your Twin City stock certificate(s) to receive this cash payment.
Citco will appoint the Exchange Agent who will send you written instructions for
surrendering your certificates after the merger is completed. For more
information on how this exchange procedure works, see "THE AGREEMENT AND THE
MERGER - Payment Procedures" on pages ___ and ___ of this proxy statement.
Twin City's common stock is quoted on Nasdaq SmallCap MarketSM under the
symbol "TWIN." On July 18, 2000, which is the day the last trade occurred before
the merger was announced, Twin City common stock was sold at $16.6875 per share.
VOTE REQUIRED TO ADOPT THE AGREEMENT
The Agreement will be adopted if the holders of at least a majority of the
outstanding shares of Twin City common stock vote for it. Directors and
executive officers of Twin City and their affiliates beneficially owned an
aggregate of 240,444, or approximately 21.44%, of the shares of Twin City common
stock outstanding on the Record Date. A failure to vote, either by not returning
the enclosed proxy or by checking the "Abstain" box, will have the same effect
as a vote against the Agreement. Each of the directors of Twin City has executed
an agreement with Citco pursuant to which each director agreed to vote his or
her shares FOR the Agreement.
RECOMMENDATION TO TWIN CITY'S SHAREHOLDERS
The Board of Directors of Twin City believes that the merger is fair to you
and in your best interests and unanimously recommends that you vote "FOR" the
adoption of the Agreement. For a discussion of the circumstances surrounding the
merger and the factors considered by Twin City's Board of Directors in approving
the Agreement.
OPINION OF TWIN CITY'S FINANCIAL ADVISOR
Trident has delivered its written opinion to the Twin City Board of
Directors, dated as of July 18, 2000 and confirmed as of the date of this proxy
statement, that the consideration to be received by the shareholders of Twin
City Bancorp, Inc. in the merger is fair from a financial point of view. Twin
City has attached this opinion as Appendix C to this proxy statement. You should
read it carefully for a description of the procedures followed, matters
considered and limitations on the reviews undertaken by Trident in providing its
opinion.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some of Twin City's directors and officers have interests in the merger
that are different from, or are in addition to their interests as shareholders
in Twin City. The Board of Directors knew about these additional interests and
considered them when they approved the agreement and the merger. These include:
7
<PAGE>
o the cancellation of outstanding stock options in exchange
for a cash payment equal to the difference between $17.15 per
share and the option exercise price;
o payments to certain of Twin City's executive officers under
their employment, severance and other agreements; and
o provisions in the Agreement relating to protection against
claims.
DISSENTERS' RIGHTS OF APPRAISAL
Shareholders have dissenters' rights under Tennessee law. If you want to
exercise dissenters' rights, you must carefully follow the procedures described
in "THE AGREEMENT AND THE MERGER - Dissenters' Appraisal Rights."
TAXABLE TRANSACTION TO TWIN CITY SHAREHOLDERS
For United States federal income tax purposes your exchange of shares of
Twin City common stock for cash generally will cause you to recognize a gain or
loss measured by the difference between the cash you receive in the merger and
your tax basis in the shares of Twin City common stock. See "THE AGREEMENT AND
THE MERGER - Tax Consequences to Shareholders."
8
<PAGE>
TWIN CITY BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
These tables show historical consolidated financial data for Twin City. The
annual historical financial condition and operating data are derived from Twin
City's consolidated financial statements audited by Crisp Hughes Evans LLP,
independent accountants. Financial amounts as of and for the six months ended
June 30, 2000 and 1999 are unaudited; however, Twin City believes such amounts
reflect all normal recurring adjustments necessary for a fair presentation of
the results of operations and financial position for those periods. Certain
financial ratios for the six months ended June 30, 1999 and 2000 have been
annualized. You should not assume that the six-month results indicate results
for any future period.
<TABLE>
<CAPTION>
SIX MONTHS
AT OR FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------------ --------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- ------- -------- ------- ------ ------
SELECTED FINANCIAL CONDITION DATA: (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Total amount of:
<S> <C> <C> <C> <C> <C> <C> <C>
Assets................................ $ 102,551 $ 105,041 $ 108,687 $ 113,245 $ 116,011 $ 114,868 $123,911
Loans receivable, net................. 73,010 78,207 77,680 83,215 87,374 88,697 93,484
Cash and investment securities........ 14,501 11,277 10,604 11,853 5,279 1,978 1,144
Mortgage-backed securities............ 11,464 11,649 15,248 12,429 17,075 15,913 18,130
Deposits.............................. 83,211 85,689 92,320 89,112 92,165 90,042 96,099
FHLB advances......................... 4,000 5,100 1,000 8,500 8,850 8,500 11,550
Stockholders' equity.................. 14,258 13,385 14,011 14,152 13,527 13,753 13,947
Number of:
Real estate loans outstanding......... 2,329 2,314 2,282 2,259 2,573 2,224 2,229
Deposit accounts...................... 8,716 8,939 9,482 9,623 9,817 9,673 10,332
Offices open.......................... 3 3 3 3 3 3 4
SELECTED OPERATIONS DATA:
Interest income......................... $ 7,677 $ 8,084 $ 8,264 $ 8,611 $ 8,510 $ 4,185 4,343
Interest expense........................ 3,905 4,063 4,261 4,303 4,269 2,044 2,361
Net interest income..................... 3,772 4,021 4,003 4,308 4,241 2,141 1,982
Provision for loan losses............... 16 422 165 232 85 80 1
Noninterest income...................... 864 740 739 906 870 457 351
Noninterest expense..................... 2,906 3,303 2,794 2,885 3,052 1,518 1,489
Income before taxes..................... 1,714 1,036 1,783 2,097 1,974 1,000 843
Income tax expense...................... 651 390 705 833 790 398 339
--------- --------- --------- --------- --------- --------- ---------
Net income.............................. $ 1,063 $ 646 $ 1,078 $ 1,264 $ 1,184 $ 602 $ 504
========= ========= ========= ========= ========= ========= =========
Basic net income per share.............. $ 0.85 $ 0.53 $ 0.90 $ 1.08 $ 1.08 $ 0.54 $0.47
====== ======= ====== ====== ======= ======= =====
Diluted net income per share............ $ 0.84 $ 0.52 $ 0.86 $ 1.04 $ 1.04 $ 0.52 $0.46
====== ======= ====== ====== ======= ======= =====
Dividends per share..................... $ 0.78 $ 0.52 $ 0.43 $ 0.40 $ 0.45 $ 0.25 $0.20
====== ======= ====== ====== ======= ======= =====
PERFORMANCE RATIOS:
Return on average assets.............. 1.06% 0.62% 1.01% 1.14% 1.02% 1.06% 0.83%
Return on average equity.............. 7.67 4.69 7.85 9.00 8.61 8.66 7.38
Noninterest expense to average total
assets .............................. 2.89 3.18 2.61 2.61 2.62 2.66 2.47
Interest rate spread.................. 3.39 3.53 3.48 3.59 3.49 3.50 3.20
Net interest margin................... 3.93 4.05 3.95 4.08 3.86 3.93 3.52
Dividend payout ratio................. 92.86 100.00 50.00 38.46 41.81 48.08 43.48
ASSET QUALITY RATIOS:
Nonperforming loans to total
loans (1) ......................... 0.07 0.16 0.02 0.10 0.23 0.03 0.04
Allowance for loan losses to
nonperforming loans (1)............ 348.08 261.06 961.54 230.95 102.87 763.00 598.00
Nonperforming assets to total
assets (2) ........................ 0.41 0.43 0.09 0.21 0.18 0.03 0.11
Allowance for losses to
nonperforming assets (2)........... 48.92 100.62 121.36 83.26 102.87 763.00 154.96
Net charge-offs to average loans
outstanding......................... 0.09 0.36 0.48 0.20 0.07 0.03 0.03
CAPITAL RATIOS:
Average equity to average assets..... 13.77 13.25 12.85 12.70 11.79 12.18 11.32
Tier 1 capital to adjusted total
assets (3)......................... 11.97 12.07 11.33 11.38 11.30 11.40 11.08
Tier 1 capital to risk-weighted
assets (3)......................... 21.80 21.26 20.40 17.65 14.10 17.90 17.44
Total capital to risk-weighted
assets (3)......................... 22.07 21.51 20.61 17.91 14.30 18.20 17.69
<FN>
_________
(1) Nonperforming loans represents accruing loans which are contractually past
due 90 days or more.
(2) Nonperforming assets represents property acquired by the Bank through
foreclosure or repossession or accounted for as an in-substance foreclosure
at its net realizable value plus nonperforming loans.
(3) Bank only.
</FN>
</TABLE>
9
<PAGE>
MARKET PRICE AND DIVIDEND DATA FOR TWIN CITY COMMON STOCK
Twin City's common stock is quoted on the Nasdaq SmallCap MarketSM under
the symbol "TWIN" The following table shows the dividends and the high and low
sale prices per share of Twin City common stock on the Nasdaq SmallCap MarketSM
for the periods indicated:
<TABLE>
<CAPTION>
CASH
DIVIDENDS
QUARTER ENDED DECLARED HIGH LOW
------------ ----------- ------- --------
<S> <C> <C> <C>
June 30, 2000 $ 0.10 $ 16 $ 9 1/4
March 31, 2000 0.10 16 5/8 8
December 31, 1999 0.10 17 5/16 15 5/8
September 30, 1999 0.10 15 11/16 13 3/16
June 30, 1999 0.10 13 15/16 11 7/8
March 31, 1999 0.15 14 11/16 13 9/16
December 31, 1998 0.10 15 12 7/8
September 30, 1998 0.10 13 3/4 12 3/4
June 30, 1998 0.10 14 3/4 13 3/4
March 31, 1998 0.10 15 3/4 14 3/8
</TABLE>
On July 18, 2000, the last trading day prior to the joint announcement by
Citco and Twin City that they had entered into the Agreement, the closing per
share sales price of Twin City common stock was $16.6875. On _________, 2000,
which is the last practicable date prior to the printing of the proxy statement,
the closing price for Twin City common stock was $______ per share.
As of ___________, 2000, there were approximately ____ holders of record of
Twin City common stock. This number does not reflect the number of persons or
entities who may hold their stock in nominee or "street" name through brokerage
firms.
10
<PAGE>
THE SPECIAL MEETING
DATE, PLACE AND TIME
The special meeting is scheduled to be held at _:__ _.m., Eastern Time, on
____________, 2000, at _________________________________, Bristol, Tennessee.
MATTERS TO BE CONSIDERED
At the special meeting, you will be asked to approve a proposal to
o a proposal to adopt the Agreement and Plan of Merger dated July
18, 2000 by and among Twin City Bancorp, Inc., Twin City Federal
Savings Bank, Citco Community Bancshares, Inc., and Citizens
Bank; and
o such other business that may properly come before the special
meeting, including a proposal to adjourn or postpone the special
meeting.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED
The Twin City Board of Directors has fixed the close of business on
____________, 2000 as the Record Date for the determination of shareholders of
Twin City entitled to receive notice of and to vote at the special meeting. On
the Record Date, there were 1,121,388 shares of Twin City common stock
outstanding. Each holder of Twin City common stock is entitled to one vote per
share held of record on the Record Date.
The presence in person or by proxy at the special meeting of the holders of
a majority of the outstanding shares of Twin City common stock is required for a
quorum. Under the Tennessee Business Corporation Act, adoption of the Agreement
will require the affirmative vote of the holders of a majority of the
outstanding shares of Twin City common stock. Accordingly, an abstention, a
failure to vote, or a broker non-vote, has the same effect as a vote against the
Agreement. Directors and executive officers of Twin City and their affiliates
beneficially owned on the Record Date an aggregate of 240,444, or approximately
21.44%, of the outstanding shares of Twin City common stock (excluding shares
which they had the right to acquire on the exercise of options). Twin City's
directors and certain executive officers have entered into agreements to vote
all shares of Twin City common stock held by them FOR the adoption of the
Agreement.
VOTING AND REVOCATION OF PROXIES
Shares of Twin City common stock represented by a proxy properly signed and
received at or prior to the special meeting, unless subsequently revoked, will
be voted at the special meeting in accordance with the instructions on the
proxy. If a proxy is signed and returned without indicating any voting
instructions, shares of Twin City common stock represented by the proxy will be
voted "FOR" adoption of the Agreement.
11
<PAGE>
If you want to revoke the proxy you submit in response to this proxy
solicitation, you must: (i) sign and deliver a written notice with a later date
to the Assistant Secretary of Twin City at or before the meeting stating that
you want to revoke the proxy, (ii) sign and deliver to the Assistant Secretary
of Twin City at or before the meeting a later-dated proxy card relating to the
same shares, or (iii) attend the meeting and vote in person. Revoking a proxy is
effective only if it occurs before the polls close at the meeting. Attending the
meeting does not automatically revoke a proxy. You must deliver written notice
revoking a proxy to Joanne Sturgill, Assistant Secretary, Twin City Bancorp,
Inc., 310 State Street, Bristol, Tennessee 37620; telephone number (423)
989-4400.
A proxy may indicate that all or a portion of the shares represented by the
proxy are not being voted with respect to a specific proposal. This could occur,
for example, when a broker is not permitted to vote shares held in street name
on certain proposals in the absence of instructions from the beneficial owner.
Shares that are not voted with respect to a specific proposal will be considered
as not present for such proposal, even though such shares will be considered
present for purposes of determining a quorum and voting on other proposals.
Abstentions on a specific proposal will be considered as present for purposes of
quorum but will not be counted as voting in favor of such proposal.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees and
agents of Twin City may solicit proxies from Twin City's shareholders, either
personally or by telephone or other form of communication. None of these persons
who solicit proxies will be specifically compensated for such services.
Nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners. Twin City will reimburse such
nominees, fiduciaries and other custodians for the reasonable out-of-pocket
expenses incurred by them in connection with this process. Twin City will bear
its own expenses in connection with the solicitation of its proxies for the
special meeting. [Twin City has retained _________________ to assist in
soliciting proxies for the special meeting and to send proxy materials to
brokerage houses and other custodians, nominees and fiduciaries for transmittal
to their principals, at a cost of $________, including out of pocket expenses.]
IMPORTANT INFORMATION FOR SHAREHOLDERS WHOSE STOCK IS HELD IN STREET NAME
If you hold your stock in street name, which means that your stock is held
for you in a brokerage account and is not registered on Twin City's stock
records in your own name, your broker will not vote your shares on the Agreement
unless you instruct your broker how you want your votes to be cast. Please tell
your broker as soon as possible how to vote your shares to make sure that your
broker has enough time to vote your shares before the polls close at the
meeting. If your broker does not vote your shares, that will have the same
effect as a vote against the Agreement. If your stock is held in street name,
you do not have the direct right to vote your shares or to revoke a proxy for
your shares unless the record holder of your stock gives you that right in
writing.
12
<PAGE>
IMPORTANT INFORMATION FOR PARTICIPANTS IN THE TWIN CITY ESOP
If you participate in the Twin City Bancorp, Inc. Employee Stock Ownership
Plan, the proxy card represents a voting instruction to the trustee of the ESOP
as to the number of shares in your plan account. Each participant in the ESOP
may direct the trustee as to the manner in which shares of common stock
allocated to the participant's plan account are to be voted. Unallocated shares
of common stock held by the Employee Stock Ownership Plan and allocated shares
for which no voting instructions are received will be voted by the trustee in
the same proportion as shares for which the trustee has received voting
instructions, subject to the trustee's exercise of his fiduciary obligations.
THE AGREEMENT AND THE MERGER
The following discussion is qualified by reference to the Agreement which
is attached as Appendix A to this proxy statement and incorporated herein by
reference. You are urged to read the Agreement carefully in its entirety. All
information contained in this proxy statement with respect to Citco Community
Bancshares, Inc. and Citizens Bank has been supplied by Citco for inclusion
herein and has not been independently verified by Twin City.
THE PARTIES TO THE AGREEMENT
TWIN CITY AND TWIN CITY FEDERAL. Twin City is the holding company for Twin
City Federal, a federal savings bank with four offices in Bristol, Tennessee and
Bristol, Virginia. The principal executive offices of Twin City and Twin City
Federal are located at 310 State Street, Bristol, Tennessee 37620.
CITCO AND CITIZENS BANK. Citco is the holding company for Citizens Bank, a
Tennessee chartered commercial bank with eight offices in Elizabethton,
Kingsport and Johnson City, Tennessee. Citizens Bank was founded in Carter
County in 1934 and entered Kingsport by acquiring Executive Park National Bank
in 1992 and opened its first office in Johnson City in 1993. Citizens Bank
acquired two additional offices in Kingsport from First Union National Bank in
1995. Citco also owns Small Business Resources, Inc. which deals in loans
guaranteed by the SBA and Farm Home Administration. The address and telephone
number of the principal executive offices of Citco and Citizens Bank are 300
Broad Street, Elizabethton, Tennessee 37643.
DESCRIPTION OF THE AGREEMENT AND THE MERGER
Twin City, Twin City Federal, Citco and Citizens Bank entered into the
Agreement on July 18, 2000. The Agreement provides that if the conditions
described below are met, Twin City will merge into Citco. As a result of this
merger, each shareholder of Twin City (other than those that choose to exercise
dissenters' rights) will receive $17.15 in cash for each share of Twin City
common stock owned. Holders of options to purchase shares of Twin City common
stock will receive a cash payment equal to the excess of $17.15 over the
exercise price of such option multiplied by the number of shares for which the
option is exercisable. Twin City shareholders will cease to be shareholders of
Twin City and will not become shareholders of Citco. Simultaneously with the
merger, Twin City Federal will merge with and into Citizens Bank and thereafter
operate as a division of Citizens Bank.
13
<PAGE>
Twin City has also granted Citco an option to purchase 223,156 shares of
Twin City common stock at a price of $15.50 per share. The directors and certain
executive officers of Twin City have agreed to vote their shares of stock in
favor of the Agreement.
BACKGROUND OF THE MERGER
In late 1999, Twin City's board of directors asked Trident to help the
board analyze the strategic alternatives available to Twin City. The board of
directors had been concerned about Twin City's ability to remain competitive in
an industry which required increasing investments in technology and in which
profit margins were under continual pressure in its main lines of business. The
board of directors was also aware of the trend towards consolidation in the
financial services industry and believed that it was appropriate to become
better informed regarding the potential value of Twin City in a business
combination.
On November 15, 1999, representatives of Trident met with the board of
directors to present their firm's analysis of strategic alternatives available
to Twin City. The analysis discussed the current operating environment for
financial institutions and Twin City's specific competitive situation. The
analysis also assessed Twin City's prospects under its current business plan and
under various alternative scenarios. The analysis surveyed recent acquisition
activity in the financial services industry and reviewed the pricing data from
recent acquisitions of financial institutions with similar characteristics to
Twin City. The Trident analysis included a discussion of companies which Trident
believed potentially would be interested in discussing a transaction in the
event the board of directors desired to further inform itself regarding the
potential value of Twin City in a business combination. After extensive
discussion of its alternatives, Twin City's board of directors authorized
Trident to prepare an information memorandum containing financial and other
information about Twin City which could be used to canvass potentially
interested parties.
On February 1, 2000, when the information memorandum had been completed,
representatives of Trident again met with the board of directors to discuss the
results of their due diligence on Twin City and their updated analysis of Twin
City's potential value in a business combination. Trident also presented a more
detailed analysis of the companies that it believed would be potentially
interested in a business combination. Twin City's special counsel was also
present at the meeting to advise the board regarding their fiduciary duties.
After extensive discussion, the board of directors authorized Trident to contact
the potentially interested parties on a confidential basis regarding their
interest in a potential business combination with Twin City and the valuation
they would place on Twin City in such a transaction.
Trident thereafter contacted the 15 financial institutions which it
believed were most likely to be interested in a business combination with Twin
City. Of these, ten institutions entered into confidentiality agreements and
received the information memorandum. By letter dated March 10, 2000, Citco
submitted a written indication of interest in a transaction in which Twin City
would be valued at $17.10 per share in cash. Citco's valuation was contingent on
further due diligence among other things. Trident continued discussions with
Citco and the other potentially interested parties and Citco was the only party
to formally submit an indication of interest. Citco subsequently raised its
valuation to $17.15 per share.
14
<PAGE>
A representative of Trident met with the board of directors on March 29,
2000 to review the Citco proposal and developments in the market. The Trident
representative noted that the market for bank stocks had continued to
deteriorate during 2000 with the stocks of banks which had a history of making
acquisitions suffering particularly. After extensive discussion of the proposed
terms of Citco's proposal and Twin City's prospects for future growth as an
independent institution, the board of directors determined to continue with the
process and agreed to allow Citco to perform due diligence.
After Citco completed its due diligence, the parties proceeded to negotiate
a final agreement. The negotiations had progressed sufficiently by early July
that the board of directors scheduled a meeting with representatives from
Trident and Twin City's special counsel to discuss the agreement for the
afternoon of July 11, 2000. Representatives of Trident and Twin City's special
counsel reviewed in detail the most current draft of the agreement and an
outline prepared by Citco's counsel of the outstanding issues and their proposed
resolution. The representative of Trident updated their financial analysis and
stated that his firm was prepared to present an opinion that the consideration
to be received by shareholders was fair from a financial point of view. After
extensive discussion, the board of directors authorized the president to sign
the agreement, subject to receipt of a final agreement reflecting the terms
discussed at the meeting.
When the the agreement was received the next day, however, certain
arrangements with respect to Twin City's senior officers required further
negotiation and the agreement was not signed. The board of directors met again
on July 13, 2000 and rescinded its prior authorization and directed the
president to reconvene the board when all issues had been satisfactorily
resolved.
Negotiations continued over the next several days and on July 18, 2000 a
final agreement acceptable to all parties was circulated. Accordingly, the board
of directors reconvened that day with representatives of Trident and Twin City's
special counsel participating telephonically. Twin City's special counsel
reviewed the final changes with the Board. The representative of Trident
delivered his firm's opinion that terms of the merger were fair to shareholders
from a financial point of view. After extensive discussion, the board of
directors approved the agreement which was signed that day.
REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARD OF DIRECTORS
Twin City's board of directors believes that the merger is in the best
interest of shareholders. The board of directors considered a number of factors
in deciding to approve and recommend the terms of the merger to shareholders,
including:
o the strategic options available to Twin City;
o that the merger price exceeded the estimated value that could be
realized by Twin City shareholders over the intermediate term,
given the rapidly changing nature of banking, competition and
delivery systems;
o the premium to recent market prices and book value represented by
the $17.15 per share to be received by the shareholders of Twin
City;
15
<PAGE>
o the historically limited liquidity of Twin City's common stock;
o Citco's community orientation and expanded services that would be
available to existing customers;
o the return to shareholders who purchased stock in Twin City's
initial public offering; and
o the opinion of Twin City's financial advisor, Trident, that the
transaction is fair to Twin City's shareholders from a financial
point of view.
The foregoing discussion of the information and factors considered by Twin
City's board of directors is not intended to be exhaustive. Twin City's board of
directors did not assign any relative or specific weights to the foregoing
factors, and individual directors may have given different weights to different
factors.
Generally, the board of directors concluded that in the long term Twin City
could not produce shareholder value in excess of the merger price, and that the
merger price was fair, from a financial point of view, to Twin City's
shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS APPROVE THE AGREEMENT AND THE MERGER.
OPINION OF TWIN CITY'S FINANCIAL ADVISOR
Twin City retained Trident to act as its financial advisor in connection
with a possible merger and related matters. As part of its engagement, Trident
agreed, if requested by Twin City, to render an opinion with respect to the
fairness, from a financial point of view, to the holders of Twin City common
stock, of the merger consideration as set forth in the agreement. Trident is a
nationally recognized specialist for the financial services industry, in
general, and for thrifts in particular. Trident is regularly engaged in
evaluations of similar businesses and in advising institutions with regard to
mergers and acquisitions, as well as raising debt and equity capital for such
institutions. Twin City selected Trident as its financial advisor based upon
Trident's qualifications, expertise and reputation in such capacity.
Trident delivered a written opinion dated July 18, 2000 that the merger
consideration was fair to Twin City shareholders, from a financial point of
view, as of the date of such opinion. Trident updated its July 18, 2000 opinion
as of the date of this proxy statement. No limitations were imposed by Twin City
on Trident with respect to the investigations made or the procedures followed in
rendering its opinion.
THE FULL TEXT OF TRIDENT'S WRITTEN OPINION TO THE TWIN CITY BOARD, DATED AS
OF THE DATE OF THIS PROXY STATEMENT, WHICH SETS FORTH THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND EXTENT OF REVIEW BY TRIDENT, IS ATTACHED AS APPENDIX C
AND IS INCORPORATED HEREIN BY REFERENCE. IT SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY IN CONJUNCTION WITH THIS PROXY STATEMENT. THE FOLLOWING SUMMARY OF
TRIDENT'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE OPINION. TRIDENT'S OPINION IS ADDRESSED TO THE TWIN CITY BOARD AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF TWIN CITY AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE TWIN CITY SPECIAL MEETING DESCRIBED IN THIS
DOCUMENT.
16
<PAGE>
Trident, in connection with rendering its opinion:
o reviewed Twin City's Annual Reports to Shareholders and Annual
Reports on Form 10-K for each of the three years in the period
ended December 31, 1999, including the audited financial
statements contained therein; and Twin City's Quarterly Report on
Form 10-Q for the three month period ended March 31, 2000;
o reviewed certain other public and non-public information,
primarily financial in nature, relating to the respective
businesses, earnings, assets and prospects of Twin City and Citco
provided to Trident or publicly available;
o participated in meetings and telephone conferences with members
of senior management of Twin City and Citco concerning the
financial condition, business, assets, financial forecasts and
prospects of the company, as well as other matters Trident
believed relevant to its inquiry;
o reviewed certain stock market information for Twin City common
stock and compared it with similar information for certain
companies, the securities of which are publicly traded;
o compared the results of operations and financial condition of
Twin City and Citco with that of certain companies which Trident
deemed to be relevant for purposes of its opinion;
o reviewed the financial terms, to the extent publicly available,
of certain acquisition transactions which Trident deemed to be
relevant for purposes of its opinion;
o reviewed the agreement dated July 18, 2000 and its schedules and
exhibits and certain related documents; and
o performed such other reviews and analyses as Trident deemed
appropriate.
The oral and written opinions provided by Trident to Twin City were
necessarily based upon economic, monetary, financial market and other relevant
conditions as of the dates thereof.
In connection with its review and arriving at its opinion, Trident relied
upon the accuracy and completeness of the financial information and other
pertinent information provided by Twin City and Citco to Trident for purposes of
rendering its opinion. Trident did not assume any obligation to independently
verify any of the provided information as being complete and accurate in all
material respects. With regard to the financial forecasts established and
developed for Twin City and Citco with the input of their respective
managements, as well as projections of cost savings and operating synergies,
Trident assumed that this information reflects the best available estimates and
judgments of Twin City and Citco as to the future performance of the separate
and combined entities and that the projections provided a reasonable basis upon
which Trident could formulate its opinion. Neither Twin City nor Citco publicly
discloses such internal
17
<PAGE>
management projections of the type utilized by Trident in connection with
Trident's role as financial advisor to Twin City. Therefore, such projections
cannot be assumed to have been prepared with a view towards public disclosure.
The projections were based upon numerous variables and assumptions that are
inherently uncertain, including, among others, factors relative to the general
economic and competitive conditions facing Twin City and Citco. Accordingly,
actual results could vary significantly from those set forth in the respective
projections.
Trident does not claim to be an expert in the evaluation of loan portfolios
or the allowance for loan losses with respect thereto and therefore assumes that
such allowances for Twin City and Citco are adequate to cover such losses. In
addition, Trident does not assume responsibility for the review of individual
credit files and did not make an independent evaluation, appraisal or physical
inspection of the assets or individual properties of Twin City or Citco, nor was
Trident provided with such appraisals. Furthermore, Trident assumes that the
merger will be consummated in accordance with the terms set forth in the
agreement, without any waiver of any material terms or conditions by Twin City,
and that obtaining the necessary regulatory approvals for the merger will not
have an adverse effect on either separate institution or the combined entity.
Moreover, in each analysis that involves per share data for Twin City, Trident
adjusted the data to reflect full dilution, i.e., the effect of the exercise of
all outstanding stock options. In particular, Trident assumes that the merger
will be recorded as a "purchase" in accordance with generally accepted
accounting principles.
In connection with rendering its opinion to Twin City's Board, Trident
performed a variety of financial and comparative analyses, which are briefly
summarized below. Such summary of analyses does not purport to be a complete
description of the analyses performed by Trident. Moreover, Trident believes
that these analyses must be considered as a whole and that selecting portions of
such analyses and the factors considered by it, without considering all such
analyses and factors, could create an incomplete understanding of the scope of
the process underlying the analyses and, more importantly, the opinion derived
from them. The preparation of a financial advisor's opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or a summary description of such analyses. In its full analysis,
Trident also included assumptions with respect to general economic, financial
market and other financial conditions. Furthermore, Trident drew from its past
experience in similar transactions, as well as its experience in the valuation
of securities and its general knowledge of the banking industry as a whole. Any
estimates in Trident's analyses were not necessarily indicative of actual future
results or values, which may significantly diverge more or less favorably from
such estimates. Estimates of company valuations do not purport to be appraisals
nor to necessarily reflect the prices at which companies or their respective
securities actually may be sold. None of the analyses performed by Trident were
assigned a greater significance by Trident than any other in deriving its
opinion.
Comparable Transaction Analysis: Trident reviewed and compared financial
perform- ance and pricing information for groups of comparable pending and
completed thrift merger transactions (through July 6, 2000) it deemed pertinent
to an analysis of the merger. The pricingratios for the merger were compared to
the average and median ratios of (i) price to last twelve months earnings, (ii)
price to tangible book value, (iii) price to capital-adjusted tangible book
value and (iv) tangible book value premium to core deposits for each of the
following comparable transaction groups:
18
<PAGE>
o all recent thrift acquisitions in the United States announced
within the preceding 12 months ("All Recent Median");
o all thrift acquisitions in the United States announced within the
preceding 90 days ("Last 90 Days Median");
o all pending thrift acquisitions in the United States that have
been announced but have yet to close ("All Pending Median");
o all Southeast thrift acquisitions announced within the preceding
12 months ("Southeast Recent Median");
o all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with assets of
$100-$150 Million ("Assets $100mm-$150mm Median");
o all thrift acquisitions in the United States announced within the
preceding 12 months with a total deal size of $15-$25 Million
("Deal Size $15mm-$25mm Median");
o all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with returns on
average assets of 90bp-110bp ("ROAA 90bp-110bp Median");
o all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with returns on
average equity of 7%-11% ("ROAE 7%-11% Median")
o all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with tangible
capital of 10%-14% ("Tangible Capital 10%-14% Median")
o Guideline thrift acquisitions announced since May 1, 1999
involving acquired thrifts with capital levels and returns on
average equity similar to Twin City ("Guideline Median")
19
<PAGE>
The following table represents a summary analysis of the comparable
transactions analyzed by Trident based on the announced transaction values:
<TABLE>
<CAPTION>
PRICE/ TANGIBLE BOOK
PRICE/ CAPITAL PRICE/ PREMIUM/
TANGIBLE ADJUSTED LTM CORE
BOOK TANGIBLE EARNINGS DEPOSITS (4)
DEALS VALUE BOOK (2) (3)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
All Recent Median 73 153.2% 175.3% 21.7x 9.3%
Last 90 Days Median 14 127.3% 147.1% 15.0x 5.2%
All Pending Median 36 130.6% 173.0% 19.7x 7.6%
Southeast Recent Median 10 121.2% 157.0% 26.4x 6.2%
Assets $100mm-$150mm Median 11 170.4% 198.1% 27.8x 9.9%
Deal Size $15mm-$25mm Median 6 172.3% 193.4% 22.9x 10.2%
ROAA 90bp-110bp Median 5 194.6% 230.3% 19.8x 11.7%
ROAE 7%-11% Median 18 158.1% 179.3% 18.8x 9.1%
Tangible Capital 10%-14% Median 15 141.0% 190.5% 29.0x 8.5%
Guideline Median 13 128.5% 155.4% 25.7x 6.0%
Twin City (1) ..................... 142.8% 164.3% 18.6x 6.3%
<FN>
-------------
(1) Twin City pricing data based on per share consideration of $17.15
(2) Price and capital adjusted to eliminate the impact of excess capital
(assumes 7% capital is adequate)
(3) Last 12 months earnings per share
(4) Tangible book value premium as a percentage of core deposits
</FN>
</TABLE>
The value of the transaction indicates that the offer made to Twin City
falls within the range of similar transactions, represented by the comparable
groups, based on multiples of price to last twelve months earnings, price to
tangible book values, capital adjusted price to tangible book values, and
tangible book value premium to core deposits.
20
<PAGE>
Discounted Cash Flow Analysis: Trident prepared a discounted cash flow
analysis with regard to Twin City's estimated acquisition value through June
2004. This analysis utilized a discount rate of 15%; assumed annual asset growth
rates of 3%-5%; assumed return on average assets of 0.83%-1.05%; assumed annual
share repurchases of 5%; and assumed terminal earnings multiples of 19 to 24
time earnings. The analyses resulted in a range of present values for Twin City
shareholders of between $12.99 and $18.09 for acquisition values. This analysis
was based on estimates by Trident in determining the terminal earnings multiples
used in projecting Twin City's acquisition value and is not necessarily
indicative of actual values or actual future results and does not purport to
reflect the prices at which any securities may trade at the present or at any
time in the future. Trident noted that the discounted cash flow analysis was
included because it is a widely used valuation methodology, but noted that the
results of such methodology are highly dependent upon the numerous assumptions
that must be made, including earnings growth rates, dividend pay-out rates and
discount rates.
Based on the aforementioned analyses and Trident's experience with numerous
mergers involving thrift institutions, it is Trident's opinion that the merger
consideration to be received by Twin City shareholders in the merger is fair
from a financial point of view.
NO COMPANY USED AS A COMPARISON IN THE ABOVE ANALYSES IS IDENTICAL TO TWIN
CITY, CITCO OR THE COMBINED ENTITY AND NO OTHER TRANSACTION IS IDENTICAL TO THE
MERGER. ACCORDINGLY, AN ANALYSIS OF THE RESULTS OF THE FOREGOING IS NOT PURELY
MATHEMATICAL; RATHER, SUCH ANALYSES INVOLVE COMPLEX CONSIDERATIONS AND JUDGMENTS
CONCERNING DIFFERENCES IN FINANCIAL MARKET AND OPERATING CHARACTERISTICS OF THE
COMPANIES AND OTHER FACTORS THAT COULD AFFECT THE PUBLIC TRADING VOLUME OF THE
COMPANIES TO WHICH TWIN CITY, CITCO AND THE COMBINED ENTITY ARE BEING COMPARED.
IN CONNECTION WITH THE DELIVERY OF ITS OPINION DATED AS OF THE DATE OF THIS
PROXY STATEMENT, TRIDENT PERFORMED PROCEDURES TO UPDATE, AS NECESSARY, CERTAIN
OF THE ANALYSES DESCRIBED ABOVE AND REVIEWED THE ASSUMPTIONS ON WHICH THE
ANALYSES DESCRIBED ABOVE WERE BASED AND THE FACTORS CONSIDERED IN CONNECTION
THEREWITH. TRIDENT DID NOT PERFORM ANY ANALYSES IN ADDITION TO THOSE DESCRIBED
ABOVE IN UPDATING THE OPINION.
For its financial advisory services provided to Twin City, Trident has been
paid fees of $40,000 to date and will be paid an additional fee that will amount
to 1.25% of the aggregate consideration received by Twin City stockholders (less
the $40,000 previously paid) at the time of closing of the merger. In addition,
Twin City has agreed to reimburse Trident for all reasonable out-of-pocket
expenses, incurred by it on Twin City's behalf, and to indemnify Trident against
certain liabilities, including any which may arise under the federal securities
laws.
Trident/McDonald Investments is a member of all principal securities
exchanges in the United States and in the conduct of its broker-dealer
activities has from time to time purchased securities from, and sold securities
to, Twin City and/or Citco. As a market maker, Trident may also have purchased
and sold the securities of Twin City for Trident's own account and for the
accounts of its customers. Additionally, Trident served as Twin City's sales
agent in Twin City Federal's mutual-to-stock conversion in 1994, and received
total fees and commissions of $227,491 for that transaction.
21
<PAGE>
PAYMENT PROCEDURES
Citco will appoint an Exchange Agent to facilitate the payment for shares
of Twin City common stock and options. Immediately prior to the closing of the
merger, Citco will pay to the Exchange Agent sufficient funds so that the
Exchange Agent can pay the merger consideration to all remaining shareholders of
Twin City and all holders of options to purchase Twin City common stock. No
later than five days after the merger is consummated, the Exchange Agent will
mail transmittal letters and instructions to all Twin City shareholders and
optionholders at their addresses as shown on Twin City's official stock records.
Shareholders can then use the transmittal letters to submit their stock
certificates for payment. Within three business days after the Exchange Agent
receives a properly completed transmittal letter and the applicable stock
certificate, the Exchange Agent will mail the payment to the shareholder. If a
shareholder has lost his or her stock certificate, the Agreement requires that
the shareholder submit an affidavit and a lost certificate indemnity bond in
order to receive payment.
The cash price of $17.15 per share will be paid without interest.
Accordingly, shareholders of Twin City should promptly complete and return their
transmittal letters as quickly as possible. Transmittal letters will be sent to
the addresses used to mail this proxy statement. If you own your stock directly
in your own name and you want to update your address, you should immediately
contact our transfer agent, Registrar and Transfer Company at 1-800-368-5948. If
you own your stock in "street name" through a broker, the Exchange Agent will
send the transmittal letter to the record owner of your shares and you will not
submit your shares yourself for payment. Instead, you should contact your broker
to receive payment.
CLOSING
The closing of the merger will take place on the last business day of the
month in which all regulatory and shareholder approvals have been received and
required waiting periods have expired or at such other date and time as the
parties agree. In no event, however, can the closing occur until all required
regulatory approvals have been obtained and all related waiting periods have
expired and Twin City shareholders have approved the Agreement. The parties
anticipate that provided all the required consents can be obtained, the merger
will close during the fourth quarter of 2000.
CONDITIONS TO COMPLETION OF THE MERGER
The consummation of the merger will only occur if all of the following
conditions are met or waived:
o The shareholders of Twin City approve the Agreement.
o The Board of Governors of the Federal Reserve System, the FDIC
and the Tennessee Department of Financial Institutions approve
the merger, all related waiting periods have expired and no
approval contains any provision which, in the reasonable good
faith opinion of Citco would so materially adversely impact the
economic or business benefits of the merger so as to render it
inadvisable.
22
<PAGE>
o All other required consents necessary for the completion of the
merger have been obtained and no such consent contains any
provision which, in the reasonable good faith opinion of Citco,
would have a material adverse effect on its anticipated benefits
from the merger.
o There is no court or agency order, injunction or decree which
prohibits, restricts or makes illegal the merger.
o There are no orders suspending the use of this proxy statement.
o Trident shall have updated its fairness opinion as of the a date
no later than three days prior to the mailing of this proxy
statement.
o The representations and warranties of all of the parties to the
Agreement are true and correct on the closing date.
o All of the agreements and covenants of the parties to the
Agreement which are set forth in the Agreement shall have been
performed or complied with in all material respects.
o Each of the directors and executive officers of Twin City and
Twin City Federal shall have delivered certain letters to Citco
regarding any possible indemnification claims of which they are
aware.
o Citco shall have entered into written amendments to the severance
agreements with three individuals who are currently officers of
Twin City Federal.
o Immediately prior to the closing, certain officers of Twin City
and Twin City Federal shall have terminated their employment and
all related employment or severance agreements and the severance
payments such officers receive as a result of such termination
shall comply with the dollar limitations set forth in the
Agreement.
o Citco shall have received written confirmation from the
contractor for Twin City Federal's Virginia branch that all
liabilities to the contractor and all subcontractors have been
satisfied and no liens or encumbrances have been placed on the
branch property.
o Citco and Twin City shall have entered into the Stock Option
Agreement.
o Citco shall have delivered to the Exchange Agent sufficient funds
to pay the aggregate amount that the shareholders and the
optionholders of Twin City are entitled to receive and Twin City
shall have received a certificate from the Exchange Agent to that
effect.
o Other customary closing conditions are met, such as the
requirements for the delivery of customary officers' certificates
and attorneys' opinion letters.
23
<PAGE>
RESTRICTIONS ON OPERATIONS
Pursuant to the Agreement, Twin City and Citco have each agreed to operate
their businesses only in the ordinary course, to preserve their business
organizations intact, and to maintain good relationships with their employees.
Each party has also agreed that it will not take any action that would have an
adverse effect on the ability of the parties to obtain all required regulatory
approvals and other consents or to perform their respective obligations and
agreements under the Agreement. The parties to the Agreement have also agreed
to:
o give prompt written notice to the other parties after becoming
aware of any situation that is reasonably likely to have a
material adverse effect on it or would cause or represent a
material breach of any of its representations and warranties or
covenants and to use its best efforts to promptly remedy such
situation;
o make all required reports with the regulatory authorities and, if
such reports contain financial statements, the statements must
fairly present the financial condition and results of operations
of the filer and comply in all material respects with all
applicable securities laws;
o cooperate in the preparation and mailing of this proxy statement;
o cooperate in the preparation and filing of all required
regulatory applications and all other required filings;
o use their best efforts to take all actions necessary to
consummate the transactions contemplated by the Agreement;
o keep each other apprised of all material developments in their
respective businesses;
o maintain the confidentiality of all confidential information
received from the other parties to the Agreement; and
o cooperate in the preparation and issuance of all press releases
regarding the Agreement and the transactions contemplated
thereby.
Twin City and Twin City Federal have also agreed to take all required
corporate action to exempt the proposed transactions from all applicable state
anti-takeover laws as well as all applicable anti-takeover provisions in their
respective charters and bylaws. The Board of Directors of Twin City also agreed
to recommend to shareholders that the Agreement and the merger be approved and
to include such recommendation in this proxy statement. The Twin City Board was
only obligated to do so, however, if such recommendation was consistent with the
Board's fiduciary duties and Trident was able to confirm its opinion that the
consideration to be received by shareholders was fair to them from a financial
point of view. Trident's updated opinion is included as Appendix C to this proxy
statement.
24
<PAGE>
In addition, Twin City and Twin City Federal have agreed that they will not
do any of the following without first having received the prior written consent
of Citco, which Citco has agreed will not be unreasonably withheld:
o amend the charter of bylaws of Twin City, Twin City Federal or
any of their subsidiaries;
o borrow, guarantee or otherwise become obligated to pay any debt,
other than in the ordinary course of business consistent with
past practices;
o permit any lien to be placed on any asset of Twin City, Twin City
Federal or any of their subsidiaries, except for certain types of
liens customarily incurred by financial institutions or liens
that had been previously disclosed to Citco;
o repurchase, acquire or exchange any shares of stock of Twin City,
Twin City Federal or any of their subsidiaries other than in the
ordinary course of business in connection with employee benefit
plans;
o pay any dividend other than the regular quarterly cash dividend
of $0.10 per share;
o issue any additional shares of capital stock, any stock
appreciation rights or any option or other right to purchase
shares of stock;
o adjust, split or combine any capital stock of Twin City, Twin
City Federal or any of their subsidiaries;
o sell, lease or otherwise dispose of or encumber any shares of
stock of any subsidiary, any investment securities, any loans or
any other real estate owned, except, in all instances, in the
ordinary course of business;
o purchase any securities or make any material investment in any
party except for purchases of U.S. Treasury securities or U.S.
Government agency securities which, in either case, have a
maturity of three years or less;
o acquire direct or indirect control over any party other than in
connection with foreclosures or by Twin City Federal acting in
its fiduciary capacity;
o grant any increase in compensation or benefits to any employee or
officer except as may be required by law or consistent with past
practices;
o pay any severance or termination pay or bonus arrangement except
pursuant to written agreements or policies in effect on the date
of the Agreement;
o amend any severance agreements with officers of Twin City, Twin
City Federal or any of their subsidiaries;
25
<PAGE>
o grant any increase in fees or other increases in compensation and
benefits to directors of Twin City, Twin City Federal or any of
their subsidiaries;
o voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits;
o enter into or amend any employment contract (unless such
amendment is required by law) that cannot be unconditionally
terminated without liability other than for services rendered at
any time before the closing;
o adopt any new employee benefit plan or make any material change
in or to any existing employee benefit plan of Twin City, Twin
City Federal or any of their subsidiaries, other than any change
that is required by law, is contemplated by the Agreement or, in
the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan;
o make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be
appropriate to conform to changes in tax laws or regulatory
accounting requirements or Generally Accepted Accounting
Principles;
o commence any litigation other than as necessary for the prudent
operation of its business or settle any litigation involving any
liability of Twin City, Twin City Federal or any of their
subsidiaries for material money damages or restrictions upon the
operations of such entity;
o except in the ordinary course of business, modify, amend, or
terminate any material contract or waive, release, compromise, or
assign any material rights or claim;
o sell any mortgage loans from their portfolio (any loans which
have been held for at least one year or construction loans one
year after they have become permanent), or swap residential
mortgage loans for mortgage-backed securities issued by the
Federal Home Loan Mortgage Corporation without Citco's
permission; or
o make any loan or other extension of credit, or grant any increase
in any extension of credit, in the aggregate amount of $250,000
to any borrower or its affiliates.
OTHER ACQUISITION PROPOSALS
The Agreement provides that, until the Agreement is terminated, Twin City
and its representatives and agents may not, directly or indirectly, initiate,
solicit or encourage any inquiries or proposals from persons other than Citco to
acquire Twin City except as may be required by applicable law (including the
fiduciary duties of the Twin City board of directors).
26
<PAGE>
REPRESENTATIONS AND WARRANTIES
Twin City and Twin City Federal have each made certain representations and
warranties in the Agreement. If any of these representations or warranties is
materially false on the closing date, Citco has the right to terminate the
Agreement and not proceed with the merger. The principal representations and
warranties relate to: (i) the due organization, good standing and corporate
power of Twin City; (ii) Twin City's and Twin City Federal's authority to enter
into the Agreement; (iii) Twin City's capital stock; (iv) subsidiaries of Twin
City; (v) Twin City's financial statements; (vi) the absence of any undisclosed
liabilities; (vii) the absence of certain changes or events; (viii) certain tax
matters; (ix) material assets; (x) certain environmental matters; (xi) Twin
City, Twin City Federal's and their subsidiaries compliance with laws; (xii)
labor relations; (xiii) employee benefit plans; (xiv) material contracts; (xv)
legal proceedings; (xvi) regulatory reports; (xvii) the truth and accuracy of
the information contained herein; (xviii) regulatory matters; (xix) state
takeover laws; (xx) anti-takeover provisions in Twin City's charter and bylaws;
(xxi) the execution of the support agreements; (xxii) derivatives; (xxiii) Year
2000 matters; (xxiv) Twin City's stock records; and (xxv) transactions between
directors and officers and Twin City.
Citco and Citizens Bank also have each made certain representations and
warranties in the Agreement. If any of these representations or warranties is
materially false on the closing date, Twin City has the right to terminate the
Agreement and not proceed with the merger. The principal representations and
warranties relate to: (i) the due organization, good standing and corporate
power of Citco; (ii) Citco and Citizens Bank's authority to enter into the
Agreement; (iii) subsidiaries of Citco; (iv) Citco's and its subsidiaries
compliance with laws; (v) the truth and accuracy of the information contained
herein; and (vi) regulatory matters.
REGULATORY APPROVALS
In order for the merger and the bank merger to occur, the Board of
Governors of the Federal Reserve System, the FDIC and the Tennessee Department
of Banking must all approve the transaction. Citco has filed applications with
the Federal Reserve Board, the FDIC and Tennessee Department of Banking. The
Office of Thrift Supervision which regulates Twin City and Twin City Federal has
also been notified of the merger as required by OTS regulations.
Because Twin City Federal is not a bank, Federal Reserve Board regulations
treat the merger as a non-bank acquisition by Citco. In reviewing non-bank
acquisitions, the Federal Reserve Board must determine whether the proposed
acquisition will produce benefits to the public (such as greater convenience,
increased competition and gains in efficiency) that outweigh possible adverse
effects (such as undue concentration of resources, decreased or unfair
competition, conflicts of interest and unsound banking practices). In making
this determination, the Federal Reserve Board will evaluate the financial and
managerial resources of Citco, including its subsidiaries and Twin City, the
effect of the merger on those resources and the management expertise, internal
control and risk management systems and capital of Twin City. The Federal
Reserve Board declined to waive the application requirement to allow it to more
fully consider the effects of the merger.
27
<PAGE>
The FDIC and the Department of Banking will consider several factors when
reviewing the merger of Twin City Federal into Citizens Bank, including the
competitive effects of the transaction, the managerial and financial resources
and future prospects of the existing and resulting institutions, and the effect
of the transaction on the convenience and needs of the communities to be served.
The Community Reinvestment Act of 1977 ("CRA") also requires that the FDIC,
in deciding whether to approve the merger of the two banks, assess their records
of performance in meeting the credit needs of the communities they serve,
including low and moderate income neighborhoods. Both Twin City Federal and
Citizens Bank received satisfactory ratings in their most recent CRA
examinations. FDIC regulations provide for publication of notice and an
opportunity for public comment on the application for the merger of Twin City
Federal and Citizens Bank. As part of the review process, it is not unusual for
the FDIC to receive protests and adverse comments from community groups and
others. The receipt by the FDIC of comments on the application, or a decision to
hold a meeting or hearing, as permitted under FDIC regulations, could prolong
the period during which the merger of the two banks is subject to review by the
FDIC. As of the date of this proxy statement, Twin City is not aware of any
protests, adverse comments or requests for a meeting or hearing filed with the
FDIC concerning the merger of the banks. The bank merger may not take place for
a period of 15 to 30 days following FDIC approval, during which time the
Department of Justice has authority to challenge the bank merger on antitrust
grounds. The precise length of the period will be determined by the FDIC in
consultation with the Department of Justice. The commencement of an antitrust
action would stay the effectiveness of any approval granted by the FDIC unless a
court specifically orders otherwise.
As of the date of this proxy statement, Citco has not obtained any
regulatory approvals. The merger of Twin City and Citco cannot proceed in the
absence of the requisite regulatory approvals. There can be no assurance that
the requisite regulatory approvals will be obtained, and if obtained, there can
be no assurance as to the date of any such approval. There can also be no
assurance that any such approvals will not contain a condition or requirement
that causes such approvals to fail to satisfy the conditions set forth in the
Agreement and described under "--Conditions to the Merger."
Citco is not aware of any other regulatory approvals that would be required
for completion of the mergers, except as described above. Should any other
approvals be required, it is presently contemplated that such approvals would be
sought. There can be no assurance that any other approvals, if required, will be
obtained.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which does not include review of the merger
from the standpoint of the adequacy of the consideration to be received by Twin
City shareholders. Furthermore, regulatory approvals do not constitute an
endorsement or recommendation of the merger.
TERMINATION OF THE AGREEMENT.
The Agreement may be terminated on or at any time prior to the closing date
by the mutual written consent of Twin City and Citco. In addition, the Agreement
may be terminated
28
<PAGE>
by Citco or Twin City (provided that the terminating party is not then in breach
of the Agreement):
o in the event of an inaccuracy of any representation or warranty
(other than a de minimus error) of the other party contained in
the Agreement which cannot be or has not been cured within 30
days after the giving of written notice to the breaching party of
such inaccuracy;
o in the event of a material breach by the other party of any
covenant or agreement contained in the Agreement which cannot be
or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach;
o in the event any consent of any regulatory authority required for
consummation of the Merger and the other transactions
contemplated hereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal;
o if shareholders of Twin City fail to approve the Agreement at the
special meeting;
o in the event that the merger shall not have been completed by
December 31, 2000 or such later date as may be necessary to
finalize any required regulatory approvals or waiting periods,
provided that the delay is not caused by any breach of the
Agreement by the party electing to terminate; or
o in the event that any of the conditions precedent to the
obligations of the terminating party to consummate the merger
cannot be satisfied by December 31, 2000 provided that the
terminating party is not in breach of any representation or
warranty or in material breach of any covenant or obligation
contained in the Agreement.
If the Agreement is terminated it shall generally become void, and there
shall be no further liability on the part of Twin City, Twin City Federal, Citco
or Citizens Bank to any other parties to the Agreement, except for any liability
arising out of any willful breach of any provision of the Agreement.
AMENDMENT OF THE AGREEMENT
The Agreement may be amended by the respective boards of directors of the
parties at any time before or after approval of the Agreement by Twin City's
shareholders. Any amendment to the Agreement after shareholders have approved
the Agreement that would decrease the price to be received or change the form of
consideration would require a resolicitation of shareholders.
WAIVER OF PERFORMANCE OF OBLIGATIONS
Either Twin City or Citco may, by a signed writing, give any consent, take
any action with respect to the termination of the Agreement or otherwise, or
waive any of the inaccuracies
29
<PAGE>
in the representations and warranties of the other party or compliance by the
other party with any of the covenants or conditions contained in the Agreement.
ACCOUNTING TREATMENT
Citco will account for the merger under the purchase method of accounting.
This means that Citco and Twin City will be treated as one company as of the
date of the merger and Citco will record the fair value of Twin City's assets
and liabilities on its financial statements. Citco will record the excess of its
purchase price over the fair value of Twin City's identifiable net assets as
goodwill.
EXPENSES
Whether or not the merger is completed, Twin City and Citco will each pay
their own fees and expenses, except that in the event a party violates a
material provision of the Agreement which remains uncured, the violating party
will be responsible for the costs and expenses incurred by the other party in
connection with the merger.
TAX CONSEQUENCES TO SHAREHOLDERS
The following is a discussion of the material federal income tax
consequences of the merger to certain holders of Twin City common stock. The
discussion is based upon the Internal Revenue Code, Treasury Regulations,
Internal Revenue Service rulings and judicial and administrative decisions in
effect as of the date of this proxy statement. This discussion assumes that the
Twin City common stock is generally held for investment. In addition, this
discussion does not address all of the tax consequences that may be relevant to
you in light of your particular circumstances or to Twin City shareholders
subject to special rules, such as foreign persons, financial institutions,
tax-exempt organizations, dealers in securities or foreign currencies or
insurance companies.
The receipt of cash for Twin City common stock in connection with the
merger will be a taxable transaction for federal income tax purposes to
shareholders receiving such cash, and may be a taxable transaction for state,
local and foreign tax purposes as well. You will recognize a gain or loss
measured by the difference between your tax basis for the Twin City common stock
owned by you at the time of the merger and the amount of cash you receive for
your Twin City shares. Your gain or loss will be a capital gain or loss if your
Twin City common stock is a capital asset to you.
The cash payments the holders of Twin City common stock will receive upon
their exchange of the Twin City common stock pursuant to the merger generally
will be subject to "backup withholding" for federal income tax purposes unless
certain requirements are met. Under federal law, the third-party paying agent
must withhold 31% of the cash payments to holders of Twin City common stock to
whom backup withholding applies, and the federal income tax liability of these
persons will be reduced by the amount that is withheld. To avoid backup
withholding, a holder of Twin City common stock must provide the third-party
exchange agent with his or her taxpayer identification number and complete a
form in which he or she certifies that he or she has not been notified by the
Internal Revenue Service that he or she is
30
<PAGE>
subject to backup withholding as a result of a failure to report interest and
dividends. The taxpayer identification number of an individual is his or her
social security number.
Neither Citco nor Twin City has requested or will request a ruling from the
Internal Revenue Service as to any of the tax effects to Twin City's
shareholders of the transactions discussed in this proxy statement, and no
opinion of counsel has been or will be rendered to Twin City shareholders with
respect to any of the tax effects of the merger to shareholders.
THE ABOVE SUMMARY OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING ON AN INDIVIDUAL
BASIS. IN ADDITION TO THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED ABOVE,
CONSUMMATION OF THE MERGER MAY HAVE SIGNIFICANT STATE AND LOCAL INCOME TAX
CONSEQUENCES THAT ARE NOT DISCUSSED IN THIS PROXY STATEMENT. ACCORDINGLY,
PERSONS CONSIDERING THE MERGER ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
SPECIFIC REFERENCE TO THE EFFECT OF THEIR OWN PARTICULAR FACTS AND CIRCUMSTANCES
ON THE MATTERS DISCUSSED IN THIS PROXY STATEMENT.
DISSENTERS' APPRAISAL RIGHTS
Under Tennessee law, if you do not wish to accept the cash payment provided
for in the Agreement, you have the right to dissent from the merger and obtain
payment for the fair value of your shares. TWIN CITY SHAREHOLDERS ELECTING TO DO
SO MUST COMPLY WITH THE PROVISIONS OF SECTION 48-23-201 ET SEQ OF THE TENNESSEE
BUSINESS CORPORATION ACT IN ORDER TO PERFECT THEIR RIGHTS. TWIN CITY WILL
REQUIRE STRICT COMPLIANCE WITH THE STATUTORY PROCEDURES. A copy of the
applicable statutes is attached as Appendix D.
The following is intended as a brief summary of the material provisions of
the Tennessee statutory procedures required to be followed by a Twin City
shareholder in order to dissent from the merger and obtain payment of the fair
value of such shares. This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by reference to Section
48-23-201 of the Tennessee Business Corporation Act, the full text of which
appears in Appendix D of this proxy statement.
Section 48-23-201 requires that if a proposed corporate action creating
dissenters' rights is put to a vote of shareholders at a shareholders' meeting,
the meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights and be accompanied by a copy of the applicable statutory
provisions. This proxy statement constitutes Twin City's notice to its
shareholders of the availability of dissenters' rights in connection with the
merger in compliance with the requirements of Section 48-23-201. If you wish to
consider exercising your dissenters' rights you should carefully review the text
of the statutory provisions contained in Appendix D because failure to timely
and properly comply with the requirements of these provisions will result in the
loss of your rights under Tennessee law.
If you elect to demand appraisal of your shares, you must satisfy both of
the following conditions:
31
<PAGE>
o You must deliver to Twin City a written demand for the payment of
the fair value for your shares before the vote with respect to
the merger is taken. This written demand for appraisal must be in
addition to and separate from any proxy or vote abstaining from
or against the merger. Voting against or failing to vote for the
merger by itself does not constitute a demand for payment within
the meaning of Tennessee law.
o You must not vote in favor of the merger. An abstention or
failure to vote will satisfy this requirement, but a vote in
favor of the merger, by proxy or in person, will constitute a
waiver of your dissenters' rights in respect of the shares so
voted and will nullify any previously filed written demands for
payment of fair value.
If you fail to comply with either of these conditions and the merger is
completed, you will be entitled to receive the cash payment for your shares of
Twin City common stock as provided for in the Agreement but will have no
dissenters' rights with respect to your shares of Twin City common stock.
All demands for payment of fair value should be addressed to __________,
Twin City Bancorp, Inc., 310 State at Edgemont, Bristol, Tennessee 37620, before
the vote on the merger is taken at the special meeting. A record shareholder may
assert dissenters' rights for fewer than all of the shares of Twin City common
stock registered in his or her name only if such holder dissents with respect to
all shares beneficially owned by any one person and notifies Twin City in
writing of the name and address of each person on whose behalf he or she is
asserting dissenters' rights. If a record shareholder holds shares that are
beneficially owned by two or more parties who do not all seek to assert
dissenters' rights, such record shareholder's rights are determined as if the
shares as to which he or she dissents and his or her other shares were
registered in the names of different shareholders. A beneficial shareholder may
assert dissenters' rights as to shares of Twin City common stock held on his
behalf only if:
o the beneficial holder submits to Twin City the record
shareholder's written consent to the dissent prior to the special
meeting; and
o he or she does so with respect to all shares of Twin City common
stock he or she beneficially owns or has power to direct the
vote.
Within ten days after the date Twin City shareholders approve the Agreement
and the merger, Twin City (or Citco, if the merger has already been
consummated), must send a written dissenters' notice to all shareholders who
have properly perfected their dissenters' rights. This notice must:
o state where a payment demand must be sent and where and when
certificates for the shares must be deposited;
o inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is
received;
32
<PAGE>
o supply a form for demanding payment that includes the date of the
first announcement to the news media or to shareholders of the
principal terms of the merger and requires that the person
asserting dissenters' rights certify whether or not he or she
acquired beneficial ownership of the shares before that date;
o set a date by which Twin City (or Citco) must receive the payment
demand, which date may not be less than one month or greater than
two months after the date this notice is delivered; and
o be accompanied by a copy of the Tennessee dissenters' rights
statutes if the copy has not previously been provided.
A shareholder sent this dissenters' rights notice must demand payment and make
the required certification before the deadline that will be specified in the
notice. A dissenting shareholder must also deposit his or her certificates for
the shares of Twin City common stock owned in accordance with the procedures
specified in the notice. Twin City may restrict the transfer of uncertificated
shares from the date the demand for payment is received until the date the
merger closes. If the merger does not close within two months of the deadline
for submitting the demand for payment, the restrictions will lapse. A
shareholder who complies with all of these requirements within the required time
periods retains all other rights as a shareholder until these rights are
cancelled or modified by the closing of the merger. A shareholder who does not
demand payment or deposit his or her stock certificates by the within the
required time periods is not entitled to continue to seek payment pursuant to
these procedures. ONCE A DEMAND FOR PAYMENT HAS BEEN FILED BY SHAREHOLDER, IT
MAY NOT BE WITHDRAWN UNLESS TWIN CITY (OR CITCO AS THE SURVIVING CORPORATION IN
THE MERGER) CONSENTS TO THE WITHDRAWAL.
As soon as the merger is closed, or upon receipt of a payment demand,
whichever is later, Citco will pay each dissenter who complied with all
applicable statutory provisions the amount Citco estimates to be the fair value
of such shares, plus accrued interest, from the effective date of the merger.
The "fair value" of the shares means the value of such shares immediately before
the close of the merger. This payment must be accompanied by:
o Twin City's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders'
equity for that year and the latest available interim financial
statements, if any;
o a statement of the estimate of the fair value of the shares;
o an explanation of how interest was calculated;
o a statement of the shareholder's right to reject such offer and
provide his or her own estimate to Citco of the fair value of
such shares (which counteroffer Citco is not obligated to take)
as well as the procedures and deadlines for doing so; and
o a copy of the dissenters' rights statutes if not previously
provided.
33
<PAGE>
If the merger is not closed within two months after the deadline for submitting
a demand for payment and depositing stock certificates, Twin City will be
obligated to return any deposited certificates and release any transfer
restrictions. If the merger subsequently closes, Citco will be obligated to send
a new dissenters' rights notice and repeat the payment demand procedures
described above.
In the event that a dissenting shareholder acquired the shares of Twin City
common stock on or after the date that the proposed merger was first announced,
Twin City (or Citco) may choose to withhold payment of the estimated fair value
of such shareholder's shares. If Twin City (or Citco) elects to do so, after the
merger is closed, Citco shall be obligated to pay to such shareholder or
shareholders an amount equal to the estimated fair value of such shares plus
interest to any such shareholder who agrees to accept it in full satisfaction of
his or her demand. Citco will be obligated to send with its offer a statement of
its estimate, an explanation of how interest was calculated and a statement of
the shareholder's right to reject such offer and provide his or her own estimate
of the fair value of the shares.
If a dissenting shareholder is not satisfied with Citco's fair value
determination, the shareholder may notify Citco in writing of his or her own
estimate of the fair value of his or her shares and amount of interest due, and
demand payment of that amount (less any payment previously paid to such
shareholder); or, in the case of a shareholder who acquired his or her shares of
Twin City common stock after the date of the first public announcement of the
merger, the shareholder may reject written offer made by Citco and demand
payment of the fair value of his or her shares, along with interest, in either
case only in the following circumstances:
o The dissenter believes that the amount paid or offered to be paid
is less than the fair value of his or shares or that the interest
was incorrectly calculated;
o Citco fails to make payment within two months after the date set
for demanding payment; or
o Twin City and Citco have not merged and Twin City has not
returned the deposited certificates or released the transfer
restrictions on uncertificated securities within two months of
the date for demanding payment.
A dissenter waives his right to reject payment or the offer of payment unless he
provides written notification of his or her objection within one month after
Citco made or offered payment.
If a demand for payment remains unsettled, Citco is required to commence a
proceeding within two months after receiving the payment demand and petition the
court to determine the fair value of the shares and the accrued interest. If it
does not do so, it will be required to pay to each dissenter whose demand
remains unsettled, the amount such dissenter has demanded. The legal action must
be commenced in a court of record having equity jurisdiction in the county where
Citco's principal office is located (Carter County). All dissenters whose claims
remain unsettled must be made party to the proceeding and all parties must be
served with a copy of the proceeding although non-residents may be served by
registered or certified mail or by publication. This court will have exclusive
jurisdiction over the matter.
34
<PAGE>
The court may appoint one or more persons as appraisers to receive evidence
and recommend a decision as to the fair value of the shares. Each dissenter made
a party to the proceeding is entitled to a judgment:
o for the amount by which the court finds the fair value of his
shares, plus accrued interest, exceeds the amount previously paid
by Citco; or
o for the fair value, plus accrued interest, of his or her
after-acquired shares for which Citco elected to withhold
payment.
The court will also determine all costs resulting from the proceeding. The court
will generally require that Citco pay all costs, except that the court may
assess the costs against some or all of the dissenters, in amounts the court
believes to be fair, to the extent that the court finds that the dissenters
acted arbitrarily, vexatiously, or not in good faith. The court may also assess
the fees and expenses of counsel and experts for the respective parties, in
amounts the court finds to be fair:
o against Citco and in favor of all dissenters if the court finds
that Twin City or Citco did not substantially comply with the
requirements of the Tennessee dissenters' rights statutes; or
o against either Citco or a dissenter, in favor of another party,
if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in
good faith with respect to the rights of the parties set forth in
the Tennessee dissenters' rights statutes.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not reasonably be assessed against Citco, the court
may award to these counsel reasonable fees to be paid out of the amounts awarded
to all of the dissenters who were benefited.
In view of the complexity of these provisions, Twin City shareholders who
may wish to dissent from the merger and pursue these rights should consult their
legal advisors.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some members of Twin City's directors and officers may have interests in
the merger that are in addition to, or different from the interests of
shareholders. The Board of Directors was aware of these interests and considered
them in approving the Agreement.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AGAINST CLAIMS. For a period of
six years from the Effective Time, Citco has agreed to indemnify and hold
harmless each present and former director and officer of Twin City from
liability and expenses arising out of matters existing or occurring at or prior
to the consummation of the merger to the fullest extent permitted, but as may be
limited, by Tennessee law. As a condition to closing each director and executive
officer of Twin City must deliver a letter to Citco stating that they have no
claims for indemnification under Twin City's or Twin City Federal's Charter or
Bylaws. All rights to
35
<PAGE>
indemnification with respect to a claim asserted within the six-year period
shall continue until final disposition of the claim. This indemnification
includes but is not limited to liability arising out of the transactions
contemplated by the Agreement. Citco has agreed to advance any costs to each of
these persons as they are incurred. Citco has also agreed to provide directors'
and officers' liability insurance coverage for the benefit of Twin City's
directors and officers for six years following consummation of the merger by
purchasing continuation coverage under Twin City's existing directors' and
officers' liability policy provided that the one-time premium for such policy
does not exceed $15,000 and such insurance can be reasonably obtained.
CONVERSION OF STOCK OPTIONS. At the effective time, each unexercised option
to purchase shares of Twin City common stock will be converted into the right to
receive in cash an amount equal to the difference between $17.15 and the
exercise price of each option multiplied by the number of shares of Twin City
common stock subject to the option. As of June 30, 2000, the directors and
executive officers of Twin City held options to purchase a total of 107,133
shares of Twin City common stock. The following table reflects the number of
options, the weighted average exercise price of the options and the amounts
payable to each director and executive officer upon cancellation of their stock
options based on the per share merger consideration of $17.15.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES WEIGHTED AVERAGE
NAME OF DIRECTOR UNDERLYING EXERCISE PRICE PER NET PROCEEDS UPON
OR EXECUTIVE OFFICER UNEXERCISED OPTIONS SHARE CANCELLATION
-------------------- ------------------- ----- ------------
<S> <C> <C> <C>
Thad R. Bowers 33,690 $ 9.33 $263,456
Paul R. Wohlford 6,738 9.33 52,691
William C. Burriss, Jr. 6,738 9.33 52,691
Sid Oakley 6,738 9.33 52,691
John M. Vann 2,694 12.8125 7,595
Robert C. Glover 10,107 9.33 79,037
John M. Wolford 10,107 9.33 79,037
Michael H. Phipps 10,107 9.33 79,037
Judith O. Bowers 10,107 9.33 79,037
Joyce S. Rouse 10,107 9.33 79,037
</TABLE>
CHANGE-IN-CONTROL SEVERANCE PLAN. Twin City's change-in-control severance
plan provides severance benefits to full-time employees who are terminated
within one year after a change in control. Employees covered by a separate
employment or severance agreement are not eligible to participate the plan.
Eligible employees are entitled to two weeks salary at the employee's existing
salary rate for every full year of employment. Benefits are limited to a maximum
of 26 weeks salary and a minimum of four weeks salary.
EMPLOYMENT AND SEVERANCE AGREEMENTS. Twin City Federal is party to an
employment agreement with Mr. Bowers, which provides for a severance payment
equal to 2.99 times his "base amount," as defined in the Internal Revenue Code
following his termination in connection with a "change in control" of Twin City,
as defined in the agreement. Twin City Federal is also party to severance
agreements with Messrs. Glover, Wolford and Phipps and Mss. Bowers and Rouse
which each provide for severance payouts equal to 1.5 times their respective
base amounts upon their termination in connection with a change in control. The
merger
36
<PAGE>
constitutes a change in control of Twin City. The Agreement recognizes that Mr.
Bowers, Ms. Bowers and Ms. Rouse will become entitled to their severance
payments as a result of the Merger. The Agreement further provides that Twin
City and Twin City Federal will use their reasonable best efforts to obtain the
consents of Mr. Bowers, Ms. Bowers and Ms. Rouse to the termination of their
respective employment and severance agreements as of the effective time and
shall pay them the amounts to which they would be entitled under their
agreements upon their termination in connection with a change in control. It is
a condition to Citco's obligation to close that the payments to Mr. Bowers, Ms.
Bowers and Ms. Rouse shall not exceed $564,712, $97,241 and $122,159,
respectively, for a total payment of no more than $784,112 provided the closing
shall have occurred prior to December 31, 2000. Messrs. Glover, Wolford and
Phipps have been offered employment with Citizens Bank following the Merger and
Mr. Bowers has been offered a seat on the Citizens Bank board of directors.
Citco's obligation to close is conditioned on Messrs. Glover, Wolford and Phipps
entering into amendments to their severance agreements providing that their
employment by Citco on the terms provided will not trigger a termination payment
under their existing agreements.
EMPLOYEE BENEFIT PLANS. After the effectiveness of the merger, Citco has
agreed to provide generally to Twin City's officers and employees who became
employees of Citco or its subsidiaries, employee benefits under employee benefit
plans (other than stock option or other plans which would involve the issuance
of Citco common stock) on terms and conditions which when taken as a whole are
substantially similar to these currently provided by Citco and its subsidiaries
to their similarly situated officers and employees. For purposes of
participation and vesting (but not accrual of benefits) service under qualified
defined benefit and defined contribution plans of Twin City will be treated as
service under any defined benefit and defined contribution plans of Citco. Prior
to the effective time, Twin City must give written notice of its withdrawal from
participation in the Financial Institutions Retirement Fund multiple employer
pension plan as of the earliest practicable date after the effective time. To
the extent that costs associated with such withdrawal exceed $75,000, the
Exchange Price will be adjusted so that the aggregate amount payable to holders
of Twin City common stock and options will be reduced by the amount by which
such costs exceed $75,000. Twin City has given notice of its withdrawal from the
Financial Institutions Retirement Fund but has not been advised what the costs
of withdrawal will be. With respect to Twin City's defined contribution 401(k)
plan, such plan will either be terminated or merged into a similar plan offered
by Citco.
EMPLOYEE STOCK OWNERSHIP PLAN. Prior to the consummation of the merger,
Twin City will take appropriate steps to terminate its ESOP. After consummation
of the merger, the ESOP will repay the outstanding balance of its loan and
allocate any surplus cash to the accounts of ESOP participants in proportion to
their account balances, to the extent allowed under applicable law and the
governing documents of the ESOP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AND LIFE INSURANCE POLICY. The Bank
entered into a supplemental executive retirement agreement with Mr. Bowers
effective January 1, 1995. The agreement entitles Mr. Bowers to ten annual
payments upon the termination of his employment for a reason other than death or
just cause. The annual payments that Mr. Bowers will receive are equal to 60% of
the average of his highest five years' compensation less an annual offset
amount. The offset amount is the sum of his primary Social Security benefit at
age 62, plus 1/10th of the value of his awards under the Management Recognition
Plan (adjusted for increase in the Consumer Price Index since the date of grant)
plus the straight life annuity value
37
<PAGE>
of his pension under the Bank's defined benefit pension plan. Within ten days
following a change-in-control, Mr. Bowers is entitled to receive a lump sum
payment equal to the present value of the benefits to which he is entitled.
Citco has agreed to honor the terms of the supplemental executive retirement
agreement provided that if the lump sum payable to Mr. Bowers exceeds $375,000,
the merger price will be adjusted so that the aggregate amount payable to
holders of Twin City common stock and options to acquire Twin City common stock
is reduced by the amount of the payment in excess of $375,000. The Bank has also
agreed to assign to Mr. Bowers its interest in a $31,986 insurance policy on his
life upon his termination of employment.
SUPPORT AGREEMENTS. As a condition to Citco's entering into the Agreement,
each of Twin City's directors and Senior Vice President Judith O. Bowers was
required to enter into a Support Agreement with Citco. The Support Agreements
obligate the directors and Ms. Bowers to vote their shares in favor of the
Agreement and the Merger and to vote against any competing acquisition proposal.
Except as otherwise may be required by their fiduciary duties, each director has
agreed to vote as a director in favor of the Merger. The directors and Ms.
Bowers have agreed not to exercise dissenters' rights and not to dispose of
their shares except by operation of law, by bona fide gift to a family member or
to a person who agrees to be bound by the Support Agreement. Each of the
directors and Ms. Bowers have further agreed that for a period of 18 months
after the effective time of the merger, they will not serve as a management
official or consultant to, or become a major shareholder in another financial
institution having an office in any county in which Twin City Federal has an
office.
THE STOCK OPTION AGREEMENT
The following summary of the Stock Option Agreement is qualified by
reference to the complete text of the agreement, which is incorporated by
reference and attached as Appendix B.
GENERAL
On the day after Citco and Twin City entered into the Agreement and as an
important inducement to Citco entering into the Agreement, Twin City also
entered into the Stock Option Agreement. Under the Stock Option Agreement, Twin
City granted to Citco an irrevocable option to purchase up to 223,156 shares of
Twin City common stock at a price per share of $15.50. The exercise price and
number of option shares are subject to certain anti-dilution and other
adjustments specified in the Stock Option Agreement. The option is exercisable
in the circumstances described below.
EFFECT OF OPTION
The option is intended to make it more likely that the merger will be
completed on the agreed terms and to compensate Citco for its efforts and costs
in case the merger is not completed under circumstances generally involving a
third party proposal for a business combination with Twin City. The option, if
exercised, would significantly increase the cost to a third party of acquiring
Twin City. Among other effects, the option could also prevent an alternative
business combination with Twin City from being accounted for as a
"pooling-of-interests." The option may therefore discourage proposals for
alternative business combinations with Twin City, even if a third party were
prepared to offer Twin City shareholders consideration
38
<PAGE>
with a higher market value than the $17.15 per share to be paid for Twin City
common stock in the merger.
EXERCISE OF THE STOCK OPTION
Citco can exercise the option in whole or in part at any time after the
occurrence of a "purchase event" and prior to termination of the option.
Generally, the right to exercise the option terminates upon the earliest
of:
o completion of the merger;
o 15 months after the first occurrence of a purchase event (or if,
at the expiration of such 15 months, after the first occurrence
of a Purchase Event, the option cannot be exercised by reason of
any applicable judgment, decree, order, law, or regulation, 30
business days after such impediment to exercise shall have been
removed);
o 18 months after the date of the Stock Option Agreement, although
in the event a court or regulatory authority order is in place
that would prevent the exercise of the option, such date shall be
extended for the period that such order is in place.
For purposes of the Stock Option Agreement, a "purchase event" means
termination of the Agreement by Citco in the following circumstances:
o by Citco (provided that it is not in breach of any representation
or warranty contained in the Agreement) in the event of an
inaccuracy of any representation or warranty of Twin City
contained in the Agreement which cannot or has not been cured
within 30 days after giving written notice to Twin City;
o by Citco (provided it is not in breach of any representation or
warranty contained in the Agreement) in the event of a material
breach by Twin City of any covenant or agreement which cannot be
or has not been cured within 30 days of Citco giving written
notice to Twin City of the breach;
o by Citco if the shareholders of Twin City do not approve the
Agreement at the special meeting; or
o by Citco (provided it is not then in breach of any representation
or warranty in the Agreement or in material breach of any
covenant or agreement) in the event that any of the conditions
precedent to its obligation to close the merger cannot be
satisfied or fulfilled by December 31, 2000;
provided that a purchase event will not be deemed to occur unless and until Twin
City enters into a definitive agreement with a third party with respect to an
"Acquisition Proposal" or an "Acquisition Proposal" shall have been consummated
during the 12 months following the termination of the Stock Option Agreement.
For purposes of the Stock Option Agreement, the
39
<PAGE>
term "Acquisition Proposal" is defined as any tender offer or exchange offer for
more than 25% of the outstanding equity securities of Twin City or any proposal
for a merger, acquisition of all of the stock or assets of, or other business
combination involving Twin City or any of its subsidiaries or the acquisition of
25% equity interest in, or 25% of the assets of, Twin City or any of its
subsidiaries.
REPURCHASE ELECTION
The Stock Option Agreement further provides that Twin City or its
successors, is required to repurchase the option (or shares of Twin City common
stock for which Citco has received upon full or partial exercise of the Stock
Option) if requested to do so by Citco. Such a request can only be made after
the occurrence of a "repurchase event" and ending 12 months thereafter. A
repurchase event is defined in the Stock Option Agreement to mean the date of a
Purchase Event.
The repurchase price for the Option will be equal to the excess, if any, of
(i) the "Applicable Price" as of the request date over (ii) the purchase price
of the option (subject to adjustment), multiplied by the number of shares for
which the Twin City stock option may then be exercised. The repurchase price for
any shares acquired upon full or partial exercise of the option will be the
Applicable Price as of the request date multiplied by the number of shares owned
directly or indirectly by Citco. For purposes of the Stock Option Agreement, the
term "Applicable Price" is defined as the highest of:
o the highest price per share paid pursuant to a tender offer or
exchange offer for shares of Twin City common stock after the
date of the Stock Option Agreement and on or prior to the request
date;
o the highest price per share to be paid by any third party for
shares and in each case pursuant to an agreement with respect to
an Acquisition Proposal with Twin City entered into on or prior
to the request date; or
o the highest bid price per shares as quoted on Nasdaq or, if the
shares are not then quoted on Nasdaq, on the principal trading
market on which the shares are traded as reported by a recognized
source during the 60 days preceding the request date.
If the consideration to be offered paid or received pursuant to either of the
first two bullet items is other than cash, the value of such consideration shall
be determined in good faith by an independent nationally recognized investment
banking firm selected by Citco and reasonably acceptable to Twin City.
PRINCIPAL HOLDERS OF TWIN CITY COMMON STOCK
The following table provides you with information regarding ownership of
Twin City common stock by directors, executive officers and any person or group
Twin City knows to beneficially own more than 5% of its outstanding common
stock. The information is as of the Record Date. Information about persons or
groups who own beneficially more than 5% of Twin
40
<PAGE>
City's common stock is based on filings with the Securities and Exchange
Commission on or before the Record Date.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP (1) OUTSTANDING (2)
------------------- ------------- ---------------
<S> <C> <C>
PRINCIPAL SHAREHOLDERS
----------------------
Twin City Bancorp, Inc.
Employee Stock Ownership Plan
310 State Street
Bristol, Tennessee 37620 97,835 (3) 8.72%
Robert L. and Elinor M. Baker
4892 Weaver Pike
Bluff City, Tennessee 37618 105,000 9.36
Thad R. and Judith O. Bowers
14 Yorkshire
Bristol, Tennessee 37620 120,047 (4) 10.30
Citco Community Bancshares, Inc.
300 Broad Street
Elizabethton, Tennessee 37643 223,156 (5) 16.60
MANAGEMENT
----------
Thad R. Bowers 120,047 (4) 10.30
William C. Burriss, Jr. 56,438 5.00
Sid Oakley 17,321 1.54
John M. Vann 5,094 0.45
Paul R. Wohlford 19,005 1.68
All directors and executive
officers as a group (10 persons) 347,577 (6) 28.29
<FN>
___________
(1) A person is considered the beneficial owner of any shares of the Twin
City common stock (1) over which he or she has or shares voting or
investment power, or (2) of which he or she has the right to acquire
beneficial ownership at any time within 60 days from the Record Date.
"Voting power" is the power to vote or direct the voting of shares and
"investment power" is the power to dispose or direct the disposition of
shares.
(2) In calculating percentage ownership for a given individual or group of
individuals, the number of shares of the Twin City common stock
outstanding includes unissued shares subject to options exercisable
within 60 days of the Record Date held by that individual or group.
(3) Includes 43,786 shares which have been allocated to the accounts of
participants. The ESOP trustees, including Directors Burriss, Oakley,
Wohlford and Vann, vote all allocated shares in accordance with
instructions of the participants; unallocated shares and shares for
which no instructions have been received generally are voted by the
ESOP trustees in the same ratio as participants direct the voting of
allocated shares or, in the absence of such direction, as directed by
Twin City's Board of Directors.
(4) Includes 43,797 shares which Mr. and Mrs. Bowers had a right to
purchase pursuant to the exercise of stock options exercisable within
60 days of the Record Date.
(5) Consists of shares which Citco may have the right to acquire under the
Option Agreement. For more information, see "THE STOCK OPTION
AGREEMENT." These shares cannot be voted at the Special Meeting.
(6) Excludes 54,049 unallocated shares held by the ESOP. Includes 107,133
shares which all directors and executive officers as a group had a
right to purchase pursuant to the exercise of stock options exercisable
within 60 days of the Record Date.
</FN>
</TABLE>
41
<PAGE>
OTHER MATTERS
Twin City's board of directors is not aware of any business to come before
the Twin City special meeting other than those matters described above in this
proxy statement. However, if any other matters should properly come before the
special meeting, it is intended that proxies will be voted in accordance with
the determination of a majority of the board of directors provided, however, if
a proposal to adjourn the special meeting is properly presented, a proxy will
not have discretion to vote in favor of the adjournment proposal any shares of
common stock which have been voted against approval and adoption of the merger
agreement.
SHAREHOLDER PROPOSALS
In the event that the merger is not approved by shareholders at the special
meeting, Twin City expects it would hold its next annual meeting of shareholders
in May, 2001. In order to be eligible for inclusion in Twin City's proxy
materials for such meeting, any shareholder proposal to take action at such
meeting must be received at Twin City's main office at 310 State at Edgemont,
Bristol, Tennessee, 37620, no later than December 16, 2000. Any such proposal
will be subject to the requirements of the proxy rules adopted under the
Securities Exchange Act of 1934, as amended.
Shareholder proposals, other than those submitted pursuant to the
Securities Exchange Act of 1934, as amended, must be delivered or mailed, in the
form prescribed by Twin City's Charter to the Assistant Secretary of Twin City
at the above address not fewer than 30 days nor more than 60 days prior to any
meeting; provided, however, that if notice or public disclosure of the meeting
is effected fewer than 40 days before the meeting, such written notice shall be
delivered or mailed, as prescribed, to the Assistant Secretary of Twin City not
later than the close of the 10th day following the day on which notice of the
meeting was mailed to shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
JOANNE STURGILL
ASSISTANT SECRETARY
Bristol, Tennessee
_____________, 2000
42
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
TWIN CITY BANCORP, INC.,
TWIN CITY FEDERAL SAVINGS BANK,
CITCO COMMUNITY BANCSHARES, INC.,
AND
CITIZENS BANK
DATED AS OF JULY 18, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER. . . . . 1
1.1 Merger. . . . . . . . . . . . . . . 1
1.2 Time and Place of Closing . . . . . 2
1.3 Effective Time. . . . . . . . . . . 2
1.4 Execution of Support Agreements . . 2
1.5 Right to Revise Transaction . . . . 2
ARTICLE 2
EFFECT OF MERGER. . . . . . . . . . . . . 2
2.1 Charters. . . . . . . . . . . . . . 2
2.2 Bylaws. . . . . . . . . . . . . . . 3
2.3 Directors and Officers. . . . . . . 3
ARTICLE 3
MANNER OF CONVERTING SHARES AND OPTIONS . 3
3.1 Conversion of Shares and Options. . 3
3.2 Anti-Dilution Provisions. . . . . . 4
3.3 Shares Held by TCB or Citco . . . . 4
3.4 Dissenting Shareholders . . . . . . 4
ARTICLE 4
EXCHANGE OF SHARES. . . . . . . . . . . . 4
4.1 Exchange Procedures . . . . . . . . 4
4.2 Rights of Former TCB Shareholders . 5
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TCB . . 5
5.1 Organization, Standing, and Power . 5
5.2 Authority; No Breach By Agreement . 6
5.3 Capital Stock . . . . . . . . . . . 7
5.4 TCB Subsidiaries. . . . . . . . . . 7
5.5 Financial Statements. . . . . . . . 8
5.6 Absence of Undisclosed Liabilities. 8
5.7 Absence of Certain Changes
or Events. . . . . . . . . . . . . 8
5.8 Tax Matters . . . . . . . . . . . . 9
5.9 Assets. . . . . . . . . . . . . . .10
5.10 Environmental Matters . . . . . . .11
5.11 Compliance with Laws. . . . . . . .12
i
<PAGE>
5.12 Labor Relations . . . . . . . . . .12
5.13 Employee Benefit Plans. . . . . . .13
5.14 Material Contracts. . . . . . . . .15
5.15 Legal Proceedings . . . . . . . . .16
5.16 Reports . . . . . . . . . . . . . .16
5.17 Statements True and Correct . . . .16
5.18 Regulatory Matters. . . . . . . . .16
5.19 State Takeover Laws . . . . . . . .17
5.20 Charter Provisions. . . . . . . . .17
5.21 Support Agreements. . . . . . . . .17
5.22 Derivatives . . . . . . . . . . . .17
5.23 Year 2000 . . . . . . . . . . . . .17
5.24 Stock Records . . . . . . . . . . .17
5.25 Certain Interests . . . . . . . . .18
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CITCO
AND CITIZENS BANK . . . . . . . . . . . .18
6.1 Organization, Standing, and Power .18
6.2 Authority; No Breach By Agreement .18
6.3 Citco Subsidiaries. . . . . . . . .19
6.4 Compliance with Laws. . . . . . . .19
6.5 Statements True and Correct . . . .20
6.6 Regulatory Matters. . . . . . . . .20
ARTICLE 7
CONDUCT OF BUSINESS PENDING
CONSUMMATION . . . . . . . . . . . . . 21
7.1 Affirmative Covenants of
Both Parties. . . . . . . . . . . 21
7.2 Negative Covenants of TCB and TCF. 21
7.3 Adverse Changes in Condition . . . 23
7.4 Reports. . . . . . . . . . . . . . 23
ARTICLE 8
ADDITIONAL AGREEMENTS. . . . . . . . . . 24
8.1 Proxy Statement; Shareholder
Approval. . . . . . . . . . . . . 24
8.2 Applications . . . . . . . . . . . 24
8.3 Filings with State Offices . . . . 24
8.4 Agreement as to Efforts to
Consummate. . . . . . . . . . . . 25
8.5 Investigation and Confidentiality. 25
8.6 State Takeover Laws. . . . . . . . 26
8.7 Press Releases . . . . . . . . . . 26
8.8 Charter Provisions . . . . . . . . 26
8.9 Employee Benefits and Contracts. . 26
ii
<PAGE>
8.10 Indemnification and Insurance . . .27
8.11 Certain Modifications . . . . . . .28
8.12 Termination of Plans. . . . . . . .29
8.13 ESOP. . . . . . . . . . . . . . . .29
8.14 Sole Agreement to Merge or Sell . .30
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO
CONSUMMATE . . . . . . . . . . . . . . . 30
9.1 Conditions to Obligations of
Each Party. . . . . . . . . . . . 30
9.2 Conditions to Obligations of
Citco and Citizens Bank . . . . . 31
9.3 Conditions to Obligations of TCB
and TCF . . . . . . . . . . . . . 32
ARTICLE 10
TERMINATION. . . . . . . . . . . . . . . 33
10.1 Termination. . . . . . . . . . . . 33
10.2 Effect of Termination. . . . . . . 34
10.3 Non-Survival of Representations
and Covenants . . . . . . . . . . 35
ARTICLE 11
MISCELLANEOUS. . . . . . . . . . . . . . 35
11.1 Definitions. . . . . . . . . . . . 35
11.2 Expenses . . . . . . . . . . . . . 41
11.3 Brokers and Finders. . . . . . . . 42
11.4 Entire Agreement . . . . . . . . . 42
11.5 Amendments . . . . . . . . . . . . 42
11.6 Waivers. . . . . . . . . . . . . . 42
11.7 Assignment. . . . . . . . . . . . .43
11.8 Notices. . . . . . . . . . . . . . 43
11.9 Governing Law. . . . . . . . . . . 44
11.10 Counterparts . . . . . . . . . . . 44
11.11 Captions . . . . . . . . . . . . . 44
11.12 Interpretations. . . . . . . . . . 44
11.13 Enforcement of Agreement . . . . . 44
11.14 Severability . . . . . . . . . . . 44
Signatures . . . . . . . . . . . . . . . . . . . . . 48
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of July 18, 2000, by and between TWIN CITY BANCORP, INC. ("TCB "), a
corporation organized and existing under the Laws of the State of Tennessee,
with its principal office located in Bristol, Tennessee; TWIN CITY FEDERAL
SAVINGS BANK ("TCF"), a federal savings bank organized and existing under the
Laws of the United States, with its principal office located in Bristol,
Tennessee; CITCO COMMUNITY BANCSHARES, INC. ("Citco"), a corporation organized
and existing under the Laws of the State of Tennessee, with its principal office
located in Elizabethton, Tennessee; and CITIZENS BANK, a corporation organized
and existing under the Laws of the State of Tennessee with its principal office
located in Elizabethton, Tennessee.
PREAMBLE
--------
The Boards of Directors of TCB, TCF, Citco, and Citizens Bank are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective shareholders. This Agreement
provides first for the acquisition of TCB by Citco pursuant to the merger of TCB
with and into Citco. Immediately thereafter, TCF shall be merged with and into
Citizens Bank. Both mergers are collectively referred to herein as the "Merger."
At the effective time of the Merger, the outstanding shares of and options to
purchase the capital stock of TCB shall be converted into the right to receive
the cash purchase price described below. The transactions described in this
Agreement are subject to the approvals of the shareholders of TCB, TCF, and
Citizens Bank; certain federal and state regulatory authorities; and the
satisfaction of certain other conditions described in this Agreement. It is the
intent of Citco to maintain the good will established by TCB by involving the
directors of TCB and TCF in the operations of the surviving corporations.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
------
Effective Time, TCB shall be merged with and into Citco in accordance with the
provisions of Section 48-21-102 of the TBCA. Citco shall be the Surviving
Corporation resulting from this merger and shall continue to be governed by the
Laws of the State of Tennessee. After the merger of TCB into Citco, and at such
time as Citco deems appropriate, TCF shall be merged with and into Citizens
Bank, with Citizens Bank being the Surviving Corporation from this merger and
continuing to be governed by
A-1
<PAGE>
the Laws of the State of Tennessee. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the
respective Boards of Directors of TCB, TCF, Citco, and Citizens Bank.
1.2 Time and Place of Closing. The consummation of the Merger (the
----------------------------
"Closing") shall take place at 9:00 A.M. eastern time on the date that the
Effective Time occurs (or the immediately preceding day if the Effective Time is
earlier than 9:00 A.M.), or at such other time as the Parties, acting through
their duly authorized officers, may mutually agree. The place of Closing shall
be at such location as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and the other transactions contemplated by
--------------
this Agreement shall become effective on the date and at the time the Tennessee
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Tennessee (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon by the
duly authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the last business day of the
month in which the last of the following occurs: (i) the effective date
(including expiration of any applicable waiting period) of the last required
Consent of any Regulatory Authority having authority over and approving or
exempting the Merger; and (ii) the date on which the shareholders of TCB and TCF
approve the matters relating to this Agreement required to be approved by such
shareholders by applicable Law; or such later day within 30 days thereof as may
be mutually agreed upon by the Parties.
1.4 Execution of Support Agreements. Immediately prior to the execution of
-------------------------------
this Agreement and as a condition hereto, each of the directors of TCB and TCF
is executing and delivering to Citco a Support Agreement in substantially the
form of Exhibit 1. In addition, Judith O. Bowers is executing and delivering a
similar Support Agreement with the noncompete provisions limited to financial
institutions in operation three (3) years or less.
1.5 Right to Revise Transaction. Citco, with the concurrence of TCB, may at
---------------------------
any time change the method of effecting the acquisition of TCB and TCF
(including without limitation the provisions of this Article 1) if and to the
extent it deems such change to be desirable; provided, however, that no such
change shall (i) alter the type of consideration to be issued to the holders of
TCB Common Stock, or options to purchase such shares, as provided for in this
Agreement, (ii) reduce the value of such consideration, (iii) Materially impair
the ability to receive the regulatory approvals, or (iv) Materially delay the
Closing.
ARTICLE 2
EFFECT OF MERGER
----------------
2.1 Charters. The Charter of Citco and Citizens Bank, respectively, in
--------
effect immediately prior to the Effective Time shall be the Charter of each
Surviving Corporation after the Effective Time until otherwise amended or
repealed.
A-2
<PAGE>
2.2 Bylaws. The Bylaws of Citco and Citizens Bank, respectively, in effect
------
immediately prior to the Effective Time shall be the Bylaws of each Surviving
Corporation after the Effective Time until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Citco and Citizens Bank,
------------------------
respectively, in office immediately prior to the Effective Time, together with
such additional persons as may thereafter be elected, shall serve as the
directors of each Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation. The officers of Citco
and Citizens Bank, respectively, in office immediately prior to the Effective
Time, together with such additional persons as may thereafter be elected, shall
serve as the officers of each Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of each Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES AND OPTIONS
---------------------------------------
3.1 Conversion of Shares and Options. Subject to the provisions of this
---------------------------------
Article 3, at the Effective Time, by virtue of the Merger and without any action
on the part of Citco, Citizens Bank, TCB, or TCF, or the shareholders of any of
the foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of Citizens Bank Common Stock and Citco Common Stock and
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding from and after the Effective Time.
(b) Each share of TCB Common Stock (excluding shares held by any TCB
Company or any Citco Company, in each case other than in a fiduciary capacity or
as a result of debts previously contracted) issued and outstanding at the
Effective Time shall be converted into $17.15 cash payable by check as soon
after the Effective Time as is feasible.
(c) Each option to purchase shares of TCB Common Stock (excluding
options held by any TCB Company or any Citco Company, and in each case other
than in a fiduciary capacity or as a result of debts previously contracted)
which has not been exercised at the Effective Time shall be converted into
$17.15 cash less the applicable exercise price per option and shall be payable
by check as soon after the Effective Date as is feasible (the purchase price per
share of TCB Common Stock identified in Sections 3.1(b) and 3.1(c), subject to
any adjustments otherwise required by Section 8.12 in this Agreement, are herein
after referred to collectively as the "Exchange Price").
(d) Each share of TCF Common Stock shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
A-3
<PAGE>
3.2 Anti-Dilution Provisions. In the event TCB changes the number of
-------------------------
shares, or options to purchase shares, of TCB Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend or similar recapitalization with respect to such stock, the Exchange
Price shall be proportionately adjusted provided that no adjustment shall be
made as the result of an increase in the number of outstanding shares as the
result of the exercise of an option to purchase TCB Common Stock which option
was outstanding on the date hereof.
3.3 Shares Held by TCB or Citco. Each of the shares, or options to purchase
---------------------------
shares, of TCB Common Stock held by any TCB Company or by any Citco Company, in
each case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.4 Dissenting Shareholders. Any holder of shares of TCB Common Stock who
------------------------
perfects such holder's dissenters' rights of appraisal in accordance with and as
contemplated by Section 48-23-201 et seq. of the TBCA shall be entitled to
receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, that no such payment shall be made to any dissenting
shareholder unless and until such dissenting shareholder has complied with the
applicable provisions of the TBCA. In the event that a dissenting shareholder of
TCB fails to perfect, or effectively withdraws or loses, his right to appraisal
and of payment for his shares under these provisions, as of the Effective Time,
the shares of TCB Common Stock held by such Person shall be exchanged as
determined under Section 3.1 of this Agreement, and the delivery of the Exchange
Price to which such holder may be entitled shall be governed by Section 4.1 of
this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 Exchange Procedures. Immediately prior to the Effective Time, Citco
--------------------
shall deposit with the exchange agent (the "Exchange Agent") for the benefit of
holders of shares of TCB Common Stock and holders of options to purchase TCB
Common Stock, sufficient cash to satisfy its obligations under Section 3.1 of
this Agreement. Within five days after the Effective Time, Citco and TCB shall
cause the Exchange Agent to mail to the former shareholders and option holders
of TCB appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares, or options to purchase shares, of TCB Common Stock shall
pass, only upon proper delivery of such certificates to the Exchange Agent).
After the Effective Time, each holder of shares, or options to purchase shares,
of TCB Common Stock (other than shares to be canceled pursuant to Section 3.3 of
this Agreement or as to which dissenters' rights of appraisal have been
perfected and not withdrawn or forfeited under Section 3.4 of this Agreement)
issued and outstanding at the Effective Time promptly upon surrender the
certificate or certificates representing such shares, or options to purchase
shares, to the Exchange Agent, shall receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends and other distributions in respect of such shares
A-4
<PAGE>
(without interest thereon) pursuant to Section 4.2 of this Agreement. Until so
surrendered, each outstanding certificate of TCB Common Stock, or options to
purchase shares, shall be deemed for all purposes, to represent the
consideration into which the number of shares, or options to purchase shares, of
TCB Common Stock represented thereby prior to the Effective Time shall have been
converted without interest. Citco shall not be obligated to deliver the
consideration to which any former holder of TCB Common Stock is entitled as a
result of the Merger until such holder surrenders such holder's certificate or
certificates representing the shares, or options to purchase shares, of TCB
Common Stock for exchange as provided in this Section 4.1. The certificate or
certificates of TCB Common Stock, or options to purchase shares, so surrendered
shall be duly endorsed as the Exchange Agent may require. Any other provision of
this Agreement notwithstanding, neither the Surviving Corporation, TCB, nor the
Exchange Agent shall be liable to a holder of TCB Common Stock, or options to
purchase shares, for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property Law.
4.2 Rights of Former TCB Shareholders. At the Effective Time, the stock
----------------------------------
transfer books of TCB shall be closed as to holders of TCB Common Stock
immediately prior to the Effective Time and no transfer of TCB Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares, or options to purchase shares,
of TCB Common Stock (other than shares to be canceled pursuant to Section 3.3 of
this Agreement or as to which dissenters' rights of appraisal have been
perfected and not withdrawn or forfeited under Section 3.4 of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive the consideration provided in Section 3.1 of this Agreement in
exchange therefor, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which have been declared or made by TCB in respect of such
shares of TCB Common Stock in accordance with the terms of this Agreement and
which remain unpaid at the Effective Time.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TCB
-------------------------------------
TCB and TCF hereby represent and warrant to Citco and Citizens Bank as
follows:
5.1 Organization, Standing, and Power. TCB is a corporation duly organized,
---------------------------------
validly existing, and in good standing under the Laws of the State of Tennessee,
and has the corporate power and authority to carry on its business as now
conducted and to own, lease, and operate its Assets. TCB is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TCB or as disclosed in Section 5.2 of
the TCB Disclosure Memorandum.
A-5
<PAGE>
5.2 Authority; No Breach By Agreement.
---------------------------------
(a) TCB and TCF have the corporate power and authority necessary to
execute, deliver, and perform their obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of TCB and TCF,
subject to the approval of this Agreement by the holders of a majority of the
shares of TCB Common Stock present at the Shareholders Meeting and approval by
TCB as the sole shareholder of TCF, which are the only shareholder votes
required for approval of this Agreement and consummation of the Merger by TCB
and TCF. Subject to such requisite shareholder approval and Consents of
applicable Regulatory Authorities, this Agreement represents a legal, valid, and
binding obligation of TCB and TCF, enforceable against TCB and TCF in accordance
with its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought and except to the extent
that indemnification and contribution may be contrary to public policy).
(b) Except as disclosed in Section 5.2(b) of the TCB Disclosure
Memorandum, neither the execution and delivery of this Agreement by TCB and TCF,
nor the consummation by TCB and TCF of the transactions contemplated hereby, nor
compliance by TCB and TCF with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of TCB's or TCF's Charter or Bylaws,
or (ii) constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of any TCB Company under,
any Contract or Permit of any TCB Company, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on TCB or TCF, or (iii) subject to
receipt of the requisite Consents referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any TCB Company or any of
their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate, banking, and securities Laws, and
rules of the NASD, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation or both with respect to any employee
benefit plans, or under the HSR Act, and other than Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the TCB
Companies, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by TCB or TCF of the Merger and the
other transactions contemplated in this Agreement.
A-6
<PAGE>
5.3 Capital Stock.
-------------
(a) The authorized capital stock of TCB consists, as of the date of
this Agreement, of 8,000,000 shares of TCB Common Stock, of which 1,121,388
shares are issued and outstanding as of the date of this Agreement and
(excluding 125,632 shares which may be issued pursuant to currently outstanding
options to acquire TCB Common Stock as disclosed in Section 5.3(a) of the TCB
Disclosure Memorandum listing each option holder, number of options granted,
strike price, and grant date) not more than 1,121,388 shares will be issued and
outstanding at the Effective Time, and 2,000,000 shares of TCB Serial Preferred
Stock, $1.00 par value per share, none of which is or will be issued or
outstanding. All of the issued and outstanding shares of TCB Common Stock are
duly and validly issued and outstanding and are fully paid and nonassessable
under the TBCA. None of the outstanding shares of TCB Common Stock has been
issued in violation of any preemptive rights of the current or past shareholders
of TCB.
(b) Except as set forth in Section 5.3(a) of this Agreement or Section
5.3(b) of the TCB Disclosure Memorandum, there are no shares of capital stock or
other equity securities of TCB outstanding and no outstanding Rights relating to
the capital stock of TCB.
5.4 TCB Subsidiaries. TCB has disclosed in Section 5.4 of the TCB
-----------------
Disclosure Memorandum all of the TCB Subsidiaries as of the date of this
Agreement. TCB or one of its Subsidiaries owns all of the issued and outstanding
shares of capital stock of each TCB Subsidiary. No equity securities of any TCB
Subsidiary are or may become required to be issued (other than to another TCB
Company) by reason of any Rights, and there are no Contracts by which any TCB
Subsidiary is bound to issue (other than to another TCB Company) additional
shares of its capital stock or Rights or by which any TCB Company is or may be
bound to transfer any shares of the capital stock of any TCB Subsidiary (other
than to another TCB Company). There are no Contracts relating to the rights of
any TCB Company to vote or to dispose of any shares of the capital stock of any
TCB Subsidiary. All of the shares of capital stock of each TCB Subsidiary held
by a TCB Company are fully paid and, nonassessable under the applicable
corporation or banking Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the TCB Company free and clear of any
Lien. Each TCB Subsidiary is either a federal savings bank or a corporation, and
is duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the corporate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Each TCB
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TCB. Each TCB Subsidiary that is a depository institution is an
"insured depository institution" as defined in the Federal Deposit Insurance Act
and applicable regulations thereunder, and the deposits in which are insured to
the applicable limits by the Bank Insurance Fund or Savings Association
Insurance Fund.
A-7
<PAGE>
5.5 Financial Statements.
--------------------
(a) TCB has filed and made available to Citco all forms, reports, and
documents required to be filed by TCB with the SEC since January 1 of the third
fiscal year preceding the date of this Agreement (collectively, the "SEC
Reports"). Except as disclosed in Section 5.5(a) of the TCB Disclosure
Memorandum, the SEC Reports (i) at the time filed, complied in all Material
respects with the applicable requirements of the 1933 Act and the 1934 Act, as
the case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a Material fact or omit to state a
Material fact required to be stated in such SEC Reports or necessary in order to
make the statements in such SEC Reports, in light of the circumstances under
which they were made, not misleading. Except for TCB Subsidiaries that are
registered as a broker, dealer or investment advisor, none of TCB Subsidiaries
is required to file any forms, reports, or other documents with the SEC.
(b) TCB has disclosed in Section 5.5 of the TCB Disclosure Memorandum, and
has delivered to Citco copies of, all TCB Financial Statements prepared for
periods ended prior to the date hereof and will deliver to Citco copies of all
TCB Financial Statements prepared subsequent to the date hereof. The TCB
Financial Statements (as of the dates thereof and for the periods covered
thereby) (i) are or, if dated after the date of this Agreement, will be in
accordance with the books and records of TCB, which are or will be, as the case
may be, complete and correct and which have been or will have been, as the case
may be, maintained in accordance with past business practices, and (ii) present
or will present, as the case may be, fairly the consolidated financial position
of TCB as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows of TCB for the periods
indicated, in accordance with GAAP (subject to any exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments which
were not or are not expected to be Material in amount or effect).
5.6 Absence of Undisclosed Liabilities. Except as disclosed in Section 5.6
----------------------------------
of the TCB Disclosure Memorandum, no TCB Company has any Liabilities that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TCB, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of TCB as of March 31, 2000, included in the TCB
Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business subsequent to March 31,
2000. Except as disclosed in Section 5.6 of the TCB Disclosure Memorandum, no
TCB Company has incurred or paid any Liability since March 31, 2000, except for
(i) such Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TCB or (ii)
in connection with the transactions contemplated by this Agreement.
5.7 Absence of Certain Changes or Events. Since March 31, 2000, except as
------------------------------------
disclosed in the TCB Financial Statements delivered prior to the date of the
Agreement or as otherwise
A-8
<PAGE>
disclosed in the TCB Disclosure Memorandum, (i) there have been no events,
changes, or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TCB, and (ii) the
TCB Companies have not taken any action, or failed to take any action, prior to
the date of this Agreement, which action or failure, if taken after the date of
this Agreement, would represent or result in a material breach or violation of
any of the covenants and agreements of TCB or TCF provided in Article 7 of this
Agreement, other than conducting the process that has led up to the execution
and consummation of this Agreement including the incurrence of expenses and
liabilities resulting therefrom.
5.8 Tax Matters.
-----------
(a) All Tax Returns required to be filed by or on behalf of any of the
TCB Companies have been timely filed, or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1999, and, to the Knowledge of TCB and TCF, all Tax Returns filed
are complete and accurate in all Material respects. All Tax Returns for periods
ending on or before the date of the most recent fiscal year end immediately
preceding the Effective Time will be timely filed or requests for extensions
will be timely filed. All Taxes shown on Tax Returns filed as of the date of
this Agreement have been paid. There is no audit examination, deficiency, or
refund Litigation with respect to any Taxes, that is reasonably likely to result
in a determination that would have, individually or in the aggregate, a Material
Adverse Effect on the TCB Companies taken as a whole, except to the extent
reserved against in the TCB Financial Statements dated prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(b) None of the TCB Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of
the TCB Companies for the period or periods through and including the date of
the respective TCB Financial Statements has been made and is reflected on such
TCB Financial Statements.
(d) Each of the TCB Companies is in compliance with, and its records
contain the information and documents (including properly completed IRS Forms
W-9) necessary to comply with, in all material respects, applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and, to the Knowledge of TCB and TCF, such records identify with
specificity all accounts subject to backup withholding under Section 3406 of the
Internal Revenue Code.
(e) None of the TCB Companies has made any payments, is obligated to
make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it
A-9
<PAGE>
to make any payments that would be disallowed as a deduction under Section 280G
or 162(m) of the Internal Revenue Code.
(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the TCB Companies except for Liens for Taxes not yet due or being
contested in good faith and for which adequate provision has been made.
(g) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the TCB Companies that occurred during or after
any Taxable Period in which the TCB Companies incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1999.
(h) No TCB Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) After the date of this Agreement, no Material election with respect
to Taxes will be made without the prior consent of Citco, which consent will not
be unreasonably withheld.
(j) No TCB Company has or has had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States and such foreign country.
5.9 Assets. Except as disclosed in Section 5.9 of the TCB Disclosure
------
Memorandum, the TCB Companies have good and marketable title, free and clear of
all Liens, to all of their respective Assets. All tangible properties used in
the businesses of the TCB Companies are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business consistent with
the TCB Company's past practices. All Assets which are Material to TCB's
business on a consolidated basis, held under leases or subleases by any of the
TCB Companies, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The TCB Companies currently
maintain insurance in amounts, scope, and coverage reasonably necessary for
their operations. None of the TCB Companies has received notice from any
insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no claims pending under such policies of insurance and no notices have been
given by any TCB Company under such policies. The Assets of the TCB Companies
include all Material Assets required to operate the business of the TCB
Companies as presently conducted.
A-10
<PAGE>
5.10 Environmental Matters.
---------------------
(a) To the Knowledge of TCB and TCF, and except as set forth in Section
5.10(a) of the TCB Disclosure Memorandum, each TCB Company, its Participation
Facilities, and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except those instances of non-compliance which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the TCB Companies, taken as a whole.
(b) There is no Litigation pending or, to the Knowledge of TCB and TCF,
threatened before any court, governmental agency, or authority, or other forum
in which any TCB Company or any of its Participation Facilities has been or,
with respect to threatened Litigation, may reasonably be expected to be named as
a defendant (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release into the environment of
any Hazardous Material, whether or not occurring at, on, under, or involving a
site owned, leased, or operated by any TCB Company or any of its Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the TCB Companies, taken as a whole.
(c) To the Knowledge of TCB and TCF, there is no Litigation pending,
threatened before any court, governmental agency, or board, or other forum in
which any of its Loan Properties (or the TCB Companies in respect of such Loan
Property) has been or, with respect to threatened Litigation, may reasonably be
expected to be named as a defendant or potentially responsible party (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material,
whether or not occurring at, on, under, or involving a Loan Property, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the TCB
Companies.
(d) To the Knowledge of TCB and TCF, there is no reasonable basis for
any Litigation of a type described in subsections (b) or (c), except such as is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the TCB Companies, taken as a whole.
(e) To the Knowledge of TCB and TCF, during the period of (i) any TCB
Company's ownership or operation of any of their respective current properties,
(ii) any TCB Company's participation in the management of any Participation
Facility, or (iii) any TCB Company's holding of a security interest in a Loan
Property, there have been no releases of Hazardous Material in, on, under, or
affecting (or potentially affecting) such properties, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the TCB Companies, taken as a whole. Prior to the period of (i) any
TCB Company's ownership or operation of any of their respective current
properties, (ii) any TCB Company's participation in the management of any
Participation Facility, or (iii) any TCB Company's holding of a security
interest in a Loan Property, to the Knowledge of TCB and except as disclosed in
Section 5.10(e) of the TCB
A-11
<PAGE>
Disclosure Memorandum, there were no releases of Hazardous Material in, on,
under, or affecting any such property, Participation Facility, or Loan Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the TCB Companies, taken as a whole.
5.11 Compliance with Laws. TCB is duly registered as a savings and loan
---------------------
holding company under the Home Owners' Loan Act. Each TCB Company has in effect
all Permits necessary for it to own, lease, or operate its Material Assets and
to carry on its business as now conducted, except for those Permits the absence
of which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on the TCB Companies, and there has occurred no Default
under any such Permit, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on the TCB
Companies. None of the TCB Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the TCB Companies; and
(b) except as set forth in Section 5.11 of the TCB Disclosure
Memorandum, has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any TCB Company is not in compliance with
any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TCB, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on the TCB
Companies, or (iii) requiring any TCB Company (x) to enter into or consent to
the issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any Board resolution
or similar undertaking, which restricts materially the conduct of its business,
or in any material manner relates to its capital adequacy, its credit or reserve
policies, its management, or the payment of dividends.
5.12 Labor Relations. No TCB Company is the subject of any Litigation
----------------
asserting that it or any other TCB Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other TCB Company to bargain with any
labor organization as to wages or conditions of employment, nor is any TCB
Company a party to or bound by any collective bargaining agreement, Contract, or
other agreement or understanding with a labor union or labor organization, nor
is there any strike or other labor dispute involving any TCB Company, pending
or, to the Knowledge of TCB and TCF, threatened, or to the Knowledge of TCB and
TCF, is there any activity involving any TCB Company's employees seeking to
certify a collective bargaining unit or engaging in any other organization
activity.
A-12
<PAGE>
5.13 Employee Benefit Plans.
---------------------
(a) TCB and TCF have disclosed to Citco in writing prior to the
execution of the Agreement and in Section 5.13 of the TCB Disclosure Memorandum,
and has delivered or made available to Citco prior to the execution of this
Agreement correct and complete copies in each case of, all Material TCB Benefits
Plans. For purposes of this Agreement, "TCB Benefit Plans" means all written, or
to the Knowledge of TCB unwritten or verbal, pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written, or
to the Knowledge of TCB unwritten or verbal, employee programs or agreements,
all medical, vision, dental, or other health plans, all life insurance plans,
and all other employee benefit plans or fringe benefit plans, including"employee
benefit plans" as that term is defined in Section 3(3) of ERISA maintained by,
sponsored in whole or in part by, or contributed to by, any TCB Company for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate. Any of the TCB Benefit Plans which is an "employee
welfare benefit plan," as that term is defined in Section 3(l) of ERISA, or an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "TCB ERISA Plan." Any TCB ERISA Plan which is
also a "defined benefit plan" (as defined in Section 414(j) of the Internal
Revenue Code or Section 3(35) of ERISA) is referred to herein as a "TCB Pension
Plan." Each "employee pension benefit plan," as defined in Section 3(2) of
ERISA, ever maintained by any TCB Company that was intended to qualify under
Section 401(a) of the Internal Revenue Code, is disclosed as such in Section
5.13 of the TCB Disclosure Memorandum.
(b) TCB and TCF have delivered or made available to Citco prior to the
execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such TCB
Benefit Plans (including insurance contracts), and all amendments thereto, (ii)
with respect to any such TCB Benefit Plans or amendments, all determination
letters, Material rulings, Material opinion letters, Material information
letters, or Material advisory opinions issued by the Internal Revenue Service,
the United States Department of Labor, or the Pension Benefit Guaranty
Corporation after December 31, 1994, (iii) annual reports or returns, audited or
unaudited financial statements, actuarial valuations and reports, and summary
annual reports prepared for any TCB Benefit Plan with respect to the most recent
plan year, and (iv) the most recent summary plan descriptions and any Material
modifications thereto.
(c) All TCB Benefit Plans are in compliance with the applicable terms
of ERISA, the Internal Revenue Code, any other applicable Laws, and all terms of
the TCB Benefit Plans, except for any breach or violation which would not be
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the TCB Companies. Each TCB ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has received a
currently effective favorable determination letter from the Internal Revenue
Service, and TCB and TCF are not aware of any circumstances likely to result in
revocation of any such favorable determination letter. Each trust created under
any TCB ERISA Plan, which is intended to be qualified under
A-13
<PAGE>
Section 401(a) of the Internal Revenue Code, has been determined to be exempt
from Tax under Section 501(a) of the Internal Revenue Code and TCB and TCF are
not aware of any circumstance which will or could reasonably result in
revocation of such exemption. With respect to each TCB Benefit Plan to the
Knowledge of TCB and TCF, no event has occurred which will or could reasonably
give rise to a loss of any intended Tax consequences under the Internal Revenue
Code or to any Tax under Section 511 of the Internal Revenue Code that is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on the TCB Companies. There is no Material pending or, to the Knowledge
of TCB and TCF, threatened Litigation relating to any TCB Benefit Plan.
(d) To the Knowledge of TCB, no TCB Company has engaged in a
transaction with respect to any TCB Benefit Plan that, assuming the Taxable
Period of such transaction has not expired as of the date of this Agreement,
would subject any TCB Company to a Material tax or penalty imposed by either
Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA. To the
Knowledge of TCB, neither TCB, TCF, nor any administrator or fiduciary of any
TCB Benefit Plan (or any agent of any of the foregoing) has engaged in any
transaction, or acted or failed to act in any manner which could subject TCB to
any direct or indirect Liability (by indemnity or otherwise) for breach of any
fiduciary, co-fiduciary, or other duty under ERISA, where such Liability,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the TCB Companies. Except as disclosed in Section 5.13(d) of
the TCB Disclosure Memorandum, to the Knowledge of TCB, no oral or written
representation or communication with respect to any aspect of the TCB Benefit
Plans has been made to employees of any TCB Company which is not in accordance
with the written or otherwise preexisting terms and provisions of such plans,
where any Liability with respect to such representation or disclosure is
reasonably likely to have a Material Adverse Effect on the TCB Companies.
(e) As of the date of the most recent actuarial valuation, no TCB
Pension Plan has any "unfunded current liability," as that term is defined in
Section 302(d)(8)(A) of ERISA, and the fair market value of the Assets of any
such plan exceeds the plan's "benefit liabilities," as that term is defined in
Section 4001(a)(16) of ERISA, when determined under actuarial factors that would
apply if the plan terminated in accordance with all applicable legal
requirements. Since the date of the most recent actuarial valuation, there has
been (i) no Material change in the financial position or funded status of any
TCB Pension Plan to the Knowledge of TCB,, (ii) no change in the actuarial
assumptions with respect to any TCB Pension Plan to the Knowledge of TCB,, and
(iii) no increase in benefits under any TCB Pension Plan as a result of plan
amendments or changes in applicable Law. Neither any TCB Pension Plan nor any
"single-, multiple-, or multi-employer plan," within the meaning of Section
4001(a)(15) or 4001(a)(3) of ERISA, currently or formerly maintained by any TCB
Company, or the single-, multiple-, or multi-employer plan of any entity which
is or was considered one employer with TCB under Section 4001 of ERISA or
Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or not
waived) (a "TCB ERISA Affiliate") has an "accumulated funding deficiency" within
the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA
or any withdrawal liability within the contemplation of Title IV of ERISA. All
contributions with respect to a TCB Pension Plan or any single-, multiple-, or
multi-employer
A-14
<PAGE>
plan of a TCB ERISA Affiliate have or will be timely made, and there is no lien
or expected lien under Internal Revenue Code Section 412(n) or ERISA Section
302(f) or Tax under Internal Revenue Code Section 4971. No TCB Company has
provided, or is required to provide, security to a TCB Pension Plan or to any
single-, multiple-, or multi-employer plan of a TCB ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code. All premiums required to be
paid under ERISA Section 4006 have been timely paid by TCB, except to the extent
any failure would not have a Material Adverse Effect on the TCB Companies.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by any TCB Company with respect to any defined benefit plan currently
or formerly maintained by any of them or by any TCB ERISA Affiliate that has not
been satisfied in full (other than Liability for Pension Benefit Guaranty
Corporation premiums, which have been paid when due, except to the extent any
failure would not have a Material Adverse Effect on the TCB Companies).
(g) Except as disclosed in Section 5.13(g) of the TCB Disclosure
Memorandum, no TCB Company has any obligations for retiree health and retiree
life benefits under any of the TCB Benefit Plans other than with respect to
benefit coverage mandated by applicable Law.
(h) Except as set forth in Section 5.13 of the TCB Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, or otherwise) becoming due to any director or
any employee of any TCB Company from any TCB Company under any TCB Benefit Plan
or otherwise, (ii) increase any benefits otherwise payable under any TCB Benefit
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any such benefit. In no event shall any such payment described in Section 5.13
of the TCB Disclosure Memorandum result in a "excess parachute" payment as
defined in Section 280G of the IRC.
(i) TCF will continue to accrue at least $4,000 per month to its SERP
plan until the Effective Time. The total SERP Liability at the Effective Time
will not exceed $375,000.
5.14 Material Contracts. Except as set forth in Section 5.14 of the TCB
-------------------
Disclosure Memorandum, none of the TCB Companies, nor any of their respective
Assets, businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $50,000, (ii) any Contract relating to the borrowing
of money by any TCB Company or the guarantee by any TCB Company of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank
advances of depository institution Subsidiaries, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
and (iii) any other Contract or amendment thereto that would be required to be
filed as an exhibit to a Form 10-KSB filed by TCB with the SEC as of the date of
this Agreement that was not filed or incorporated by reference as an exhibit to
TCB's Form 10-KSB for the fiscal year ended
A-15
<PAGE>
December 31, 1999 (together with all Contracts referred to in Sections 5.9 and
5.13(a) of this Agreement, the "TCB Contracts"). With respect to each TCB
Contract: (i) the Contract is in full force and effect; (ii) no TCB Company is
in Default thereunder, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TCB; (iii)
no TCB Company has repudiated or waived any Material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
TCB and TCF, in Default in any respect, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the TCB Companies, or has repudiated or waived any Material provision
thereunder. Except for Federal Home Loan Bank advances, all of the indebtedness
of any TCB Company for money borrowed is prepayable at any time by such TCB
Company without penalty or premium.
5.15 Legal Proceedings. Except as set forth in Section 5.15 of the TCB
------------------
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
Knowledge of TCB and TCF, threatened against any TCB Company, or against any
Asset, employee benefit plan, interest, or right of any of them, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any TCB Company.
5.16 Reports. Since December 31, 1994, or the date of organization if
-------
later, each TCB Company has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with any Regulatory Authorities, except failures to file which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the TCB Companies. As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all Material respects with all applicable Laws
and has been made available for review by representatives of Citco.
5.17 Statements True and Correct. None of the information supplied or to be
---------------------------
supplied by any TCB Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to TCB's shareholders in connection with the
Shareholders' Meeting will, when first mailed to the shareholders of TCB, be
false or misleading with respect to any Material fact, or contain any
misstatement of Material fact, or omit to state any Material fact required to be
stated thereunder or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Shareholders' Meeting, be false or misleading with respect to any Material
fact, or omit to state any Material fact required to be stated thereunder or
necessary to correct any Material statement in any earlier communication with
respect to the solicitation of any proxy for the Shareholders' Meeting. All
documents that any TCB Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all Material respects with the
provisions of applicable Law.
5.18 Regulatory Matters. Except as specifically contemplated by this
-------------------
Agreement, no TCB Company or any Affiliate thereof has taken or agreed to take
any action, and TCB has no Knowledge of any fact or circumstance that is
reasonably likely to materially impede or delay receipt of any
A-16
<PAGE>
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement. To the Knowledge of TCB and TCF, there exists no fact, circumstance,
or reason why the requisite Consents referred to in Section 9.1(b) of this
Agreement cannot be received in a timely manner without imposition of any
condition of the type described in the last sentence of such Section 9.1(b).
5.19 State Takeover Laws. Each TCB Company has taken all necessary action
-------------------
to exempt the transactions contemplated by this Agreement from any applicable
"moratorium," "control share," "fair price," "business combination," or other
anti-takeover laws and regulations of the State of Tennessee (collectively,
"Takeover Laws") including those Laws contained within Sections 48-103-101 et
seq. of the TBCA.
5.20 Charter Provisions. Each TCB Company has taken all action so that the
------------------
entering into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Charter, Bylaws, or other governing
instruments of any TCB Company or restrict or impair the ability of Citco or any
of its Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of any TCB Company that may be directly or
indirectly acquired or controlled by it.
5.21 Support Agreements. Each of the directors of TCB and TCF has executed
------------------
and delivered to Citco a Support Agreement in substantially the form as Exhibit
1 to this Agreement. In addition, Judith O. Bowers is executing and delivering a
similar Support Agreement with the noncompete provisions limited to financial
institutions in operation three (3) years or less.
5.22 Derivatives. All interest rate swaps, caps, floors, option agreements,
-----------
futures and forward contracts, and other similar risk management arrangements,
whether entered into for TCB's own account, or for the account of one or more
the TCB Subsidiaries or their customers, were entered into (i) in accordance
with prudent business practices and all applicable Laws, and (ii) with
counterparties believed to be financially responsible.
5.23 Year 2000. To the Knowledge of TCB and TCF, all critical computer
---------
software necessary for the conduct of its business (the "Software") has been
tested and is designed to be used prior to, during, and after the calendar year
2000 A.D., and critical Software will operate during each such time period
without error relating to the year 2000, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century. TCB and TCF further represent and
warrant that critical Software has been tested and accepts, calculates, sorts,
extracts and otherwise processes date inputs and date values, and returns and
displays date values, in a consistent manner regardless of the dates used,
whether before, on, or after January 1, 2000.
5.24 Stock Records. To the Knowledge of TCB, the stock transfer books and
--------------
stock ledgers of TCB and TCF are in good order, complete, accurate and up to
date, and with all necessary signatures on the assignments of certificates
representing shares previously transferred, and set forth
A-17
<PAGE>
all stock and securities issued, transferred and surrendered. Except as
described in Section 5.24 of the TCB Disclosure Memorandum, to the Knowledge of
TCB, no transfer has been made without surrender of the proper certificate, duly
endorsed, or the completion of a lost certificate affidavit, and all
certificates so surrendered have been duly canceled and are attached thereto.
5.25 Certain Interests. Except in arm's length transactions pursuant to
------------------
standard commercial terms and conditions or as set forth in Section 5.25 of the
TCB Disclosure Memorandum, no officer or director of any TCB Company has any
material interest in any property, real or personal, tangible or intangible,
used in or pertaining to the business of any TCB Company. No such person is
indebted to any TCB Company except for indebtedness arising in the ordinary
course of business except as disclosed in Section 5.25 of the TCB Disclosure
Memorandum and TCB Company is not indebted to any such person except for amounts
due under normal salary or reimbursement of ordinary business expenses.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CITCO AND CITIZENS BANK
---------------------------------------------------------
Citco and Citizens Bank hereby represent and warrant to TCB and TCF as
follows:
6.1 Organization, Standing, and Power. Citco is a corporation duly
------------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Tennessee, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Material Assets. Citco and
Citizens Bank are duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of their respective Assets or the nature or
conduct of their respective business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Citco.
6.2 Authority; No Breach By Agreement.
---------------------------------
(a) Citco and Citizens Bank have the corporate power and authority
necessary to execute, deliver, and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery,
and performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Citco and
Citizens Bank. This Agreement represents a legal, valid, and binding obligation
of Citco and Citizens Bank, enforceable against them in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
A-18
<PAGE>
(b) Neither the execution and delivery of this Agreement by Citco and
Citizens Bank, nor the consummation by Citco of the transactions contemplated
hereby, nor compliance by Citco with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of their Charters or
Bylaws, (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any Citco
Company under, any Contract or Permit of any Citco Company, where such Default
or Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Citco, or (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to any Citco Company or any
of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Citco, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
Citco of the Merger and the other transactions contemplated in this Agreement.
6.3 Citco Subsidiaries. Citco or one of its Subsidiaries owns all of the
-------------------
issued and outstanding shares of capital stock of each Citco Subsidiary. There
are no Contracts relating to the rights of any Citco Company to vote or to
dispose of any shares of the capital stock of any Citco Subsidiary. All of the
shares of capital stock of each Citco Subsidiary held by a Citco Company are
fully paid and, except as provided in statutes pursuant to which depository
institution Subsidiaries are organized, nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the Citco Company free and clear of any Lien. Each
Citco Subsidiary is either a bank or a corporation, and is duly organized,
validly existing, and (as to corporations) in good standing under the Laws of
the jurisdiction in which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate its Assets and
to carry on its business as now conducted. Each Citco Subsidiary is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Citco. Each Citco Subsidiary that
is a depository institution is an "insured depository institution" as defined in
the Federal Deposit Insurance Act and applicable regulations thereunder, and the
deposits in which are insured by the Bank Insurance Fund or Savings Association
Insurance Fund. As of the date of this Agreement, Citco does not own
beneficially any shares of the capital stock of TCB.
6.4 Compliance with Laws. Citco is duly registered as a bank holding
----------------------
company under the BHC Act. Each Citco Company has in effect all Permits
necessary for it to own, lease, or operate
A-19
<PAGE>
its Material Assets and to carry on its business as now conducted, except for
those Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Citco, and there
has occurred no Default under any such Permit, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Citco. None of the Citco Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Citco; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any Citco Company is not in compliance with
any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Citco, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Citco,
or (iii) requiring any Citco Company (x) to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive, commitment,
or memorandum of understanding, or (y) to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
6.5 Statements True and Correct. None of the information supplied or to be
---------------------------
supplied by any Citco Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to TCB's shareholders in connection with the
Shareholders' Meeting, will, when first mailed to the shareholders of TCB, be
false or misleading with respect to any Material fact, or contain any
misstatement of Material fact, or omit to state any Material fact required to be
stated thereunder or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Shareholders' Meeting, be false or misleading with respect to any Material
fact, or omit to state any Material fact required to be stated thereunder or
necessary to correct any Material statement in any earlier communication with
respect to the solicitation of any proxy for the Shareholders' Meeting. All
documents that any Citco Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all Material respects with the
provisions of applicable Law.
6.6 Regulatory Matters. No Citco Company or any Affiliate thereof has taken
------------------
or agreed to take any action, and Citco has no Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of
any Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section. To the Knowledge of Citco,
there exists no fact, circumstance or reason why the requisite Consents referred
to in Section 9.1(b) of this Agreement
A-20
<PAGE>
cannot be received in a timely manner without imposition of any condition of the
type described in the last sentence of such Section 9.1(b). Based upon the
funding of the loan commitment letter received by Citco, at the Closing, Citco
will have sufficient capital resources available to allow it to consummate the
Merger on the terms provided herein.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Affirmative Covenants of Both Parties. Unless the prior written consent
-------------------------------------
of the other Party shall have been obtained, and except as otherwise expressly
contemplated herein, each Party shall and shall cause each of its Subsidiaries
to (i) operate its business only in the usual, regular, and ordinary course,
(ii) preserve intact its business organization and Assets and maintain its
rights and franchises, (iii) use its reasonable efforts to maintain its current
employee relationships, and (iv) take no action which would (a) adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) of this Agreement, or (b)
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement; provided, that the foregoing shall not prevent
any Citco Company from discontinuing or disposing of any of its Assets or
business, or from acquiring or agreeing to acquire any other Person or any
Assets thereof, if such action is, in the judgment of Citco, desirable in the
conduct of the business of Citco and its Subsidiaries and such action will not
have a Material Adverse Effect on Citco.
7.2 Negative Covenants of TCB and TCF. From the date of this Agreement
-----------------------------------
until the earlier of the Effective Time or the termination of this Agreement,
TCB and TCF covenant and agree that they will not do or agree or commit to do,
or permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of Citco, which consent shall not be
unreasonably withheld:
(a) amend the Charter, Bylaws, or other governing instruments of any TCB
Company, or
(b) incur, guarantee, or otherwise become responsible for, any additional
debt obligation or other obligation for borrowed money (other than indebtedness
of a TCB Company to another TCB Company), except in the ordinary course of the
business consistent with past practices (which shall include, for TCB
Subsidiaries that are depository institutions, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Reserve Bank or Federal
Home Loan Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or impose, or suffer the imposition, on any
Asset of any TCB Company of any Lien or permit any such Lien to exist (other
than in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of business,
the satisfaction of legal requirements in the exercise of trust powers, and
Liens in effect as of the date hereof that are disclosed in the TCB Disclosure
Memorandum); or
A-21
<PAGE>
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any TCB Company, or declare or pay any dividend, special or
regular, (except that TCB may declare and pay its standard quarterly dividends
of $.10 per share prior to the Effective Time) or make any other distribution in
respect of TCB's capital stock; or
(d) except for this Agreement or pursuant to the exercise of Rights
outstanding as of the date of this Agreement and pursuant to the terms thereof
in existence on the date of this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of TCB Common Stock or any other capital
stock of any TCB Company, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any security
convertible into any such stock; or
(e) adjust, split, combine, or reclassify any capital stock of any TCB
Company or issue or authorize the issuance of any other securities in respect of
or in substitution for shares of TCB Common Stock, or sell, lease, mortgage, or
otherwise dispose of or otherwise encumber (i) any shares of capital stock of
any TCB Subsidiary (unless any such shares of stock are sold or otherwise
transferred to another TCB Company), (ii) investment securities, (iii) loans,
including dispositions thereof through loan participation agreements, and (iv)
other real estate owned by any TCB Company (except for the sale of foreclosed
real estate) other than in all instances, in the ordinary course of business for
reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or less,
purchase any securities or make any Material investment, either by purchase of
stock or securities, contributions to capital, Asset transfers, or purchase of
any Assets, in any Person other than a wholly-owned TCB Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in connection
with (i) foreclosures in the ordinary course of business, (ii) acquisitions of
control by a depository institution Subsidiary in its fiduciary capacity, or
(iii) the creation of new wholly-owned Subsidiaries organized to conduct or
continue activities otherwise permitted by this Agreement provided that nothing
herein shall prevent TCF from selling residential mortgage loans which have been
held for less than one year. It is understood that TCF will not swap residential
mortgage loans for mortgage-backed securities issued by the Federal Home Loan
Mortgage Corporation without Citco's permission; or
(g) except as otherwise permitted or required in this Agreement, grant
any increase in compensation or benefits to the employees or officers of any TCB
Company, except as required by Law or in accordance with past practices as
described in Section 7.2(g) of the TCB Disclosure Memorandum; pay any severance
or termination pay or any bonus other than pursuant to written policies or
written Contracts in effect on the date of this Agreement; enter into or amend
any severance agreements with officers of any TCB Company; grant any increase in
fees or other
A-22
<PAGE>
increases in compensation or other benefits to directors of any TCB Company; or
voluntarily accelerate the vesting of any stock options or other stock-based
compensation or employee benefits; or
(h) enter into or amend any employment Contract between any TCB Company
and any Person (unless such amendment is required by Law) that the TCB Company
does not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(i) adopt any new employee benefit plan of any TCB Company or make any
Material change in or to any existing employee benefit plans of any TCB Company
other than any such change that is required by Law or as contemplated by this
Agreement or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than as necessary for the prudent
operation of its business or settle any Litigation involving any Liability of
any TCB Company for Material money damages or restrictions upon the operations
of any TCB Company; or
(l) except in the ordinary course of business, modify, amend, or
terminate any Material Contract or waive, release, compromise, or assign any
Material rights or claims; or
(m) sell any mortgage loans from their portfolio (any loans which have
been held for at least one year or construction loans one year after they have
become permanent), and it is understood that TCF will not swap residential
mortgage loans for mortgage-backed securities issued by the Federal Home Loan
Mortgage Corporation without Citco's permission; or
(n) make any loan or other extension of credit, or grant any increase
in an extension of credit, in the aggregate amount of $250,000 to any borrower
or its Affiliates.
7.3 Adverse Changes in Condition. Each Party agrees to give written notice
----------------------------
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
Material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.4 Reports. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial
A-23
<PAGE>
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the entity
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not Material). As
of their respective dates, such reports filed with the SEC will comply in all
Material respects with the Securities Laws and will not contain any untrue
statement of a Material fact or omit to state a Material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 Proxy Statement; Shareholder Approval. As soon as reasonably
------------------------------------------
practicable after execution of this Agreement, TCB shall prepare the Proxy
Statement to be filed with the SEC. Citco shall furnish all information
concerning it as TCB may reasonably request in connection with such action. TCB
shall call a Shareholders' Meeting, to be held as soon as reasonably
practicable, for the purpose of voting upon approval of this Agreement and such
other related matters as it deems appropriate. In connection with the
Shareholders' Meeting, (i) TCB shall mail such Proxy Statement to its
shareholders, (ii) the Parties shall furnish to each other all information
concerning them that they may reasonably request in connection with such Proxy
Statement, (iii) the Board of Directors of TCB shall recommend to its
shareholders the approval of the matters submitted for approval (subject to
compliance with the Board's fiduciary duties and the receipt from Trident
Securities, a Division of McDonald Investments Inc., of a letter dated not more
than three days prior to the date of the mailing of the Proxy Statement
confirming the opinion given to the Board prior to execution of this Agreement
to the effect that the consideration to be received in the Merger by the holders
of TCB Common Stock is fair, from a financial point of view, to such holders),
and (iv) the Board of Directors and officers of TCB shall use their reasonable
efforts to obtain such shareholders' approval. In addition, nothing in this
Section 8.1 or elsewhere in this Agreement shall prohibit accurate disclosure by
TCB of information that is required to be disclosed in the Proxy Statement or in
any other document required to be filed with the SEC (including, without
limitation, a Solicitation/Recommendation Statement on Schedule 14D-9) or
otherwise required to be publicly disclosed by applicable Law or regulations or
rules of the NASD.
8.2 Applications. Citco shall promptly prepare and file, and TCB and TCF
-----------
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. Citco
shall permit TCB and its counsel to review (and approve with respect to
information relating to TCB) such applications prior to filing same.
A-24
<PAGE>
8.3 Filings with State Offices. Upon the terms and subject to the
-----------------------------
conditions of this Agreement, Citco shall execute and file the Tennessee
Certificate of Merger with the Secretary of State of the State of Tennessee and
the Tennessee Articles of Merger with the Secretary of State of the State of
Tennessee in connection with the Closing. Citizens Bank shall execute and file
similar documents as required for its merger with TCF.
8.4 Agreement as to Efforts to Consummate. Subject to the terms and
-----------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including, without limitation, using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
8.5 Investigation and Confidentiality.
---------------------------------
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all Material developments relevant to its business and to
consummation of the Merger. Each Party shall permit the other Party to make or
cause to be made such investigation of its business and properties and of its
respective financial and legal conditions as the other Party reasonably
requests, provided that such investigation shall be reasonably related to the
transactions contemplated hereby and shall not interfere unnecessarily with
normal operations.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. In the event
that a Party is required by applicable Law or valid court process to disclose
any such confidential information, then such Party shall provide the other Party
with prompt written notice of any such requirement so that the other Party may
seek a protective order or other appropriate remedy and/or waive compliance with
this Section 8.5 If in the absence of a protective order or other remedy or the
receipt of a waiver by the other Party, a Party is nonetheless, in the opinion
of counsel, legally compelled to disclose any such confidential information to
any tribunal or else stand liable for contempt or suffer other censure or
penalty, a Party may, without liability hereunder, disclose to such tribunal
only that portion of the confidential information which such counsel advises
such Party is legally required to be disclosed; provided that such disclosing
Party use its best efforts to preserve the confidentiality of such confidential
information, including without limitation, by cooperating with the other Party
to obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded such confidential information by such
tribunal. If this
A-25
<PAGE>
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a Material
breach of any representation, warranty, covenant, or agreement of the other
Party or which has had or is reasonably likely to have a Material Adverse Effect
on the other Party.
(d) Neither Party nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client or similar privilege with respect to such information or
contravene any Law, rule, regulation, Order, judgment, decree, fiduciary duty,
or agreement entered into prior to the date of this Agreement. The Parties will
use their reasonable efforts to make appropriate substitute disclosure
arrangements, to the extent practicable, in circumstances in which the
restrictions of the preceding sentence apply.
8.6 State Takeover Laws. Each TCB Company shall take all necessary steps to
-------------------
exempt the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Laws.
8.7 Press Releases. Prior to the Effective Time, Citco and TCB shall
---------------
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 Charter Provisions. Each TCB Company shall take all necessary action to
------------------
ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not result
in the grant of any rights to any Person under the Charter, Bylaws, or other
governing instruments of any TCB Company or restrict or impair the ability of
Citco or any of its Subsidiaries to vote, or otherwise to exercise the rights of
a shareholder with respect to, shares of any TCB Company that may be directly or
indirectly acquired or controlled by it.
8.9 Employee Benefits and Contracts. Following the Effective Time, Citco
--------------------------------
shall provide generally to officers and employees of the TCB Companies, who at
or after the Effective Time become employees of a Citco Company, employee
benefits under employee benefit plans (other than stock option or other plans
involving the potential issuance of Citco Common Stock except as set forth in
this Section 8.9), on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the Citco Companies to
their similarly situated officers and employees. For purposes of participation
and vesting (but not accrual of benefits) under such
A-26
<PAGE>
employee benefit plans, (i) service under any qualified defined benefit plans of
the TCB Companies shall be treated as service under Citco's qualified defined
benefit plans, (ii) service under any qualified defined contribution plans of
the TCB Companies shall be treated as service under Citco's qualified defined
contribution plans, and (iii) service under any other employee benefit plans of
the TCB Companies shall be treated as service under any similar employee benefit
plans maintained by Citco. Except as otherwise described in this Agreement,
Citco also shall honor and cause each of its Subsidiaries to honor all
employment, severance, consulting, and other compensation Contracts disclosed in
Section 8.9 of the TCB Disclosure Memorandum to Citco between any TCB Company
and any current or former director, officer, or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the TCB Benefit Plans. Subject to the provisions of
Section 9.2(f), Citco and Citizens Bank expressly acknowledge that as a result
of the transaction contemplated by this Agreement, Thad R. Bowers, Judith O.
Bowers, and Joyce S. Rouse will become entitled to the payments provided for
under their respective employment and severance agreements upon their
termination in connection with a change in control. TCB and TCF shall use their
reasonable best efforts to obtain the consents of Mr. Bowers, Ms. Bowers, and
Ms. Rouse to the termination of their respective employment and severance
agreements as of the Effective Time and shall pay Mr. Bowers, Ms. Bowers, and
Ms. Rouse the amounts to which they would be entitled under such agreements upon
their termination in connection with a change in control.
8.10 Indemnification and Insurance.
-----------------------------
(a) Subject to the conditions set forth in paragraph (b) below, for a
period of six (6) years after the Effective Time, Citco and Citizens Bank shall
indemnify, defend, and hold harmless each officer and director of a TCB Company
entitled to indemnification from a TCB Company (each, an "Indemnified Party")
against all Liabilities arising out of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the fullest extent permitted, but as may be
limited, by Tennessee Law, in each case as in effect on the date hereof,
including provisions relating to advances of expenses incurred in the defense of
any Litigation; provided, however, that all rights to indemnification in respect
of any claim asserted or made against an Indemnified Party within such six (6)
year period shall continue until the final disposition of such claim. Without
limiting the foregoing, in any case in which approval by TCB is required to
effectuate any indemnification, Citco shall direct, at the election of the
Indemnified Party, that the determination of any such approval shall be made by
independent counsel mutually agreed upon between Citco and the Indemnified
Party.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) above, upon learning of any such Liability or Litigation, shall
promptly notify Citco thereof. In the event of any such Litigation (whether
arising before or after the Effective Time), (i) Citco shall have the right to
assume the defense thereof and Citco shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof (employing counsel reasonably satisfactory to the Indemnified Parties),
except that if Citco elects not to assume such defense or counsel for the
A-27
<PAGE>
Indemnified Parties advises in writing that there are Material substantive
issues which raise conflicts of interest between Citco and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Citco shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that (i) Citco shall be obligated pursuant to this paragraph (b) to pay
for only one firm of counsel for all Indemnified Parties in any jurisdiction,
unless counsel for any Indemnified Party advises in writing that there are
Material substantive issues which raise conflicts of interest between the
Indemnified Parties, (ii) the Indemnified Parties will cooperate (to the extent
reasonably appropriate under the circumstances) in the defense of any such
Litigation, and (iii) Citco shall not be liable for any settlement effected
without its prior written consent; and provided further that Citco shall not
have any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall determine, and such determination shall have become
final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law.
(c) If Citco or any of its successors or assigns shall consolidate with
or merge into any other Person and shall not be the continuing or surviving
Person of such consolidation or merger or shall transfer all or substantially
all of its Assets to any Person, then and in each case, proper provision shall
be made so that the successors and assigns of Citco shall assume the obligations
set forth in this Section 8.10.
(d) The provisions of this Section 8.10 are intended to be for the
benefit of and shall be enforceable by, each Indemnified Party, his or her heirs
and representatives.
(e) At the Effective Time, Citco shall provide directors and officers
insurance coverage for TCB's directors and officers by purchasing continuation
coverage under TCB's existing directors' and officers' liability insurance
policy (or provide a policy providing comparable coverage and amounts and terms
no less favorable to the persons currently covered by TCB's existing policy)
covering persons who are currently covered by such insurance on a prior acts
basis for a period of six years after the Effective Time and as long as the
one-time premium for such policy does not exceed $15,000 and such insurance can
reasonably be obtained.
8.11 Certain Modifications. Citco and TCB shall consult with respect to
----------------------
their loan, litigation, and real estate valuation policies and practices
(including loan classifications and levels of reserves) and the TCB Companies
shall make such modifications or changes to their policies and practices, if
any, immediately prior to the Effective Time, as may be mutually agreed upon
provided such modifications or changes are in accordance with GAAP and all
applicable Laws. Citco and TCB also shall consult with respect to the character,
amount, and timing of restructuring and Merger-related expense charges to be
taken by each of the Parties in connection with the transactions contemplated by
this Agreement and shall take such charges in accordance with GAAP and all
applicable Laws as may be mutually agreed upon by the Parties. In no event,
however, shall TCB or TCF be obligated to take any such actions unless and until
it shall have received from Citco written confirmation that all conditions
precedent to Citco's obligation to close shall have been satisfied or waived.
Neither Party's representations, warranties, and covenants contained in this
A-28
<PAGE>
Agreement shall be deemed to be inaccurate or breached in any respect or deemed
to have a Material Adverse Effect on TCB as a consequence of any modifications
or charges undertaken solely on account of this Section 8.11.
8.12 Termination of Plans.
--------------------
(a) Prior to the Effective Time, TCF shall give written notice to the
Financial Institutions Retirement Fund ("FIRF") of its withdrawal from
participation in FIRF effective as of the earliest practicable date after the
Effective Time. TCB and/or TCF shall accrue and pay all contributions due and
payable to FIRF, including all contributions payable because of withdrawal from
TCF's participation in FIRF. Within sixty (60) days after the execution of this
Agreement, Citco and TCB will use their reasonable best efforts to determine the
costs associated with withdrawing from participation in FIRF. To the extent it
is determined that such costs and any similar costs associated with the previous
termination of the MRP Plan will be in excess of the anticipated annual funding
cost of $75,000, an adjustment will be made to decrease the Exchange Price so
that the aggregate amount payable by Citco to holders of TCB Common Stock and
options to acquire TCB Common Stock pursuant to Section 3.1 of this Agreement
will be reduced by the amount by which such costs exceed $75,000.
(b) With respect to the TCB 401(k) plan, TCB will cooperate with Citco
prior to the Effective Time to prepare for either the termination of such plan
or the merger of such plan into a similar plan offered by Citco to its
employees.
(c) With respect to the maximum of $375,000 in SERP Liability
outstanding as of the Effective Time, Citco or the Citco Companies shall pay
such Liability within ten days after the Effective Time. To the extent any
additional SERP Liability is determined by Citco to be due and payable, an
adjustment will be made to decrease the Exchange Price so that the aggregate
amount payable by Citco to holders of TCB Common Stock and options to acquire
TCB Common Stock pursuant to Section 3.1 of this Agreement will be reduced by
the amount by which such costs exceed $375,000.
8.13 ESOP. As soon as practicable after the execution of this Agreement,
----
Citco and TCB will use their reasonable best efforts to take such actions as may
be necessary or advisable to terminate the TCB Employee Stock Ownership Plan
("ESOP") at the Effective Time. Between the date hereof and the Effective Time,
the existing TCB ESOP indebtedness will be paid in accordance with the current
debt repayment schedule, and TCB or TCF may make the contributions to the TCB
ESOP as is allowable under applicable provisions of the Internal Revenue Code to
fund such payments which must be approved by Citco. Any indebtedness of the TCB
ESOP remaining as of the Effective Time shall be repaid from the related trust,
in accordance with Section 17.3 of the TCB ESOP provided, however, that (i) any
related sale or distribution of shares by the TCB ESOP shall be effected in
accordance with the requirements of federal and any applicable state securities
laws and regulations, and (ii) all distributions from the TCB ESOP after the
Effective Time shall be in cash. Upon the repayment of the TCB ESOP loan, the
remaining funds in the TCB ESOP suspense
A-29
<PAGE>
account will be allocated (to the extent permitted by Sections 401(a), 415,
4975, and other applicable provisions of the Internal Revenue Code) to TCB ESOP
participants, as determined under the terms of the TCB ESOP. TCB and TCF are
authorized to file as soon as possible a determination application with the
Internal Revenue Service regarding the tax qualification of the TCB ESOP upon
termination. TCB and Citco agree that, subject to the conditions described
herein and the receipt of a favorable Internal Revenue Service determination
letter as soon as practicable after the Effective Time and repayment of the TCB
ESOP loan, participants in the TCB ESOP shall be entitled at their election to
have the amounts in the TCB ESOP accounts either distributed to them in a lump
sum or rolled over to another tax-qualified plan (including Citco plans to the
extent permitted by Citco) or individual retirement account. The actions
relating to termination of the TCB ESOP will be adopted conditioned upon the
consummation of the Merger. As of and following the Effective Time, Citco shall
cause the TCB ESOP to be maintained for the exclusive benefit of employees and
other persons who are participants or beneficiaries therein prior to the
Effective Time and proceed with termination of the TCB ESOP through distribution
of its assets in accordance with this Section 8.14 and as otherwise may be
required to comply with applicable law.
8.14 Sole Agreement to Merge or Sell. Except as required by applicable law,
-------------------------------
rules, or regulations (including the fiduciary duties of the TCB and TCF
directors under applicable law), no TCB Company has been, is, will become, or
will be allowed to become, a party to any merger or business combination
agreement, letter of intent, agreement of sale, or other agreement obligating
any TCB Company to sell or authorize the sale or transfer of any capital stock ,
or to allow any TCB Company to merge or consolidate with, or to be acquired in
any other manner by, any entity or person other than Citco. Until such time, if
any, as this Agreement is terminated pursuant to Section 10, except as required
by applicable law, rules, or regulations (including the fiduciary duties of the
TCB and TCF directors under applicable law), the TCB Companies will not, and
will cause each of their representatives or agents not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Citco) relating to any transaction involving the sale of the business or
assets (other than in the ordinary course of business) of any TCB Company, or
any of the capital stock of any TCB Company, or any merger, consolidation,
business combination, or similar transaction involving any TCB Company.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 Conditions to Obligations of Each Party. The respective obligations of
---------------------------------------
each Party to perform this Agreement and to consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Shareholder Approval. The shareholders of TCB shall have approved this
--------------------
Agreement, and the consummation of the transactions contemplated hereby,
including the Merger, as and to the extent required by Law and by the provisions
of any governing instruments.
A-30
<PAGE>
(b) Regulatory Approvals. All Consents of, filings and registrations with,
--------------------
and notifications to, all Regulatory Authorities required for consummation of
the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(excluding requirements relating to the raising of additional capital or the
disposition of Assets or deposits) which in the reasonable good faith judgment
of the Board of Directors of Citco would so materially adversely impact the
economic or business benefits of the transactions contemplated by this Agreement
so as to render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and all
------------------------
Consents required for consummation of the Merger (other than those referred to
in Section 9.1(b) of this Agreement) or for the preventing of any Default under
any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party. No Consent obtained which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
which in the reasonable good faith judgment of the Board of Directors of Citco
would so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.
(d) Legal Proceedings. No court or governmental or Regulatory Authority of
-----------------
competent jurisdiction shall have enacted, issued, promulgated, enforced, or
entered any Law or Order (whether temporary, preliminary, or permanent) or taken
any other action which prohibits, restricts, or makes illegal consummation of
the transactions contemplated by this Agreement.
(e) Proxy Statement. The Proxy Statement shall be effective under the 1934
---------------
Act, no stop orders suspending the effectiveness of the Proxy Statement shall
have been issued, and no action, suit, proceeding, or investigation by the SEC
to suspend the effectiveness thereof shall have been initiated and be
continuing.
(f) Fairness Opinion. Trident Securities, a Division of McDonald
-----------------
Investments Inc., shall have issued at the time described in Section 8.1 an
opinion to TCB as to the fairness, from a financial point of view, of the
Merger.
9.2 Conditions to Obligations of Citco and Citizens Bank. The obligations
-----------------------------------------------------
of Citco and Citizens Bank to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by Citco and Citizens Bank pursuant
to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section 9.2(a),
-------------------------------
the accuracy of the representations and warranties of TCB and TCF set forth in
this Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
A-31
<PAGE>
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of TCB and TCF
set forth in this Agreement shall be true and correct (except for inaccuracies
which are de minimis in amount).
(b) Performance of Agreements and Covenants. Each and all of the agreements
---------------------------------------
and covenants of TCB and TCF to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all Material respects.
(c) Certificates. TCB shall have delivered to Citco (i) a certificate,
------------
dated as of the Effective Time and signed on its behalf by its duly authorized
officers, to the effect that the conditions of its obligations set forth in
Section 9.2(a) and 9.2(b) of this Agreement have been satisfied, and (ii)
certified copies of resolutions duly adopted by TCB's and TCF's Board of
Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as Citco and its counsel shall request.
(d) Claims Letters. Each of the directors and executive officers of TCB and
--------------
TCF shall have executed and delivered to Citco, letters in substantially the
form of Exhibit 2.
(e) Legal Opinion. Citco shall have received a written opinion, dated as of
-------------
the Effective Time, of counsel to TCB, in substantially the form of Exhibit 3.
(f) Amendment to Severance Agreements. Citco shall have entered into
------------------------------------
written agreements in the form attached as Exhibit 8 with base compensation
terms similar to those currently in effect with Michael H. Phipps, John M.
Wolford, and Robert C. Glover. Immediately prior to the Effective Time, Thad
Bowers, Judith O. Bowers, and Joyce S. Rouse will terminate their employment,
and any outstanding employment or severance agreements, with the TCB Companies
with the maximum severance, golden parachute, or other payments (excluding
payments which may be due such persons under the SERP, but only to the extent
necessary to keep all such payments below the definition of the "golden
parachute" under the IRC, or upon the conversion of shares of TCB Common Stock
to Article 3 of this Agreement) payable to such employees in the amounts of
$564,712, $97,241, and $122,159, respectively, for a total severance, golden
parachute, or other payment of no more than $784,112 (provided that the
Effective Time shall have occurred prior to December 31, 2000).
(g) Contractor Letter. Citco shall have received a written confirmation, in
-----------------
a form acceptable to Citco, from the contractor for TCF's Virginia branch that
all Liabilities to the contractor and all subcontractors have been satisfied in
full and no liens or encumbrances have been placed on the branch property.
(h) Stock Option Agreement. Citco and TCB shall have entered into the Stock
----------------------
Option Agreement, in the form attached as Exhibit 7, within 24 hours after the
execution of this Agreement.
A-32
<PAGE>
9.3 Conditions to Obligations of TCB and TCF. The obligations of TCB and
------------------------------------------
TCF to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by TCB and TCF pursuant to Section 11.6(b)
of this Agreement:
(a) Representations and Warranties. For purposes of this Section 9.3(a),
-------------------------------
the accuracy of the representations and warranties of Citco and Citizens Bank
set forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date). The representations and warranties of
Citco and Citizens Bank set forth in this Agreement shall be true and correct
(except for inaccuracies which are de minimis in amount).
(b) Performance of Agreements and Covenants. Each and all of the agreements
---------------------------------------
and covenants of Citco and Citizens Bank to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in all
Material respects.
(c) Certificates. Citco shall have delivered to TCB (i) a certificate,
------------
dated as of the Effective Time and signed on its behalf by its duly authorized
officers, to the effect that the conditions of its obligations set forth in
Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and (ii)
certified copies of resolutions duly adopted by Citco's and Citizens Bank's
Board of Directors evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as TCB and its counsel shall request.
(d) Legal Opinion. TCB shall have received a written opinion, dated as of
-------------
the Effective Time, of counsel to Citco, in substantially the form of Exhibit 4.
(e) Exchange Agent Certificate. The Exchange Agent shall have delivered to
--------------------------
TCF a certificate dated as of the Effective Time certifying to its receipt of
sufficient cash to pay for the aggregate Exchange Price.
ARTICLE 10
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the shareholders of TCB,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of the Board of Directors of Citco and the Board of
Directors of TCB each so determined by majority vote of the respective Boards;
or
A-33
<PAGE>
(b) By the Board of Directors of any Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of TCB and TCF and Section 9.3(a) of this
Agreement in the case of Citco and Citizens Bank or in Material breach of any
covenant or other agreement contained in this Agreement) in the event of an
inaccuracy of any representation or warranty of the other Party contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such inaccuracy and which
inaccuracy would provide the terminating Party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section 9.2(a)
of this Agreement in the case of TCB and TCF and Section 9.3(a) of this
Agreement in the case of Citco and Citizens Bank; or
(c) By the Board of Directors of any Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of TCB and TCF and Section 9.3(a) in the
case of Citco and Citizens Bank) in the event of a Material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
(d) By the Board of Directors of any Party in the event (i) any Consent
of any Regulatory Authority required for consummation of the Merger and the
other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal, or (ii) the shareholders of
TCB fail to vote their approval of the matters submitted for the approval by
such shareholders at the Shareholders' Meeting where the transactions were
presented to such shareholders for approval and voted upon; or
(e) By the Board of Directors of any Party in the event that the Merger
shall not have been consummated by December 31, 2000, or such later date, as may
be necessary to finalize any required regulatory approvals or waiting periods,
if the failure to consummate the transactions contemplated hereby on or before
such date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of any Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of TCB and TCF and Section 9.3(a) of this
Agreement in the case of Citco and Citizens Bank or in Material breach of any
covenant or other agreement contained in this Agreement) in the event that any
of the conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section 10.1(e)
of this Agreement.
10.2 Effect of Termination. In the event of the termination and abandonment
---------------------
of this Agreement pursuant to Section 10.1 of this Agreement, this Agreement
shall become void and have no effect, except that (i) the provisions of this
Section 10.2 and Article 11 and Section 8.5(b) of this
A-34
<PAGE>
Agreement shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 10.1(b), 10.1(c), or 10.1(f) of this Agreement
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, or agreement giving rise to such
termination.
10.3 Non-Survival of Representations and Covenants. The respective
--------------------------------------------------
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4, and 11 of this Agreement.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 Definitions.
-----------
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CITCO COMPANIES" shall mean, collectively, Citco and all Citco
Subsidiaries.
"CITCO SUBSIDIARIES" shall mean the Subsidiaries of Citco and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of Citco in the future and owned by Citco at the Effective Time.
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement, entered into prior to the date of this Agreement, between TCB and
Citco.
A-35
<PAGE>
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on a Party.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXHIBITS" 1 through C-2, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
A-36
<PAGE>
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean the personal
knowledge of the chairman, president, or chief financial officer of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities, or business, including those promulgated, interpreted, or enforced
by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including costs
of investigation, collection, and defense), claim, deficiency, guaranty, or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention,
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for property Taxes not yet due and
payable, (ii) for depository institution Subsidiaries of a Party, pledges to
secure deposits, and other Liens incurred in the ordinary course of the banking
business; (iii) such standard exceptions to title as are pre-printed in Schedule
B to the ALTA Form B title commitment;(iv) Liens which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on a Party;
and (v) Liens which have been disclosed in either the Citco Disclosure
Memorandum or the TCB Disclosure Memorandum.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement, but shall not include regular, periodic
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
A-37
<PAGE>
"LOAN PROPERTY" shall mean any property owned, leased, or operated by
the Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security or other interest (including an interest in a
fiduciary capacity), and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a Material adverse impact on (i) the financial condition,
results of operations, or business of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in GAAP or regulatory accounting principles generally applicable to
banks and their holding companies, (c) actions and omissions of a Party (or any
of its Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, (d) the Merger and
compliance with the provisions of this Agreement on the operating performance of
the Parties; and (e) changes in economic conditions generally affecting
financial institutions.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
(including, but not limited to, participating in a fiduciary capacity) and,
where required by the context, said term means the owner or operator of such
facility or property, but only with respect to such facility or property.
"PARTY" shall mean either TCB, TCF, Citizens Bank, or Citco, and
"PARTIES" shall mean TCB, TCF, Citizens Bank, and Citco.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any
A-38
<PAGE>
Person is a party or that is or may be binding upon or inure to the benefit of
any Person or its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PROXY STATEMENT" shall mean the proxy statement used by TCB to solicit
the approval of its shareholders of the transactions contemplated by this
Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Federal Deposit Insurance Corporation, the
Office of Thrift Supervision, all state regulatory agencies having jurisdiction
over the Parties and their respective Subsidiaries, the NASD, and the SEC.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
TCB to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 50% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 50% or more
A-39
<PAGE>
of the outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
"SURVIVING CORPORATION" shall mean Citco with respect to the merger of
Citco and TCB and Citizens Bank with respect to the merger of Citizens Bank and
TCF.
"TAX" or "TAXES" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, local, or foreign government or subdivision or
agency thereof, including any interest, penalties, or additions thereto.
"TAXABLE PERIOD" shall mean any period prescribed by any governmental
authority, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is required
to be filed or Tax is required to be paid.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary group
that includes a Party or its Subsidiaries.
"TBCA" shall mean the Tennessee Business Corporation Act as amended.
"TBL" shall mean the Tennessee Banking Law as amended.
"TCB COMMON STOCK" shall mean the $1.00 par value common stock of TCB.
"TCB COMPANIES" shall mean, collectively, TCB and all TCB Subsidiaries.
"TCB DISCLOSURE MEMORANDUM" shall mean the written information entitled
"TCB Disclosure Memorandum" delivered prior to the execution of this Agreement
to Citco describing in reasonable detail the matters contained therein and, with
respect to each disclosure made therein, specifically referencing each Section
or subsection of this Agreement under which such disclosure is being made. The
inclusion of any matter in this document shall not be deemed an admission or
otherwise to imply that any such matter is Material for purposes of this
Agreement.
"TCB FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of TCB as of March
31, 2000, and as of December 31, 1999 and 1998, and the related statements of
income, changes in shareholders' equity, and cash flows
A-40
<PAGE>
(including related notes and schedules, if any) for the three months ended March
31, 2000, and for each of the three years ended December 31, 1999, 1998, and
1997, included in the TCB Disclosure Memorandum, and (ii) the consolidated
statements of condition of TCB (including related notes and schedules, if any)
and related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) with respect to periods
ended subsequent to March 31, 2000.
"TCB SUBSIDIARIES" shall mean the Subsidiaries of TCB, which shall
include the TCB Subsidiaries described in Section 5.4 of this Agreement and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of TCB in the future and owned by TCB at the Effective Time.
"TCF COMMON STOCK" shall mean the $1.00 par value Common Stock of TCF.
"TENNESSEE ARTICLES OF MERGER" shall mean collectively the Articles of
Merger to be executed by Citco and TCB as well as the Articles of Merger to be
executed by Citizens Bank and TCB and filed with the Secretary of State of the
State of Tennessee relating to the Merger as contemplated by Section 1.1 of this
Agreement.
(b) The terms set forth below shall have the meanings ascribed thereto
in the referenced sections:
Closing. . . . . . . . . . . . . . Section 1.2
Effective Time . . . . . . . . . . Section 1.3
Exchange Agent . . . . . . . . . . Section 4.1
Exchange Price . . . . . . . . . . Section 3.1(c)
Indemnified Party. . . . . . . . . Section 8.10
Merger . . . . . . . . . . . . . . Section 1.1
TCB Benefit Plans. . . . . . . . . Section 5.13(a)
TCB Contracts. . . . . . . . . . . Section 5.14
TCB ERISA Affiliate. . . . . . . . Section 5.13(e)
TCB ERISA Plan . . . . . . . . . . Section 5.13(a)
TCB Pension Plan . . . . . . . . . Section 5.13(a)
TCB SEC Reports. . . . . . . . . . Section 5.5(a)
Takeover Laws. . . . . . . . . . . Section 5.19
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
--------
(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration, and application fees, printing
A-41
<PAGE>
fees, and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 Brokers and Finders. Except for Trident Securities
-------------------
as to TCB and Baxter, Fentress and Company as to Citco, each of the Parties
represents and warrants that neither it nor any of its officers, directors,
employees, or Affiliates has employed any broker or finder or incurred any
Liability for any financial advisory fees, investment bankers' fees, brokerage
fees, commissions, or finders' fees in connection with this Agreement or the
transactions contemplated hereby. In the event of a claim by any broker or
finder based upon his, her, or its representing or being retained by or
allegedly representing or being retained by TCB , TCF, Citco, or Citizens Bank,
each of the Parties, as the case may be, agrees to indemnify and hold the other
Party harmless of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly
----------------
provided herein, this Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement between the Parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
the Confidentiality Agreement, which shall remain in effect. Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.12 and 8.14 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this
----------
Agreement may be amended by a subsequent writing signed by each of the Parties
upon the approval of the Boards of Directors of each of the Parties, whether
before or after shareholder approval of this Agreement has been obtained;
provided, that after any such approval by the holders of TCB Common Stock, there
shall be no amendment decreasing the Exchange Price or changing the form of
consideration without the further approval of such holders.
11.6 Waivers.
-------
(a) Prior to or at the Effective Time, Citco, acting through its Board
of Directors, chief executive officer, chief financial officer, or other
authorized officer, shall have the right to waive any Default in the performance
of any term of this Agreement by TCB or TCF, to waive or extend the time for the
compliance or fulfillment by TCB or TCF of any and all of their obligations
under this Agreement, and to waive any or all of the conditions precedent to the
obligations of Citco and Citizens Bank under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly
A-42
<PAGE>
authorized officer of Citco except that any unfulfilled conditions shall be
deemed to have been waived at the Effective Time.
(b) Prior to or at the Effective Time, TCB, acting through its Board of
Directors, chief executive officer, chief financial officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Citco or Citizens Bank, to waive or extend the time
for the compliance or fulfillment by Citco or Citizens Bank of any and all of
their obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of TCB and TCF under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of TCB except that any unfulfilled conditions shall be deemed
to have been waived at the Effective Time.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated
----------
hereby, neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by the Parties and their respective successors and
assigns.
11.8 Notices. All notices or other communications which
-------
are required or permitted hereunder shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified mail,
postage pre-paid, or by courier or overnight carrier, to the persons at the
addresses set forth below (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
delivered:
TCB or TCF: Twin City Bancorp, Inc.
310 State Street
Bristol, Tennessee 37620
Telecopy Number: (423) 989-4449
Attention: Thad R. Bowers
President
A-43
<PAGE>
Copy to Counsel: Stradley Ronon Housley Kantarian
& Bronstein, LLP
1220 19th Street, N.W., Suite 700
Telecopy Number: (202) 822-0140
Attention: James C. Stewart, Esq.
Citco or Citizens Bank: Citco Community Bancshares, Inc.
300 Broad Street
Elizabethton, Tennessee 37643
Telecopy Number: (423) 542-1606
Attention: Joe LaPorte, III
Chairman of the Board
Copy to Counsel: Baker, Donelson, Bearman & Caldwell
A Professional Corporation
511 Union Street, Suite 1700
Nashville, Tennessee 37219
Telecopy Number: (615) 744-5718
Attention: Steven J. Eisen, Esq.
11.9 Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the Laws of the State of Tennessee, without regard to any
applicable conflicts of Laws, except to the extent that federal Laws relate to
the consummation of the Merger.
11.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
--------
purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
---------------
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of the
Parties.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the
A-44
<PAGE>
terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and attested by officers thereunto as of the day and year
first above written.
ATTEST: TWIN CITY BANCORP, INC.
By: /s/ John M. Wolford By: /s/ Thad R. Bowers
------------------------ -----------------------------
Senior Vice President Thad R. Bowers, President
ATTEST: TWIN CITY FEDERAL SAVINGS BANK
By: /s/ John M. Wolford By: /s/ Thad R. Bowers
------------------------ -----------------------------
Senior Vice President Thad R. Bowers, President
Title: President
ATTEST: CITCO COMMUNITY BANCSHARES, INC.
By: /s/ Sam LaPorte By: /s/ Joe LaPorte, III
------------------------ -----------------------------
Secretary Joe LaPorte, III
Chairman of the Board
ATTEST: CITIZENS BANK
By: /s/ Richard Tetrick By: /s/ Joe LaPorte, III
------------------------ -----------------------------
Secretary Joe LaPorte, III
Chairman of the Board
A-45
<PAGE>
Appendix B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Option Agreement") is made and entered
into this 19th day of July, 2000, between Twin City Bancorp, Inc., a Tennessee
corporation ("TCB"), whose principal offices are at 310 State Street, Bristol,
Tennessee 37620; and Citco Community Bancshares, Inc., a Tennessee corporation
("Citco"), whose principal offices are at 300 Broad Street, Elizabethton,
Tennessee 37643.
W I T N E S S E T H:
WHEREAS, TCB and Citco are parties to the Agreement and Plan of Merger
dated 18th day of July, 2000 (the "Merger Agreement") and terms not otherwise
defined herein are as defined in the Merger Agreement.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements contained herein and in the Merger Agreement, and for the purpose of
protecting the interests of Citco in proceeding with the Merger, the parties
hereto agree as follows:
1. Option. Subject to the terms and conditions set forth in this Option
------
Agreement, TCB hereby grants to Citco an irrevocable option ("Option") to
purchase up to 223,156 shares ("Option Shares") of Common Stock, $1.00 par
value, of TCB ("Shares"), being 19.9% of the number of Shares outstanding on the
date of this Agreement before such issuance, at a purchase price of $15.50 per
Option Share (such price, as adjusted as applicable, the "Purchase Price"). The
number of Option Shares that may be received upon the exercise of the Option and
the Purchase Price are subject to adjustment and other conditions as follows:
(a) If not in Material breach of the Merger Agreement and provided
that no preliminary or permanent injunction or other order against delivery of
the Option Shares issued by any court of competent jurisdiction shall be in
effect, Citco may exercise the Option, in whole or in part, at any time or from
time to time following the occurrence of a Purchase Event (as defined below);
provided that, except as otherwise provided in this Option Agreement, the Option
shall terminate and be of no further force and effect upon the earliest to occur
of (i) the Effective Time, (ii) 15 months after the first occurrence of a
Purchase Event (or if, at the expiration of such 15 months, after the first
occurrence of a Purchase Event, the Option cannot be exercised by reason of any
applicable judgement, decree, order, law, or regulation, thirty (30) business
days after such impediment to exercise shall have been removed), or (iii) 18
months after the date of this Agreement, although in the event a court or
regulatory authority order is in place that would prevent the exercise of the
Option, such date shall be extended for the period that such order is in place.
Termination of the Option shall not effect any rights under the Merger Agreement
which by their terms extend beyond the date of such termination. As used herein,
a "Purchase Event" means the termination of this Agreement under any
circumstance which would or could entitle Citco to terminate this Agreement
pursuant to Sections 10.1 (b), (c), (d)(ii), or (f) of the Merger Agreement;
provided, that a Purchase Event shall not occur unless and until TCB shall have
entered into a definitive agreement
B-1
<PAGE>
with a third party with respect to an Acquisition Proposal or an Acquisition
Proposal shall have been consummated during the 12 months following such
termination of this Agreement.
(b) In the event Citco wishes to exercise the Option, it shall send
written notice to TCB of the date of the closing of the exercise, which shall be
not later than 20 business days from the date of the notice; provided, that such
closing shall be held only if (i) such purchase would not otherwise violate or
cause the violation of any applicable law, rule, or regulation or any
restraining order injunction, decree or ruling issued by court or other
governmental authority prohibiting the delivery of such Option Shares, and (ii)
any prior notification to or approval of any regulatory authority required in
connection with such purchase shall have been made or obtained. If the closing
cannot be consummated by reason of the restrictions set forth in this paragraph,
the closing shall be held within 10 days following the elimination of such
restriction.
2. Reserved Shares. TCB hereby represents and warrants to Citco that it is
---------------
taking all necessary corporate and other action to authorize and reserve and
permit it to issue, and will have reserved issuance at all times from the date
of this Option Agreement until the obligation to deliver Shares upon the
exercise of the Option terminates, upon exercise of Option, Shares necessary for
Citco to exercise the Option, and TCB will take all necessary corporate action
to authorize and reserve for issuance all additional Shares or other securities
which may be issued pursuant to any change in the capitalization of TCB. The
shares to be issued upon due exercise of the Option, including all additional
Shares or other securities which may be issuable upon exercise of Option
pursuant to any change in capitalization, upon issuance pursuant to this Option
Agreement, shall be duly issued, fully paid and non assessable, and shall be
delivered free and clear of all liens, including any pre- emptive rights of any
shareholder of TCB. In the event of any recapitalization of TCB, appropriate
adjustments will be made in the Option Shares.
3. Repurchase. Not withstanding the other provisions of this Option
----------
Agreement, at any time commencing upon the first occurrence of a Repurchase
Event (as defined below) and ending 12 months thereafter, TCB (or any successor
entity) shall:
(a) At the request of Citco, repurchase from Citco the Option (if and
to the extent not previously exercised or terminated) at a price equal to the
excess, if any, of (x) the Applicable Price (as defined below) as of the Request
Date (as defined below) for a Share over (y) the Purchase Price (subject to
adjustment for any recapitalizations as described above), multiplied by the
number of Shares with respect to which the Option had not been exercised (the
"Option Repurchase Price"); and
(b) At the request of Citco, from time to time, repurchase, all but
not less than all of the Option Shares owned directly or indirectly by Citco at
a price equal to the Applicable Price as of the Request Date multiplied by
number of Option Shares owned directly or indirectly by Citco (the "Option Share
Repurchase Price").
At any time following the occurrence of Purchase Event, TCB (or any successor
entity) may at its election, repurchase the Option (if and to the extent not
previously exercised or terminated) or all but not less than all of the Option
Shares at the Option Repurchase Price or the Option Share Repurchase Price, as
the case may be. Any repurchase contemplated in this Option Agreement shall
B-2
<PAGE>
be subject to receipt of any necessary regulatory approvals for which the
Parties shall use their reasonable efforts to obtain promptly.
4. Definitions. For purposes of this Option Agreement, the following terms
-----------
have the following meanings:
(a) "Acquisition Proposal" with respect to a Party shall mean any
tender offer or exchange offer for more than 25% of the outstanding equity
securities of such Party or any proposal for a merger, acquisition of all of the
stock or Assets of, or other business combination involving such Party or any of
its Subsidiaries or the acquisition of 25% equity interest in, or 25% of the
Assets of, such Party or any of its Subsidiaries.
(b) "Applicable Price" as of any date means the highest of (A) the
highest price per Share paid pursuant to a tender offer or exchange offer for
Shares after the date of this Agreement and on or prior to such date, (B) the
highest price per Share to be paid by any third party for Shares and each case
pursuant to an agreement with respect to an Acquisition Proposal with TCB
entered into on or prior to such date, or (C) the highest bid price per Share as
quoted on the National Association of Securities Dealers Automated Quotations
System, or, if the Shares are not quoted thereon, on the principal trading
market on which the Shares are traded as reported by a recognized source during
the 60 days preceding such date. If the consideration to be offered, paid, or
received pursuant to the foregoing clauses (A) or (B) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Citco and
reasonably acceptable to TCB.
(c) "Repurchase Event" means the date that Citco is entitled to
terminate the Merger Agreement pursuant to Sections 10.1 (b), (c), (d)(ii), or
(f); provided, that a Repurchase Event shall not occur unless and until TCB
shall have entered into a definitive agreement with a third party with respect
to an Acquisition Proposal or an Acquisition Proposal shall have been
consummated during the 12-month period following such date.
(d) "Request Date" means the date on which TCB or Citco, as the case
may be, exercises its rights under this Option Agreement.
5. Registration Rights. TCB shall, if requested by Citco at any time and
--------------------
from time to time within two years of the first exercise of the Option, as
expeditiously as possible, prepare and file up to two registration statements
under the 1933 Act if such registration is necessary in order to permit the sale
or other disposition of any or all Shares that have been acquired by or are
issuable to Citco upon exercise Option in accordance with the intended method of
sale or other disposition stated by Citco, including a "shelf" registration
statement under Rule 415 under the 1933 Act or any successor provision, and TCB
shall use all reasonable efforts to qualify such shares or other securities
under any applicable state securities laws. Any registration statement prepared
and filed under this Option Agreement shall be at TCB's expense except for
underwriting discounts or commissions, brokers' fees, and the reasonable fees
and disbursements of Citco's counsel related thereto. TCB also will take
reasonable efforts to list such shares on any securities exchange or market
where TCB's shares are traded.
B-3
<PAGE>
6. Representation of Citco. This Option is not being, and any Option Shares
-----------------------
or other securities acquired by Citco upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Laws.
7. Amendment. This Option Agreement may be amended or supplemented at any
---------
time by mutual agreement of TCB and Citco. Any such amendment or supplement must
be in writing and approved by their respective Boards of Directors and shall be
subject to the provisions of Article 10 of the Merger Agreement.
8. Entire Agreement. This Option Agreement, together with the Merger
-----------------
Agreement, constitutes the entire agreement between the Parties hereto with
respect thereto, written or oral. Nothing in this Option Agreement, expressed or
implied, is intended to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Option Agreement.
9. Assignment. Neither this Option Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent of
the other Party. Subject to the preceding sentence, this Option Agreement will
be binding upon, inure to the benefit of, and be enforceable by the Parties and
their respective successors and assigns.
10. Governing Law. This Option Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Tennessee applicable to agreements
made and entirely to be performed in such state, except to the extent federal
law may be applicable.
IN WITNESS WHEREOF, the parties hereto have caused this Option Agreement to
be executed in counterparts by their duly authorized officers and their
corporate seals to be hereunto affixed and attested by their officers thereunto
duly authorized, all as of the day and year first above written.
CITCO COMMUNITY BANCSHARES, INC.
By: /s/ Joe LaPorte, III
----------------------------
Title: Chairman
----------------------------
TWIN CITY BANCORP, INC.
By: /s/ Thad R. Bowers
----------------------------
Title: President
----------------------------
B-4
<PAGE>
Appendix C
________, 2000
Board of Directors
Twin City Bancorp, Inc.
310 State Street
Bristol, Tennessee 37620
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the holders of the issued and outstanding shares of common
stock (the "Twin City Common Stock") of Twin City Bancorp, Inc. ("Twin City"),
of the consideration to be paid by Citco Community Bancshares, Inc. ("Citco")
pursuant to the Agreement and Plan of Merger, dated as of July 18, 2000 (the
"Agreement") by and among Twin City and Citco. Unless otherwise noted, all terms
used herein will have the same meaning as defined in the Agreement.
The Agreement provides for the merger (the "Merger") of Twin City with
and into Citco, pursuant to which, among other things, at the Effective Time (as
defined in the Agreement), each outstanding share of Twin City Common Stock,
other than any shares held in the treasury of Twin City, will be exchanged for
the right to receive $17.15 in cash (the "Consideration"). The terms and
conditions of the Merger are more fully set forth in the Agreement.
Trident Securities ("Trident"), a division of McDonald Investments
Inc., as part of its investment banking business, is customarily engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
We have acted as Twin City's financial advisor in connection with, and
have participated in certain negotiations leading to, the Agreement. In
connection with rendering our opinion set forth herein, we have among other
things:
(i) Reviewed certain publicly available information concerning Twin
City, including the Annual Reports on Form 10-K of Twin City for
each of the years in the three year period ended December
31, 1999 and the Quarterly Reports on Form 10-Q of Twin City for
the quarters ended March 31, 2000 and June 30, 2000;
(ii) Reviewed certain other internal information, primarily financial
in nature relating to the respective businesses, earnings,
assets and prospects of Twin City and Citco provided to us or
publicly available for purposes of our analysis;
C-1
<PAGE>
Board of Directors
________, 2000
Page 2
(iii) Participated in meetings and telephone conferences with members
of senior management of Twin City concerning the financial
condition, business, assets, financial forecasts and prospects of
the company, as well as other matters we believed relevant to our
inquiry;
(iv) Reviewed certain stock market information for Twin City Common
Stock and compared it with similar information for certain
companies, the securities of which are publicly traded;
(v) Compared the results of operations and financial condition of
Twin City with that of certain companies, which we deemed to be
relevant for purposes of this opinion;
(vi) Reviewed the financial terms, to the extent publicly available,
of certain acquisition transactions, which we deemed to be
relevant for purposes of this opinion;
(vii) Reviewed the Agreement and certain related documents; and
(viii) Performed such other reviews and analyses as we have deemed
appropriate.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information reviewed by us and have relied upon the accuracy and completeness of
the representations, warranties and covenants of Twin City and Citco contained
in the Agreement. We have not been engaged to undertake, and have not assumed
any responsibility for, nor have we conducted, an independent investigation or
verification of such matters. We have not been engaged to and we have not
conducted a physical inspection of any of the assets, properties or facilities
of either Twin City or Citco, nor have we made or obtained or been furnished
with any independent valuation or appraisal of any of such assets, properties or
facilities or any of the liabilities of either Twin City or Citco. With respect
to financial forecasts used in our analysis, we have assumed that such forecasts
have been reasonably prepared by management of Twin City on a basis reflecting
the best currently available estimates and judgments of the management of Twin
City as to the future performance of Twin City. We have not been engaged to and
we have not assumed any responsibility for, nor have we conducted any
independent investigation or verification of such matters, and we express no
view as to such financial forecasts or the assumptions on which they are based.
We have also assumed that all of the conditions to the consummation of the
Merger, as set forth in the Agreement, would be satisfied and that the Merger
would be consummated on a timely basis in the manner contemplated by the
Agreement.
C-2
<PAGE>
Board of Directors
___________, 2000
Page 3
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness, as
of the date hereof, from a financial point of view, of the Consideration, to the
holders of Twin City Common Stock, and does not address the underlying business
decision by Twin City's Board of Directors to effect the Merger, does not
compare or discuss the relative merits of any competing proposal or any other
terms of the Merger, and does not constitute a recommendation to any Twin City
shareholder as to how such shareholder should vote with respect to the Merger.
This opinion does not represent an opinion as to what the value of Twin City
Common Stock may be at the Effective Time of the Merger or as to the prospects
of Twin City's business or Citco's business.
We have acted as financial advisor to Twin City in connection with the
Merger and will receive from Twin City a fee for our services, a significant
portion of which is contingent upon the consummation of the Merger, as well as
Twin City's agreement to indemnify us under certain circumstances. We will also
receive a fee for our services in rendering this opinion. In the past, we have
also provided certain other investment banking services for Twin City and have
received compensation for such services.
In the ordinary course of business, we may actively trade securities of
Twin City for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this opinion was prepared solely for the
confidential use of the Board of Directors and senior management of Twin City
and may not be disclosed, summarized, excerpted from or otherwise publicly
referred to without our prior written consent. Our opinion does not constitute a
recommendation to any stockholder of Twin City as to how such stockholder should
vote at the stockholders' meeting held in connection with the Merger. This
opinion does not represent an opinion as to what the value of Twin City Common
Stock may be at the Effective Time of the Merger or as to the prospects of Twin
City's business or Citco's business. Notwithstanding the foregoing, this opinion
may be included in the proxy statement to be mailed to the holders of Twin City
Common Stock in connection with the Merger, provided that this opinion will be
reproduced in such proxy statement in full, and any description of or reference
to us or our actions, or any summary of the opinion in such proxy statement,
will be in a form reasonably acceptable to us and our counsel.
C-3
<PAGE>
Board of Directors
___________, 2000
Page 3
Based upon and subject to the foregoing and such other matters, as we
consider relevant, it is our opinion that as of the date hereof, the
Consideration is fair, from a financial point of view, to the stockholders of
Twin City.
Very truly yours,
TRIDENT SECURITIES, a division of
McDonald Investments Inc.
C-4
<PAGE>
Appendix D
TENNESSEE BUSINESS CORPORATION ACT
Chapter 23
BUSINESS CORPORATIONS--DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
48-23-101 DEFINITIONS.--(1) "Beneficial shareholder" means the person who
is a beneficial owner of shares held by a nominee as the record shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 48-23-102 and who exercises that right when and
in the manner required by Sections 48-23-201--48-23-209;
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the corporate
action that gave rise to the shareholder's right to dissent until the date of
payment, at the average auction rate paid on United States treasury bills with a
maturity of six (6) months (or the closest maturity thereto) as of the auction
date for such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation; and
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
48-23-102 RIGHT TO DISSENT.--(a) A shareholder is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If shareholder approval is required or the merger by Section 48-21-103
or the charter and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent under
Section 48-21-104;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
(4) An amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter, or to
cumulate votes, other than a limitation by dilution through issuance of shares
or other securities with similar voting rights; or
(E) Reduces the number of shares owned by the shareholder to a fraction of
a share, if the fractional share is to be acquired for cash under Section
48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the charter, bylaws, or a resolution of the board of directors provides that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this chapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder may
dissent as to any shares of a security which, as of the date of the effectuation
of the transaction which would otherwise give rise to dissenters' rights, is
listed on an exchange registered under Section 6 of the Securities Exchange Act
of 1934, as amended, or is
D-1
<PAGE>
a "national market system security," as defined in rules promulgated pursuant to
the Securities Exchange Act of 1934, as amended.
48-23-103 DISSENT BY NOMINEES AND BENEFICAL OWNERS.--(a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights to shares of any
one (1) or more classes held on his behalf only if:
(1) He submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder asserts
dissents' rights; and
(2) He does so with respect to all shares of the same class of which he is
the beneficial shareholder or over which he has power to direct the vote.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
48-23-201 NOTICE OF DISSENTERS' RIGHTS. --(a) If proposed corporate action
creating dissenters' rights under Section 48-23-102 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under Section 48-23-102
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in Section 48-23-203.
(c) A corporation's failure to give notice pursuant to this section will
not invalidate the corporate action.
48-23-202 NOTICE OF INTENT TO DEMAND PAYMENT--(a) If proposed corporate
action creating dissenters' rights under Section 48-23-102 is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to assert dissenters'
right:
(1) Must deliver to the corporation, before the vote is taken, written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action. No such
written notice of intent to demand payment is required of any shareholder to
whom the corporation failed to provide the notice required by Section 48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this chapter.
48-23-203 DISSENTERS' NOTICE--(a) If proposed corporate action creating
dissenters' rights under Section 48-23-102 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of Section 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he acquired beneficial ownership of the shares
before that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than one (1) nor more than two (2) months after the
date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to Section
48-23-201.
48-23-204 DUTY TO DEMAND PAYMENT.--(a) A shareholder sent a dissenters'
notice described in Section 48-23-203 must demand payment, certify whether he
acquired beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to Section 48-23-203(b)(3), and deposit
his certificates in accordance with the terms of the notice.
D-2
<PAGE>
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the effectuation of the proposed corporate
action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn unless
the corporation with which it was filed, or the surviving corporation, consents
thereto.
48-23-205 SHARE RESTRICTIONS. --(a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effectuated or the restrictions
released under Section 48-23-207.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the effectuation of the proposed corporate
action.
48-23-206 PAYMENT.--(a) Except as provided in Section 48-23-208, as soon as
the proposed corporate action is effectuated, or upon receipt of a payment
demand, whichever is later, the corporation shall pay each dissenter who
complied with Section 48-23-204 the amount the corporation estimates to be the
fair value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Section
48-23-209; and
(5) A copy of this chapter if the corporation has not previously sent a
copy of this chapter to the shareholder pursuant to Section 48-23-201 or Section
48-23-203.
48-23-207 FAILURE TO TAKE ACTION.--(a) If the corporation does not
effectuate the proposed action that gave rise to the dissenters' rights within
two (2) months after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under Section 48-23-203 and repeat the payment demand
procedure.
48-23-208 AFTER-ACQUIRED SHARES.--(a) A corporation may elect to withhold
payment required by Section 48-23-206 from a dissenter unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the principal terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after effectuating the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under Section
48-23-209.
48-23-209 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.--(a)
A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of interest due, and demand payment of his
estimate (less any payment under Section 48-23-206), or reject the corporation's
offer under Section 48-23-208 and demand payment of the fair value of his shares
and interest due, if:
(1) The dissenter believes that the amount paid under Section 48-23-206 or
offered under Section 48-23-208 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Section 48-23-206 within
two (2) months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within two (2) months after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within one (1) month after the corporation made or offered payment for his
shares.
D-3
<PAGE>
PART 3. JUDICIAL APPRAISAL OF SHARES
48-23-301 COURT ACTION.--(a) If a demand for payment under Section
48-23-209 remains unsettled, the corporation shall commence a proceeding within
two (2) months after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the two-month period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record
having equity jurisdiction in the county where the corporation's principal
office (or, if none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in this state,
it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one (1) or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of his
shares, plus accrued interest, exceeds the amount paid by the corporation; or
(2) For the fair value, plus accrued interest, of his after-acquired shares
for which the corporation elected to withhold payment under Section 48-23-208.
48-23-302 COURT COSTS AND COUNSEL FEES.--(a) The court in an appraisal
proceeding commenced under Section 48-23-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under Section 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of Sections 48-23-201--48-23-209; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.
D-4
<PAGE>
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE TWIN CITY BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS
__________, 2000
The undersigned hereby appoints ______________ and _______________, with full
powers of substitution, to act as proxies for the undersigned, to vote all
shares of common stock of Twin City Bancorp, Inc. (the "Company") which the
undersigned is entitled to vote at the special meeting of shareholders (the
"Special Meeting"), to be held at ________________________________________ on
_____________, _____________,2000 at __:__ _.m., and at any and all adjournments
or postponements thereof, as follows:
FOR AGAINST ABSTAIN
1. The approval and adoption of the Agreement and [ ] [ ] [ ]
Plan of Merger, dated July 18, 2000, by and among
Twin City Bancorp, Inc., Twin City Federal Savings
Bank, Citco Community Bancshares, Inc. and
Citizens Bank.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AGREEMENT AND PLAN OF MERGER
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE MERGER AGREEMENT. IF ANY OTHER BUSINESS IS
PRESENTED AT THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY IN ACCORDANCE WITH THE DETERMINATION OF THE BOARD OF DIRECTORS.
PROVIDED, HOWEVER, IF A PROPOSAL TO ADJOURN THE SPECIAL MEETING IS PROPERLY
PRESENTED, A PROXY WILL NOT HAVE DISCRETION TO VOTE IN FAVOR OF THE ADJOURNMENT
PROPOSAL ANY SHARES OF COMMON STOCK WHICH HAVE BEEN VOTED AGAINST APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Please be sure to sign and date Date ________________________________
this proxy in the box below
__________________________________________________________________________
Shareholders sign above. Co-holder (if any) sign above.
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED
TWIN CITY BANCORP, INC.
BRISTOL, TENNESSEE
Should the above shareholder be present and elect to vote at the Special
Meeting or at any adjournment thereof and after notification to the Assistant
Secretary of the Company at the Special Meeting of the shareholder's decision to
terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect.
The above shareholder acknowledges receipt from the Company prior to the
execution of this proxy of Notice of the Special Meeting and a Proxy Statement,
dated _________________, 2000.
Please sign exactly as your name appears on this proxy card. When signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY TODAY
